Variations in Financial Accounting Management

The provided content discusses the importance of consolidated financial reports in understanding a company's financial performance and decision-making. It highlights that consolidated reports are essential for investors, creditors, vendors, and other stakeholders to evaluate the financial health of an organization. The report emphasizes that without consolidated financial statements, it can be challenging for financiers or financial experts to gain a comprehensive view of the company's financial status. The content also touches on potential measurement bases, such as historical cost, current cost, depreciation value, fair value, and exit value. Additionally, it mentions the importance of accounting standards, particularly in relation to consolidated reporting, and notes that companies can use this method to hide financial issues.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to question 1.......................................................................................................................2
Techniques to Manage International Intentional Financial Transaction Risk.................................2
Answer 2..........................................................................................................................................5
Answer 3..........................................................................................................................................9
Importance................................................................................................................................9
Purpose.....................................................................................................................................9
Benefits...................................................................................................................................10
Considerations........................................................................................................................10
Reference List................................................................................................................................11

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Answer to question 1
Techniques to Manage International Intentional Financial Transaction Risk
While conducting business internationally the entities are faced with several risk factors.
It becomes very necessary that certain tools and instruments are effectively and efficiently used
for the purpose of elimination of the same (Warren & Jones, 2018).
The three main techniques that are used to manage the risks of foreign exchange. These
techniques are: 1. forward contracts 2. Future contracts 3. Options
Foreign Exchange Risk: Technique 1
Forward contracts:
Forward foreign exchange contracts are useful for organizations which enter into an
agreement for the purpose of receiving foreign currency payment at a specified time in upcoming
days. And in both the cases, it will kill the exchange introduction that is one of the three centre
segments of remote trade chance. It will make the rate certain, and enable the organization to
know precisely what the profits will be or, on account of a buy, what the consumption will be.
Be that as it may, there is a remaining financial introduction (Schipper, Francis & Weil, 2017).
When forward foreign exchange is used agreement vary contingent on the fact that
whether a company is an importer or an exporter.
To calculate yearly percentage payment or deduction, the following formula are given:
Forward premium or discount = (Forward rate – Spot rate)/Spot rate x 360/Number of days
under the forward contract
The method here is in relation to the exchange cost is stated in respect of national bill
units for every unit of foreign bill. To give an example, if the advert cost of 0.72 US $ is equal to
1 Australian Dollar on a particular date and its price for 180 days is 1.20 AUD , the annualized
advancing premium stands as 0.20, as under:

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Forward premium or deduction = (1.20 – 1) * 360/180 = 0.20
The frontward calculation is also called swap rate. In the event that the instalment is
included (in points) to or subtract the rebates (in points) from spot rate, the swap rate can be
changed over into an inside and out rate. These forward instalment and rebates demonstrate the
financing cost differences amid the individual monetary forms in the between bank showcase
(Renz, 2016).
However, bill with higher rates of interest is sold forward, and then the seller enjoys the
benefit of ownership on to the high bill earnings during the period of time amid approving upon
the deal and its maturity.
Buyers will have to incur loss if they wait till they get bills of high earning. The interest
rate loss is start by the forward discount. In the forward securities industry, bills are purchased
and sold for coming transfer, could range from one, three, six or even more from the date of
contract (Lovell, 2014).

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Foreign Exchange Risk: Technique 2.
Future contracts:
Multinational organizations may utilize fates contracts to balance their hazard in the
vacillations of monetary standards. On the off chance that an organization is paid in an
unexpected cash in comparison to that of the nation where its head office is found then the
organization has a considerable hazard because of changes in estimation of two monetary
standards. So to avoid this company can lock in its exchange rate by going into future contracts.
Foreign Exchange Risk: Technique 3.
Options:
Options are financial instruments which are traded by currency speculators, but they can
also be useful protection for multinational companies. Sellers of forex options are mostly
multinational banks with large Forex trading operations (Larson, Lewis & Spilker, 2017).
A forex option grants the right but not the responsibility to buy or sell currency at an
agreed exchange rate. A currency choice is different from forward contract, in future money deal
or buy it is secured future cash deal and can in this manner result in FX misfortunes if the
conversion scale goes down. Utilizing forex choices to fence FX hazard can shield a business
from unfriendly conversion scale developments at the same time it still allows it to benefit from
favourable ones (Khan, 2015). However, organizations sometimes have to pay a charge to obtain
the protection that an option provides.

