Contemporary Accounting Theory

The paper critically evaluates the conceptual framework applied in an ASX listed company: Magellan Glob Trust (MGG) and how the company applies this concept in the choosing of financial events, concerns and statements.

Running head: CONTEMPORARY ACCOUNTING THEORY 1
Contemporary Accounting Theory (Part A and B)
Student’s Name
Institution Affiliation
Date

CONTEMPORARY ACCOUNTING THEORY 2
1. Executive Summary
The ideology behind the formation of conceptual framework (CF), in the sector of
accounting is based on the mandate to identify key issues while reviewing financial
statements. This framework is purpose to enable the company to attain and evaluate its
financial health. Thus, this paper will critically evaluate the conceptual framework applied in
an ASX listed company: Magellan Glob Trust (MGG) and how the company applies this
concept in the choosing of financial events, concerns and statements. In paper B, the paper
will compare the International Integrated Reporting System over the Sustainability Reporting
Guidelines, which also entails explain the specific strengths and limitations of accounting
based on CF. The paper will compare the evaluation of the framework against a South
African Country Old Mutual Ltd. (OMU) , on an index, Magellan Glob Trust against the
company’s integrated reportage.

CONTEMPORARY ACCOUNTING THEORY 3
2. Introduction
The documentation of the concept is obliged or expected to outlay critical financial
guidelines that fundamentally control and underlie the steps to preparing and presenting a
company’s financial statements and economic valuation. In that regard, these financial
statements are applied by various key stakeholders in the company to effectively formulate
the CF, relevant for evaluating the finances of a company. In that case, this paper evaluates
the concept evaluation of two companies: Magellan Glob Trust (MGG) and the Old Mutual
Ltd. (OMU), which are Australian and South African Companies respectively. It is also
significant to evaluate the IASB in formulating revised and standardized accounting
protocols, which is relevant for financial statements applicable by companies when applying
financial protocols or handling problems evident in the compliance activities to specific
accounting standards. In that regard, this paper analyses the conceptual framework purposed
for financial reporting and its relevance and application in an Australian Company i.e.
Magellan Glob Trust (MGG). The second paper of this paper will evaluate the sustainability
and integrated reporting frameworks applicable in a South African Company i.e. The Old
Mutual Ltd. (OMU).
3. Part A
a) Review of the history and development of the Conceptual Framework for
Financial Reporting
The Conceptual Framework (CF) development in the UK, US and other countries in
the world began in 1976, following its introduction by the FASB in US. The conceptual
framework was created as a basis system that crucially outlays accounting guidelines, which
cordially affirms accounting reporting concerns.

CONTEMPORARY ACCOUNTING THEORY 4
From 1978 to 2010, the governing entity had issued eight accounting statements
regarding the relevant financial reports applied by various companies, including one SFAC
No. 4, which signified the conceptual framework that applies to non-business enterprises.
However, SFACs No. 1, 2 and 3 have already been replaced, which leave only 5 as valid
SFAC Nos. The reporting is the SFAC No. 4, which represent the conceptual framework
considered by the International Accounting Standards Committee (IASC). This accounting
body was established in 1973, which represented a predecessor entity of the accounting
standards body globally. By 1st April 2010, the accounting entity (IASB) assumed the role of
IASC obliged to set out the Conceptual framework, despite the current standards being
reference to as the International Financial Reporting Standards (IFRS) (Timbate & Park,
2018). In 1975, the entity presented its initial reporting of the IAS, which represented the
accounting policy disclosure (Crombie, 2012). The IASC presented its 28th IAS by April
1989, which represented the financial statements for investment in the relevant associates.
Therefore, the conceptual framework developed for the presentation and preparation
of accounting frameworks had been approved by April 1989 by the IASC. This reporting was
therefore published in 1989 and applied by the IASB in 2001, despite its relevance in
formulating and unindustrialized the IAS framework. For the purpose of delayed issuance of
the standard, the fundamental purpose of the CF is to assist the financial entity to formulate
International Accounting Standards in the future; and allow the review of the present
Standards paragraphs (IASB, 2010b and B1713) signifying this framework. The accounting
body committed itself into an agreement with the United States’ FASB, which was referred
as the 2nd Norwalk Agreement by 2002; and mandating that two accounting entities would
principally consider removing its present differences and merge on the basis of the quality
conceptual framework (Ehoff, 2010). Following the joint conference in 2004, the accounting
bodies (FASB and IASB) agreed to include respective key components and concerns as an

