Preparation of Annual Report and Measurement Methods: A Case Study of Blackmore

This assignment deals with the different aspects of preparation of an annual report and the types of measurement that is followed. The annual report of Blackmores annual statement has been downloaded and analyzed and important methods of the preparation for the annual report of the company has been explained and important abstracts from the annual report has been given.

ACCOUNTING ASSIGNMENT

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Prepared By
Student’s Name:
Date: 21st April, 2019

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Executive Summary
The following assignment deals with the different aspects of preparation of an annual report and the
types of measurement that is followed. The annual report of Blackmores annual statement has been
downloaded and analyzed and important methods of the preparation for the annual report of the
company has been explained and important abstracts from the annual report has been given.

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Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Analysis........................................................................................................................................................5
Measurement and Types of Measurement Methods..................................................................................5
Measurement Method in case of Blackmore..............................................................................................5
Objective of General Purpose Financial Reporting......................................................................................6
Qualitative Characteristics of Financial Statement......................................................................................7
Qualitative Characteristics in case of Blackmore.........................................................................................7
Recommendations.......................................................................................................................................8
Conclusion...................................................................................................................................................9

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Introduction
Measurement forms the base of financial reporting. It refers to the monetary value at which various
items that includes asset, liabilities, income and expense, are presented in the financial statements of
the company. There are many qualitative and quantitative characteristics that a financial statement
must possess for it to be correct and user friendly. There are many users of the financial statements and
hence it is important that it is prepared properly, and it serves the purpose for the users. The investors
depend on the annual report and the financial statements to take decision whether they want to invest
in the company or not (Awasthi, Omrani, & Gerber, 2018). Based on the technique of measurement
followed, these items are valued. The company that has been selected in this assignment is Blackmore
Limited. The company is an Australian Limited health supplement Company that was founded in 1930s.
The company has a market cap more than billions and is listed on the Australian Stock Exchange. The
company is operational in large number of countries. The annual report of the company has been
studied and the different aspects of financial reporting in preparation of these annual report is analyzed
and presented. A brief analysis is presented below.
Analysis
Measurement and Types of Measurement Methods
Financial measurement refers to the method of valuation of the assets, liabilities, income and expenses
in monetary terms and presenting them in the financial statements of the company. Measurement
requires a series of basis of measurement and there are different methods that are followed. Single
measurement and mixed measurement, in case of single measurement only one method of accounting
is followed, but in case of mixed method there are different methods which will be followed that will
include fair value measure of accounting, historical method of accounting and net realizable value.
Different methods can be followed for different items and for obtaining different information related to
these items of the financial statements (Berg, Lundh, & Falkenström, 2019). If a single method is
followed, it may be easy to follow, understandable and more reliable and the overall cost is so less. In
case of multiple methods, it can be argued that the total in the financial statements are not having
correct meaning. In case of single method, the current values are used however they do not provide the

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correct information always about the items like intangible assets that are measured at fair value. As per
the IFRS the companies must use mixed method of measurement that is more reliable then single
method. There might be some level of uncertainty that might be considered with each level of
measurement. But sometimes the higher the level of uncertainty the degree of reliability is also more.
Now we analyze in case of Blackmore which method of measurement is followed as per the annual
statements of the company.
Measurement Method in case of Blackmore
The annual report of the Blackmore company has been studied. The company is one of biggest health
supplements company that is listed on the Australian Stock Exchange. In case of Blackmore it can be
seen that the financials of the company have been reported based on the provisions of the corporation
Act 2001, and IFRS and accounting standards are complying with that of the law. The basis of
measurement is that the major basis of the preparation of the financial statements is based on historical
cost except some other items that are valued based on the fair values (Boghossian, 2017). These assets
will include non-current assets and financial instruments. In case of historical cost, the cost is based on
the fair value of the consideration that is given in exchange of the assets of the company. So, in case of
the given company we see that mixed method of measurement has been followed as different
accounting methods are followed. An example from the annual report has been attached below-