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Answer 2
A. Qualitative characteristics of data play an important supporting role in judgment utility,
judgement theory approach to accounting explanation (Hoskin, Fizzell & Cherry, 2014).
Qualitative features are the testimonial that makes the data relevant in monetary reports
helpful to users.
International Accounting Standards Board (IASB) has acknowledged four main qualitative
characteristics of accounting information:
1. Understand-ability
2. Relevance
3. Reliability
4. Comparability
Materiality, authentic depiction, material over form, impartiality, judiciousness,
wholeness, timeliness are other qualities as suggested by IASB.
The qualitative characteristics which have found broader acceptance and recognition in
accounting books are as follows:
1. Relevance:
Relevance is nearly and straight connected to the idea of helpful data Relevance suggests
that all points of data has to be in written report that may help the users in making judgment
and/or forecasting. However, data that is given more weight in judgement-making is more
applicable.
Especially, it is the data’s capacity to point out differences which pinpoints whether it is relevant
to a decision or not (Henderson et al., 2015).

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As per the financial report of 2016-17 of Was farmers the information given in the report is
relevant to investors, consumers, suppliers and other vendors. Everything is very clearly
given in the report from revenue to shareholders equity.
Financial Accounting Standards Board in its Concept No. 1 comments:
“Applicable Accounting information must be equipped for having any kind of effect in a
choice and helping the clients to get forecasts about the results of past, present and future
occasions or right desires.”
2. Reliability:
Reliability is represented as an essential attribute (importance and reliability) that settle
on bookkeeping information accommodating for basic leadership. Amend data is expected to
shape decisions about the acquiring potential and monetary point of view of a business concern.
Anyway, reliability varies from thing to thing (Gassen, 2014).
Some point of data given in a yearly report may have higher degree of certain than others.
For example, data concerning capital goods may be less dependable than definite data about
current possession because of variation in vagueness of awareness. Reliability is the quality on
which the users can depend on it without doubt as typical meaning to represent (Elliott, 2017).

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As per the financial report of 2016-17 of Wasfarmers the information given in the report is
very much reliable as the data is audited by one of the well-known accounting firm called
Earnest & Young?
3. Understandability:
Understandability is the quality of data that helps consumer to understand its importance.
The advantage of data can be enhanced by making it easy to understand and therefore making it
useful to a wider circle of users (Chan et al., 2016).
The data present in the report should be understandable by both intelligent & normal
people, forms a prejudice which is irregular with a basis of enough disclosure. Display of data
should not only assist perceiving but also prevent incorrect determination of financial report. So,
logical monetary accounting information must be present which can be understood by the person
who uses the data and conveys in a way and with language within in the range of perceiving
(Carlon et al., 2015).
As per the financial report of 2016-17 of Wesfarmers the information given in the report
is relevant to investors, consumers, suppliers and other vendors. Everything is very clearly
mentioned in the report and it’s very easy for everyone to understand the report and act on it.
4. Comparability:
Economical judgement needs making choice between achievable courses of acts. The
decision-maker while making a decision will make comparisons between options, which are
supported by financial data. Comparison mean to have things like described in a same way and
different things described otherwise (Callen, 2015)
As per FASB (USA) Concept No. 2 states comparability, “as the decision or state of
couple of qualities are comparative, and correlation is typically a numeric evaluation of the
comparative attributes. Clearly, lawful correlation is likely just if the estimations utilized the sum
or proportions dependably compare to the component that is the subject of examination”.