CONTEMPORARY ACCOUNTING THEORY 5
interlinked project to formulate a single Conceptual Framework. This initiative as governed
and established based on the original FASB’s conceptual framework and the IASB’s
framework. All the two boards utilized the developed framework as a foundation of their
accounting standards for the CF.
b) Explanation of Australian accounting profession’s concerns regarding
Conceptual Framework
The Quasi-legislation denotes that the necessity for the Constitution-centred CF in
Australia makes it nearly impossible to ensure that documented accounting frameworks are
consistent and have been formulated logically. Despite the fact that it is seemingly convenient
to evaluate the fundamentals of accounting in the term ‘objectives’ of the relevant accounting
statements, the professions claims that the looseness of the standards in Australia has
presented more potential accounting problems. In that case, the Australian Accounting
Profession is more concerned with evaluation the CF functions instead of its objectives in the
evaluation of an entity’s financial statements. This further implies that the professions
currently rejects the reference and reasoning lines of CF on the basis on accounting
’objectives’ in the evaluation of financial statements. The main reason for this is that, the
existence of the urged to establish the under-pinning accounting frameworks falters short-
term accounting objectives.
c) Discussion of academic’s concerns about the quality (potential benefits and
limitations) of the Conceptual Framework
The CF has potential benefits and limitations to consider as an academic concern. In
that case, here are the benefits evident following the introduction of the framework in the
accounting industry.

CONTEMPORARY ACCOUNTING THEORY 6
 Since many nations have established CF, which is similar globally (or might have
alternatively adopted the IASC frameworks), there is the need for countries to
embrace considerable global compatibility on the basic of various accounting
standards (Prosic, 2015). In that case, academic’s concern on quality features on the
standard’s comparability and consistency over the global financial reporting (whereby
professions argues that it is relevant for the evaluation of foreign investment capitals
and flows.
 Academic are concerned with accounting logic and consistency, which implies that
accounting standards established following the application of CF should be logical
and consistent.
 CF provides the global fundamentals of accounting systems. In that case, the
standard-setters are expected to be accountable for all their financial decisions
(Romolini, Fissi & Gori, 2017). In case these decisions are retrieved from key
concerns evaluated in the CF, the accounting professions expect the standards to be
clear thereby necessitating more explanation prior the implementation.
 The CF establishes an appropriate methodology of communicating the fundamental
concepts based on the present financial reports. Therefore, this framework provides
the best guidance for entities to reports on particular accounting standards and
evaluation any financial concern (Crombie, 2012).
A portion of the limitations that have been related to conceptual frameworks of bookkeeping
include:
 Conceptual frameworks are outrageous to formulate.
 The enhancement of the CF is affected by the governmental actions. With this, some
accountants present the concern that CFs is more inclined to political procedures.

CONTEMPORARY ACCOUNTING THEORY 7
 Linked to the limitation outlined above, whenever the CF considers involving
accounting concerns, there is always an issue of financial estimation of given assets as
argued by (Molyneux & Wilson, 2017).
The CFs considers more on financial-related matters. In that case, this framework will
consider disregarding various execution segments such as ecological and social revealing
components. Moreover, through the evaluation of financial execution, CFs critically transits
the consideration of financial analysts based on corporate execution.
d) Explanation of how the conceptual framework has been applied by the selected
Australian Company
(i) How many statements/reports have been prepared as per the Conceptual Framework
and what are their major components
Fig. 1: Consolidate Financial Statement Position of MAGELLAN GLOB TRUST (MGG)

