Contemporary Issues in Accounting: Analysis of Fairfax Media Limited's Compliance with AASB and IASB Conceptual Framework

This report analyses the extent of satisfying the rules and regulations of conceptual framework of AASB and IASB by Fairfax Media Limited. It covers the objectives, recognition criteria, fundamental and enhancing qualitative characteristics of financial information.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student
Name of the University
Author’s Note

1CONTEMPORARY ISSUES IN ACCOUNTING
Abstract
This aim of this report is to analyse the extent of satisfying the rules and regulations of
conceptual framework of AASB and IASB by Fairfax Media Limited. The first part of the
report examines the objectives of conceptual framework. The second part of the report analyses
the recognition criteria of various financial elements. The third part of the report analyses the
fundamental and enhancing qualitative characteristics of financial information.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Conceptual Framework Objectives..................................................................................................3
Recognition Criteria.........................................................................................................................8
Fundamental Qualitative Characteristics.......................................................................................12
Enhancing Qualitative Characteristics...........................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
In the twenty-first century, business organizations all over the world face different kinds
if complex issues and Accounting Issues are considered as one of the major problems among all
of them. It is the obligation on the business organizations to prepare and present their financial
statements accordance with the required accounting rules and regulations. Non-compliance with
these rules and regulations poses accounting and financial reporting related threats for the
companies. The same problems can be seen for the Australian companies. In order to avoid these
assorting issues, both International Accounting Standard Board (IASB) and Australian
Accounting Standard Board (AASB) has developed conceptual framework for financial reporting
(aasb.gov.au 2018). It is highly required for the business entities of Australia to follow the rules
and regulations of conceptual framework. This report takes an honest attempt to analyse the
extent of satisfying the rules and regulations of conceptual framework of AASB and IASB. For
the purpose of this report, Fairfax Media Limited is taken into consideration as the company is
listed among the top 100 companies in Australian Stock Exchange (ASX) (fairfaxmedia.com.au
2018).
Conceptual Framework Objectives
The above discussion states that the business entities of Australia are required to comply
with the rules and regulations of accounting conceptual framework. In this context, it need to be
mentioned that there are three major objectives of the conceptual framework of IASB and
Fairfax Media Limited is required to prepare their financial reports after considering these
objectives.

4CONTEMPORARY ISSUES IN ACCOUNTING
The first objective of conceptual framework is to express the true financial position of
the business entities with the help of financial reporting. The financial position of the companies
can be recognized from the statement of financial position or balance sheet (aasb.gov.au 2018).
The latest annual report of Fairfax Media Limited includes the statement of financial position
that reflects the current financial position or standing of the company. Moreover, the company
provides various notes to the financial items in this statement for greater understandably.

5CONTEMPORARY ISSUES IN ACCOUNTING
(Source: fairfaxmedia.com.au 2018)
The second objective of conceptual framework is to convey the financial performance of
the business entities by providing relevant financial information (aasb.gov.au 2018). The users of
financial information can know the performance of the companies by observing the income
statement along with the notes related to them. In the latest annual report of Fairfax Media
Limited, the presence of consolidated income statement can be seen that convey the financial
performance of the company. It can be seen in bellow:
(Source: fairfaxmedia.com.au 2018)
The third objective of conceptual framework is to show changes in financial position of
the business entities. In this objective, the main financial statements are statement of change in

6CONTEMPORARY ISSUES IN ACCOUNTING
equity and statement of cash flows (aasb.gov.au 2018). The latest annual report of Fairfax Media
Limited shows the presence of the statements of change in equity and cash flows along with their
notes. It can be found in below:
(Source: fairfaxmedia.com.au 2018)

7CONTEMPORARY ISSUES IN ACCOUNTING
(Source: fairfaxmedia.com.au 2018)
Thus, from the above discussion, it can be seen that Fairfax Media Limited always
considers the objectives of conceptual framework for the purpose of financial reporting. In
addition, the company prepares and presents their financial statements as per the requirements of
Corporation Act 2001, Australian Accounting Standard and the alternative pronouncements of
AASB. Apart from this, Fairfax Media Limited also complies with the standards and regulations
of International Financial Reporting Standards (IFRS) and IASB. In the presence of all of these
compliances, it has become surer that the company follows the objectives of conceptual
framework (fairfaxmedia.com.au 2018).

8CONTEMPORARY ISSUES IN ACCOUNTING
Recognition Criteria
The above discussion shows the major objectives of conceptual framework. Apart from
these objectives, Fairfax Media Limited must flow the provided criteria for the recognition of
major financial elements; they are assets, liabilities, equity, revenue and expenses. According to
the conceptual framework of IASB and AASB, Fairfax Media Limited needs to consider three
dimensions while recognizing the major elements. First, Fairfax Media Limited needs to consider
all relevant information about the assets and liabilities along with income, expenses and change
in equity at the time of recognition (aasb.gov.au 2018). Second, the management of Fairfax
Media Limited also needs to consider the aspects of faithful representation of assets and
liabilities and other aspects (aasb.gov.au 2018). Third, the company also needs to consider
important financial information for cost and benefits. In order to consider all these aspects,
Fairfax Media Limited should follow the standards of AASB for the recognition of these crucial
financial elements (aasb.gov.au 2018).
Asset: Fairfax Media Limited follows fair value accounting for the recognition of their asset as it
provides relevance to the financial information. For the recognition of property, plant and
equipment (PPE), the company considers cost value less accumulated depreciation and
accumulated impairment loss. Depreciation is charged on straight-line basis. Thus, the company
follows AASB 116 Property, Plant and Equipment under section 334 of the Corporations Act
2001 (aasb.gov.au 2018).

