Qualitative Characteristics of Accounting Information

This essay discusses the concept of revaluation in regard to Telstra's land and highlights the qualitative characteristics of financial information. It also identifies key fundamental characteristics in the annual report of Abacus Property Group.

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 1
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EXECUTIVE SUMMARY
The purpose of this essay is to discuss the concept of revaluation in regard to the Telstra’s land
which was revalued. The essay also highlights the qualitative characteristics of financial
information and discusses the understandability, comparability, relevance and faithful
representation.it also identify key fundamental characteristics in the annual report of Abacus
property group.

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 3
Table of Contents
1.0 PART 1...................................................................................................................................................4
1.1 INTRODUCTION.................................................................................................................................4
1.2 REVALUATION....................................................................................................................................4
2.0 PART 2...................................................................................................................................................4
2.1 AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB)...................................................................4
2.2 QUALITATIVE CHARACTERISTICS OF FINANCIAL INFORMATION........................................................5
2.2.1UNDERSTANDABILITY..................................................................................................................5
2.2.2 RELEVANCE.................................................................................................................................5
2.2.3 COMPAREABILITY.......................................................................................................................5
2.2.4 RELIABILITY.................................................................................................................................6
2.2.5 FAITHFUL REPRESENTATION.......................................................................................................6
2.3 PRUDENCE CONCEPT.............................................................................................................................6
3.0 PART 3...................................................................................................................................................7
3.1 ABACUS PROPERTY GROUP ANNUAL 2017/2018 ANNUAL REPORT FEATURES.................................7
3.1.1 UNDERSTANDABILITY.................................................................................................................7
3.1.2 COMPAREABILITY.......................................................................................................................7
3.1.3 FAITHFUL REPRESENTATION.......................................................................................................8
3.1.4 RELIABILITY.................................................................................................................................8
3.1.5 RELEVANCE.................................................................................................................................8
3.2 PRUDENCE CONCEPT.........................................................................................................................8
4.0 PART 4...................................................................................................................................................9
4.1 REACTION OF INVESTORS AND SECURITY MARKET...........................................................................9
5.1 CONCLUSION.........................................................................................................................................9
6.0 REFERENCES........................................................................................................................................10
7.0 APPENDICES.........................................................................................................................................12
7.1 APPENDIX I: ABACUS 2017 TOTAL ASSETS.......................................................................................12
7.2 APPENDIX II: ABACUS 2018 TOTAL ASSETS......................................................................................12

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 4
1.0 PART 1.
1.1 INTRODUCTION
Abacus property group is a diversified group that carries out its operations majorly in Australia.
Its securities are traded in the Australian security exchange.it was listed in the security exchange
in November 2002 and its total market capital base was $2.4 billion at 30th June 2017 and $2.7
billion as at 30th June 2018.its main business is the investment property. They acquire property
assets and making sure that this asset is effectively managed to generate more returns and grow.
1.2 REVALUATION
It is right for the accountants of Telstra to revalue land since the market values of fixed assets
like land keeps on changing from time to time due to appreciation in their values AASB QC5.
This asset should therefore be revalued each year by various accountants of various companies
so as to ascertain their true book values as at that period. Revaluation of these assets will assist
the company to establish their true asset base based on the true carrying amount of asset
revalued. This concept of revaluation is in line with AASB paragraph 81 on revaluation and
restatement of asset. Revaluing land means presenting true information in the financial statement
and therefore it is in line with faithful representation under AASB QC12-QC16.
2.0 PART 2.
2.1 AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB).
The Australian accounting standards board(AASB) is enforcing the standards of international
accounting standards board (IASB) for reporting and presentation of the accounting information.
Some sections of the current Australian conceptual framework contain some qualitative
characteristics of financial information, definition and recognition of some items in the financial
statements (Wagenhofer, 2009, pg. 76). To differentiate Australian framework from the
international framework, prefix “Aus” is used followed by the number of IASB paragraph and
the decimal.
2.2 QUALITATIVE CHARACTERISTICS OF FINANCIAL INFORMATION
2.2.1UNDERSTANDABILITY
Understandability is an essential feature of an accounting information as it should be prepared
bearing in mind the needs of the users as per the requirement of AASB paragraph QC30 – QC32.
They should be prepared in the most understandable manner and in a way that can be easily
comprehended by the users of such information.in this feature, users of the accounting

