Conceptual Framework for Financial Reporting and Integrated Reporting

This report discusses the history and development of the conceptual framework for financial reporting, including the concerns of the Australian accounting profession. It also explores the potential benefits and limitations of the conceptual framework. Additionally, it compares the sustainability reporting guidelines of the Global Reporting Initiative (GRI) and the International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC). The report focuses on two corporate giants, Diversified United Investment Limited and PSG Group, and analyzes their financial statements and reports based on the conceptual framework. It also discusses the components of an integrated report and evaluates the disclosure of information by a selected South African company.

Executive summary
The business environment has seen drastic improvements since the introduction of the
conceptual framework of financial reporting. The manner of adoption of the framework and
the development of it over global locations is discussed briefly in the report. The focus of the
business giants nowadays is to constitute a positive brand image and reflect their concerns for
the planet through alternative reporting patterns for social responsibility. Two popular ways
trending currently are Sustainability Reporting and Integrated Reporting. Two corporate
giants are studied, one from Australia and one from South Africa being Diversified United
Investment Limited and PSG Group respectively. the Australian company prepares a
sustainability report while the PSG Group presents an integrated report.

Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Part-A....................................................................................................................................................3
(a) History and development of the conceptual framework for financial reporting............................3
(b) The concerns of Australian Accounting Profession.....................................................................4
(c) Potential benefits and limitations of Conceptual Framework for Financial Reporting.................5
I) How many statements/reports have been prepared as per the Conceptual Framework and
what are their major components...................................................................................................5
ii) Which recognition principles and measurement bases have been applied for revenue, assets
and liabilities.................................................................................................................................6
(iii) What qualitative characteristics of information exhibit in company’s various financial
reports............................................................................................................................................7
Part B: Integrated/sustainability reporting.............................................................................................8
(a) Compare and contrast the Sustainability Reporting Guidelines of the Global Reporting
Initiative (GRI) and the International Integrated Reporting Framework of the International
Integrated Reporting Council (IIRC) for explaining a holistic view (broader view) of corporate
social responsibility reporting in addition to reporting of corporate financial performance...............8
(b) Explain the rigour (strengths and limitations) of the conventional accounting, based upon the
Conceptual Framework for Financial Reporting, to explain the contents of sustainability as well as
integrated reports...............................................................................................................................9
(c) Discuss the applicability (usefulness or limitations) of the theories you learned to explain the
contents of sustainability as well as integrated reports....................................................................10
(d) Prepare an index (a table or checklist) of various components (criteria) of an integrated report,
and then discuss whether and how the selected South African company has disclosed information
against each of those components (criteria).....................................................................................10
Conclusion...........................................................................................................................................12
References...........................................................................................................................................13

Introduction
With the diverse range of risks and transactional uncertainties, it is seen that it is
mandatory to hold on a power to operate as per the IASB and accounting guide polices. It is
important to inspect whether the companies adopt conceptual frameworks and proper
accounting in Australia (Ahi, & Searcy, 2015). While foreseeing the adoption of conceptual
framework, firstly it is important to set up proper harmonisation among the domestic and
international accounting with the reporting framework. It is seen that it is quite difficult to
adapt with the laid down changes and acceptance becomes difficult as regulated by the AAPC
(Australian Accounting Profession Community). This report details the study in regards to
conceptual frameworks to accept the changes of newly laid conceptual framework to take
into consideration (Ahi, & Searcy, 2015).
Part-A
(a) History and development of the conceptual framework for financial reporting
International Financial Reporting Standards (IFRS) first came to operational existence in
Australian in the year 2005, which marked the Australia’s first attempt to comply with a
framework that was based upon the conceptual Framework laid by International Accounting
Standards Board (IASB). The new framework framed by AASB by based upon the guidelines
set by the IASB. Th conceptual framework set by IASB was however a result of an
agreement that took place between FASB and IASB to revise the manner in which financial
reporting was undertaken then. The agreement was entered in year 2004 jointly by these two
organisations. On completion of the agreed proposals of the agreement, AASB presented its
own conceptual framework based upon the IASB’s framework.
However, in 2013 end certain revisions were made in the existing framework by AASB. The
IASB’s conceptual framework originally had 4 chapters, and the revision made by AASB
was meant to incorporate Chapter 1 and 3 of the original framework to the framework
developed by AASB.
U.S. however has not yet adopted the conceptual framework as developed by IASB, rather is
following a joint concept for financial reporting which is being collaborated by FASB and
IASB jointly. U.S. has shown reluctance to converge its financial reporting as required by the

