Accounting Concepts and Issues in Financial Statements of Galaxy Resources Materials

[Date]
Student’s Name
UNIVERSITY NAME
Advance
Financial
Accounting
HA3011

Executive Summary
The report is an overall evaluation and study of the accounting concepts being used
by Galaxy Resources Materials. It also highlights the issues in accounting and in the
area of measurement w.r.t. conceptual framework – examples have been given to
substantiate the same. The qualitative fundamental characteristics of the financial
statements namely faithful representation and the concept of relevance has also
been discussed w.r.t. critical and significant information in the financials and in case
one is more important than the other in case of assets and liabilities. Screenshots
from the annual report have been used to evidentiated the stated facts. The
responsibility of preparation of company’s financial statements preparation lies in
the hands of the management and they use a variety of estimates and assumptions
while preparing it and therefore it has been checked if it complies with the
regulatory accounting framework.

Table of Contents
Introduction................................................................................................................ 3
Description of the Accounting concepts.....................................................................3
Conceptual Framework and the measurement issue while accounting......................5
Fundamental Qualitative Characteristics – Relevance and faithfulness in
representation............................................................................................................ 8
Conclusion.................................................................................................................. 9
References............................................................................................................... 10

Introduction
The accounting concepts have been prescribed by the accounting boards around
the world and the International Accounting Standards Board (IASB) in order to guide
the accountants and the management in preparation of the financial statements of
the company. It is for this purpose that the conceptual framework and generally
accepted accounting principles were introduced so that it helps the management in
financial statements preparation. The company which has been considered for
analysis here is Galaxy Resources Materials, which is listed on ASX. It is a public
mining company which has been in existence since 1996 (Bogle, 2018). Some of the
basic and standard accounting concepts being used in all the companies are
primarily accrual concept, going concern, materiality and consistency. The ASX
based companies are also required to comply with the Australian Accounting
Standards and the Corporation Act, 2001.
The very purpose of using these accounting concepts, principles and policies is to
cater to the needs of the wide group of stakeholders – who can both be internal as
well as external. Internal users of financial statements can be employees,
management, debtors, creditors, etc. whereas the external management of the
company includes banks, financial institutions, government, tax authorities, etc. The
annual report and the accounting by the company does help the users in decision
making (ICAEW, 2011).
Description of the Accounting concepts
Out of all the accounting concepts, three of them are basic and compulsorily to be
applied by all the companies while preparing the financial statements and while
maintaining the accounting books – they are principle of going concern, principle of
consistency and the accrual concept. Disclosure on account of these accounting
concepts are generally not required in the financial statements as these are
supposed to be followed by default. However, in case the same is not being
followed, then a separate disclosure is required so as to state the reasons of the
deviation by the given company.
Going concern is one of the basic accounting concepts whereby it is assumed that
the company will continue its operations and business in the coming future without
any risk of getting closed or liquidated unless a situation arises whereby the
company may have no other option but to close the business. Therefore, it is
assumed that the entity or business is a going concern unless the same has been
specifically mentioned or disclosed in the annual report of the company. If at all
there is any risk in the continuity of the business, the same should be disclosed
specifically in the Director’s Report as well as the same should be captured in the
Auditor’s Report (Linden & Freeman, 2017). It is one of the primary responsibilities
of the management to assess if there is any risk to the going concern assumption of
the client and highlight them. In the case of Galaxy Resources Materials, there are
no such conditions which put the company in risk w.r.t. going concern assumption.