Accounting Concepts and Financial Reporting Analysis Report

This report provides a comprehensive analysis of key accounting concepts and their application in financial reporting, using Qube Holdings Limited as a case study. It begins by defining and explaining several crucial concepts, including the going concern, business entity, realization, accounting period, and money measurement concepts. The report then emphasizes the importance of relevance and faithful representation as fundamental accounting characteristics. The discussion extends to measurement techniques, differentiating between historical cost and current value measurement, and illustrating their application within Qube Holdings Limited. Detailed examples from Qube's financial statements are used to show how these concepts are implemented in practice, including the treatment of depreciation, revenue recognition, and investment properties. The report concludes by summarizing the importance of these concepts in ensuring accurate and reliable financial reporting.

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UNIVERSITY NAME
STUDENT NAME
STUDENT ID
COURSE
DATE

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SUMMARY.
The main aim of preparing this this report is to discuss on the generally accepted accounting
concepts that has been feature in the company's report and their significance in facilitating
preparations of financial statements. The concepts mentioned include the going concern concept,
business entity concept, realization concept accounting period concept and money measurement
concept. The report further ascertains the importance of relevance and faithful representation as
the basic accounting characteristics. Faithful representation states that financial statements
should be prepared honestly without biasness. Financial statements should be relevant to the
users for them to use them in making financial decisions. Business entity concept is well brought
out as Qube Holding limited company is formed under the Corporations Act of Australia. The
entity also exhibits a going concern as its financial plans are more than one year

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Table of Contents
INTRODUCTION...........................................................................................................................................4
REALIZATION CONCEPT...............................................................................................................................4
GOING CONCERN CONCEPT.........................................................................................................................4
BUSINESS ENTITY CONCEPT.........................................................................................................................5
MEASUREMENT...........................................................................................................................................6
HISTORICAL COSTS MEASUREMENT............................................................................................................7
CURRENT VALUE MEASUREMENT...............................................................................................................8
QUBE HOLDINGS LIMITED MEASURMENT...................................................................................................8
QUBE HOLDING LIMITED DEPRECIATION....................................................................................................8
REVENUE MEASUREMENT AND RECOGNITION...........................................................................................9
INVESTEMENT PROPERTIES.........................................................................................................................9
RELEVANCE AND FAITHFUL REPRESENTATION............................................................................................9
EXAMPLES OF HOW RELEVANCE IS BROUGHT OUT IN BOOKS OF QUBE HOLDINGS LIMITED...................10
HOW FAITHFUL REPRESENTATION IS BROUGHT OUT IN THE STATEMENTS OF QUBE HOLDINGS LIMITED.
.................................................................................................................................................................. 11
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................13
APPENDICES..............................................................................................................................................15
APPENDIX I: investment properties.......................................................................................................15
APPENDIX II: fair value measurement...................................................................................................15
APPENDIX III: NOTES..........................................................................................................................15
APPENDIX IV: NON-CONTROLLING INTERESTS......................................................................................15

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INTRODUCTION
Accounting concepts refers to assumptions, rules and principles that underlie preparations of
financial statements whereas measurement implies the technique employed by entities in
determining book values of accounting items. Measurement of financial items are brought out in
this report and qualitative characteristics of good financial information.
REALIZATION CONCEPT
It states that revenue from any commercial transactions should be encompassed in the accounting
records only after it has been realised. Realization means the creation of legal right to receive
consideration in a contract which is mainly money (Weil, Schipper & Francis, 2013).
The revenue is determined at its market value of the amount gained (Horton, Macve & Serafeim,
2011, pg. 492). Revenue obtained from the services delivery is only recognisable on provision of
the goods and income generated by offering storage facilities is recognisable on daily or weekly
basis. Wages and salaries liabilities, yearly leave and accumulated sick leave that are settled in
bracket of one year of the date of its reporting are recognized in respect of employees
services ,the reporting information and measured at amounts anticipated to be paid when
liabilities are paid .Long service liability is recognized in the provision for workers benefits and
weigh as the recent valence of the anticipated future obligations to be serviced as a result of
services offered by the workers prior to the date of reporting using the anticipated future wage
and salary ranks (pg. 62). On the bonus plan obligation is recognised as an expenditure for
bonuses where contracts require or when the original performance that has established such
important requirement.
GOING CONCERN CONCEPT
Views a business entity to be continuous operation that is expected to proceed to unforeseen
future. The concept states that the business has perpetual succession i.e. it continues to operate as
profits generated are used to advance the business (Dewi & Dewi, 2017, pg. 120). The enterprise
exists so long as the law that saw its establishment is still in practice and relevant to the laws of
the country or state in which entity is domicile (Goo, Chi &Shen, 2016, pg. 539).
Qube company exhibits a going concern concept i.e. by disclosing in its books of account the
retained earnings and a provision for reserve account of 7.0 million Australian dollars in 2016

