Financial Reporting

This report discusses the requirement of general purpose financial reporting under AASB's conceptual framework and the establishment of AASBs for Australian entities. It also analyzes the financial report of David Jones Ltd and the disclosures required for executive remuneration.

Running head: FINANCIAL REPORTING
Financial reporting
Name of the student
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Executive summary
Purpose of the report is focussing on the requirement of general purpose financial reporting
under AASBs conceptual framework. It will further highlight the requirement of establishing
the AASBs for the Australian entities. The report will also mention the details provided in the
financial report of David Jones Ltd and the disclosures required for executive remuneration.
Moreover, the report will focus on the reaction of the investors based on the information
provided in the financial statement of the entity.

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Table of Contents
Introduction................................................................................................................................3
Answer 1....................................................................................................................................3
Answer 2....................................................................................................................................4
Answer 3....................................................................................................................................5
Answer 4....................................................................................................................................6
Answer 5....................................................................................................................................7
Conclusion..................................................................................................................................8
Reference..................................................................................................................................10

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Introduction
Financial reports of the entity intend to deliver required information for meeting the
requirements of external users for making various crucial decisions. Development and
establishment of AASBs are crucial for the business practices carried out by Australian firms
as it is responsible for issuing, maintaining and developing the accounting standards
applicable under Australian Company Law (Huber 2017).
Answer 1
Comments on the given statement
Purpose of GPFR is delivering relevant information to help the users in making and
evaluating decisions regarding distribution of the limited resources and enable the governing
bodies and management to perform their accountability. Accountability concept is considered
as an indefinite concept. It is regarded as distinct objective of GPFR that requires delivering
variety of information including reporting for the social responsibility. Financial reports
delivers the means for controller of resources belong to the entity to report regarding their
role as the steward of these resources (Luke 2016). Users of the financial reports require
information regarding –
 Whether reporting entity achieved its objective and is economically and efficiently
operating the procedures
 Ability of the entity to continue providing services and goods in future period
 Whether the resources have been utilised for purposes it was intended for
The reports are intended to fulfil the requirement of common users who are not able
to command. Hence, the report shall be prepared in such way that it can satisfy the

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information needs. Providing information regarding financial as well as economic
performance of the entity is crucial as it is relevant in allocating the resources and
accountability (Newberry 2015).
Hence, social accountability under AASB conceptual framework is considered as part
of GPFR objective.
Answer 2
Necessity of establishing and developing AASBs for business practise in Australia
Accounting standards used by the Australian business practices while preparing the
financial reports in accordance with Corporation Law are prepared by AASB, the body that is
established by Australian Securities and Investments Commission Act 1989, under Part 12.
Development of AASBs involves various steps that include the process of public consultation
and supplementary discussion, wherever applicable, with the key business groups. Each of
the standards issued by AASB includes an application clause that specifies companies to
which the standard is applicable. It lists the basis information those shall be included in
financial report applicable for all the entities. Different disclosure rules are there in Australia
for different types of entity based on their type (Mazhambe 2014). Different types of entities
are classified as follows –
 Category 1 - Disclosing entities those include mainly the listed corporations and the
registered managed schemes for investment or the undertakings with prescribed
interest. These entities have the listed securities or they have the issued shares and
other types of securities owing to prospectus circulation
 Category 2 - Unlisted public entity and big proprietary entities. It includes the entities
that meets below mentioned 2 out of 3 criteria –

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 Gross operating revenue is equal to or more than $10 million
 Gross assets are equal to or more than $5 million
 Employees number equal to or more than 50
 Category 3 - Small proprietary entities.
As per Corporation aw, all the entities from category 1 shall maintain the accurate
records related to financial transactions and the information those are required for preparing
the financial statements and auditing of the financial statements. However, all the entities
shall prepare annual financial reports except the entities from category 3. Matters those are
required to be reported and disclosed in financial reports are included in the accounting
standards made by AASB. Hence it is necessary for business practise in Australia to establish
and develop AASBs (Aasb.gov.au. 2019).
Answer 3
Information disclosed in annual report of David Jones Ltd
Different information provided in the annual report of the company for the period
ended 27th July 2013 is as follows –
 Performance Analysis
 Chairman’s and Managing Director’s and Chief Executive Officer’s Report
 5 year Financial Statistics
 Executive Committee
 Statement of Corporate Governance
 Report for Corporate Sustainability
 Report of Directors
 Report for Remuneration

