Contemporary Issues in Accounting: Measurement Requirements, Qualitative Characteristics, and Users of Financial Reports

This article discusses the measurement requirements, fundamental and enhancing qualitative characteristics, and users of financial reports in the context of APA Group's financial statements. It explores the conceptual framework of accounting and its significance in setting accounting standards.

CONTEMPORARY ISSUES IN
ACCOUNTING

Table of Contents
Introduction................................................................................................................................2
Main Body..................................................................................................................................2
Measurement requirements of the conceptual framework.....................................................2
Fundamental qualitative characteristics.................................................................................3
Enhancing qualitative characteristics.....................................................................................4
Users of the financial reports..................................................................................................6
Basic knowledge of accounting..............................................................................................6
The requirement for general purpose financial reporting.......................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8
1

Introduction
The conceptual framework is considered to be a framework which consists of interrelated
fundamentals and objectives. The objectives are to determine the purpose and goals of
financial reporting. The fundamental is considered to be the underlying concepts that assist in
achieving those objectives. The concepts provide direction to select events, circumstances
and transactions which are to be accounted, recognized, measured, summarized and reported.
Thus, it provides a framework for setting accounting standards, resolving accounting disputes
and following fundamental principles. APA group is the leading energy infrastructure
organization in Australia (APA, 2018). The company have more than 1700 employees and
operates gas transmission networks all across the country. The organization delivers safe,
reliable and smart solutions through interconnected infrastructure and adequate industry
knowledge. The management of the APA group has managed the business operations in an
efficient manner.
Main Body
Measurement requirements of the conceptual framework
Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
2

The general purpose financial report of APA group has been prepared as per the requirements
of the Corporations Act 2001, Australian Accounting Standards and complying with the
International Financial Reporting Standards. The financial reports of the organization have
been prepared based on the historical cost but excluding the financial instruments (Deegan,
2012). The finance leases under the assets are recognized initially at their fair value or at the
amount which is equal to the minimum lease payment’s present value. The borrowings are
initially recognized at the fair value deducting the transaction costs. The rate of interest swaps
fair value at the reporting date is identified by the discounting future flow of cash. The
financial instruments of the organization are carried out at the fair value in the financial
position statement. The fair value can be examined from the quoted prices in the active
market. The financial instrument if in the market is not active then the organization uses
different valuation models for determining the fair value (Holton, 2012). The main objective
of implementing valuation methods is to set a price that will be received for selling the asset
or transferring the liability between the participants of the market. The fair value values of the
financial liabilities and financial assets are being measured and evaluated at the end of the
reporting period. The information depicts that APA group complied with the measurement
requirements of the conceptual framework.
Fundamental qualitative characteristics
Source: (Annual Report, 2018)
3

Source: (Annual Report, 2018)
The directors of APA group declares that the financial statements and notes are being
prepared as per the Corporation Act 2001 consisting of accounting standards providing a fair
and true view of the financial performance and position. The independent report of Deloitte
also depicts that the consolidated profit or loss statement and other comprehensive income,
consolidated financial position statement, consolidated cash flow statement and consolidated
equity changes statements have been prepared as per the accounting rules and policies. The
financial report is prepared as per the Corporations Act 2001 showing fair and true view of
the financial performance and position (Greuning, Scott and Terblanche, 2011). The directors
are being responsible to prepare the financial report as per the Corporations Act 2001 and
Australian Accounting Standards in order to provide a true and fair view. The financial
information assists the users to make significant decisions in an appropriate manner. The
faithful representation has been carried out by the organization which maximizes the
characteristics of neutrality, error fee and completeness. A specified structure is being
followed for ensuring appropriate preparation of the financial report. The information
depicted is both relevant and represented faithfully as per the needs of the users (Shim and
Siegel, 2008).
Enhancing qualitative characteristics
The qualitative characteristics such as understandability, timeliness, verifiability and
comparability enhance the quality of the information that is faithfully represented and
relevant.
4

Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
5

Source: (Annual Report, 2018)
The information about the reporting organization is considered to be more useful when it can
be compared with other entities with similar information. The financial statement of the APA
group provides significant information which can be compared with other entities. The
consolidated profit or loss statement, consolidated financial position statement, consolidated
statement of equity changes and cash flow statement are being prepared by all the
organizations (Iasplus, 2018). Thus, the information can be used for examining the financial
position and performance of the firms. The comparability allows the users to determine and
understand the differences and similarities between the organizations.
Verifiability assists the organization to ensure that the information is represented faithfully in
front of the users. The users need a true and fair view of the position of the organization.
APA group prepares the financial statements as per the Australian Accounting Standards and
Corporations Act 2001 ensuring a fair and true view of the organization. Timeliness is
referred to the availability of the information in time to the decisions enabling them to make
decisions (Needles and Powers, 2012). The financial statements are prepared by the APA
group at end of each accounting period which is 30 June 2018. The information assists the
users to make significant decisions on the basis of the available information.
Characterising, presenting and classifying information appropriately make it understandable.
The financial reports prepared by the APA group are complete and consists of appropriate
information which can be easily understood. All the items are classified in order to
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appropriate manner. The users would be able to review the economic and business activities
of the APA group from the annual report in an appropriate manner (Sharma, 2010).
Users of the financial reports
The users of the financial reports are to able to use the information provided in the report to
make decisions. The management team of the APA group are able to examine the financial
performance of the organization which enables them to make financing and operational
decisions. The investors are able to understand the profitability, cash flows and liquidity of
the organization. It enables them to make a decision of making an investment on the basis of
whether the organization will be able to generate returns or not (Northington and Gerard,
2011). The lenders and other creditors are able to determine and evaluate the liquidity level
and profit margin of the organization. It assists them to determine whether the organization
will be able to recover all its debts in future. On the basis of the information, they would
decide whether lending money would be a good decision or not. Apart from this, the
employees also get significant information which assists them to understand their future
career prospect within the organization. The government is able to understand whether the
company is paying the taxes in an appropriate manner. The customers and suppliers are also
able to evaluate the financial position and performance of the organization. Thus, the APA
group provides significant information to the users of the financial report.
Basic knowledge of accounting
The users of the financial reports should have more than basic knowledge of accounting for
analysing an organization. It will assist them to make decisions in an appropriate manner by
determining and comparing the financial information with the performance of the
organization. Only gaining information about the income, expense, assets, liabilities and cash
flows are not considered to be enough for the users (Roode and Leith, 2009). They should
also understand the accounting rules and procedures which are being used for preparing the
financial statements. The users will be able to determine and evaluate which financial items
are treated in which manner within the financial statements. The users will be able to evaluate
whether the organization is moving in the right direction or not. The users will be able to
identify the financial items which contributed to the increase or decrease in the profit margin,
liquidity, cash flows, assets and equity.
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The requirement for general purpose financial reporting
The general purpose of financial reporting is to provide significantly useful information to
users that assist them to make economic and business decisions. The financial reporting of
APA group consists of all the significant information that enables the lenders, investors and
other creditors to make decisions about purchasing, holding or selling debt instruments,
settling or providing loans or other credit forms, or exercising votes and influencing the
actions of the management that imposes impact on the economic resources of the
organization (Fasb, 2018). The users of the information are not able to assess the ability of
the organization to generate future cash flows but also how efficiently and effectively
management has carried out their responsibilities. The financial statements have provided
information in respect to the financial performance and position of the APA group. The users
are able to make financial and other decisions in an appropriate manner. Thus, APA group is
able to meet the requirement for general purpose financial reporting.
Conclusion
APA group has appropriately met requirements of the conceptual framework. The financial
statements have been prepared on the basis of the accounting rules and standards in order to
ensure a fair and true view of the organization. The users are able to use the report and obtain
significant information that assists them to make decisions.
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References
Annual Report (2018). Annual Report. [online] Apa.com.au. Available at:
https://www.apa.com.au/globalassets/documents/annual-reports/2018-annual-reports/
apa_group_annual_and_sustainability_reports_2018.pdf [Accessed 13 Dec. 2018].
APA (2018). APA Group homepage - APA Group. [online] Apa.com.au. Available at:
https://www.apa.com.au/ [Accessed 13 Dec. 2018].
Deegan, C. (2012). Australian financial accounting. 10th ed. North Ryde, N.S.W.: McGraw-
Hill Australia.
Fasb (2018). The Conceptual Framework. [online] Fasb.org. Available at:
https://www.fasb.org/jsp/FASB/Page/BridgePage&cid=1176168367774#section_1 [Accessed
13 Dec. 2018].
Greuning, H., Scott, D. and Terblanche, S. (2011). International financial reporting
standards. 5th ed. Washington, D.C.: World Bank.
Holton, R. (2012). Global finance. 12th ed. Abingdon, Oxon: Routledge.
Iasplus (2018). Conceptual Framework for Financial Reporting 2018. [online] Iasplus.com.
Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 13 Dec.
2018].
Needles, B. and Powers, M. (2012). Financial accounting. 6th ed. Mason, OH: South-
Western Cengage Learning.
Northington, S. and Gerard, G. (2011). Finance. 7th ed. New York: Ferguson's.
Roode, M. and Leith, K. (2009). Financial reporting. 8th ed. [Pretoria]: [Salt and Pepper].
Sharma, N. (2010). Business finance. 5th ed. Jaipur, India: ABD Publishers.
Shim, J. and Siegel, J. (2008). Financial management. 4th ed. Hauppauge, N.Y.: Barron's
Educational Series.
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