Contemporary Issues in Accounting: A Study of Boral Limited's Compliance with AASB Conceptual Framework

This report evaluates Boral Limited's compliance with the AASB conceptual framework in terms of objectives of general purpose financial reporting, recognition criteria, and qualitative characteristics. The report concludes that Boral Limited has adhered to the guidelines and regulations set out in the conceptual framework.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student:
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Executive Summary:
Based on the evaluation of the report, it is inherent that Boral Limited has conformed
to the required guidelines and norms, as stated in the conceptual framework of AASB. The
conformance could be seen in terms of disclosure of the financial statements containing all
the useful information for assisting the users in undertaking decisions. Finally, it has been
analysed that Boral Limited has adhered to the various objectives of the conceptual
framework, criteria for recognition and qualitative characteristics depicted under the
conceptual framework of AASB.

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Table of Contents
1. Introduction:...........................................................................................................................3
2. Objectives of general purpose financial reporting:................................................................3
3. Recognition criteria of conceptual framework:......................................................................7
4. Qualitative characteristics of conceptual framework:..........................................................12
5. Conclusion and recommendations:......................................................................................13
References:...............................................................................................................................14

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1. Introduction:
The intention of this report is to take into account the significant conceptual
framework aspects for business organisations having headquarters in Australia. In order to fit
such intention, Boral Limited is selected as the firm, which is a multinational organisation
involved in supplying and producing construction and building materials. Despite its base in
Australia, the organisation has widespread global operations in USA and Asian nations
(Boral.com 2018). The paper would be distributed into three different segments. The primary
focal area would be to assess the objectives of general purpose financial reporting from the
perspective of Boral Limited. In addition, the second segment of the paper would assess the
compliance of the organisation with the recognition criteria related to conceptual framework.
Finally, the report would shed light on emphasising the qualitative features of conceptual
framework with respect to the financial information disclosed by Boral Limited.
2. Objectives of general purpose financial reporting:
The “Australian Accounting Standards Board (AASB)” has formulated conceptual
framework, which provides the organisations with the necessary regulations and standards in
relation to financial reporting. The organisations need to be responsible for conforming to
such standards and regulations, as set out in the conceptual framework of AASB
(Aasb.gov.au 2018). The situation could be applied for Boral Limited and the conceptual
framework of AASB has three main objectives, which would be evaluated in the following
decision:
First objective:
This conceptual framework objective states the financial reports of the organisations
need to have information, which would enable the users of the financial statements in

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analysing their existing financial conditions. The main users of the organisation include
owners, managers and shareholders as the internal users, while the external users are
suppliers, creditors, government, community, customers and public (Huber 2017). This
denotes that certain necessary information regarding assets, liabilities and equity need to be
included in the financial statements. From the annual report of Boral Limited in 2017, the
organisation has published its balance sheet statement having the vital information of assets,
liabilities and equity. This is shown as follows:

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Second objective:
Another objective of general purpose financial reporting is to ensure that the business
organisations are responsible for publishing all information to their users so that they could
judge about the financial performance of the organisations. Such information includes
revenue, income, expenses and loss. In accordance with the annual report of Boral Limited in
2017, it could be seen that the organisation has published its income statement and this
statement possesses all information about above-mentioned aspects. This would help the
investors and other users to understand the financial performance of the organisation in a
better manner, which is evident from the following table:

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Third objective:
The general purpose financial reporting has mandated the need for all business
organisations to deliver important information to their users so that any change in financial
condition could be identified by comparing with that of the previous year. This is because it
would assist them in anticipating the likely performance of the organisations in future
(Brigham et al. 2016). From the latest annual report of Boral Limited, it could be seen that
the organisation has published statement of change in equity and cash flow statement, which
reveal the changes in its cash position and financial performance over the years. Such
procedure enables the investors as well as the other users to obtain an overview of any change
in financial condition of Boral Limited. This is inherent from the following two figures:

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3. Recognition criteria of conceptual framework:
Certain criteria are laid out in the AASB conceptual framework in order to facilitate
the recognition of equity, assets, expenses, liabilities and revenue. All Australian entities have
to comply with these criteria so that the financial aspects mentioned above could be

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recognised. The aspects are not exceptions for Boral Limited and the evidences of these
aspects in the context of the organisation could be discussed as follows:
Assets:
Boral Limited has different types of assets and the conceptual framework has made it
mandatory for the management of the organisation to comply with the rules and policies
mentioned in “AASB 116 Property, Plant and Equipment” falling under “Section 334 of the
Corporations Act 2001”. In case of Boral Limited, this asset is measured at historical cost
after deducting impairment losses and accumulated depreciation charges and it follows the
straight line method of depreciation.
Boral Limited has to comply with “AASB 102 Inventories”, as mandated by the
AASB conceptual framework in order to recognise its inventories. The organisation

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recognises its inventories at either net realisable value or cost, whichever is lower
(Boral.com.au 2018).
Finally, it needs to adhere to the norms laid down in “AASB 138 Intangible Assets”
for measuring or recognising its intangible assets (Cheng et al. 2014). The intangible assets of
Boral Limited are gauged at cost after impairment losses and accumulated depreciation are
deducted.
Liabilities:
In accordance with the conceptual framework regulations, Boral Limited is
responsible to adhere to “AASB 132 Presentation of Financial Instruments” in order to
recognise its business borrowings. The latest annual report of the organisation states that
borrowings are gauged at fair value from which transaction costs are deducted.