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 5
information are assumed to possess some skills to read and understand well the accounting
reports and obtain relevant information suitable to their needs.
2.2.2 RELEVANCE
Relevance of the accounting information simply means that the accounting information
presented in the annual reports of the company should be useful to the decision making process
of the intended users of such information. This same function of the information plays a key role
in projection of the future concerning the way that the company can structure itself or the results
of its budgeted program (AASB paragraph QC5 – QC10). The information concerning the state of
the company at a particular point in time and its previous performance is used to project the
future position of the company and other users need like dividend payout ratio, salaries and
wages, share prices and the company’s solvency state.
2.2.3 COMPAREABILITY
Comparability means that the accounting information presentation should be in form that can be
easily compared with the statements of the same firm in the same industry. It also means that,
users of the information should be able to make comparisons of the company’s performance
from one year to the next and identify some changes and trends in such reports. Therefore, this
quality needs preparers of financial statements to present financial reports of the same nature and
effect in the same and consistent manner for the company and different entities (AASB paragraphs
QC20 – QC25).
2.2.4 RELIABILITY
Reliability of an accounting information means that the information contained in the statements
does not contain errors and biasness and can be utilized by various users to provide key
information that they need from them.an accounting information may be relevant but not reliable
or its recognition may be misleading (Shortridge & Smith, 2009, pg. 11). For instance, the value
of the claim for damages which is under a legal action may be disputed and therefore it will not
be in order for the company to recognize this value in its full amount in the statement of financial
position as it will portray a wrong information to the users.
2.2.5 FAITHFUL REPRESENTATION
Faithfull representation of accounting information means that the financial information should
represent transaction events faithfully according to AASB QC12-QC16. For instance, the
statement of financial position should represent faithfully the elements such as assets, liabilities

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 6
and equity of the company as at the reporting period and should meet the criteria set to be used in
the recognition. It is advisable that the companies should recognize elements of the financial
statement and provide necessary disclosures concerning the risks of possible errors around such
recognition.
3.0 PART 3
3.1 ABACUS PROPERTY GROUP ANNUAL 2017/2018 ANNUAL REPORT
FEATURES
3.1.1 UNDERSTANDABILITY
Fundamental qualitative characteristics of a good accounting information has been portrayed in
various aspects of the 2017 and 2018 annual reports of abacus property group. Understandability
feature has been clearly demonstrated since the annual reports of this company can be easily read
and understood by the user (AASB paragraphs QC30 – QC32).it display all elements of the
financial statement in a logical and easy to read manner. For instance, the income statement of
abacus property group clearly lists all the revenues and expenses in a very clear manner.
Common user of this information will be able to know that the group made a net profit after tax
of $292088000 and $246958000 in 2017 and 2018 respectively. The user can therefore make
appropriate decision based on this understanding. Abacus group comprise of AGHL, AT, AGPL,
AIT, ASPT and ASOL group which jointly form abacus property group. The statement of
comprehensive income has clearly lists various incomes that are attributable to each group. This
enhances the understandability of this information who want to know the income of each group
(Kirschenheiter &Ramakrishna, 2010).
3.1.2 COMPAREABILITY
Comparability feature is clearly portrayed in these annual reports as they relate to the same
period of time, that is 30th June of 2017 and 2018.this will enhance the comparison of various
elements of the reports that relate to the same period of time. The income statement also gives a
net profit after tax of $292088000 and $246958000 in 2017 and 2018 respectively. The user will
therefore be able to do simple comparisons of these two profits and make relevant investment
decision regarding to the company. Comparison on various incomes of a particular group for
each year can be clearly drawn from the statement of comprehensive income since the statement
list the income for each particular group. The annual report of abacus group is easily comparable
across years (Cascino & Gassen, 2010).

