Contemporary Issues in Accounting

The report focused on evaluating the various aspects of the conceptual framework for AP Eagers Limited, an ASX listed organisation. The paper has highlighted the adherence to the measurement requirements of the conceptual framework in the context of the organisation. Secondly, it has emphasised on analysing the compliance of the company to the qualitative features of the framework. The next segment depicts the validity of the financial statements of the firm in order to assist the users in making effective decisions. Finally, the report has concentrated on evacuating whether more than primary accounting knowledge is needed for the users to analyse the financial reports.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
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Executive Summary:
The report focused on evaluating the various aspects of the conceptual framework for AP Eagers
Limited, an ASX listed organisation. The paper has highlighted the adherence to the
measurement requirements of the conceptual framework in the context of the organisation.
Secondly, it has emphasised on analysing the compliance of the company to the qualitative
features of the framework. The next segment depicts the validity of the financial statements of
the firm in order to assist the users in making effective decisions. Finally, the report has
concentrated on evacuating whether more than primary accounting knowledge is needed for the
users to analyse the financial reports.

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Table of Contents
Introduction:....................................................................................................................................3
Background of AP Eagers Limited:.................................................................................................3
Measurement requirements of the conceptual framework:.............................................................3
Fundamental qualitative characteristics:..........................................................................................7
Enhancing qualitative characteristics:.............................................................................................9
Ability of the users to use the report for making decisions:..........................................................11
Knowledge needed for business analysis:.....................................................................................16
Requirements for general purpose financial reporting:.................................................................16
Conclusion and recommendations:................................................................................................16
References:....................................................................................................................................18

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Introduction:
The accounting norms are to be complied by all listed entities for performing their
financial reporting initiatives. With the help of such compliance, certain accounting as well as
financial reporting related issues could be avoided. The identical situation could be observed in
case of ASX listed entities, as it is necessary for them to conform to the required guidelines of
the conceptual framework. The conceptual framework for financial reporting could be observed
in Australia, which is provided by IFRS and the standards are to be complied with the business
organisations. The report is prepared with the intent of analysing the extent of conformance to
the different accounting sections of the conceptual framework by AP Eagers Limited.
Background of AP Eagers Limited:
The organisation is one of the oldest listed automotive retail groups in Australia (AP
Eagers 2018). The core business of the entity comprises of the operations and ownerships of
motor vehicle dealerships. It provides facilities including the sale of used and new vehicles,
parts, services along with facilitating allied consumer finance.
Measurement requirements of the conceptual framework:
All ASX listed entities are required to take into account the measurement requirements in
their process of financial reporting for complying with the conceptual framework and AP Eagers
Limited is not an exception to this case as well. According to this framework, the entities require
reporting their liabilities and assets via two bases of measurement and they constitute of
historical cost and fair value (Beattie 2014). Moreover, in this framework, assets are to be treated
as resources for the organisations and they develop due to the future economic benefits and past

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events. Conversely, liabilities are the present obligations for the entities arising out of past events
leading to resource outflows (Aasb.gov.au 2018). Equity could be deemed as residual interest
after total liabilities are subtracted from total assets.
In a similar manner, it is necessary for the entities to take into account the realisations of
the various financial statement elements. For this, two particular conditions are to be considered
at the time of realising the financial statement elements. Firstly, categorisation needs to be made,
if it is probable that future benefits associated with the items would stream from the listed
entities. Lastly, recognition is needed for these items; in case, they have specific cost values for
reliable measurement (Chen, Feldmann and Tang 2015).
After analysis of the annual report of AP Eagers Limited in 2017, the entity has used fair
value and historical asset for measuring its assets and liabilities.

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The above extracts make it evident that AP Eagers Limited has utilised historical cost and
fair value for measuring assets and liabilities based on business requirements. In accordance with
the historical cost method, the company has measured its assets and liabilities in a way providing
monetary information about all the line items in its various financial statements. However, in fair
value accounting, AP Eagers Limited has measured liabilities and assets based on the current
value by giving necessary information at the measurement date.
However, the organisation is required taking into account other factors for choosing the
bases of measurement. Out of such factors, one of them is relevance that could be identified from
the annual report of the entity, as it has published financial information for both 2016 and 2017.
Along with this, adequate conformance has been assured with IFRS, AASB and Corporations
Act 2001 ensuring faithful representation of the published financial information.

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Fundamental qualitative characteristics:
Two fundamental characteristics are evident in the conceptual framework and they are
demonstrated briefly as follows:
Faithful representation:
If faithfulness is ensured in financial information, it becomes easy for the users to make
effective decisions. In order to assure faithful representation, it is necessary that the financial
information should be complete, free from errors and neutral (Cheng et al. 2014). From the 2017
annual report of AP Eagers Limited, it is evaluated that the organisation has complied effectively
with Corporations Act 2001, AASB and IFRS. Since compliance is made effectively with these
aspects, the financial information of AP Eagers Limited could be said to have faithful
representation.
Relevance:

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When relevancy is present in financial information, the users would be affected positively
for undertaking decisions. Hence, it is essential to ensure the presence of predictive as
confirmatory values in the financial statements of the organisation (Henderson et al. 2015).
When there is presence of predictive values, the users would find it easy in projecting future
results. By using the latest annual report, the users could project future results by assessing
financial position of AP Eagers Limited in 2016 and 2017 (Apeagers.com.au 2018).
In addition, confirmatory value is evident in financial information at the time the users
possess the ability of providing feedback about the previous accounting events. From the annual