conceptual framework for it is an aided cost burden as well as they consider the quality of US
GAAP to be superior to the IFRS Financial Statements.
In U.K. on the other hand, the European Union have adopted the IFRS, i.e. the IAS
regulations because of a decision made in June 2002 for financial statements beginning with
financial year 2005. These regulations as adopted are applicable on EU Member States which
are 28 in number and upon the three geographical locations of European Economic Area as
well.
The analysis of the kind of financial reporting followed by different countries describe the
different frameworks adopted by them, yet the certain similarity in the approach to present
information which is of most use for the users.
(b) The concerns of Australian Accounting Profession
The application of conceptual framework in not welcomed greatly by the Accounting
professionals in Australia because of several accounting concerns it has raised. The
execution, creating, and compliance of the framework with the process can be costlier
(Diversified United Investment Limited, 2018).
The issues related to conceptual framework do not comply with significant new and emerging
accounting profession rather view the existing practises and policies that are served and
alternated differentiated (Searcy, 2016).
There are many other complex issues relevant to old accounting policies, which have
remained unsolved. For example- Manner through which accounting balances can be
measured can be debated. Standard base is not available in regards to the measurement on the
historical cost and the fair cost with any other possible manner.
It is clear that adoption of newly conceptual framework indicates severe change. Dynamic
nature and change related to denial to accept easily as per the AAPC (Australian Accounting
Profession community) (Stacchezzini, Melloni, & Lai, 2016).

(c) Potential benefits and limitations of Conceptual Framework for Financial Reporting
The conceptual framework has shown proven benefits for the users as well as the preparers.
The approach has provided a streamlined and consistent manner against which the financial
information shall be prepared, presented and compared. The consistency is not only in the
preparation and presentation of the financial information but also in the understandability it
adds for the users. The credibility and reliability attached with financial information has
undoubtedly enhanced to make it much appropriate for the readers.
Inspite of such benefits, the conceptual framework yet is to be simplified for its use. The
requirements for preparation are complex and add to the time taken by preparers to apply
them. The conceptual framework means an end approach in itself beyond which the creativity
of the preparers of information is not allowed. Also for the end users, the information
presented through these standards might appear complex to be understood.
a. The company that has been selected for checking of the compliance of conceptual framework
are Diversified United Investment Limited and PSG Group limited. The annual reports and
the financial statements in regards to 2018 have recognised and analysed-
I) How many statements/reports have been prepared as per the Conceptual Framework
and what are their major components
Conceptual framework insists the preparation of the financial statements, which avail
information related to assets, liabilities, income, and comprehensive income of the
Diversified United Investment Limited and PSG Group limited. These requirements related to
financial statement explicit data and information such as statement of cash flows, statement
of financial presentation, notes to accounts, and fluctuation in equity. Presentation related to
consolidated and comprehensive income statement when the reporting group is a parent and
subsidiary of operations (Govindan, 2018).
The statement as prepared by both of the companies such as Diversified United Investment
Limited and PSG Group limited, as per the conceptual framework and element as follows-
Consolidated statement of change in equity- Some of the important components related to
capital transaction that is related for Diversified United Investment Limited and PSG Group

limited, and profit and loss for 2018 (Stacchezzini, Melloni, & Lai, 2016). The part of
expenses and other income attributable to the parent Diversified United Investment Limited
and PSG Group limited and the minority equity interest holders (Hahn, Pinkse, Preuss, &
Figge, 2015).
Consolidated profit, loss and comprehensive income- Main components will include revenue,
total comprehensive, income tax expense, profits for the fiscal year, and basic and diluted
earnings per share (Maestrini, Luzzini, Maccarrone, & Caniato, 2017). The business overall
revenue and expenses are eventually shown by this statement.
Consolidated statement related to financial position- It includes current assets, current
liabilities, non-current assets and non-current liabilities and its relative equity (Maestrini,
Luzzini, Maccarrone, & Caniato, 2017). The financial position of the business in relation to
the amount of assets owned, liabilities due to be paid and equity is reflected.
Consolidated statement of cash flow statement- The components consist cash flow from
investment decisions, cash flows derived from the financial activities, and cash flows from
the operating activities (Henderson, Peirson, Herbohn, & Howieson, 2015).
Notes to accounts- Relative notes to the financial statements consist the description of the
mandatory data as per the statement of income statement, and consolidated balance sheet of
Diversified United Investment Limited and PSG Group limited (Henderson, Peirson,
Herbohn, & Howieson, 2015). For instance- description of income taxation, expense and
above revenue amount concerning the asset evaluation (Maestrini, Luzzini, Maccarrone, &
Caniato, 2017).
ii) Which recognition principles and measurement bases have been applied for revenue,
assets and liabilities
REVENUE
Recognition- Diversified United Investment Limited and PSG Group limited are further
identified revenue according to the accounting standards and conceptual framework on the
basis of turnover and the profitability of future monetary profits as flowing to the company
(Henderson, Peirson, Herbohn, & Howieson, 2015).
Measurement- Fair value measurement can be adapted in terms of revenue, received and
receivable on the basis of consideration of contractual terms (Morioka, & Carvalho, 2016).