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 Financial Statements and notes to financial statement
 Declaration of directors’
 Independence Declaration of Auditor
 Independent Audit Report
 Information of Shareholders
 Corporate Directory
Further, it is mentioned in the report that the financial statements of the entity is
general purpose financial statements and have been prepared as per Corporation Act 2001
and are complied with the AAS issued by AASB and IFRS issued by IASB.
Answer 4
Disclosure requirement for manager’s incentive in annual report
Different disclosures are required for the remuneration provided to specified directors
and specified directors are as follows –
 Total value of the remuneration including bonus, base salaries, allowances, fees, non-
employment benefits, personal benefits, perquisites, and equity investments.
Remuneration does not include the amount of expenses incurred by the employee for
the benefit of entity. While measuring the remuneration the measurement shall be
complied with the AASB 1028 for employee benefits. For any kind of benefit
provided to the employee that is not included in AASB 1028, it shall be measured
based on the cost expensed by it for providing such benefit (Aasb.gov.au 2019).
 Aggregate of each element and aggregate of each executive’s remuneration for each
specified executives and each specified director

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 Comparative value against the previous year is not to be disclosed for the individuals
those were out of the specified category for the period under consideration. however,
comparative disclosure shall be provided for total value of remuneration and
aggregate elements
 Details of remuneration including whether and how the remuneration is associated
with the company’s performance, remuneration amount and nature and the principal
used for determining that, conditions and terms for allowing performance bonus or
cash bonus with details of date of granting the remuneration, nature of the
remuneration and performance criteria to be eligible for getting the same (Boyas and
Teeter 2017).
Remuneration report of David Jones Ltd disclosed following amount of remuneration –
Answer 5
Investor’s reaction with regard to disclosure made in the annual report

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As the investors are basically concerned about their money invested in the company,
they are specifically interested about information provided in the annual report of the
company. Based on the information they make their further plans regarding investment. From
the annual report of David Jones Ltd for the period ended 27th July 2013 below mentioned
key information gathered –
From above table, it can be identified that in profitability and liquidity context the
company’s performance has been worsened in 2013 against the performance of 2012. Further
the current ratio of 2013 is indicating that the company’s current assets are not enough to
meet its short term obligations. Only the leverage position of the company has been improved
by 9.10% (David Jones 2019). Hence, from investor’s aspect it can be determined that the
entity is not good for the purpose of investment. Thus, it is clear from the above discussion
that the investors and the securities market will react on the basis of information disclosed in
the annual report (Penman 2015).
Conclusion
On the basis of above discussion it can be concluded that AASB plays important role
in providing the accounting standards those shall be followed by the Australian entities while

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preparing their financial report. Based on the information provided in the financial report,
investors make important decisions. Hence, social accountability is an important part of
GPFR.

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Reference
Aasb.gov.au. 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content102/c3/AASB1046_01-04.pdf [Accessed 7 Feb.
2019].
Boyas, E. and Teeter, R., 2017. Teaching Financial Ratio Analysis using XBRL.
In Developments in Business Simulation and Experiential Learning: Proceedings of the
Annual ABSEL conference (Vol. 44, No. 1).
David Jones., 2019. David Jones Online | Shop Fashion, Beauty, Home & More. [online]
Available at: https://www.davidjones.com/ [Accessed 7 Feb. 2019].
Huber, W., 2017. Irreconcilable differences? The FASB's conceptual framework and the
public interest. International Journal of Critical Accounting, 9(5/6), pp.514-523.
Luke, B., 2016. Measuring and reporting on social performance: from numbers and narratives
to a useful reporting framework for social enterprises. Social and Environmental
Accountability Journal, 36(2), pp.103-123.
Luke, B., 2017. Statement of social performance: Opportunities and barriers to
adoption. Social and Environmental Accountability Journal, 37(2), pp.118-136.
Mazhambe, Z., 2014. Review of International Accounting Standards Board (IASB) Proposed
New Conceptual Framework: Discussion Paper (DP/2013/1). Journal of Modern Accounting
and Auditing, 10(8).
Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public
Money & Management, 35(5), pp.371-376.

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Penman, S.H., 2015. Financial Ratios and Equity Valuation. Wiley Encyclopedia of
Management, pp.1-7.
Yong, K.O., Lim, C.Y. and Tan, P., 2016. Theory and practice of the proposed conceptual
framework: Evidence from the field. Advances in accounting, 35, pp.62-74.