Contemporary Issues in Accounting

This report provides a critical analysis of the general purpose financial reporting by Vocus Group Limited, an international telecommunication company. It examines the measurement criteria adopted by the company and its compliance with the conceptual framework requirements. The report also explores the fundamental qualitative characteristics of the conceptual framework applied by Vocus Group Limited and the enhancing qualitative characteristics. Additionally, it discusses the decision-making relevance of the financial report and the knowledge required by end-users. Finally, the report highlights the requirements of general purpose financial reporting.

CONTEMPORARY ISSUES IN ACCOUNTING
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Contents
Introduction.................................................................................................................................................3
Critical Analysis of General Purpose Financial Reporting by Vocus Group Limited..................................3
Measurement Criteria Adopted by the Company & its Compliance with Conceptual Framework
Requirements...........................................................................................................................................3
Fundamental Qualitative Characteristics of Conceptual Framework Applied by Vocus Group Limited. 5
Enhancing Qualitative Characteristics of Conceptual Framework Applied by Company........................7
Decision Making Relevance of the Financial Report of the Company....................................................9
Knowledge required by the end-users of Financial Reports as stated by Conceptual Framework to
Assist in Decision Making.....................................................................................................................10
Requirements of General purpose financial Reporting..........................................................................10
Conclusion.................................................................................................................................................10
Recommendations.....................................................................................................................................10
References.................................................................................................................................................12
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Introduction
The conceptual framework of accounting is developed by IASB (International Accounting
Standard Board) for improving the quality of financial reporting by businesses all over the world. In this
context, the present report is developed for developing an understanding of the various features of the
accounting framework and its adoption within the business entities during financial reporting. This has
been carried out with analyzing the financial report of a selected ASX listed entity, that is, Vocus Group
Limited, an international telecommunication company of Australia.
Critical Analysis of General Purpose Financial Reporting by Vocus Group
Limited
Measurement Criteria Adopted by the Company & its Compliance with Conceptual
Framework Requirements
Measurement as per IFRS Framework means recognizing and reporting elements of financial
statements in monetary amounts and different measurement basis can provide more useful information to
different users in different situation. Therefore elements of financial statements can be measured on two
bases –
- Historical Cost
- Current Value
However other measurement basis can also be used to recognize and report financial statements such as
Net Realizable value, Present Value to make the general purpose financial report more productive for the
end-users (Complied Framework, 2015).
Historical cost means the cost incurred in the past as a result of which a financial item is raised.
However historical cost for the financial elements is updated by the time passes. For example asset will
be measured at historical cost less depreciation or Impairment if any and liability when it becomes
onerous. On the other side current value provide updated information of a financial element on the
measurement date. Current value measurement basis is further divided in to fair value, value in use and
current cost. To meet the reporting requirements and objective of General Purpose Financial Reporting
(Compliance Framework, 2015), an entity must choose an appropriate measurement basis for recognition
of elements of financial statement. An evaluation of the Annual Report of Vocus Group Limited shows
that Non-Current Assets (Property, Plant &Equipment) are recognized at historical cost less depreciation
and Impairment. Trade receivables of the company are measured at fair value and subsequently measured
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at amortized cost and revenue is recognized on fair value in the financial statements of Vocus Group
Limited. Goodwill is allocable to identified cash generating units whenever impairment test is done
(Vocus Group ltd: Annual Report, 2018)
(Source: Vocus Group Limited: Annual Report, 2018)
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(Source: Vocus Group Limited: Annual Report, 2018)
Fundamental Qualitative Characteristics of Conceptual Framework Applied by
Vocus Group Limited
Fundamental qualitative characteristics of financial reporting provide information that can be the
most useful for the end users in decision making about the entity. The Fundamental qualitative
characteristics of financial information are relevance & faithful representation. The each and every
information cannot be relevant for every user or for a user in different decisions. Thus, information is
relevant and material if it can differ in the decision of the users on such financial statements of the
company and to make financial information capable to change the decision of users it should have
predictive value as well as confirmatory value. The annual Report of the Vocus Group Ltd. reflects that it
has provided all the relevant information in its financial statement which is material and useful for the
users (IFRS Conceptual Framework, 2018). For example the performance highlights of the company
shows its current growth rate and performance and it’s easy to predict its future position in the industry.
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(Source: Vocus Group Limited: Annual Report, 2018)
Conceptual Framework provides the second most qualitative characteristic of financial information is
faithful representation which represents substance of the company’s financial position and performance
over the legal form only. Information is faithfully represented if it is complete, neutral and free from
errors (Macve, 2015). Whether the information provided by Vocus Group Limited in its annual report
has the fundamental qualitative characteristics or not can be seen from its independent audit report
prepared by Deloitte (Vocus Group ltd: Annual Report, 2018).
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(Source: Vocus Group Limited: Annual Report, 2018)
Enhancing Qualitative Characteristics of Conceptual Framework Applied by
Company
The four qualitative characteristics – Comparability, verifiability, timeliness and
understandability enhance the importance of information which is relevant and faithfully represented.