Liabilities
Measurement- The relative measurement of the liabilities on the basis of costing concept,
which are independent of the some of the important elements such as apartment pass to the
contribution, and derivative financial markets and instruments. The exception is related to the
valuation of fair value.
Recognition- it has been observed that a liability has been recognised in the financial
statements through resource outflows that turns probable connected to the monetary inflow of
benefit. Another important condition can be a reliable measurement of the relative settlement
costing (Morioka, & Carvalho, 2016).
Assets
Measurement- The major assets related to subsequently evaluated on the basis of historical
costs, investment property, and fair costing technique, which are less than accumulated
amortisation and depreciation for Diversified United Investment Limited and PSG Group
limited (Morioka, & Carvalho, 2016).
Recognition- Identification of liabilities and assets by Diversified United Investment Limited
and PSG Group limited where sustainable economic gain that are probable to flow of cash as
measured reliably. Identification is made on the basis of entity and cost in order to measure
the reliability without any exception case, assets acquired in its business combination
(Morioka, & Carvalho, 2016).
(iii) What qualitative characteristics of information exhibit in company’s various
financial reports
As per the data presented by the Diversified United Investment Limited and PSG Group
limited, it is seen that it exhibits fundamental qualitative features as represented as faithful
and its relevance. The basis that has been used by the management, assumption justified at
the required places in order to keep the thing over the forms, and application of estimations.
The financial reports have as laid down in such a form so that it can easily understandable
and can be compared. Entire data that has been used for presenting overall business
information is material for users. In such a timely statement and verified in terms economic
environment that organisation operates (Morioka, & Carvalho, 2016).

Part B: Integrated/sustainability reporting
(a) Compare and contrast the Sustainability Reporting Guidelines of the Global Reporting
Initiative (GRI) and the International Integrated Reporting Framework of the International
Integrated Reporting Council (IIRC) for explaining a holistic view (broader view) of
corporate social responsibility reporting in addition to reporting of corporate financial
performance.
The theory for both the reporting sustainability guidelines as provided by the reporting
initiative globally. The international reporting framework on the basis of integration of IIRC
(International integration reported council) to add the valuation to the financial reporting by
considering the CSR (Corporate social responsibility) that is equal to essential connected to
the financial reporting (PSG Group Ltd, 2018). The aiming is same as they are very different
in respected to the difference between the approaches and differences will be seen as-
Integration of reporting framework is on the basis of step ahead on the reporting
sustainability. It will assist the organisation to help the stakeholders as an integration of the
sustainability and financial risks in the company and the type through which long term and
sustainable uncertainty in the organisation (PSG Group Ltd, 2018). The issue was related to
companies that are related to the creation of value by following the integration approach as
suggested by the conceptual framework. (PSG Group Ltd, 2018).
On the other hand, integration of reporting as showed in terms of non-financial and financial
reporting, which is relative to the integration of the non-monetary aspects and monetary
aspects (Tschopp, & Huefner, 2015).
The main principles as guided for the sustainability reports as it concerns society and
environment finally relating to other corporate governance reporting.
As per the stakeholders in terms on sustainable reports as extensive such as employees,
suppliers to the business, general community, customers, and investors (PSG Group Ltd,
2018).

