HA 3011 Advanced Financial Accounting: Financial Statement Analysis

This report provides a comprehensive analysis of advanced financial accounting principles, focusing on qualitative characteristics of financial reporting, including understandability, relevance, reliability, comparability, and verifiability, within the context of International Financial Reporting Standards (IFRS). It also examines the public interest theory, capture interest theory, and economic interest group theory of regulation, discussing their implications for financial disclosures and corporate behavior. The report further explores the revaluation of permanent possessions, including the cost model and revaluation model, and analyzes managerial incentives in the revaluation of plant, property, and equipment, considering factors like gearing, liquidity, and potential impacts on financial statements. The analysis incorporates real-world examples and references to relevant literature, offering a thorough understanding of the complexities and considerations in advanced financial accounting.

Advanced Financial Accounting 1
ADVANCED FINANCIAL ACCOUNTING
By (Student’s Name)
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Advanced Financial Accounting 2
Part A
This paper focuses on qualitative characteristics financial reporting and also has a view
on the commercial, economic information with an abstract structure, the other perception on the
theories such as public interest, capture and economic interest theory of regulation. There is also
standard scrutiny of significance and figurative authenticity of US corporate financial statements.
A grand break down of assets, plant and equipment reassessment as well as business financial
statements, Shareholders consequence on capital and a variety of decisions regarding financial
accounting. The financial accounting statement boards used in the task review; The Accounting
for the Impairment or removal of Assets that have to stay for a more extended period. The
specific situational breakdown on management’s business mutual accountability is deciding on
marketplace forces with policies also particular a situational viewpoint on this document.
A comprehensive breakdown of economic coverage is the essential focus of the paper
based on the situational evaluation tasks. Commercial information can also be viewed as
financial statements which are described as official evidence of company’s business and
economic activities. The implementation of the financial records of other international company
to help investors scrutinise their activities is picking pace. This is not just an issue that has
emerged opening a discussion on whether it is an appropriate measure of gauging international
markets activities or a deceptive occurrence. Public business accountability refers to the
behaviour a business does in the name of openhanded to the society that will be advantageous to
the outside shareholders. CSR's aim is usually on the social and environmental accountability a
specific company has to do, according to the set ideology of the particular organizations or the
corporations work as per the corporation listing guide, the case in the task project an approach to
be discussed on whether the ethical act of a business should be enforced.

Advanced Financial Accounting 3
Qualitative characteristics of financial reporting
According to the theoretical structure of the global financial coverage, a vast number of
funds have been exhausted to implement international principles to help investors make
comparisons between companies in global resources marketplace. As per the economic rations,
IFRS contains qualitative financial characteristic of financial reporting to satisfy the present
reporting practices. The qualitative features of financial reporting are as follows;
Understandability: The information is required to be comprehensible to users of the
financial statements. It implies that the data must be represented, with further details supplied in
the underneath footnotes as desirable to support an explanation. In an editorial that appeared in
the Australian Financial Review on February 2012 (by Agnes King), evidently states that
shareholders rely much on sponsors information and organization briefings to comprehend the
business figures, this come into view to be certified by present reporting practices in relation to
IFRS as explained in ED.
Relevance: The information must be relevant to the needs of the users, which is the case
when information influences the economic decisions of users. This may involve reporting
particularly relevant information or information whose omission or misstatement could influence
the economic decisions of the targeted group. Relevance is satisfied by the current reporting
practices, and this is helpful to the users as defined in ED.
Reliability: The information must be without of substance blunder and prejudice and not
deceptive to the intended users. Should replicate essentials and statistics of the finances.
Therefore, the information should realistically symbolise dealings and other proceedings, and
practically characterise estimates and reservations throughout appropriate revelation. This is
according to bookkeeping apparatus of February 2018, from the Australian Financial according