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that could be use in the business for the periods 2017,2018 and even 2019.The 2016 revenue
reserve is transferred to 2017 and the succeeding years as the report indicates that at 30th June
2017 which is the end of the company's financial year 7.0Million Australian dollars is transferred
to the succeeding year. The reserve constitute a going concern concept of the business that
includes; business combination reserve which is the difference between amount paid to obtain a
non-controlling interest in branch and the carrying valence of the shares. obtained. Share based
payment reserve applied in documenting i.e. differences which comes about due to transactions
with non-controlling interest and do not lead to a loss of control. Foreign currency transaction
reserve which exchanges the differences that comes about on translation of the foreign regulated
entity recognisable in other comprehensive income shown on note 37 and piled up in a distinct
reserve within the enterprise. The company signing a contract of seven years to obtain senior
unsecured loan of 150 million Australian Dollar's is an indication that the entity is expected to
proceed for unforeseen future with the Clean Energy Finance Corporation Fund. The Clean
Energy Finance Corporation Fund will aid the company to construct the Moorebank Logistics
Park. The qube Holdings Limited company provides for the workers benefit of 16.4 million
Australian Dollars in the financial year 2017 is approximated to be meet by the company within
a period of twelve months a clear indication that the entity's management deems that the
company will proceed for unforeseen future(Pg76). The revaluation of freehold land and
premises or the leased land by the group every financial year by a revaluation expert or even
using the recent prices in the least active markets or by the use of a discounted cash flow
projections best illustrates the going concern concept(Pg72).
BUSINESS ENTITY CONCEPT
This concept states that a business enterprise is treated as a separate entity from the owners
(Horvat, 2015).
Qube company enters into a contract on its own name with Clean Energy Finance to obtain a
seven year loan of 150 million Australian dollars which will aid the company in constructing the
Morebank Logistics Park. The Qube board of directors are given a mandate to take the risk on
behalf of the company which is seen as an artificial person by the corporations Act of Australia
which leads to its formation. The directors are tasked to check on the cash flow levels whether or
not they are able to meet the debt obligations and capital expenditure without involving investors

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capital .Furthermore the company enters into a contract by acquiring the residual 50 % interest in
Australian Amalgamated Terminals Limited( AAT).The purchase price is set at 150 million
Australian dollars which is also part of the strategy of acquiring Asciano encompassing Qubes
acquisition of 50% interest in Patrick .All these are entered as the Qube company is considered
an artificial person by law with the capacity to contract though this is carried with the best
interest of the shareholders being in mind of the board of directors and that aim of wealth
maximisation which is the sole interest of the investors in a company. For execution purpose the
company which is treated as single entity is under Maurice James, The Managing Director who
together with other company administrators are tasked to undertake the operation of the company
without involving the shareholders. For execution purposes the company has been encompassing
of Logistics and Ports and Bulk. The Logistics Division is mandated to offer a wide varsity of
services relating to imports and exports of containerised cargo. The Managing Director and the
board of directors has been tasked as the chief decision maker of all the operating segments.
Qube company has been set up as a fully owned Australian controlled enterprise and has effected
a tax consolidation legislation. Due to this the enterprise is liable to tax and the postponed tax
properties including other financial obligations of the enterprise which are written off (Pg. 80).
ACCOUNTING PERIOD CONCEPT
states that the continuous lifetime of an entity is broken down into smaller periods to ease the
burden of reporting (Gluzová, 2017, pg. 436).
This is concept has been shown in the Qube report. The company has its financial period ending
on 30 June every year and begins on 1st July of every year. Qube Limited Company and its
subsidiaries prepares their financial statements ending 30th June of every year. The company
reports a total of 520.1 million Australian dollars as at 30th June 2017 which is the end of the
company’s financial year.
MEASUREMENT
Measurement refers to the way of establishing the value of items that are to be recorded in the
financial and how they can be recognized and recorded in the statement of financial position and
income statement (Salas, Prince, Baker &Shrestha, 2017, pg. 67).

