Conceptual Framework for Financial Accounting and Reporting

Contemporary Issues in Accounting

ACCOUNTING 1
Introduction
Conceptual framework is a framework that is used by the company to prepare the financial
statement (Macve, 2015). It is essential for the company to maintain the annual reports so that
the researchers used it to analyse. In this report, the analysis has been done on the annual
reports of the Austal Company. In this report, answers will be given by analysing the annual
report of the company.
1.
The complied framework is applied on annual report of the company by the beginning of the
period on or after the 1st July. Measurement requirement is a process of evaluating the
monetary amount in which the financial statement is to be measured and carried in the
balance sheet. There are many different ways to measure the monetary amount such as
historical cost, realisable, present value and current cost.
Historical cost is the method in which the assets are recorded on its nominal and original cost
at the time of acquired by the company. Current cost is a method that is used to measure the
value of asset and liability. In this method, assets are carried at the current amount of the
asset in the market. Realisable value is an actual price received, less transportation and the
applicable processing adjustments. It is observed that most of the companies applied the
historical and the fair value method (Australian Government, 2018).
According to the annual report of Austal Company, it is observed that the company compiled
the conceptual framework. It applies the historical cost and fair value method to measure the
asset and liabilities. It implements these methods on the different assets and liabilities as per
the nature and condition.
For example-

ACCOUNTING 2
Plant and equipment is measured at the fair value method less accumulated depreciation on
buildings and other losses.
(Source: Austal Limited, 2018)
Inventories and work in progress of the company are measured at the historical cost
(Source: Austal Limited, 2018)
These examples indicate that the company applied the historical and fair value method to
measure the asset.
2.
As per the complied framework, there are four characteristics of fundamental qualitative
characteristics such as relevance, materiality and the faithful representation. Materiality refers
that an accounting standard can be ignored by the company if the net amount has a small