CONTEMPORARY ACCOUNTING THEORY 8
According to the Fig. 1 above, the company has prepared its financial data considering the
company’s consolidated financial statements, which only eliminated the investment
subsidiary, dividends, including profits and loss.
The company has produced more than five reports having major components evident in all.
The Components include:
 The purposes of accounting reporting: FASB's first Announcement of financial and
Accounting Ideas (SFAC 1) (1978) distinguished the expansive destinations of
accounting evaluation. The first and most broad goal expressed in SFAC 1 is to give
data that is helpful to present and potential speculators and different clients in making
the balanced venture, credit, and comparable choices. From this starting point in
SFAC 1, the MAGELLAN GLOB TRUST (MGG) communicated other
progressively explicit targets.
 The Fundamental of Useful Financial Data: The second component in the conceptual
framework is the characteristics (or subjective attributes) that budgetary data ought to
have in the event that it is to be valuable in basic leadership. In SFAC 2, the FASB
said that data is helpful on the off chance that it is (I) important, (ii) dependable, and
(iii) tantamount (Carnevale & Mazzuca, 2012). Data is pertinent on the off chance
that it can have any kind of effect in a choice. The data has this quality when it
enables clients to anticipate the future or assess the past and is gotten so as to
influence their choices.
 Financial Statement Elements: Another significant advancement in building up a
conceptual framework is to decide the components of budget reports. This includes
characterizing the classes of MAGELLAN GLOB TRUST (MGG)’s data that ought
to be contained in monetary reports. FASB's exchange of fiscal summary components

CONTEMPORARY ACCOUNTING THEORY 9
incorporates meanings of significant components, for example, resources, liabilities,
value, incomes, costs, additions, and misfortunes (Crombie, 2012).
Financial Measurement and Recognition: In SFAC 5, ‘Acknowledgment and Estimation in
Fiscal summaries of Business Ventures’, the FASB set up ideas for choosing (1) when things
ought to be introduced (or perceived) in the budget summaries, and (2) how to allocate
numbers to (or measure) financial items.
(ii) Which recognition principles and measurement bases have been applied for revenue,
assets and liabilities
Generally, the FASB has said that things ought to be perceived in the fiscal summaries in the
event that they meet the accompanying criteria:
 Characterizations: The thing meets the meaning of a component of budget reports;
 Measurability: It has an important quality quantifiable with adequate dependability
 Position: The data about it is equipped for having any kind of effect on client choices;
and
 Dependability: The MAGELLAN GLOB TRUST (MGG)’s data is illustratively
resolute, irrefutable, and impartial.
In SFAC 5, the FASB has expressed that a full arrangement of budget summaries should
appear: Money related position toward the finish of the period, Profit for the period and
Exhaustive salary for the period. This new idea is more extensive than profit and incorporates
all adjustments in proprietors' value other than those that came about because of exchanges
with the proprietors (Hodge, Rajgopal & Shevlin, 2009). A few changes in resource esteems
are incorporated into this idea however are barred from MAGELLAN GLOB TRUST (MGG)
income.

CONTEMPORARY ACCOUNTING THEORY 10
(iii) What qualitative characteristics of information exhibit in company’s various financial
reports?
Quantitative characteristics of information shows by the company’s financial reports
include:
Operationalization of the subjective attributes: To build an estimation apparatus, we
use earlier writing which characterizes money related detailing quality as far as the crucial
and upgrading subjective attributes fundamental choice convenience as characterized in the
ED. The basic subjective attributes (for example significance and loyal portrayal) are most
significant and decide the substance of money related detailing data (Alfiero, Cane, Doronzo
& Esposito, 2018).
Importance: ‘Significance’ feature of the company refers to its capability to
comprehend various concerns raised by clients as suppliers of capital in the company.
Considering the past literature, the relevance of operationalized applying various accounting
elements denotes corroborative and prescient framework. As discussed earlier in this paper,
accountants will critically evaluate the quality of financial earnings instead of accounting
reporting and its quality. This aspect is restrained due to the fact that it ignores non-financial
information and future financial-connected data that is accessible by shareholders. (Mostyn,
2012). In order to enhance the quality extend, extensive and prescient analysis of the
MAGELLAN GLOB TRUST (MGG);’s financial statement is required.
4. Part B
a) Comparison of Sustainability Reporting Guidelines and International Integrated
Reporting Framework

