Analysis of Contemporary Accounting Issues: AGL Energy and Alinta Gas

This report provides an executive summary and detailed analysis of contemporary issues in accounting, focusing on the application of the conceptual framework to the financial reporting of AGL Energy and Alinta Gas. It explores how the accounting framework meets the needs of various stakeholders, including investors, employees, lenders, suppliers, government, public, and investment analysts, through the analysis of financial statements. The report examines the annual reports of both companies, assessing their adherence to the framework and the inclusion of prudence in financial statements. It investigates the revisions to the conceptual framework to incorporate prudence and their impact, supported by examples from AGL Energy and Alinta Gas. The report highlights the importance of providing relevant and reliable information to stakeholders, including creditors and shareholders, in accordance with AASB guidelines, and discusses disparities in corporate reporting and how conceptual frameworks improve consistency and reliability. Finally, the report concludes with recommendations based on the findings and provides a list of references.

Contemporary Issues in Accounting

Executive Summary
The current framework meets the requirements of various users of financial statements as stated
in the main motive behind the framework of accounting. Recent study shows that AGL Energy
and Alinta Gas both the organization are providing relevant information to their users in order to
take right decisions. This report will assess revision of framework of accounting to include
Prudence in order to recognize inequality in financial reporting.

Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
How framework of accounting meets the requirements of various stakeholders with the help of financial
statements-.................................................................................................................................................4
Analyzing the conceptual framework with reference to the annual reports of AGL Energy and Alinta Gas-
.................................................................................................................................................................... 7
Analysis of framework of accounting in order to analyze prudence in the financial statements –.............8
Analysis of conceptual framework revision to include Prudence with reference to the annual reports of
AGL Energy and Alinta Gas-.........................................................................................................................9
Conclusion and Recommendation.............................................................................................................11
References.................................................................................................................................................12

Introduction
The organizations which are being analysed are AGL Energy and Alinta Gas from Australia. The
major objective of this study is to evaluate the financial performance and operation performance
in order to report various stakeholders like shareholders, lenders and creditors with the AASB
guidelines. The assignment also focuses on conceptual framework designed to make sure that the
organizations should help in analyzing true value of the organization. Both AGL Energy and
Alinta Gas are recognized organizations in Australia. Disparity in Corporate Reporting will also
be analyzed in this assignment.
How framework of accounting meets the requirements of various
stakeholders with the help of financial statements-
The conceptual framework is a new concept. This conceptual framework in Australia has
resulted in evolution of even accounting standards which is majorly a n issue in daily life which
is more reactive in approach. The deficiency in financial statements had increased the risk that
accounting policies are not consistent with each other. This risk of inconsistency in the financial
statements will not be able to meet the need of various users of financial statements (Cheng et.
al., 2014). But, conceptual framework brings consistency in the financial reports which meet the
requirements of various users of financial statements as stated.
A financial statement has included a design which increases the reliability of reliability
consistency, and helps the users of financial statements in the advance of standards for future.
The current accounting framework helps the users in interpretation of information associated
with financial statements as it provides an understanding on the principles on which financial

statements are prepared. Each corporation has its own accounting standards. But, conceptual
framework has harmonized theses accounting standards in order to bring the relevant information
to the users of financial statements.
In general, the framework of accounting drives the expansion in standards of accounting. Social,
economical factors play a role to provide guide for formation of standards in order to provide
relevant information to users. The conceptual framework has incorporated the requirements of
capital markets and regulations in order to protect the rights of user of financial statements
(Carrington, et. al., 2010).
The motive of accounting is to provide financial information about the organization in order to
provide present and potential users, creditor’s relevant information for decision making. The
major objective of Conceptual Framework of Accounting is not limited to financial statements
but also to financial reporting. The objective of conceptual framework of accounting is derived
towards summit the requirements of various stakeholders. The primary user of group consists of
lenders, creditors and present and potential equity investors. The decisions made by users in
order to distribute their well developed resources to a relevant organization and in order to
protect their investment. This conceptual framework of accounting helps the users in assessment
of organization in terms of generation of cash inflows and stewardship of management (Van
Mourik, 2010). These users use the information about the organization and claims to various
resources and inputs in order to process of decisions making.
Framework of accounting helps the stakeholders in fulfilling their various requirements through
financial statements. There are various types of users which are discussed below-