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report of AP Eagers Limited in 2017, the users could gather financial information for the past
year 2016 as well.
Enhancing qualitative characteristics:
In accordance with the conceptual framework, four enhancing qualitative characteristics
are evident in financial information, which are stated as follows:
Comparability:
In the presence of this specific characteristic, the users could find it easy to identify and
understand the common features and differences associated with the different financial items of
the listed entities. It has been identified from the annual report of AP Eagers Limited in 2017, all
financial information related to the mentioned year and that of the previous information is

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published in tabular formats. With the help of these formats, the users could compare the
financial information of the organisation with its rivals and different timeframes.
Verifiability:
If there is evidence of this specific characteristic, the users of financial information could
utilise independent observations and knowledge for reaching a conclusion (Lang and Stice-
Lawrence 2015). There could be direct or indirect verification. In accordance with the 2017
annual report of AP Eagers Limited, considerable disclosures are made as financial notes. This
has helped the users to utilise direct or indirect knowledge so that the accounting information of
the entity could be verified.

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Timeliness:
Timeliness ensures that the necessary financial information is delivered at the time of
making valuable decisions. The past information is less effective in the decision-making process.
It has been identified from the annual report of AP Eagers Limited in 2017; it has disclosed
essential financial information for 2016 and 2017.
Understandability:
By using this characteristic, the organisations find it easy to categorise and depict
financial information in a clear and concise way so that the users could understand in a better
manner (Spiceland et al. 2018). It could be observed from the annual report of the organisation
that it has published its financial information in an understandable and simple format supported
by relevant justifications of the various accounting treatments to be published as financial
footnotes. Such aspects have helped in increasing the overall user understandability.
Ability of the users to use the report for making decisions:
Before the financial statements are used for decision-making purpose, all organisations
should comply with the conceptual framework objectives. The initial objective requires listed
entities to disclose essential information about their financial position as well as economic
resources that could be observed in balance sheets.

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The above extract mainly denotes such information disclosure from AP Eagers Limited in
the 2017 annual report in the form of balance sheet statement.
The second objective of the framework requires the ASX listed firms in publishing
information about the changes in economic resources and financial performance.

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From the above tables, it is inherent that AP Eagers Limited has published financial
information related to financial performance in the form of statement of change in equity and
income statement.
The third objective of the framework is to publish vital information relation to the cash
flows of the business entities in annual reports.

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It is clear from the above table that AP Eagers Limited has disclosed necessary
information pertaining to its cash flows. This has been ensured by representing the financial
information in the form of different financial statements. Hence, it is evident that the users of the
financial statements of the organisation could utilise information so that they could undertake
effective decisions.

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Knowledge needed for business analysis:
As per the conceptual framework, the users are required to possess primary accounting
knowledge for understanding the financial statements of the companies. The annual report of AP
Eagers Limited contains all the necessary financial information in simple formats by complying
with the primary principles. Along with this, the firm has provided relevant justifications about
the crucial items of the financial statements as notes to financial statements. Since the aspects are
inherent in the annual report of AP Eagers Limited, it is sufficient for analysing the financial
standing of the organisation (Simnett and Huggins 2015).
Requirements for general purpose financial reporting:
As per Zhang and Andrew (2014), this type of financial reporting takes into account the
financial statements in a specific accounting year so that the investors and creditors could be
assisted for making effective decisions. The main financial statements constitute of balance sheet
statement, income statement, statement of change in equity and cash flow statement. It has been
assessed that the organisation has published the statements in annual report by adhering to the
relevant accounting regulations and thus, effective compliance has been ensured in terms of
general purpose financial reporting (Aasb.gov.au 2018).
Conclusion and recommendations:
It is apparent that AP Eagers Limited has made necessary compliance with the
measurement requirements, as laid out in the conceptual framework. In addition, it has been
evaluated that the firm has made adequate compliance with the qualitative features of the
conceptual framework in the process of financial reporting. Lastly, the financial information is

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disclosed through revelation of various financial statements, which have helped the users in
utilising the same for decision-making.
For improving the financial reporting practice, AP Eagers Limited needs to appoint
internal auditors for checking over the documentation at various regular intervals in order to
ensure that the sale of products and services without bills could be checked at the point of sale.
In addition, revenue recognition principle needs to be maintained as well. Finally, it needs to
make adequate disclosures regarding the impairment of goodwill in its annual report.

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References:
Aasb.gov.au., 2018. [online] Available at:
https://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf [Accessed 11 Dec.
2018].
Aasb.gov.au., 2018. Conceptual framework . [online] Available at:
https://www.aasb.gov.au/Pronouncements/Conceptual-framework.aspx [Accessed 11 Dec.
2018].
AP Eagers., 2018. A.P. Eagers Limited | Automotive Group | Australia. [online] Available at:
https://www.apeagers.com.au/ [Accessed 11 Dec. 2018].
Apeagers.com.au., 2018. [online] Available at:
https://www.apeagers.com.au/wp-content/uploads/2018/04/1790804.pdf [Accessed 11 Dec.
2018].
Beattie, V., 2014. Accounting narratives and the narrative turn in accounting research: Issues,
theory, methodology, methods and a research framework. The British Accounting Review, 46(2),
pp.111-134.
Chen, L., Feldmann, A. and Tang, O., 2015. The relationship between disclosures of corporate
social performance and financial performance: Evidences from GRI reports in manufacturing
industry. International Journal of Production Economics, 170, pp.445-456.

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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.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
Lang, M. and Stice-Lawrence, L., 2015. Textual analysis and international financial reporting:
Large sample evidence. Journal of Accounting and Economics, 60(2-3), pp.110-135.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add
value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Spiceland, D., Thomas, W., Nelson, M., Tan, P.H.N., Low, B. and Low, K.Y., 2018.
Intermediate accounting, Routledge.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.