CONTEMPORARY ACCOUNTING THEORY 11
Both the sustainability and international integrated reporting frameworks are
applicable in the business world today (Pérez-López, Moreno-Romero, & Barkemeyer,
2013). The role of businesses in the society today is gradually increasing, as compared its
initial obligation of evaluating its profitability or recording its finances. The Sustainability
Reporting Guideline presents the relevant standards applicable to the help companies to
enhance competitive advantage (Ceulemans, Lozano & Alonso-Almeida, 2015). Moreover,
the component of environmental sustainability in the guideline is critically recommended for
firms to apply the world today. However, this form of reporting concentrates more on a
selected segment of the entity’s status but unable to indicated the specific and relevant
climatic transitions and environmental factors (Crombie, 2012). Apart from that sustainability
reports do not effectively indicated financial information relevant for evaluating the
opportunities and risks of an entity.
On the other hand, International Integrated Reporting Framework improves the
corporation’s reputation; thus, the profitability of the firm can be evaluated based on global
norms and laws (Messner, 2010). The reporting necessitates investors to build the
relationship with both the accounting and non-accounting data analysts to be able to
effectively evaluate potential risks. Numerous organizations have energetically begun to get
readily integrated reports in different configurations and each report has been shaped as per
the requirements of business properties. Moreover, integrated announcing standards and rules
have been distributed by the Worldwide Integrated Detailing Board, so as to give direction to
report evaluators (Soyka, 2013). With the expanding significance and spread of integrated
detailing, banters about the advantages and issues experienced in the readiness expanded. In
this investigation, the followings are clarified: the terms of monetary announcing,
sustainability analysis, and accounting detailing; the development of these terms; advantages

CONTEMPORARY ACCOUNTING THEORY 12
of integrated revealing and issues that might be experienced while readiness; and the
connection between budgetary announcing and integrated detailing.
b) Rigour (strength & limitations) of the conventional accounting, based upon the
Conceptual Framework for contents of sustainability as well as integrated
reports
Strengths
The conventional accounting, centred on the CF provides a firm foundation for formulating
future financial statement standards, which enhance the sustainability status of specific
companies. The strength evident in this framework is to permit the introduction of accounting
standards and international integrated reports, which clarify the key matters in financial
statements. Conventional accounting also evaluates key material concerns, i.e. both positive
and negative, in financial statements.
Limitations
Debilitated Basic leadership: Convectional accounting offers decision chiefs little data on an
association's specialties. This is on the grounds that the sort of use the planning procedure
tasks is theoretical and isn't solid for settling on specific choices. This powers chiefs in
governments and associations utilizing traditional planning strategies to change their
arrangements regularly, in order to emphasize their selections.
c) Applicability (usefulness of limitations) of the theories to explain contents of
sustainability as well as integrated reports
Association financial analysists around the globe utilize institutional hypothesis or
neo-institutional theory in their exploration to demonstrate that establishments of monetary,
social, instructive, money related, and political nature keeps up a huge impact upon overall

CONTEMPORARY ACCOUNTING THEORY 13
associations. Badiyani (2012) directs exact research upon 309 organizations chose from
different sources, in particular, GRI reports list, GRI dataset with best customary
sustainability reports, CRRA Reporting Award 2010. Results demonstrate that integrated
revealing is exceedingly associated with the phase of monetary improvement, national
corporate duty, nations' qualities framework, worker's guilds, the private use of tertiary
training, proprietorship scattering. The creators neglected to demonstrate the impact of the
political factor, underlining the irregularity of information with respect to the years for which
data has been gathered, given the way that the examination does not think about the
assumption of significant changes in the political framework.
d) Preparation of an index (a table or checklist) of various components (criteria) of
an integrated report, and discussion of whether and how the selected South
African Company has disclosed information against each of those components
(criteria)
The integrated reporting considers providing companies with the sufficient
understanding of liabilities and assets, and how they will utilize this data to enhance
profitability (Faria, 2016). These capitals can be money-related, made, scholarly, human, and
social and relationship, and normal capital, yet organizations need not embrace these key
components. Integrated announcing is worked around the accompanying key segments,
which are applicable in the Old Mutual Ltd. (OMU) Iron Ore Ltd.
Table 1: Checklist of Key Components
Checklist No. Key Component
#1  Environment
An integrated report includes the company’s summary of the relevant
compliance to environmental frameworks. These frameworks are
implemented and varied based on specific geographies to which the