9CONTEMPORARY ISSUES IN ACCOUNTING
(Source: fairfaxmedia.com.au 2018)
In case of intangible assets, Goodwill is recognized in cost of the acquisitions value on
the fair value. Radio license is not subject to impairment. Software, database and websites are
subject to impairment. The company complies with the principles of AASB 138 Intangible
Assets and IAS 38 Intangible Assets (aasb.gov.au 2018).

10CONTEMPORARY ISSUES IN ACCOUNTING
(Source: fairfaxmedia.com.au 2018)
In Fairfax Media Limited, fair value accounting is used for the recognition of trade
receivables as per AASB 9 Financial Instruments; lower cost and net realizable value is used for
the recognition of inventories as per AASB 102 Inventories (aasb.gov.au 2018).
(Source: fairfaxmedia.com.au 2018)

11CONTEMPORARY ISSUES IN ACCOUNTING
(Source: fairfaxmedia.com.au 2018)
Liability: For the recognition of the trade creditors, Fairfax Media Limited considers the cost
value based on the fair value accounting as per the standards of AASB 9 Financial Instruments
(aasb.gov.au 2018). In case of the recognition of interest bearing liabilities, the company
considers amortized costs based on fair value recognition.
(Source: fairfaxmedia.com.au 2018)
Equity: Fairfax Media Limited classifies their ordinary shares as equity. The attribution of
incremental costs is directly done to the issue of shares and they are recognized as equity as per
AASB 1004 Contributions (aasb.gov.au 2018).
(Source: fairfaxmedia.com.au 2018)

12CONTEMPORARY ISSUES IN ACCOUNTING
Revenue: There are different kinds of sources of revenue in Fairfax Media Limited. The
recognition of revenue from advertising, circulation and others are recognized on the date of
publication. Revenue from commission is recognized on accrual basis. Revenues from the
advertisements are recognized at the time of the placement of advertisements. For this reason, the
company complies with the principles of AASB 118 Revenue (aasb.gov.au 2018).
(Source: fairfaxmedia.com.au 2018)
Expense: It needs to be mentioned that the company recognizes their different business expenses
when they occur.
Fundamental Qualitative Characteristics
The financial information of the companies must contain the fundamental qualitative
characteristics so that they become more purposeful to the users. The following discussion shows
the fundamental qualitative characteristics of financial information of Fairfax Media Limited.
Relevance: Relevant financial information is capable enough for making difference in the
financial decision-making process (aasb.gov.au 2018). For this reason, it is required for the
financial information to have both predictive and confirmatory value. It can be seen that Fairfax
Media Limited provides all the necessary and relevant financial information about their different
economic resources in their financial statements (fairfaxmedia.com.au 2018).

13CONTEMPORARY ISSUES IN ACCOUNTING
Faithful Representation: As per this characteristic, it is the responsibility of the business
entities to represent all the financial information faithfully. For this reason, the information needs
to be complete, neutral and free from errors (aasb.gov.au 2018). From the financial statements of
Fairfax Media Limited, it can be observed that the users of financial information can determine
the availability of information from different financial statements. In addition, as per the audit
opinion, the company has developed their financial statements by complying with the required
accounting standards and regulations (fairfaxmedia.com.au 2018).
Enhancing Qualitative Characteristics
The following discussion shows the fundamental qualitative characteristics of financial
information of Fairfax Media Limited.
Comparability: The comparability characteristic of financial information makes the users
identify and understand the similarities and differences in the financial information (aasb.gov.au
2018). It needs to be mentioned that the users can compare the financial information with the
other business entities, or the same entity for different financial period (fairfaxmedia.com.au
2018).
Verifiability: The process of verifiability is majorly helpful for the promotion of faithful
representations (aasb.gov.au 2018). In case of Fairfax Media Limited, it can be observed that the
users are able to apply knowledge and independent observation for the purpose of decision-
making process (fairfaxmedia.com.au 2018).
Timeliness: Timeliness characteristic provides the users with correct information on timely basis
(aasb.gov.au 2018). Fairfax Media Limited always provides current financial information on
perfect time as old financial information has less usefulness (fairfaxmedia.com.au 2018).

14CONTEMPORARY ISSUES IN ACCOUNTING
Understandable: Financial information become information when they are classified,
characterised and presented correctly (aasb.gov.au 2018). Fairfax Media Limited provides
different types of notes of the financial statements so that provided financial information can be
easily observed and understood (fairfaxmedia.com.au 2018).
Conclusion
As per the above discussion, there are three major characteristics of conceptual
framework and Fairfax Media Limited develops their financial statements by complying with
these objectives. In case of the recognition criteria, the company effectively follows the
measurement criteria provided by AASB conceptual framework for the recognition of their
major financial elements. Moreover, in the attempt to make the financial information more useful
and purposeful, Fairfax Media Limited complies with the fundamental as well as qualitative
characteristics of financial information.

15CONTEMPORARY ISSUES IN ACCOUNTING
References
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 10 Apr.
2018].
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 10 Apr.
2018].
Aasb.gov.au. (2018). Contributions. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Financial Instruments. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Intangible Assets. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 10 Apr.
2018].

16CONTEMPORARY ISSUES IN ACCOUNTING
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf
[Accessed 10 Apr. 2018].
Fairfaxmedia.com.au. (2018). Corporate Profile - Fairfax Media Limited . [online] Available at:
http://www.fairfaxmedia.com.au/Company/Corporate-Profile/corporate-profile [Accessed 10
Apr. 2018].
Fairfaxmedia.com.au. (2018). FAIRFAX MEDIA ANNUAL REPORT 2017. [online] Available at:
http://www.fairfaxmedia.com.au/ArticleDocuments/193/2017%20Fairfax%20Annual
%20Report_Book.pdf.aspx?Embed=Y [Accessed 10 Apr. 2018].