Advanced Financial Accounting 4
to Wesfarmers finance director Terry Bowen says the observations are merely dependable to the
theoretically educated if not they might be deceptive. Therefore, dependability appears to be
pleased by present financial reporting as defined in ED.
Comparability: The information must be equivalent to the financial information
accessible for other accounting periods so that users can recognise trends of the routine and
financial situation of the reporting article. It allows the intended users to evaluate different
subsequent financial reports prior to them taking action, for shareholders if it’s favourable they
empower (Van der Velde 2016).
Verifiability: The information must be demonstrated and to be specific to the organisation
concerned to create assenting notion that the information provided is correct and no errors
obtainable, this trait satisfies the existing financial reporting.
The Financial individuality above is dependable with the view that profitable financial
reports induce the own rationale of financial reporting. Objectives of the financial reporting state
that:
1. The most important purpose of financial reporting is to present information that is
useful to current and possible shareholders and other users in making balanced business
enterprise, credit and comparable decisions.
2. Financial reporting is supposed to present information to help current and
prospective investors and creditors and other users evaluate the amounts, timing and
improbability of potential cash proceeds.
3. The financial reporting should provide information about the financial possessions of
a project, the claims to those possessions, effects of communication, actions and conditions.
Assessment Task Part B:

Advanced Financial Accounting 5
Public Interest Theory
From a public interest theory perception, the management would commence the rules if
they consider that the probable payback to the community goes beyond the predictable expenses.
Shaping the cost and profit is intent exercise, and the measurements of necessity mean various
parties maybe favoured while others may tolerate more cost from the rules opening. It is a
complementary step. Instruction is one of the government’s main functions. It is also its
traditional duties; system defines the boundary connecting government and the society, state and
marketplace (Libby 2017). Consequently, directive gives governments effort to set the range of
personal actions. If the state produces a good or services under its own command, for instance,
government-owned business, it is not accountable to speak of the rule. On the other hand, if a
private company provides the same services, within the limitations defined by rules, we have to
do with the system. In other words, the significance of systems as a tool of public policy is
extremely changeable (Chauvey et al. 2015).
Capture Interest Theory
This suggests that finally, it will be the synchronised party that captures the strict
procedure to make certain that any successive guideline best serves its own wellbeing. Since the
revelation will have particular implications for the government that produce different important
ecological and public impacts. For example lumber and transportation companies then perhaps
exacting business relations will take measures to guarantee they can impact the regulations
through securing the support of citizens on the authoritarian body of maybe in advance
association of the body Scott.
Economic Interest Group Theory

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The economic interest group theory of regulation implicate that all people including law
makers and regulators are motivated by self-significance, thus from this point of view the
revelation rule would only be supported by the regulators if one way or another the regulation
provided profit to them, since big business can be liable to have elevated level of political
authority throughout financial sustain of the regulators or connected management, or in the
course of possible control over a large number of votes we might question if the strong
legislation would be enacted that unhelpfully crash large corporations (Mogylova 2014).
The theories cover an extensive phase, public interest regulation up to the 1960s until
alternative public theory launched its significant attack on recognised theory likewise, the
perceptible pragmatism and significant position of the 20th century. In conclusion, the theory of
believable promise is strongly associated with the regulatory reforms and that followed from
market gap and privatisation of public services utilities that took place in the 1990s and has
continued ever since. Broad to the three sets of theories is their unswerving focal point on
authoritarian management being its responsibilities its association and its presentation. An
additional ordinary attribute of the three theories is that the theory is that they function with the
notion of the public interest. Up till now for any of the three theories, the idea remains
indefinable, unproblematic to raise in political exposé but complex to uphold in operational
Levine, Forrence (1990). A resolution to this dispute it differentiates between the interests of
synchronised industry and society and those third parties that have a venture in synchronised
action affects unenthusiastically.
Assessment Task Part C
The revaluation of permanent possessions is the procedure or lessening their rising price
in case of first changes in fair marketplace value of the permanent property. Global financial

