Accounting Concepts and Conceptual Framework in Financial Reporting

This report discusses the accounting concepts and conceptual framework in financial reporting. It provides an overview of the background of the company and explains the issues related to measurement. The report also explores the fundamental qualitative characteristics of financial reporting.

Running head: REPORT 0
ADVANCED FINANCIAL ACCOUNTING
MAY 29, 2019
STUDENT DETAILS:

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Contents
Introduction................................................................................................................................2
Background of company............................................................................................................2
Explanation of accounting concepts...........................................................................................2
The conceptual framework and issues related to measurement.................................................2
Fundamental Qualitative Characteristics...................................................................................2
Conclusion..................................................................................................................................2
References..................................................................................................................................3

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Introduction
The key objective of financial reporting is to render data, which is significant as well as
helpful. The accounting concept deals with laws, rules, and regulations required for fulfilling
the requirements of the worker, investor, as well as different shareholders.
This concept means that the businesses can identify the revenues, losses and profits in the
amount, which differ from what will be identified on the basis of cash accepted from the
customer and while payment is made to the workers as well as the dealers.
In financial reporting, the conceptual framework is the theory of accounting made through the
standards-setting bodies in opposition to that the practical issues may be tested quantitatively.
In addition, the conceptual framework is the systematic device with various frameworks as
well as differences. This is utilised to create the conceptual distinction and manage the
concepts. The solid conceptual framework captures something actual and does this in the
manner, which is simple to recall as well as implement. The conceptual framework for
presentation, as well as the preparation of the financial statement as changed, involves the
conceptual framework used for Financial Reporting as provided through the IASB. A main
motive for establishing conceptual framework is that it provides framework for setting
accounting standards, a base for resolving the accounting problems, the fundamental concepts
that do not require happening in the accounting standards. In the following parts, the
accounting concepts followed by Boral limited is discussed and assessed. This report also
states the conceptual framework of the company, measurement issues, and fundamental
qualitative characteristics (Costa and Torrecchia, 2018).

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Background of the company
Boral Limited was founded in the year 1946. This company is established in North Sydney
(Australia). Boral Limited produces as well as delivers the materials related to building &
construction in American countries, Asian countries and Australian countries. This company
also makes an offer of block, brick; asphalt materials related to cement, concrete and
retaining walls, pavers, materials related to roof, board of plaster, light materials related to
window and building, timber product, quarry material, fly ashes, stone, materials for roofing
as well as masonry. Boral Limited also renders spray sealing or asphalt lying, services related
to material techniques, placing of materials, installation of roof tiles, as well as assortment
services related to empty pallets. Additionally, this involves in the activities related to
properties, transport, and landfill-services. This organisation serves the non-residential
construction as well as residential construction. It also provides services in the marketplace of
engineering as well as infrastructure (Lyle, 2018).
The financial year 2018 represented as the remarkable year in the transformation of Boral
Limited, with positive incorporation of a headwater business in Northern America, along with
more profits in Australia and alliance of important development of previous periods in Boral
USG. In the financial year 2018, Boral Limited delivered fundamental PAT (exclusive of
important items) of 473 million dollars, the substantial increment of 38% over the last years
(Panteli and Mancarella, 2015). The company also attained the acquirement net synergy of 39
million American dollars, ahead of the preliminary30–35 million American dollars target,
and the company has enhanced the 4-year synergy targets to 115 million American dollars.
The main approach of a company is to deliver advanced performances and maintainable
development is continuing well and delivering the value for the shareholders of the company
(Kelley and Knowles, 2016).