CONTEMPORARY ACCOUNTING THEORY 14
company is found.
#2
 Socio-Political
The report should include the structure of the federal governance, which
enables the firms to create its anticipated value in the market.
#3  Production
Includes available opportunities and risks required for dealing with an
entity’s concerns on boosting its throughput.
#4  Financial Evaluation of Costs
This deals with the applied strategies and the means of allocating the
company’s resource for production (Ivan, 2018).
#5  People
This aspect is critical for the achievement and performance of strategic
aims to financial outcomes and periods. With the right people, an entity
is capable of establishing a competitive advantage (Graymore, 2014).
#6  Health & Safety (H&S)
An integrated report includes the relevant regulations on Health and
Safety, which helps the company to control its strategies concerning the
mitigation of its strategies challenges on HS.
 The Old Mutual Ltd. (OMU) has disclosed the six key components in the checklist,
which underpins all the activities undertaken in the company. Every pillar
(Environment, Socio-Political, Production, Financial Evaluation of Costs, People, and
Health & Safety) defines the Key Performance Indicator (KPI), including the
fundamental targets set by the firm to evaluate its accounting and non-accounting
performance.
e) Comparison of Australian company’s reporting practices with the index and the
integrated reporting practices in the selected South African Company

CONTEMPORARY ACCOUNTING THEORY 15
Based on the index of key components (Environment, Socio-Political, Production,
Financial Evaluation of Costs, People, and Health & Safety) in an integrated report, it is
evident that the Old Mutual Ltd. (OMU) prepares an integrated report. The integrated report
presented in 2018 was written basically for prospective and current stakeholders, who
consider demonstrating that the company has effective strategies that are capable of
delivering and optimizing production value. From 2018 until the present, Old Mutual Ltd.
(OMU) has implemented targeted transitions to the relevant changes in its accounting
strategies to enhance sustainability within its competitive environment.
When the reporting practices of the Magellan Glob Trust and the Old Mutual Ltd are
compared, it can be realized that the remuneration committee of both companies put
emphasis on remuneration in their reporting, which underpins future profitability in ensuring
strategic goals are achieved. For the Magellan Glob Trust, as viewed from the 2018
integrated report, the core components of the integrated reporting practice have been
disclosed from the pre-listed financial statements. Thus, the company proceeds to monitor its
stakeholder and investors’ feedback concerning the best practices evident in the reporting
practices for better performance.
The transitional practice has resulted to firm and flexible management and evaluation
of the balance sheet. Considering this foundation, the company can focus of its development
of accounting value for review by its relevant shareholder in a responsible and sustainable
manner. As indicated throughout the integrated report published in 2018, the company’s
management and strategic practices to productivity has been signified by comprehensive
gratitude of critical resources and relationship, which Old Mutual Ltd. (OMU) relies to create
its strategic accounting valuation.

CONTEMPORARY ACCOUNTING THEORY 16
In comparison to the reporting from the two companies (Magellan Glob Trust and the
Old Mutual Ltd. (OMU) based on the provided index of key components, it is evident that the
relative strategies concerning corporate strategies, operating framework, opportunity analysis,
and risk management required thorough analysis. The annual reports of both companies cover
the obligation, including the financial operation, which have a fundamental control on
business processes. For instance, the Old Mutual Ltd. (OMU)’s report considers the
Centurion corporate management office, Saldanha’s port operation and the marketing
segment that the company operates in. Another significant practice evident from the
companies is the evaluation of productivity, which considers evaluating potential outcomes,
opportunities and risks in the company’s operations. The financial outcomes are helpful for
the various stakeholders who need this information to monitor their investment in the
company (Adams & Simnett, 2011).
5. Conclusion
The conceptual framework signifies a critical concern in the financial accounting
field, which fundamentally deals with the monitoring and preparation of audited financial
statements. The founding concern of the CF and Integrated Reports is crucial for key
stakeholders and company users to retried data concerning the company’s profitability.
Resultantly, the structure presents the necessary data that can be used as a basis for financial
decision for companies since the information is relevant, applicable and error-free. Thus, the
financial frameworks have enabled the Old Mutual Ltd. (OMU) and Magellan Glob Trust to
enable its profitability in the world of accounting.

CONTEMPORARY ACCOUNTING THEORY 17
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