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In the development of the conceptual framework,2010, the sitting board make some
consideration over measurement of various elements in the financial statements. They also
debated over the issue of measurement in depth and whether a single measurement method
should be adopted as a basis for measuring various elements in the financial statements. They
later on made a conclusion that using different basis of measurement will give a very useful
information to various users of the financial information. They therefore identified some basic
basis of measurement of accounting elements.
HISTORICAL COSTS MEASUREMENT
This basis gives an information on the items obtained from their historical costs value of their
original transaction (Boss et al (2010).in case a particular asset is an element in question, then its
acquisition costs is the basis for measurement for instance acquisition related costs of $ 2.3
MILLION is disclosed to have been added in the consolidated statement of incomes in pg. 98.in
case of the liability, it is the amount acquired to incur of bear the liability costs.
Based on the historical costs measurement, the value of the assets or liability in question is
reviewed say on yearly basis to in order to determine its depreciation value or the impairment
costs.
According to the historical cost, it is expected that the value of the asset that is recorded in the
books of account must not be higher than the value anticipated to be recovered from use or the
sale of that asset.it is therefore historical costs that can be recovered.
Usually, historical costs basis is used but always used with other bases such as;
Inventories-they are taken at the lower of costs and the net realizable value
Marketable securities-taken at their fair value
Pension liabilities -taken at their present values
Historical costs basis is advantageous in that it is simple to use and also certain for instance
every entity knows that they have made certain payment amount for a certain asset when they
acquired them and also they know that they have certain amount of their liabilities based on their
various obligations.

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The historical costs tend not to consider various changes in prices of non-monetary assets and
therefore current cost is sometimes preferred by some entities. For example, various carrying
amounts or book values of assets are outdated costs which have been affected by factors like
inflation.
CURRENT VALUE MEASUREMENT
This basis of measurement gives an information concerning the item by use of information that
gives a picture about the conditions during the period of measurement. Measurement base
comprise of the current costs, fulfillment value, value in use and the fair value (Barker &Schulte,
2017, pg. 56).
QUBE HOLDINGS LIMITED MEASURMENT.
It is based on historical costs basis.in pg. 72 of the 2017 annual report, it is disclosed that PPE is
taken or stated at their historic cost less any reduction charge on the asset.it is further disclosed
that the historical costs of the asset comprise of the expenses relating to the asset acquisition.
Land in this case is not subject to depreciation.
Leasehold improvements is disclosed to have been depreciated over its useful life (qube holdings
2017 annual reports pg. 72).
Under the same pg. 72, costs that will follow will be summed up in the carrying value or
recognized as different asset when it is very certain that future cash flow will flow into the entity.
QUBE HOLDING LIMITED DEPRECIATION.
It is further disclosed under the same page that assets are depreciated by use of straight line
method where costs are allocated to the useful lives of the assets that is estimated with the
following assets depreciation range in %:
 Houses 2.5-10
 Leases 2.5-10
 fittings 10-20
 PPE 5-33.3

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The group further discloses that the remaining values and estimated useful lives of various assets
are reviewed and relevant changes made after the accounting date (pg. 72).
The asset carrying value is usually written down to the value that can be recovered if that asset’s
book value is higher than its estimated recoupable value (Fusy, 2009, pg. 1871).
REVENUE MEASUREMENT AND RECOGNITION.
Revenue is measured at the fair value of the price that is received and is recorded on that value as
shown on pg.65 of the 2017 annual report. However, this value is the net of the discounts,
disbursements and the allowances. For instance, revenues from services provided by the group is
recognized only if such services have been delivered (Horton, Macve& Serafeim, 2011, pg. 493).
INVESTEMENT PROPERTIES.
In pg. 73 of the 2017 annual report, it is clearly shown that the investment property is measured
at its fair value as shown by the net gain from the adjustment of the fair value, straight lining of
operating lease is also shown on the same page. Detailed calculation is shown under appendix I.
RELEVANCE AND FAITHFUL REPRESENTATION.
Relevance of the financial information implies that the information contained in the financial
statements must be relevant to the final user to assist him in the decision of investment choices
(Karğın, 2013, pg.73). It must influence the decision made by the user by helping him/her make
relevant judgement of the past activities of the company, determine on the current and predict on
future. For example, the information of a particular asset concerning present conditions will be of
benefit to the user in predicting about the future ability of the entity to adapt to various economic
conditions (Song, Thomas & Yi, 2010, pg. 1373). This role of the information has a key function
of determining the future set up of the entity in terms of budgets and various programmes.the
data regarding the situation of the entity at some time and its past achievement is utilized to
predict the next situation of the entity and various interested parties needs such as dividends
distributed to shareholders, earnings of employees and wages, stock values and the entity’s
liquidity. To be capable to utilize accounting data to project on the coming and previous events,
various information must be properly disclosed such as abnormal incomes generated or expenses
incurred by the company. All these items must be explained so as to aid in predicting on the
future adequately (Nobes &Stadler, 2015, Pg. 591).