(b) Explain the rigour (strengths and limitations) of the conventional accounting, based upon
the Conceptual Framework for Financial Reporting, to explain the contents of sustainability
as well as integrated reports.
Conventional Accounting has been in operation since 100 years ago and users are much well
verse with it. It is quite easy to make conventional accounting reports as the disclosure as
well as the preparation requirements are fewer and less complex. Also the costs incurred in
their preparation are too reasonable to be considered.
However, the reports prepared under conventional accounting fail to add value for longer run
for business. These reports focus only upon the profit and lack elements of planet and people
living there. The qualitative aspects of business operations as well the quality of the
surroundings of business operations are entirely ignored through these reports. The business
information is presented only to the extent it has a direct monetary account on business
profits. Any impact caused upon the planet is not concerned for.

(c) Discuss the applicability (usefulness or limitations) of the theories you learned to explain
the contents of sustainability as well as integrated reports.
Sustainability disclosures are best when are made voluntarily by business houses. The
organisation making voluntary disclosures about their sustainable approach add benefit for
them in the longer run. If the business houses just keep on caring about profits and not the
planet, the society shall not allow the business to operate therein for long. As per the
Stakeholder’s theory, the business operates to care for the need of multiple stakeholders if it
wants to grow. Caring about the profit and monetary stakeholders alone add no long term
value for business. Also the legitimacy theory satisfies this aspect. As per legitimacy theory
the business is required to value the values acceptable in the culture and space where it
operates. The business actions are legitimate only till it satisfies the needs of social
legitimacy beyond self-profits. the management is expected to keep the interest of these
highly powerful stakeholders who are capable to turning business upside down for
organisation in case of any dissatisfaction. The stakeholder theory is tested in every round of
business performance. Whenever a business is undertaking something good for the society as
its voluntary responsibility to do the same and discloses it, a positive message is served to the
society. This voluntary disclosure has the capability to add positive grounds on the existence
of business and enhances the brand image of it.
(d) Prepare an index (a table or checklist) of various components (criteria) of an integrated
report, and then discuss whether and how the selected South African company has disclosed
information against each of those components (criteria).
The checklist required for a report to become an integrated report is as follows:
 Announcement of strategy, prospects, corporate governance, and presentation of company
regarding the external business environment in creating sustainable value (Nurzaimah, &
Muda, 2016).
 Availing the material in information, this is succinct, measureable and helps in creating the
value (Nurzaimah, & Muda, 2016).
 The materialistic data obtainable in the financial report as includes of every negative and
positive features (Dumay, Bernardi, Guthrie, & Demartini, 2016).
 Depiction of the basis based upon which the report is prepared and disclosure the key risks of
business and opportunities.

 Disclosure about the several factors from the external environment which have the capability
to impact the performance of business and its value.
 The disclosure of key business strategies and the kind of business model.
PSG Group has assumed the risk administration procedure and justification actions with
applicable business level-strategies to report the requirements and attention of an extensive
range of investors. It maintained the single model work program to maintain the effective
sustainability (Evans., Pearce, Vitak, & Treem, 2016). It has concisely stated in the annual
reports regarding the authority style monitored in diverse sectors, the crucial strategies for
safety organization and relative fiscal performance realized (Nurzaimah, & Muda, 2016).
Data has been delivered in a comprised method to reflect the actions undertaken by corporate
and the factual outcomes acquired. The materials threats that might hinder the trade
presentation have been revealed. The replication of data in the financial information of PSG
Group is reproducing both substantial processes and uncertainties of corporate. The outcome
obtained out of these material processes have been obtainable faithfully (Reimer, Jakobs,
Borg, & Trevisan, 2015).

(e) Discuss whether the selected Australian company prepare an integrated report. If
not, then what alternative report/s this company prepares for reporting corporate social
responsibility in addition to reporting of its financial performance. Compare the
contents of Austrian company’s corporate social responsibility reporting in addition to
reporting of financial performance with the index and contents of the integrated report
of the South African company presented in Part B (d) above.
The Australian corporate Diversified United Investment Limited has prepared two different
reports, one being the annual report and other the sustainable report. The integrated report
presented by PSG Group however is an integrated report.
The business model reflected in the integrated report of PSG Group presents the business
strategies adopted by it for the entire line of business operations at a single space, be them its
financial operations or the non-financial operations. For Diversified United Investment
Limited however, the operations of business are being reflected in two reports, the financials
in the annual report and the non-financials in the sustainability report. The Diversified United
Investment Limited has stressed upon the formation of the business committees and the
governance structure which is concerned more with the operations meant to earn profit.
However in case of PSG Group, the integrated report at the same point present the
committees formulated in business meant to add value to the planet along with generation of
profits.
The risk of political instability, market growth, change in taxation norms, social culture
diversities, etc. is reflected in the reports formulated by both the companies; only the
presentation style is different. For the report presented by Diversified United Investment
Limited, the report is sustainability report which only pins the non-financial areas, while for
PSG Group the integrated report is a mix report pinning financial as well as non-financial
areas. The contents of both the reports are almost similar, yet the presentation to the users is
entirely different.
Conclusion
From the above discussion regarding the conceptual framework and principles by the
company so, that it can accomplish transparency in regards to financial statements. It is seen
that it is analysed demonstration of the data in such a way that it will be consistent to the