 Investors: Current accounting framework helps the investors to get the financial
information related to the organization in order to assess how effectively and efficiently
the organization is carrying out its business. Investors can also identify the level of risk
and return in future associated with the organization through Current accounting
framework.
 Employees: Current accounting framework helps the employees in extracting the data of
the organization about the profitability and stability of the organization. They can also
retrieve data which helps them to identify the organization performance and various other
opportunities regarding job promotions etc.
 Lenders: They can get financial information about the organization in order to identify
the ability of organization to meet its obligation and the repayment of borrowing amount
through current accounting framework (Cooper and Morgan, 2013).
 Suppliers and Creditors: Current accounting framework helps Suppliers and Creditors to
retrieve information which enable them to identify whether the organization will be able
to pay the amounts or not owned to them. Trade creditors are likely to interest in the
organization where there is shorter span of repayments.
 Government: Current accounting framework of accounting helps the government to
assess or identify organization whether they are complying with agreed policies and
compliances or not. This also helps the Government in identification of taxation policies.
 Public: Financial statements help the general public in determining information regarding
recent technological and other development in the organization through Current
accounting framework (Palea, 2014).

 Investment Analyst: Current accounting framework provide data relating to an
organization in order to identify the threats related to the organization so that
determination of investment potential can be made and to advise clients accordingly.
Analyzing the conceptual framework with reference to the annual
reports of AGL Energy and Alinta Gas-
From the annual report of AGL Energy, it can be analyzed that the AGL Energy, in order to
reach the goal of improvement in readability of financial statement made various changes.
Complying with the current accounting framework, AGL Energy has been made to the
requirements over time and makes the financial statements less complicated for the user. AGL
Energy within the existing framework helps in creating a more reader-friendly document that
complies with the legislation. The information on creditors is also provided by the organization
in order to provide correct information to its stakeholders about the profitability of the
organization. This inclusion of creditors in its financial statements is the result of current
accounting framework which promotes credibility for the organization. AGL Energy includes the
accounting policies as suggested by the accounting framework. The organization also provides
justification by the management for its cash inflows and cash outflows in the financial
statements. The organization also provides relevant information about the capital market and the
number of shares allotted and allotment of right shares and debentures in the financial
statements. Also, AGL Energy follows IAS 2 (inventories) in order to provide justification for
specification of costs of purchases, conversion costs and various other costs regarding inventory
collection. AGL makes it easier for users to understand the principles of measures adopted by the
organization in order to adopt IFRS 13. AGL Energy Ltd. adopts the measurement concept of

fair market value in the financial statement in order to show relation with the markett cap in
regard to capital market for implication of true value to its stakeholders.
From the annual report of Alinta Gas, it can be analyzed that the organization has incorporated
various disclosures about their items in the financial statement in order to inclusion of prudence
for providing reliable information to their stakeholders. The financial information helps its
stakeholders in taking various investment decisions. The organization has decreased the pages
consisting irrelevant information in order to provide reliable information to customers. The
financial statements are more focused which helps the users to make decisions. Users will not get
distracted by the information provided in financial statements because of conceptual framework
of accounting (Jones, 2010). Alinta Gas also allows the users to see how the profits have been
incurred in order to make users to rely on information provided by the organization. By
minimizing the number of measurement methods and further expansion, Alinta Gas makes its
financial statements more reliable and consistent for its stakeholders. In addition to this reliable
measurement concept is also followed by, Alinta Gas which states that liability are to be shown
in financial statements in order to describe expression of monetary in regard to forgone various
benefits of economy. So, Alinta Gas provides defines nominal amounts to be paid by the
organization and other dates for the settlement of the liabilities of the organization.
Analysis of framework of accounting in order to analyze prudence in the
financial statements –
The framework of accounting does not consist to irrelevant information over financial statements
and AASB has agreed that adding prudence to financial statement would add more clarity to the
users. As, a result it was identified that the financial statement should provide information which
is more prudence. The prudence in the financial statement can be shown only through stating of