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Faithful representation of the financial information implies that accounting data must present
transaction and activities of the company in a faithful and transparent manner. For example, the
financial statements such as the balance sheet of the company must portray items such as assets,
liabilities and equity of the entity as at the date of the balance sheet in a trues and reliable
manner. This is achieved by employing the correct measurement methods and recognition of
revenues and liabilities using the correct technique. Most of the accounting information normal
portray data and information that is not stated faithfully due to the problems in the methods of
measurement and recognition of key financial items like the determination of the goodwill could
be hard to establish in a very reliable manner leading to its misstatement in the books of
accounts.to ensure that financial information is presented in a very faithful manner, it is always
good for the company to provide supporting notes that usually accompany financial statements to
disclose various assumption used in measurement and recognition of various items in the
financial statements and the risks associated thereof. For information to be faithful therefore, it
must be complete in presentation, error free and must portray the neutrality (Macintosh, 2009,
pg. 265).
Relevance and faithful representation therefore are both important if financial information is to
present true and useful information to various users. Information that is free from errors will be
relevant to the user in that it will give an information that will be utilized to the benefit of the
user such as true position on the company based on book values of assets and liabilities.
EXAMPLES OF HOW RELEVANCE IS BROUGHT OUT IN
BOOKS OF QUBE HOLDINGS LIMITED.
 In pg. 6 of the 2017 annual report, it is disclosed that the company will declare dividends
of 2.8 cents thus enhancing maintenance of 5.5 c per share in previous year. This
information will be relevant to the user.
 The company is seen as a forward looking from 2017 annual report where they stated that
economic conditions are expected to remain constant in 2018. Pg. 6. this is of concern to
investors who want to know the risk faced by the company.
 Under note 21, pg. 93, it is disclosed that the assets are measured as shown in appendix
II.

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 In pg. 97 of the 2017 annual reports, it is pointed out that for purposes of understanding
how various changes in structure of the group will affect the performance of the
company, various notes have been provided. This indicate that the financial information
is relevant to the user. Shown under appendix III
 In pg. 71, it is disclosed that the group will consider the prevailing economic condition
when determining impairment provision for any year. This show that the group will
consider market situation which is relevant to the user. Under the same page, the group
has no reason to believe that impairment was necessary as at 30th June 2017 based on
forecast made by Patrick.
HOW FAITHFUL REPRESENTATION IS BROUGHT OUT IN
THE STATEMENTS OF QUBE HOLDINGS LIMITED.
 In pg. 73, the group disclosed some assumptions used in estimation of useful lives of
property, plant and equipment which includes discounting rates, expected cash flow from
the use of such assets and capital expenditure. This enhances faithful representation of
accounting information.
 In pg. 75 of the annual reports, the group states that they obtain an independent valuation
with respect to investment properties under the assumption in note 21.
 In pg. 107, accounting policies of consolidation is stated to be followed. This enhances
faithful representation of accounting information. Acquisition method of accounting has
been shown to be followed by the group under note 22. Various accounting principles
have been followed for example intercompany transactions, balance and unrealized gains
have been eliminated which is in line with principle of consolidation. Furthermore, on
controlling interests have been shown separately in the books in line with accounting
principles as shown under appendix IV
 Faithful representation is clearly shown in the auditor’s report in the following way;
 Goodwill is disclosed not to have been amortized and yet it is a
requirement in Australian accounting law.
 Remuneration comply with section 300A of corporation act 2001 (pg.
136)
 Land is indicated to have been premeasured at fair value as at 30th June
2017 (pg. 134)

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 Corporate governance statement of the group dated 30th June 2017 shows various
activities that the company engages to ensure compliance with good management
practices
CONCLUSION
In conclusion, qube holdings limited has portrayed various accounting concepts in the
preparations of their financial statements and complied with issues of good measurements and
shows good qualitative characteristics of relevance and faithful representation.
REFERENCES.