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Explanation of accounting concepts
The accounting concept means the fundamental rules, assumptions, and principles that use as
a foundation to record the transactions related to business and preparing the accounts. It is
also assumed by the accounting concept a business entity as well as the owner of the entity,
are considered as two separate independent personalities for the accounting purpose. The
accounting concepts have a significant role in conducting business affairs. The mechanism is
required to know the credit and debit of the functions of a corporation (Bridgett, et. al, 2015).
Besides, it is essential to make sure by managers that they have proper knowledge of
accounting. The reason is that a simple mistake can spoil everything. The most significant
and easy problem, which is required to be understood by the managers, is different in nature,
going concern, disclosure, timeliness, true and fair representation, as well as relevance
(Kalisch, Müller and Tüscher, 2015). In the addition of this, the accounting practices entail
the documentation, extent and establishment of the financial-bound data that permits the
well-versed judgement as well as a foundation of the decisions taking by correct
shareholders. The company faces numerous conceptual problems. This is essential that one
must know the accounting concepts, to develop the firm’s foundation of how accounting does
work. The following are basic accounting concepts-
1. The economic entity concept- The business-related transactions are to be continued
separated from the owner’s transactions. By conducting this, there are no intermixing
of business transactions and private transaction in the financial statement of entity.
2. The matching concept- the expenses in relation to revenues are required to be
recognised in same time, where revenue was identified. With the help of this, there is
no any deferral of identification of expenses in upcoming reporting period, with a

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purpose of someone seeing; the financial statements of the company can be assured
that each feature of dealing has recorded at the same time.
3. The consistency concept- while a company chooses to use the specific accounting
method, it should continue to use this over a go-forward basis. By doing this, financial
statements of corporation created in numerous times may be consistently compared.
4. The materiality concept- it is stated by materiality concept that an accounting standard
may be avoided, in a case where the net effect of conducting this so has this smaller
influence over the financial statements that user of financial statements will not be
misinformed. The materiality concept is known as the materiality constraint. It is
stated by this concept that the financial data is material to the company's financial
statements if this will modify the view and opinions of the rational individual. In
different terms, the significant financial data, which will sway the opinions of users of
financial statement, must be involved in financial statement of the company.
The materiality concept is comparative in significance as well as extent. Certain
financial data may be material to a corporation, however, may be irrelevant to others.
It is slightly obvious while a person thinks in relation to the smaller corporation
versus the larger corporation. The significant and larger expenditures to the smaller
corporation may be small the immaterial to the large corporation because of the
revenues as well as sizes.
5. The conservatism concept- The conservatism concept is a general concept of
identifying the liabilities and expenditures as soon as possible while there are
improbabilities in respect of results, however, to only identify the assets as well as
revenues when they are guaranteed of being accepted. The conservatism Principle is
the concept in accounting in GAAP that identifies and records expenditures and

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liabilities-uncertain or certain in nature, as soon as possible however identifies
revenue and asset, while they are guaranteed of being accepted. This provides the
easy direction to record the matters related to estimates as well as uncertainties (Crise,
et. al, 2018).
6. The accruals concept- as per an accruals concept, the revenue is identified at a period
when they generated. Additionally, the accruals concept states that the expense is
identified at a while asset is consumed. In this way, the accruals concept addresses
that the business may identify the revenues based on cash accepted by the customer or
while the payment is made to suppliers as well as employees. Therefore, the auditor of
the company will only approve the financial statements of the corporations, which
have conducted as according to a concept of accruals.
7. The going concern concept- The Corporation’s financial statements are made
according to an assumption that a business would stay in a function in a forthcoming
period. In addition, as per the going concern concept, recognition of expenditure and
the revenue recognition maybe deferred to forthcoming time, while an entity is still
working. Or else, the expenditure’s recording in specific will be accelerated in a
present time.
A capital structure of Boral Limited contains equity as well as debt. The directors
determine a company’s proper capital structure; particularly how much is raised from
equity shareholder and how much is advanced from the debt (the financial
instruments) to funding the upcoming and present functions of this company. In the
addition, the director of company reviews a capital structure of group and dividend
policy frequently and do so in reference of the capability of group to endure as the

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going concern basis, for making investment in the chances, which develop the
business and increase the value of stakeholder (Crespo, Boschm and Balland, 2017).
Boral Limited also assesses the capability of a group to continue as the going concern, and
whether this going concern accounting concept is proper or relevant. It also includes the
disclosing, as applicable, cases associated with the going concern and utilising a going
concern accounting concept if they wish either to liquidate the Group or to end the functions
or have no accurate substitutes, however, to do so. Additionally, the company adopts the
matching concept at the time of recognising income and expenditure. Other incomes are
identified as per the systematic basis over a period essential to match it with the related costs
for that this is desired to reimburse. In a case when the cost already has incurred the amount
is recognised in the period, the claim is affirmed (Lewandowski, 2016).
The company also follows the consistency concept and materiality concept. Information is
only involved in a financial report to an extent this has regarded material and related to
proper knowledge of a company's financial statements. Besides, the accounting methods as
well as accounting methods of the calculation, in preparation of company’s financial
statements, are constant with the disclosed and followed in the annual report of Boral Limited
(Crandall, Deater-Deckard and Riley, 2015).
The conceptual framework and issues related to measurement
The sound conceptual framework serves as the foundation for standard setting and advances
the standards constancy over a period. The conceptual framework also renders the direction
in resolving the evolving practical issues. The major aim of conceptual Framework was to
help International Accounting Standard Board in establishment of future IFRS and within the
reviews of current IFRS. In the addition of this, the conceptual Framework can also help the