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Another significant liability is provision and all the organisations are liable to
conform to the norms mentioned under “AASB 137 Provisions, Contingent Liabilities and
Contingent Assets” to recognise the same (Gomariz and Ballesta 2014). The annual report of
Boral Limited in 2017 makes it evident that provisions are considered at the time of presence
of any existing obligation because of past event.
Finally, according to AASB regulations, it is necessary for the business organisations
to maintain the guidelines mentioned under “AASB 16 Leases” (Henderson et al. 2015).
Boral Limited has adhered to these guidelines as well evident from its annual report.
Equity:

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Boral Limited is liable to adhere to the guidelines depicted under “AASB 132
Financial Instruments: Presentation” for recognising equity. It recognises the entirely paid
ordinary shares in the form of equity.
Revenue:
Boral Limited has to conform to the principles mentioned under “AASB 118
Revenues” so that it could realise revenue. The organisation recognises revenue after
rendering services to its customers.
Expenses:

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The conceptual framework of AASB requires the organisations to recognise expenses
when future economic benefits are expected to flow out of them (Nobes 2014). The major
expenses of Boral Limited include selling and distribution expenses along with
administration expenses.
4. Qualitative characteristics of conceptual framework:
Based on the conceptual framework of AASB, the financial information of the
organisations needs to possess the qualitative characteristics in order to increase the
usefulness of the users, which are demonstrated briefly as follows:
Fundamental qualitative characteristics:
These characteristics constitute of relevance and faithful representation. It could be
observed from the annual report of Boral Limited in 2017 that the financial statements of the
organisation include financial information for the years 2016 and 2017. This implies the
efforts of the organisation in providing their users with relevant financial information so that
effective decisions could be undertaken (Wahlen, Baginski and Bradshaw 2014). At the same
time, Boral Limited conforms to the AASB principles, IFRS, IASB and Corporations Act
2001 for assuring accurate and faithful representation of its financial statements.
Enhancing qualitative characteristics:
The different enhancing qualitative characteristics of conceptual framework constitute
of verifiability, comparability, understandability and timeliness (Warren and Jones 2018). In
this case, it is to be noted that Boral Limited has presented its financial information in a
manner in order to enable the users to compare them with similar information of other
business organisations and varying timeframes of Boral Limited. Due to this reason, the

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organisation discloses its financial information of the previous year in the financial
statements of the existing year.
Apart from this, the notes to accounts mentioned in the annual report of Boral Limited
assists the users by providing a scope to check the accounting assumptions made and
financial statement projections. It publishes its financial statements monthly, quarterly and
annually so that timeliness of financial information could be maintained. It is significant to
note that the accounting treatments are supported by relevant clarifications and justifications
in financial footnotes. The aim is to aid the users of the reports so that they could understand
those financial and accounting treatments mentioned in the annual report (Zhang and Andrew
2014).
5. Conclusion and recommendations:
It is clearly inherent from the above analysis that Boral Limited has made effective
compliance with the different guidelines stated in the AASB conceptual framework. This is
supported by the figures extracted from the annual report of the organisation with relevant
explanations. After this, it has been found that Boral Limited has not encountered any issue in
recording and recognising assets, liabilities, revenue, expenses and equity. This is because it
has adhered entirely to the various criteria for recognition, as mandated by the conceptual
framework of AASB. Finally, it could be observed that the disclosure of financial
information by Boral Limited contains the necessary fundamental and enhancing qualitative
characteristics mentioned in the conceptual framework. Therefore, all the Australian entities
are recommended to maintain compliance with all the features and guidelines of the
conceptual framework for avoiding accounting issues.

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References:
Aasb.gov.au., 2018. Conceptual Framework For Financial Reporting. [online] Available at:
<http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf> [Accessed 13
August 2018].
Boral.com., 2018. [online] Available at:
https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-
2017.pdf [Accessed 13 Aug. 2018].
Boral.com.au., 2018. Boral Australia: Build something great™. [online] Available at:
https://www.boral.com.au/ [Accessed 13 Aug. 2018].
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international
integrated reporting framework: key issues and future research opportunities. Journal of
International Financial Management & Accounting, 25(1), pp.90-119.
Gomariz, M.F.C. and Ballesta, J.P.S., 2014. Financial reporting quality, debt maturity and
investment efficiency. Journal of Banking & Finance, 40, pp.494-506.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Huber, W.D., 2017. Irreconcilable differences? The FASB's conceptual framework and the
public interest. International Journal of Critical Accounting, 9(5-6), pp.514-523.
Nobes, C., 2014. International classification of financial reporting. Routledge.

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Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement
analysis and valuation. Nelson Education.
Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.