Contemporary Issues in Accounting

CONTEMPORARY ISSUES IN ACCOUNTING
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Contents
Introduction......................................................................................................................................3
Part 1: Measurement Criteria Adopted by the Company & its Compliance with Conceptual
Framework Requirements................................................................................................................3
Part 2: Fundamental Qualitative Characteristics of Conceptual Framework Applied by
Nanosonics Limited.........................................................................................................................5
Part 3: Enhancing Qualitative Criteria met by Nanosonics Limited as per CF of Accounting.......7
Part 4: Review of financial report of Nanosonics Infection Prevention Limited to assess its
decision usefulness..........................................................................................................................8
Part 5: Knowledge required by users of the financial report to analyse the financial performance
of the company..............................................................................................................................11
Conclusion.....................................................................................................................................12
Recommendation...........................................................................................................................13
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Introduction
Business entities are largely facing the issue of enhancing the quality and reliability of
their financial reporting systems with the increasing cases reported of corporate failure due to
manipulation of financial information. As such, the IASB has developed the conceptual
accounting framework to improve the quality of financial reporting and thereby protecting the
interests of the investors. AASB (Australian Accounting Standards Limited) has also directed
ASX listed entities to comply with the conceptual framework (CF) of accounting to secure the
interests of the end-users of financial reports. In this context, this report has been prepared for
examining the compliance of the company Nanosonics Limited, a medical technology company
involved in research, development and commercialization of the decontamination products and
technologies as per the CR of accounting principles and requirements. This has been carried out
by analyzing its annual report for the financial year 2017.
Part 1: Measurement Criteria Adopted by the Company & its Compliance with Conceptual
Framework Requirements
The Financial Accounting Standard Board’s Conceptual framework gives a set of rules and
standards which are to be followed by every reporting company. To make consistency in
Financial Reporting done by companies, Conceptual Framework states two major bases of
Measurement of financial items of a financial statement of company, First one is Historical Cost
and the second is Current Value.
Historical cost represent amount spent/ received for an event in past as a result of which a
financial item is showing in financial statement. For measurement of a financial item on
historical cost basis, it is tested for impairment and any wear and tear cost that is to say
depreciation or amortization is also considered and the financial item is measured after deducting
depreciation, amortization and any impairment (AASB Exposure Draft, 2015).
Current value is the fair value of the financial item on which a person of a stable mind is
willing to buy or sell on the measurement date. Current value is divided in fair value, current cost
and value in use. An entity can choose more than one measurement basis for different
financial items to make its financial report more appropriate and useful for the users (Wolk,
2016).
An analysis of the annual report of Nanosonics Limited shows that it has followed the
measurement base guidelines set by the Financial Accounting Standard Board in Conceptual
Framework. Nanosonics Limited has prepared its financial statement on historical cost basis and
measured its financial assets and financial liabilities including derivative instruments at fair value
which can be seen from below extract of notes to accounts of Nanosonics Limited.
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(Source: Nanosonics Ltd, 2017)
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