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Comparable financial accounting data provides likeliness and variations that appear from
fundamental likeliness & variations in the organizations or organizations and their deals, and not
just because of the variation in financial accounting management (Beatty & Liao, 2014).
Data, in the event that practically identical, will help the chief to learn similar money related
ability and inadequacy and potential for the future, between at least two firms or between periods
in a solitary firm.
As per the financial report of 2016-17 of Wesfarmers the information given in the report is
relevant to investors, consumers, suppliers and other vendors. Investors who want to invest in the
stocks can decision based on the financial statements.
Answer 2 (2)
Possible measurement bases acknowledged by IASB are Historical cost, current cost,
deprival value, fair value & present
Historical Cost
An reliable expense is a proportion of important worth used in bookkeeping where the
cost of a benefit on the money related proclamation depends on its unique cost when procured by
the organization.
Current cost
The financial expense of an asset or of its proportionate profitable limit or administration
potential. This definition incorporates creation cost and substitution cost, characterized as takes
after: Reproduction cost can be characterized as present expense of delivering a current asset
with a same one. Substitution cost (of an asset): can be characterized as present expense of
supplanting a current asset with proportionate profitable limit or administration potential (Barth,
2015).
Fair value
The amount at which an asset or liability can be exchanged between the two parties and
must be present in person face to face with each other.
Exit Value
Exit value is the proceeds if an asset or business are sold and the approximated amount is
considered profitable if the proceeds are received from and third party who is not involved in the

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transaction and the proceed is done face to face with each other and the sale is not done hurriedly
or quickly.
Answer 3
As a normal practice, accounting rules which are accepted generally (GAAP) requires
solidified financial articulations from mother companies which control the auxiliary companies
or have more dominance in joint endeavors and key organizations. To say, it's only the mother
organization which reveals the part of the financial information of the entire organization
because individual subsidiary provide only the profits & debts to the mother organization
(Abernathy et al., 2015).
Importance
Expanding an organization frequently includes purchasing of rivalry business to get their
customers and growing business by inventing new commodities, services and technology. These
new add-ons to a company’s product range generally are a method of acquiring smaller
companies that cater to a specific niche through their own product range or technologies. These
subsidiary companies usually keep on operating as a separate entity, however controlled by the
mother organization but as per accounting concept each company must maintain their own
bookkeeping records. These various financial records are then coverd with the mother
organizations secretarial records to deliver the merged financial reports.
Purpose
It’s challenging for a capitalist or financial expert to collect all the data of accounting of a
mother organization and its subsidiaries so as to get a view of the financial status of the
organization, so mother organizations are needed to report their assets/ properties on a
consolidated basis. Once in a while the mother organization will prepare a separate report of its
own funds, however these separate reports are not valid so a consolidated report must be
accompanied with.

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Misconceptions
Solidified financial reports dependably did not give a clearer photo of the financial state of an
organization in respect to the individual bookkeeping reports of backups are there at the notes
area of the combined finances. And it winds up simpler to shroud issues of the supplementary
reports and this is the means by which Enron handled to cover the losses and liabilities of a few
activities which neglected to create any profits. It simply hid them in questionable auxiliaries
worked for the utilization of concealing certain financial issues.
Benefits:
The profit report of combined monetary report must be easy to understand and analyse to
a capitalist, creditors, vendors and any individual wanting information about how safe is the
company with respect to be able to pay bills and continue as a successful organization. Yet, a
nastier benefit of combined funds is that they can be maneuverer to hide financial issues. And
it’s very difficult to trace those hidden issues from the financial data. The FASB (Financial
Accounting Standards Board) routinely go to these organizations to rectify explanations and
necessity and that may serve as escape for organizations want to cover the deficit and
accountability. The IASB (International Accounting Standards Board) is also engaged in
devising explanation and regulation that will produce more correct and reliable financial reports
of the foreign organizations & having its subsidiaries overseas.
Considerations
Without consolidated financial reports appraisal procedure of an organization for finance
or funding aim could be a lengthy & complicated and may miss the important possession or
accountability. However, in many arguments that takes place between organization management,
accounting and scrutiny at every year end includes the process as to how combining of reports
ought to be done to get the total photo of the organization's financial wellbeing. And its
reviewer's obligation to ensure that the joining of bookkeeping reports appropriately shows the
real status of the organization.

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Reference List
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Policy, Third Edition-5 Volume Set (pp. 1-6). Routledge.

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