economic phenomenon instead of following of legal form (Kober et. al., 2010). The
organizations have different economic phenomenon according to their functioning which will
lead towards disparity in corporate accounting.
The term of prudence also uncovers as the necessity for differentiation between liabilities, assets,
profits and losses in order to help the stakeholders to take the correct judgments for their
investments in the organization. The term prudence requires various justifications by the
organization in order to support different items of the financial statements of the organization.
(Burritt and Schaltegger, 2010).
Analysis of conceptual framework revision to include Prudence with
reference to the annual reports of AGL Energy and Alinta Gas-
In the annual report of AGL Energy, there is a particular column for various stakeholders of the
organization with their various involvements in order to provide prudence. AGL Energy give
details of its Engagement Framework and risks associated to public with it for further
information (AGL Energy, 2017). Prudence on stakeholder engagement can be identified from
this section.
AGL Energy made proper disclosures in the balance sheet according to the prescribed
accounting standards and laws. The organization helps the stakeholders in identify the business
position of the organization in comparison to its competitors in order to respond to the
competitive environment. This will help the stakeholders to derive the reliable and complete
information about the organization in order to take various investment decisions. (AGL Energy,
2017).

AGL Energy ensures that their sustainability strategy has been installed in a manner which is
efficient way of saving time and different costs. The management of AGL Energy keeps track on
the targets to be achieved and on the new law and orders initiated by the government in order to
review with other competitors in Australia. The depreciation provided on machinery and plant is
treated as deduction from the profit of the organization AGL Energy (Whittington, 2010). While
the surplus or profit derived from revaluation is being treated more effectively in order to
achieve prudence by AGL Energy. AGL adopts the concept of providing Comparative
information to the stakeholders in order to identification of the exposure of risk by the
organization also various other product lines of the organization. The organization also provides
information about Electricity Hedging Policy in public in order to update the stakeholders about
the financial position of the organization. AGL Energy follows AASB 108 where The
organization correct any material mistake of earlier financial year in the first financial report
after the error has been occurred in order to make the reliability and prudence of the financial
statements by the organization for the stakeholders.
Alinta Gas shows prudence in the identification of assets and liabilities in the balance sheet in
order to provide fair representation of its profits to the stakeholders. Prudence is derived through
correct representation of variables in the financial statements in order to quantify and measure
them. (Alinta Gas, 2017).
The standards of accounting adopted by the organization should made justification for the assets
and liabilities in the financial statements in order to provide prudence (Wells, 2011). The
instances of showing prudence in the financial statements of Alinta Gas can be identified on the
basis of showing unusual profits in OCI instead of profit and loss statements of the organization.
Alinta Gas follows the concept of consistency in presentation of the financial statements in order

to show reliability of items with one period over another so that an easy analysis can be made by
the stakeholders. Alinta Gas follows the written down value approach for calculation of
depreciation in order to provide justification. Alinta Gas follows the principle of materiality in
order to present all the material information regarding same class under a single head for better
prudence.
Conclusion and Recommendation
From the above analysis it can be concluded that framework of accounting serves various
requirements of various stakeholders. This conceptual framework of accounting helps the users
in assessment of organization in terms of generation of cash inflows and stewardship of
management. AGL Energy within the existing framework helps in creating a more reader-
friendly document that complies with the legislation. Alinta Gas also allows the users to see how
the calculations have been done in order to make users to rely on information provided by the
organization. Because of inclusion of prudence by both the organization in the Corporate
Reporting has led towards disparity.
From the above analysis it can be recommended that Alinta Gas should provide more
information to its users when compared to its competitor AGL Energy. Alinta Gas should show
the calculations have been done in order to make users to rely on information provided by the
organization in order to enhance reliability. It is also recommended that there are various
requirements of the stakeholders from the financial statements of the organization. So, the
organization should provide reliable and consistent information to the stakeholders in order to
serve their requirements.

References
AGL Energy (2017) Annual Reports. [Online]. Available at:
https://www.agl.com.au/about-agl/investor-centre/reports-and-presentations/annual-reports
Alinta Gas (2017) Annual Reports. [Online]. Available at:
https://www.alintaenergy.com.au/Alinta/media/Documents/Sustainability-Report-2015-16-
WEB.pdf
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