accounting process, policies and procedure as applied by the and PSG Group limited and
corporate Diversified United Investment Limited.
References
Ahi, P., & Searcy, C. (2015). An analysis of metrics used to measure performance in green and
sustainable supply chains. Journal of Cleaner Production, 86, 360-377.
Barad, M. (2018, November). Applying Quality Function Deployment to Build a Knowledge
Management Conceptual Framework. In ICICKM 2018 15th International Conference on
Intellectual Capital Knowledge Management & Organisational Learning (p. 1). Academic
Conferences and publishing limited.
Bosse, D. A., & Phillips, R. A. (2016). Agency theory and bounded self-interest. Academy of
Management Review, 41(2), 276-297.
Cardona, A. J. A., Chica, C. A. P., & Barragán, D. H. O. (2018). Conceptual Framework.
In Building-Integrated Photovoltaic Systems (BIPVS) (pp. 9-16). Springer, Cham.
Dinnie, K. (2015). Nation branding: Concepts, issues, practice. Routledge.
Diversified United Investment Limited, (2018). Annual report. Retrieved from:
file:///C:/Users/System04099/Downloads/3446257_1999319186_FINAL-
DUIAnnualReport2018-4750.pdf
Dumay, J., Bernardi, C., Guthrie, J., & Demartini, P. (2016, September). Integrated reporting: a
structured literature review. In Accounting Forum (Vol. 40, No. 3, pp. 166-185). Taylor &
Francis.
Evans, S. K., Pearce, K. E., Vitak, J., & Treem, J. W. (2016). Explicating affordances: A conceptual
framework for understanding affordances in communication research. Journal of Computer-
Mediated Communication, 22(1), 35-52.
Govindan, K. (2018). Sustainable consumption and production in the food supply chain: A
conceptual framework. International Journal of Production Economics, 195, 419-431.
Hahn, T., Pinkse, J., Preuss, L., & Figge, F. (2015). Tensions in corporate sustainability: Towards an
integrative framework. Journal of Business Ethics, 127(2), 297-316.

Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.
Maestrini, V., Luzzini, D., Maccarrone, P., & Caniato, F. (2017). Supply chain performance
measurement systems: A systematic review and research agenda. International Journal of
Production Economics, 183, 299-315.
Morioka, S. N., & de Carvalho, M. M. (2016). A systematic literature review towards a conceptual
framework for integrating sustainability performance into business. Journal of Cleaner
Production, 136, 134-146.
Nurzaimah, R., & Muda, I. (2016). The skills and understanding of rural enterprise management of
the preparation of financial statements using Financial Accounting Standards (IFRs) financial
statement on the Entities without Public Accountability (ETAP) framework on the
implementation of village administration law. International Journal of Applied Business and
Economic Research, 14(11), 7417-7429.
PSG Group Ltd, (2018). Annual report. Retrieved from:
file:///C:/Users/System04099/Downloads/3446254_537028577_PSGREPORT2018.pdf
Reimer, E., Jakobs, E. M., Borg, A., & Trevisan, B. (2015, July). New ways to develop professional
communication concepts. In 2015 IEEE International Professional Communication
Conference (IPCC) (pp. 1-7). IEEE.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial statement
analysis. John Wiley & Sons.
Stacchezzini, R., Melloni, G., & Lai, A. (2016). Sustainability management and reporting: the role of
integrated reporting for communicating corporate sustainability management. Journal of
Cleaner Production, 136, 102-110.
Tschopp, D., & Huefner, R. J. (2015). Comparing the evolution of CSR reporting to that of financial
reporting. Journal of Business Ethics, 127(3), 565-577.