Critical Analysis of General Purpose Financial Reporting by Caltex Australia Limited

Accounting Theory & Issues
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Introduction
The present report is developed for providing a critical analysis of the application of
General Purpose Financial Reporting by business corporations. This is carried out by examining
the effectiveness of an ASX listed business entity to meet the obligations of the conceptual
framework of accounting. Australian Accounting Standards Board (AASB) ahs directed the all
the business entities listed on ASX to follow the conceptual framework of accounting for
improving the quality of financial reporting. The business entity selected is Caltex Australia
Limited that is involved in purchasing, refining, distribution and selling the petroleum products
within Australia and New Zealand. The critical analysis of the annual report of the selected
business entity is done by comparing it with annual report of another corporation by considering
their adherence to AASB, conceptual framework and corporation’s law. At last, the report also
discusses the investment feasibility of the selected company for investors on the basis of critical
analysis of its annual report.
Critical Analysis of Annual Report of Caltex Australia
Caltex Australia, an ASX listed entity, need to comply with AASB, conceptual
framework and Corporations Law for developing and publishing its financial report. The
company needs to adhere to all the principles of conceptual framework of accounting stated by
IASB. The framework has stated relevance and faithful presentation of information to be
fundamental characteristics of financial reporting. In addition to this, the enhanced qualitative
characteristics of financial reporting as stated by the framework are understandability,
comparability, verifiability and timeliness. The relevance feature of the accounting framework
has stated that the financial information disclosed by an entity should have both a predictive and
confirmatory value. Caltex Australia, has adopted the use of historical experience for estimating
the expected value of financial items in the future context. The confirmatory value of financial
items is also stated in the general purpose financial statement that is calculated by the use of
specific accounting policies (Bazley and Robinson, 2014).
The faithful presentation of information characteristic of conceptual accounting
framework has stated that the financial reports must disclose the information that is complete in
all aspects and free from any type of materialistic error (Carlon, 2012). The company has
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complied with this principle also effectively as it has included the statement of director’s and
auditors to ensure that financial report is faithfully presented as depicted below:
(Source: Annual report Caltex Australia Limited, 2017)
It can be stated form the statement of director’s and auditor’s that the company has
developed the financial statements as per the accounting standards of AASB and following the
corporation’s Law to present true and fair value of the key financial items such as assets,
liabilities, equity and others. The company as per the understandability characteristic of
conceptual accounting framework has disclosed the relevant accounting policies and methods
that are used for developing the financial report. The notes section of the financial report of the
company has discussed the type of accounting practices and techniques that are used in recording
the value of key financial items as depicted below (Caltex: Annual Report, 2017):
(Source: Annual report Caltex Australia Limited, 2017)
The comparability characteristic of conceptual accounting framework has provided that
business entities need to present the financial information in a comparable manner so that it is
easy for the investors to analyze the percentage growth or decline in its financial performance as
compared with the previous year. As per this characteristic, the general purpose financial
statement of Caltex has been presented in a comparable format by depicting the comparisons of
the key financial items value with that of the previous year (IFRS Conceptual Framework, 2018).
The same has been depicted below:
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