Financial Reporting and Business Practices of Xero Limited: Analysis and Evaluation

Running head: FINANCIAL REPORTING AND BUSINESS PRACTICES OF XERO
LIMITED
Financial reporting and business practices in Xero Limited
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1FINANCIAL REPORTING AND BUSINESS PRACTICES OF XERO LIMITED
Introduction
Xero Limited is positioned as a “Software as a Service (SaaS)” company that offers
online accounting along with business services to small businesses (Xero.com. 2019). The
objective of the essay is to realize the implementation of AASB Conceptual framework in
consideration to AASB 101 and AASB 102 inventory within financial reporting and business
practices within Australia. In analyzing the same annual report for the year 2017/ 2018 of Xero
Limited will be elaboration for recognizing the inventory system followed in this selected
company. In addition, through analyzing AASB conceptual framework the costing system
implemented by the company will be analyzed along with evaluating the impact of distinct
costing methods on the financial system of the company.
Evaluation of Inventory Measurement
The objective of AASB 102 accounting standard prescribes the accounting treatment for
inventories. This standard is implemented in XERO Limited in order to attain suitable guidance
on cost determination along with its subsequent recognition as an expense encompassing the
write down as well as net realizable value (AASB 2015). Through analyzing the inventories of
Zero Limited it has been gathered that the net realizable amount that is expected by the company
after selling the inventory within its ordinary business course. As per the “Aus 10 Paragraph of
AASB 102” it is observed that the cost of inventories of the company encompass lower cost
along with net realizable value. For the inventories held in distribution a loss of service of the
potential might be identified and is measured relied on the existence of on the recent replacement
expense which is decreased than the real acquisition expense or other subsequent carrying
amount. AASB 123 Borrowing Costs is observed to be followed in Xero Limited in which the

2FINANCIAL REPORTING AND BUSINESS PRACTICES OF XERO LIMITED
company considers its borrowing cost is encompassed within cost of inventories. Under such
statement it is observed that following AASB accounting standard the company might purchase
inventories on different settlement terms (Newberry 2015). The annual report of the company
has explained that when the arrangement effectively attains a financial element, in the element
serves as a difference between purchase prices for normal credit terms along with the paid
amount that is recognized as interest expense over a financing period.
Inventory System Application in Xero Limited
After analyzing the annual report for the year 2017/ 2018 of Xero Limited it has been
analyzed that the company uses effective inventory systems that facilitate the company in
keeping track of their stock levels along with related values on a daily basis. In analysis the
financial report of the company, it has been realized that Xero Limited follows “First-in-First-