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 7
3.1.3 FAITHFUL REPRESENTATION
Quality of faithful representation has been clearly shown in the way the group has disclosed
various significant estimates and judgments with regard to treatment of accounting elements.it
has been disclosed that the financial asset is treated at the fair value through the profit and loss
on recognition (pg.42 of the 2018 annual report).
3.1.4 RELIABILITY
Reliability quality is shown in pg. 49 where the group has adequately shown the amount of total
facility loan and the unused amount at the reporting date. This information will assist the user of
this information in making key decision regarding the investment in the group.
3.1.5 RELEVANCE
Relevance quality has been clearly shown since the group has provided key financial information
consistently from year to year. This information will assist the user to judge and draw relevant
conclusion regarding the groups viability. Total equity has been shown to be $ 1,916,702,000
and $ 1,814,621,000 in 2018 and 2017 respectively. This can help the user project the total
equity for 2019 since it is shown to be on an upward trajectory.it is in line with AASB paragraph
QC6 – QC10
4.0 PART 4.
4.1 REACTION OF INVESTORS AND SECURITY MARKET
The security market will react to various disclosures regarding the company’s announcements on
their earnings. This is an announcement on the company’s performance and profitability levels
for a particular period. For the case of abacus group, it reported its performance annually of a
profit of $292088000 and $246958000 in 2017 and 2018 respectively. Profitability of the
company is shown in the income statement while the earnings are supposed to be adequately
announced for a company that is listed in the security market. This is in line with the quality of
relevance with regard to the predictability of the company’s performance.in the financial
statement of abacus property group pg.27, it is clearly shown that Basic and diluted earnings per
stapled security (cents) were 42.18 and 49.91 in 2018 and 2017 consecutively. This will make
and investor to know that the value decline in 2018 by 7.73. The information disclosed will make
the investors judge the possible levels of dividend expected from the company.

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 8
According to Cready and Gurun (2010), lower earning will will move market values higher and
Hussin et al. (2010) found out that low earnings of a company will leads to negative market
reaction. On disclosure of share price of the company, stock prices will will react positively or
negatively depending on the announcement.
5.1 CONCLUSION
In conclusion, good accounting information must contain the above characteristics for it to
achieve its intended goals so directed. Investors need to know the overall profitability of the
company while the security market would want to know the shares declared by the entity. All
these should be well covered if a financial report has all the necessary qualities of a good report.
6.0 REFERENCES.
AASB FRAMEWORK <https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-
04_COMPjun14_07-14.pdf>

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 9
Abacus property group annual reports < http://www.annualreports.com/Company/abacus-
property-group>
Cascino, S. and Gassen, J., 2010. Mandatory IFRS adoption and accounting comparability (No.
2010-046). SFB 649 discussion paper.
Kirschenheiter, M. and Ramakrishnan, R.T., 2010, September. Prudence demands conservatism.
AAA.
Shortridge, R.T. and Smith, P.A., 2009. Understanding the changes in accounting
thought. Research in accounting regulation, 21(1), pp.11-18.
Wagenhofer, A., 2009. Global accounting standards: reality and ambitions. Accounting Research
Journal, 22(1), pp.68-80.

QUALITATIVE CHARACTERISTICS OF ACCOUNTING INFORMATION 10
7.0 APPENDICES
7.1 APPENDIX I: ABACUS 2017 TOTAL ASSETS
5%
26%
26%
17%
7%
19%
ABACUS TOTAL ASSETS:$2.4 BILLION AS AT 30TH JUNE
2017
other assets office portfolio self-storage portfolio
retail portfolio industrial portfolio developments
7.2 APPENDIX II: ABACUS 2018 TOTAL ASSETS
5%
32%
24%
16%
6%
17%
ABACUS TOTAL ASSETS:$2.7 BILLION AS AT 30TH JUNE
2018
other assets office portfolio self-storage portfolio
retail portfolio industrial portfolio developments