Advanced Financial Accounting 7
reporting standards necessitate that fixed assets to be originally recorded at cost but they permit
two models for succeeding accounting for fixed assets which are the cost model and the
revaluation model (McNeil, Frey and Embrechts 2015). In cost model the fixed assets are
accepted at their original cost less accumulated downgrading and accumulated destruction losses,
there is no increasing alteration to value outstanding to changing conditions. In revaluation
model, an asset is originally improved at cost, but consequently its carrying total is augmented to
an explanation for any appreciation in value, the dissimilarity between cost model and
revaluation model is that revaluation model allows equally descending and growing adjustment
in the value of a property while model allows descending adjustment due to destruction loss.
Fair value is calculated presuming an operation in the primary market for the asset or the
accountability. In the nonexistence of primary market, it is understood that the contract would
take place in the most beneficial market; this is the market that would exploit the sum that would
be conventional to sell an asset or reducing the amount that would be remunerated to shift a
responsibility, taking in to description that the business and transfer cost. In whichever case, the
article desires to have entrance to the market, although it does not inevitably have to be able to
carry out any business in that market on the capacity date (Plummer and Patton 2015).
PART D
Managerial Incentive in the revaluation of plant, Property and Equipment
Gearing or economic influence represent the elementary breakdown ratio of a business’s
stretched term of liability to its impartiality resources. Gearing is directly connected to the debt
and equity ratio the privileged the debt to equity ratio, the higher the level of gearing Westwood,
(1995). This shows the various reasons for which gearing can be a significant feature in the
assessment of a certain firm will make if to revalue or not to revalue its fixed assets. The

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promotion of book value can be well thought-out as an indication of probable expansion options
of depts. constricting cannot be guaranteed exclusive of a rationally high amount of real assets in
the balance sheet which might affect the decision of revaluation. In the same way, the expenses
implicated in the procedure of revaluation are unusual for a small company to large company
(Palmrose and Kinney, Jr 2018).
The production of radically unusual numbers in the revaluation procedure is habituated
by the supply of fixed assets retained by the chosen business. The bigger the supply of fixed
assets in contrast to total assets, the higher the possibility for revaluation to report a compact
productivity Depending on a company notice, a choice whether to revalue or not to revalue its
assets will be taken into deliberation (Zhang and Andrew 2014).
Liquidity represents the competence of an asset to be quickly sold or convert into cash.
As a proxy for company liquidity, the quick asset ratio consequences from the calculation of
inventories from existing assets and then alienated by present liabilities. In conclusion
revaluation of assets is an important accounting decision in the firm as it impacts various
financial statement (Hu, Percy and Yao 2015).

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References
Chauvey, J. N., Giordano-Spring, S., Cho, C. H. and Patten, D. M., 2015. The normativity and
legitimacy of CSR disclosure: Evidence from France. Journal of Business Ethics, 130(4), 789-
803.
Hu, F., Percy, M. and Yao, D., 2015. Asset revaluations and earnings management: Evidence
from Australian companies. Corporate Ownership and Control, 13(1), 930-939.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to
Behavioural Accounting Research (pp. 42-54). Routledge.
McNeil, A.J., Frey, R. and Embrechts, P., 2015. Quantitative risk management: Concepts,
techniques and tools. Princeton university press.
Mogylova, M., 2014. Institutional provision of agricultural fixed assets revaluation up-to-date.
Accounting and Finance, (2), 167-172.
Palmrose, Z. V. and Kinney, Jr, W. R., 2018. Auditor and FASB Responsibilities for
Representing Underlying Economics-What US Standards Actually Say. Accounting Horizons.

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Plummer, E. and Patton, T. K., 2015. Using financial statements to provide evidence on the fiscal
sustainability of the states. Journal of Public Budgeting, Accounting & Financial Management,
27(2), 225-264.
Van der Velde, J., 2016. Trusts: Revaluation of assets by trustees. Bulletin (Law Society of
South Australia), 38(10), 36.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.