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This has been stated in the section of notes to accounts of the company that highlights the different
approaches of preparation of the financial statements and the different methods of measurement has
also been stated that clarifies that the company is following mixed method of measurement. It can also
be seen that historical cost method is the main basis for most of the assets of the company but for
financial instruments the main basis followed is fair market value approach of the asset (Cayon, Thorp, &
Wu, 2017).
Objective of General Purpose Financial Reporting
The major objective of the financial reporting is to provide important financial information about the
reporting entities. The major use of the financial report is to provide useful information about the assets
to the investors and creditors of the company and the other users of the financial statements. This
information helps them in providing clarity about the company and its financial position and based on
that the investing decisions can be done by the potential interested parties, what is the position of the
company in the market, whether or not it would be feasible to invest in the company, the kind of return
that the company would be able to generate are few of the major information that the stakeholders can
get from these annual statements (Dosi, Roventini, & Russo, 2019). Therefore, it is important that
correct measurement method is followed for these financial statements and in case there is any
assumptions they should provide information about that in their annual report. So, we see that there is
a lot of importance associated with reporting of the information in the financial statements of the
company and the annual report. In case of Blackmore we see that the company has prepared the
financial reporting following the basis of the general-purpose reporting framework and thus that will
help in making the users more confident about the information and make it more reliable on all
grounds. The major users include the creditors, the investors, the stakeholders, the general public all
these depend on the financial reports and the annual statement of the company.
Qualitative Characteristics of Financial Statement
The basic qualitative characteristics of financial statements include-
1. Relevance – This is one of the most important characteristic of financial reporting that all the
information that is stated there must be relevant and should be as per the accounting standards

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and provisions. It should be related to the accounting period and in case the company has made
any assumption then that should also be presented clearly in the annual report of the company.
In case of the given case it can be said that in case of Blackmore the information is relevant and
has been presented clearly and the company has followed all the relevant standards.
2. Reliability – It is also one of the most important characteristic that financial report must possess.
Reliable information is important so that they can make judgement about the potential earnings
and the financial position of the company. Reliability is something that differs from item to item
and thus we see that measurement is so important as in case of multiple methods of accounting
measurement it becomes more important (Kweon, 2018).
3. Understandability- Understandability is the quality of the information that helps in
understanding its significance. Not all the users have all the knowledge about accounting and
hence it is important that data must be simply presented, and the users are able to understand
the same. Understandability also helps in making sure that there is no wrong interpretation of
the data that is presented in the books of the company and the annual report of the company.
Qualitative Characteristics in case of Blackmore.
In case of Blackmore annual report, it can be seen that the financial statements of the company are
clear and precise and the information that the company has presented is clear and relevant. The
company has presented all the necessary assumptions in the notes to account for the company and have
also stated the accounting standard and policies that have been adopted by the company. By doing this
the company has made sure that the user has clear knowledge about the financial statements and are
able to take decisions based on the same (Oh, Kim, & Shin, 2019). The company has stated the method
of accounting followed for each item of the financial statement, thus that makes the annual report
reliable and the information relevant. Thus we see that qualitative characteristics of the annual report
and financial framework of reporting has been applied appropriately. An extract from the annual report
of the company to showcase the basis of preparation that has been followed is attached hereunder-

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Recommendations
Following the analysis done, it can be said that Blackmore has prepared the books following multiple
methods of measurement, however there are certain changes that the management can bring which
includes making the annual report more simple as all the users do not have great knowledge about
accounting and thus they need a simple and precise report that can provide them the information that
they are looking for and highlight those items that they need to focus on whose overall valuation is
complicated. In case the company is able to do so it will help in making the financial statement simpler.
In aspects of the corporate reporting framework and different measurement methods, it can be seen
that single or multiple methods of measurement both are imperative and followed by companies all

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over the world. However, applying a single method of measurement might not be able to give the most
correct depiction of the company and its financial statements and hence the use of multiple methods of
measurement becomes important and relevant in the field of accounting all over the world (White, Ellis,
Jones, Moran, & Simpson, 2018).
Conclusion
Based on the facts of the annual reports stated above, it can be said that financial statements are annual
reports that the company prepares are a mirror that helps the users in understanding where the
company is standing in terms of financial competency and whether or not the investors should invest in
the company the decision is taken based on these statements only. Thus, it is important that the
management should comply with the accounting standards and financial reporting framework
requirements in preparation of these annual report. In case of Blackmore, it can be seen that the
management has followed multiple method of measurement so when this is the situation, the risk to
rely on the information increases, as users find it difficult to understand the use of complicated method
of measurement and thus in this case giving proper notes with explanation is very important and the
management of the company has applied this in the preparation of its annual report and made it user
friendly and have also covered the issues that occurs because of the use of multiple method of
measurement which is important given that using a single method for valuation will not give the correct
value of the financial position of the company.

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