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preparer of financial statements to develop the accounting policies for the event or transaction
not contained through the present standards. In this way, the conceptual framework handles
the problems related to the fundamental financial reporting like the readers and purposes of
the financial statement of an entity, a characteristic that creates accounting data relevant, and
the fundamental components of the financial statement of an entity. These fundamental
components of the financial statements include liability, asset equity, revenue, and expenses.
Moreover, this framework of the company also handles the concept to identify and measure
the components in financial statement of the company. In this way, fundamental elements of
conceptual framework involve qualitative characteristics of accounting data, the general
purpose of financial reporting, purpose of financial reports, measurement in addition to
identification in the financial statement of company, as well as other fundamental elements of
company’s financial statements (Bekçioglu, et. al, 2016).
According to annual report of Boral Limited, this is clear that the financial reports have
presented and made according to provisions of the Corporation Act Cth 2001, as well as the
authoritative declaration of the AASB and Australian Accounting Standards. Boral Limited
prepared the financial report as per the Australian IFRS issued by IASB and Accounting
Standards of Australia standards (Annual Report 2018). Financial statements of an entity
present fair as well as true view of performance of the company along with financial position.
The financial statements of the corporation conform to Corporations Regulations 2001 as
well as accounting. Boral Limited follows the important accounting policies to make the base
from the values of the asset, expenses, income, the value of liability as well as the value of
equity. In addition, the company is independent of a group as per the provisions related to
auditor’s independence according to the Corporations Act 2001. This organisation has also
fulfilled the other moral obligations as per the code of conduct.

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Fundamental Qualitative Characteristics
Fundamental qualitative characteristics of financial reporting information cover relevance
and faithful representation. According to these characteristics of the information related to
financial reporting, this is significant that the information should be related to the user’s
needs, which the matter of concern while the data affect the financial decision is made
through the users of financial statements. It can include particular data related to reporting or
the information whose misstatements or mistakes can affect the financial decision made by
the user of financial statement (Díaz, et. al, 2015).
Moreover, the faithful representation is also regarded as other important fundamental
qualitative characteristic. This significant characteristic refers to a concept stating that the
corporation’s financial statements must be produced in the manner to precisely state the
position related to the business of the company. By the analysis of the annual report of a
corporation, this can say that the financial statement of an organisation provide the faithful
representation along with related presentation. Boral Limited faithfully shows various events
as well as dealings, shows the fundamental cases related to events, and carefully states
estimates. It also discovers the uncertainties by the proper disclosures. For example, the
corporation has confirmed with relevant representation and faithful representation
characteristic in relation to revenues–

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Conclusion
As per this discussion, it can say that the conceptual framework states nature of financial
reporting as well as accounting, the functions, and the drawbacks. This is regarded that the
Financial Accounting Standards Board’s contribution thus far and the presence to this day are
because of the conceptual framework’s quality and the utility. The major reason to establish
the agreed conceptual framework is that this renders the fundamental principles that improve
the setting of accounting standards. The accounting Concepts can be considered as the
fundamental accounting assumption, which acts as the foundation for making the financial
statement of the organisation. Additionally, the accounting concepts render the integrated
structure and rational strategy to the accounting procedure. The financial transactions that
occur are interpreted considering the accounting concepts that direct the accounting method.

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References
Annual Report (2018) Boral Annual Report 2018. Available at:
http://acquia-stg.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-
2018.pdf. Access on 30/05/2019
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Concept by the End of 20th Century: Strategic Cost Management. Muhasebe ve Finans
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Bloomberg (2018). Boral limited. Available at:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=392930. Access
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