Contemporary Issues in Accounting: Xero Limited

Contemporary Issues in Accounting: Xero Limited
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Executive Summary
This report is developed for providing an examination of the annual report of an ASX
listed entity, that is, Xero Ltd, in accordance with the principles of conceptual accounting
framework of IASB. It has been identified from analyzing the compliance of the company that it
has effectively followed all the general purpose financial reporting requirements stated by the
CF. The fundamental and enhancing qualitative characteristics are adequately met and it has met
the general objective of developing the financial statements.
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Contents
Introduction......................................................................................................................................4
Critical Analysis of General Purpose Financial Reporting by XERO Ltd......................................4
Measurement Criteria Adopted by the Company & its Compliance with Conceptual
Framework Requirements............................................................................................................4
Fundamental Qualitative Characteristics of Conceptual Framework Applied by Xero Limited.5
Enhancing Qualitative Characteristics of Conceptual Framework Applied by Company...........7
Decision Making Relevance of the Financial Report of the Company......................................10
Knowledge required by the end-users of Financial Reports as stated by CF to Assist in
Decision Making........................................................................................................................11
Evaluation whether Xero Ltd has met the requirement of general purpose financial report.....11
Conclusion.....................................................................................................................................11
Recommendation...........................................................................................................................12
References......................................................................................................................................13
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Introduction
The compliance with the conceptual framework of accounting is becoming essential for
business entities around the world developing their financial statements in accordance with IASB
(International Accounting Standard Board). The AASB (Australian Accounting Standards
Board) have also directed all the ASX listed entities to develop their financial reports as per the
IASB standards. In this context, this report is directed to a selected an ASX listed corporation by
providing an evaluation of its compliance with the essential requirements of the conceptual
framework of accounting. This is undertaken by evaluation of the annual report of the selected
company and examining its compliance with the qualitative and measurement criteria’s stated by
the CF. The Company selected for analysis purpose is Xero Limited, a public software company
involved in providing cloud based software platform for small and medium-sized business.
Critical Analysis of General Purpose Financial Reporting by XERO Ltd
Measurement Criteria Adopted by the Company & its Compliance with Conceptual
Framework Requirements
As per the Conceptual Framework, a listed reporting entity needs to provide information
about the measurement base it chooses to value its assets & Liabilities. A Business entity can
choose measurement approach either historical cost or current value as stated by CF. Current
value is divided into fair value, value in use &current cost. An Entity needs to select an
appropriate measurement approach which meets the requirement and objective of General
Purpose Financial Reporting (Complied Framework, 2015).On the evaluation on Annual Report
it can be said that Xero Ltd. has valued its fixed assets (Property, Plant & Equipment) on
historical cost less Depreciation which is charged on Straight Line basis. Fixed Assets are tested
for Impairment whenever there are indications of it.
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