An information of an entity if comparable with the information of other entity or with the
information of the same entity but for different period than it becomes more useful as reflected by the
remuneration policy and framework of the Vocus Group Limited (Vocus Group ltd: Annual Report,
2018).
Verifiability characteristic of information makes it easy for the user to verify the given
information by cross checking the same as required by the conceptual framework. For example to double
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check the closing inventory one can check its opening inventory increased by purchased during the year
and decreased by used during the year with the physical verification.
Timeliness represents providing current and updated information to the user to make it easy for
them to take a quick and responsive decision. There is no use of the information provided after the
opportunity has been missed even if it was relevant (Vocus Group ltd: Annual Report, 2018).
Understandability characteristic convert a data into information so that the user is able to
understand and perceive the given information in the same way as it is represented in the financial report
with detailed notes to accounts and explain the key matters then he will be able to make the right decision
(Schroeder Clark and Cathey, 2016).
(Source: Vocus Group Limited: Annual Report, 2018)
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Vocus Group Limited has enhanced the quality of the information provided by it in the annual report can
be seen by the below statement.
(Source: Vocus Group Limited: Annual Report, 2018)
Decision Making Relevance of the Financial Report of the Company
A general purpose financial report of the company helps users and even companies itself in
decision making as the report fulfills all the requirements of conceptual framework stated by IFRS. Users
can take investment making decision on the basis of the financial report of the company by analyzing its
current position, evaluating company’s performance, growth, market opportunities, competitors, market
trend etc.
Business itself can take decision about increasing production, work efficiency and effectiveness
to reduce cost, increase sales, investments etc.
Lenders can examine company’s financial health and solvency to satisfy that whether the
company is capable of paying the debt or not.
Vendors can take decision about extending credits or not by evaluating the general purpose
financial report of the company.
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Prospective investors can have the knowledge about prospective growth by looking at share price,
dividends declared by the reporting entity in the past, Preferential or bonus share issues (Vocus Group
ltd: Annual Report, 2018).
Knowledge required by the end-users of Financial Reports as stated by Conceptual
Framework to Assist in Decision Making
It is true that a person having the basic knowledge of accounting can understand the financial
report of a company. he can have the knowledge about company’s performance, growth, products, market
etc. but to make a sound decision on the basis of the financial information provided by the company, the
person should have a deep knowledge of accounting and finance as well as current market scenario to
analyze the data or figures stated in the financial report, to confirm the compliance requirement of
compliance framework, to predict company’s future position based on the historical data provided by the
company by using various analytical techniques such as Trend Analysis, Ratio Analysis, Historical
Analysis, Vertical Analysis. When the investor is having a sound knowledge of accounting and finance he
can make decision about in what segment he should invest his money to make it safe as well as make it
productive by analyzing the segment reporting of the reporting entity (Schroeder Clark and Cathey,
2016).
Requirements of General purpose financial Reporting
The main objective as per the CF to develop genre purpose financial reports by business
corporations is to asset the decision-making process of business entities. In this context, the various
requirements of general purpose financial reports is to provide information regarding the present as well
as future financial performance of an entity. This is done by developing and providing various financial
statements within an entity as analyzed from the annual report of Vocus Group. The entity has presented
the financial statements such as cash flows, income, profit and loss and equity position that are helpful in
stating present as well as predicting future financial performance of a given entity (Christian and
Lüdenbach, 2013).
Conclusion
It can be said from the overall discussion held within the report that it is highly essential for
entities to develop quality financial reports as per the principles of CF of accounting. This is required to
protect the interests of various end-users of a financial report so that they can take accurate decisions
regarding investing their money within an entity.
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Recommendations
It has been analyzed from evaluation of the financial report of Vocus Group as per the CF of
accounting principles that the company has effectively followed all the essential requirements of the
framework. Thus, the company is financially sound and presents less risk for the investors in the context
of presenting any manipulated financial formation. Hence, it is safe to invest within the company.
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References
Christian, D. and Lüdenbach, N. 2013. IFRS Essentials. London: John Wiley & Sons.
Complied Framework. 2015. Australian accounting standards Board. [Online]. Available at:
https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed on: 16
April 2019].
IFRS Conceptual Framework. 2018. Conceptual Framework for Financial Reporting. [Online].
Available at: https://www.ifrs.org/-/media/project/conceptual-framework/fact-sheet-project-
summary-and-feedback-statement/conceptual-framework-project-summary.pdf [Accessed on: 17
April 2019].
Macve, R. 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision
Tool, or Threat. UK: Routledge.
Schroeder, R.G., Clark, M. and Cathey, J.M. 2016. Financial Accounting Theory and Analysis:
Text and Cases. US: Wiley.
Vocus Group ltd. 2018. Annual Report. [Online]. Available at:
https://vocusgroup.com.au/investors/company-performance/annual-reports/ [Accessed on: 17 April
2019].
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