Importance of Accounting Concepts in Financial Reporting

HA3011
Advanced Financial Accounting
T1
201
9

Contents
Structure................................................................................................................ 2
Introduction........................................................................................................... 3
Description of Accounting Concepts......................................................................3
Conceptual Framework and the issue of measurement.........................................5
Fundamental Qualitative Characteristics – Understanding of relevance and
Representational Faithfulness...............................................................................6
Conclusion............................................................................................................. 7
References............................................................................................................. 8

Structure
This assignment consists of various accounting concepts analysed by taking a
real life example of a listed company, which is APA Group FP Units stapled
Securities. It involves identification of various accounting concepts considered
along with suitable assumptions that are made, in addition the conceptual
framework of such financial reporting and the issue of measurement is dealt in
this assignment. In addition to this the importance of the framework in
preparation and presentation of financial statements is discussed in detailed
along with the usage of relevant and qualitative information while accounting for
a transaction and presentation of such accounting balances to the users of the
statements / reports. A fair estimate of the number of accounting concepts that
are to be considered while preparing accounts are made along with suitable
explanation for the same. Finally, the conclusion has been derived at based on
the usage of accounting concepts and the fundamental framework of reporting of
financial matters by a listed corporate entity.

Introduction
The accounting of a company is done in accordance with generally accepted
accounting principles (GAAP) which states the way assumptions and accounts
are to be made. Company, which is APA Group FP units Stapled Securities has
considered all the applicable accounting standards based on the examination of
the annual report 2018 (Arnott, et al., 2017). Accounting concepts such as
accrual, going concern and consistency are fundamental for any organisation as
these affect the nature of reporting of financial statements by the company.
On the other hand, furthermore several other accounting concepts such as
money measurement concept, Business entity concept are to be built into the
internal controls and the standard operating procedures of the company as these
are required as per the regulation. These standards play a major key role in
standardising the accounting policies of the company with that of the other listed
companies in the market.
Description of Accounting Concepts
There are primarily few accounting concepts that are most required to be
followed without any deviation which are going concern, consistency and
accrual. They are needed to be disclosed in case of not following them as that
would impact the users of the financial statements.
Going concern concept is an important assumption based on an estimated
concept which fairly acknowledges the future of the company in terms of
financial as well as non-financial requirements of the company and there is
requirement in accounting for only the assets and liabilities based on its usage
life (Alexander, 2016).
A deviation/change in accounting estimates or policies are allowed when there is
a requirement of any regulation or statutory guidelines, for better presentation of
financial statements and proper disclosure is made for any such change.
Few concepts that are required to be kept in mind while preparing financial
statements are money measurement concept, business entity concept, cost
concept, dual aspect concept, realisation concept and many more.
Periodicity concept of accounting tells that the accounting has to be done
periodically and in accordance with the consistency concept where if a company
is reporting its financial statements yearly then it has to follow doing the same
and if required can present an interim financial report which need to consists of
all the elements of accounting done during that period mentioned in the financial
report (Heminway, 2017).
There is a huge chances of deviation from the concept of cost as only few
accounting elements have to comply with the cost concept which mostly deals