Contemporary Issues in Accounting

This report analyzes the ASX Limited annual report to understand how it complies with the conceptual framework of accounting. It examines measurement requirements, qualitative characteristics, and the users of financial reports.

Contemporary Issues in Accounting

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Introduction
Conceptual framework defines the ideas and objectives that lead to creation of a consistent
set of rules and standards. The framework sets the nature, functions, limits of financial
accounting in order to prepare the financial statements of the company. There are three main
reasons for the development of conceptual framework and these are framework for setting
accounting standards, resolving accounting disputes, fundamental principles that do not
repeated in accounting standards. The main objective of the framework is to prepare the
financial statement as per the principles and standards so that researchers can use it (Lumen,
2018). In this report, ASX Limited has been taken into consideration to analyse the report by
using the annual report.
1.
Measurement requirement is the process of evaluating the asset and liabilities in monetary
terms in order to maintain the records and carried the amount in balance sheet. There are
different ways of measuring the assets and liabilities such as historical cost methods, and fair
value method (Australian Government, 2018). Historical cost method evaluates the assets on
the basis of original cost and the cost that is invested by the company at the time of
acquisition. The cost of asset is measured at the current amount as per the market is called
current cost method and it is also known with the name of fair value. It is observed that most
of the companies used the historical and fair value method in order to evaluate the asset.
As per the analysis of annual report of ASX limited, it has been seen that the company
complied the conceptual framework. It applied the fair value method and historical cost
method in order to evaluate the value of asset. For example-Plant and Equipment of the

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company is measured at the fair value by subtracting the accumulated depreciation and the
other impairment value.
(Source: ASX Limited, 2018)
Trade receivable of the company is evaluated on the basis of fair value method
(Source: ASX Limited, 2018)
2.
There are three features of fundamental qualitative and these are materiality, relevance, and
the faithful representation. Materiality defines the small amount of transaction that does not
affect the profitability ration of the company. Faithful representation is the economic

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phenomena in terms of numbers and words (CFI, 2018). As per the analysis of annual report,
the company applied the materiality method to show the small transaction in order to prepare
the appropriate report. It has been seen that the company applied the methods and theories in
order to prepare the profit and loss account and balance sheet at the end of the year on the
specific date.
3.
Enhancing qualitative features are verifiability, comparability and the understandability.
Verifiability defines that the information contain in the report should be verified or confirmed
in order to provide the guarantee to users. Understandability refers that the organisation
should contain the information that can be easily understandable by the investors. The term
comparability defines that the company has to compare a thing with the similar information
about the other thing (Accounting Tools, 2018).
The company applied these frameworks during the preparation of annual report. It has been
seen that the annual report is prepared by an auditor who is highly qualified and it is also
observed that the report is prepared as per the IFRS Standards. It can be said that the financial
report of the company is verified and the users can use it. It has been seen that, it is followed
all the frameworks and standards during the preparation of financial report that is why, it can
easily understand by the users. As per the annual report, it is observed that the company used
the two years of data due to which it is easy to compare (ASX Limited, 2018).
4.
Investors, government, lender, creditors, employees and the other stakeholders are the users
of financial report. The users analyse the report in order to evaluate the financial performance

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of the company. It is necessary to evaluate the financial position of the company so that they
can easily invest on it.
(Source: ASX Limited, 2018)
The annual report of ASX limited is prepared and audited as per the Corporation Act 2001
and Australian Accounting Standards. The accounts contain the whole information related to
the company performance and each transaction so that the users know about each and
everything. The whole information helps the users and investors to take the decision related
to investment (Australian Government, 2018).
5.
Yes, it is required for the users to have the high knowledge with the basic knowledge in order
to analyse the annual report of the company. The financial statement contains the
information which is used to evaluate the financial position of the company. It is essential for
the users to analyse the report in the depth to evaluate the profitability, cash flow statement
and the other important accounts. These accounts contains the whole information of financial
transactions of the company due to which it is difficult for the users to understand it who
have the basic knowledge about the accounts and statement. Analysing the profit and loss

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account, balance sheet, and cash flow statement requires the high level of knowledge so that
they can understand the each and every concept Lumen. (2018. The chances of fraud are high
due to which it is necessary for the users to evaluate the risk before investing the money. It is
highly recommended that the users have to analyse the annual report in depth and by
comparing it with the previous year performances. The analyses help the users to protect
themselves from the incidents of fraud (Henderson, Peirson, Herbohn, and Howieson, 2015).
But the analyses can be done only when the users have the high knowledge of evaluating and
understanding the financial accounts.
6.
Yes, the annual report of ASX Limited is prepared by the auditor as per the Corporate Act
2001 and the Australian Accounting standards. It contains the whole information related to
the financial transactions of the company. It met all the requirement of the users in order to
evaluate the financial position of the company. The information contain in annual report is
appropriate as it is audited by the auditor with the correct methods and frameworks that is
fully assured by the users. The transparency in information helps the users to take the general
decision regarding the company. The whole information can easily understand by the users
due to which they can take the general decision regarding the investment. The other benefit of
the annual report is that the users can compare the data from the previous year as it contains
the data of previous year as well. It helps the users to forecast the company position for the
future with the use of previous records and data. The benefits and uses of annual report state
that the company can use the annual report for taking decision (Macve, 2015).
Conclusion
At the end, it is concluded that the ASX Limited complied the conceptual framework. At the
time of preparing the financial statements, it applied all the standards and framework as per

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the Corporation Act 2001 such as enhancing and fundamental characteristics. It has been
analysed that the report is prepared in an appropriate manner that helps the users to
understand and compare it. It is also useful for the users to take the general decision by
evaluating the financial performance. At the end, it can be said that the preparing the
financial statement is beneficial for the company as well as for the users due to appropriate
records and data.

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References
Accounting Tools. (2018) The qualitative characteristics of financial statements. [online]
Available from: https://www.accountingtools.com/articles/what-are-the-qualitative-
characteristics-of-financial-statem.html [Accessed 18/4/19].
ASX Limited. (2018) ASX Limited Annual Report 2018. [online] Available from:
https://www.asx.com.au/documents/investor-relations/AnnualReport2018.pdf [Accessed
18/4/19].
Australian Government. (2018) Conceptual framework. [online] Available from:
https://www.aasb.gov.au/Pronouncements/Conceptual-framework.aspx [Accessed 8/4/19].
CFI. (2018) Qualitative Characteristics of Accounting Information.
https://corporatefinanceinstitute.com/resources/knowledge/accounting/qualitative-
characteristics-of-accounting-information/ [Accessed 8/4/19].
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B. (2015) Issues in financial
accounting. Pearson Higher Education AU.
Lumen. (2018) The Accounting Concept. [online] Available from:
https://courses.lumenlearning.com/boundless-accounting/chapter/the-accounting-concept/
[Accessed 18/4/19].
Macve, R. (2015) A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.