Analysis of Accounting Theory Issues: REA Group Limited Report

This report provides an in-depth analysis of contemporary accounting theory, using the 2017 annual report of REA Group Limited as a case study. It examines whether the company's financial statements meet the objectives of financial reporting, adhere to the recognition criteria for financial statement elements, and demonstrate the fundamental and enhancing qualitative characteristics of financial reporting. The report highlights that REA Group Limited's financial statements comply with the Australian Accounting Standards Board (AASB) standards, ensuring comparability, relevance, and faithful representation. It also assesses the report's usability by stakeholders and evaluates the revenue recognition and other financial components. The conclusion emphasizes the company's adherence to regulatory standards, supported by references to relevant academic literature.

Running head: ISSUES IN CONTEMPORARY ACCOUNTING THEORY
Issues in Contemporary Accounting Theory
Name of the Student:
Name of the University:
Author Note

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ISSUES IN CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Introduction......................................................................................................................................3
Objectives of the general purpose financial reporting.....................................................................3
Have the target audience adequately used the report?.....................................................................5
Recognition criteria for the elements of the financial statements....................................................6
Fundamental qualitative characteristics of financial reporting........................................................6
Enhancing qualitative characteristic of the firm..............................................................................7
Conclusion.......................................................................................................................................7
References and Bibliography...........................................................................................................8

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Executive Summary
This particular study focuses upon the Australian corporate entity, REA Group Limited.
The annual report of this particular entity for the financial year of 2017 has been evaluated in
order to find out the fact that whether financial statements satisfy the required objectives of
financial reporting, whether the company has satisfied the criteria of recognition in regards to
the particulars of the accounting statements and other associated factors.
It has been found out that the management of the company has prepared the accounting
statements of the corporate firms in regards to the issued standards of the regulatory bodies like
the Australian Accounting Standards Board.

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Introduction
The issue that has been presented in the question is that the annual report of a listed
organization has been analyzed in order to examine the objectivity the regulatory standards that
have been applied in order to prepare the accounting statements. It should be noted here that the
Australian Accounting Standards Board has essentially established the particular accounting
standards that are applied for the preparation of the accounting statements of an organization in
Australia.
This particular study focuses upon the Australian corporate entity, REA Group Limited.
The annual report of this particular entity for the financial year of 2017 has been evaluated in
order to find out the fact that whether financial statements satisfy the required objectives of
financial reporting, whether the company has satisfied the criteria in regards to recognition for
the particulars of the accounting statements and other associated factors.
Objectives of the financial reporting that is prepared for general purpose
The objectives of financial reporting that is mandatorily carried out by the corporate
entities have been as follows:
 The objective of the general purpose financial reporting is primarily regulated around the
providence of financial information in regards to the financial entity that can be useful to
the third party investors, debtors and creditors for making the investment decisions.
 Decisions in regards to the potential and existing potential investors for dealing in the
debt instruments are also facilitated by analyzing the financial statements.
 It must be noted here that the general purpose financial reports cannot provide the all the
financial information that is required by the investors in order to make the required
financial decisions (Ali, Akbar & Ormrod, 2016)
The financial statements of REA Group Limited reflect the fact that the accounting
statements have been created by referring to the regulatry standards as established by AASB.
This means that the accounting statements lead to satisfy the objectives of the financial reporting
carried out by financial entities sufficiently. This can be further evidenced from the fact that the

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Australian Accounting Standards Board (AASB 101) reports that the basis for the preparation of
the accounting statements have been that the degree of comparability of the financial statements
of the corporate entity for the previous periods and the financial statements of other entities is
high (Ali, Akbar & Ormrod, 2016). It must be mentioned here that a sufficiently qualified
financial statements will consist of the elements like:
 Assets
 Liabilities
 Equity statement
 Income and expenses
 Cash flows
Moreover, it must be mentioned here that a complete set of financial statements
essentially consist of the essential elements as follows:
 Financial position statement at the end of the accounting year
 Comprehensive income financial statement for the stipulated year
 Change in equity statement for the financial period
 Complete cash flow statement for the stipulated year
 Financial disclosures
The financial report of the company has adhered to all these standards. This means that
the annual report of the company has included all the above mentioned accounting statements.
These statements are the income statement that is consolidated in nature, comprehensive income
statement that is consolidated in nature, financial position statement that is consolidated in
nature, consolidated statement of changes in equity and cash flow statement that is consolidated
in nature. The company has also provided the required financial disclosures. Furthermore, the
general features of the annual reports of REA Group Limited have been prepared in parity with
the accounting regulatory standards (Ali, Akbar & Ormrod, 2016). This can be evidenced from
the fact that are as follows:
 The accounting statements have been created on the basis of the International Financial
Reporting Standards

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ISSUES IN CONTEMPORARY ACCOUNTING THEORY
 The management of the firm has properly asserted the fact that the entity is a going
concern and has resulted in the execution of the creation of the accounting statements
accordingly
 Furthermore, the management of the firm has prepared the financial statements in such a
way that the similar classes of items have been reported separately if material
 The financial disclosures that have been provided by the companies have been reported
separately and the financial information revealed by the particular disclosures have been
clear and meaningful
 It must be noted here that the financial statements of the company has been created on the
basis of accrual accounting
 The administration of the firm has been such that it has facilitated in the providence of
the required information in regards to the offset of the assets and the liabilities of the firm
 Each of the statements that have been included in the annual report of the company has
facilitated the providence of the required information that has been featured by a high
degree of comparability
Therefore, it can be deduced that the company has met the objectives of the general
purpose financial reporting (Balsmeier & Vanhaverbeke, 2018).
Have the target audience adequately used the report?
The target audience that are the shareholders, stakeholders, creditors, debtors and the
other third party investors of the firm have been able to utilize the financial report for the
purpose of taking the financial decisions effectively. This can be evidenced from the fact that the
financial report prepared by the management of REA Group Limited has been providing enough
information into the financial condition of the company. The financial disclosures provide
enough overview in to the past performance of the company. The investors of the company and
the other potential stakeholders get enough overview into the operations of the company on the
basis of the data that has been disclosed in the accounting statements of the companies.
Moreover, it has been provided in the financial report of the company that the shareholders have
received enough remuneration thus ensuring welfare of the shareholders of the firm (Balsmeier
& Vanhaverbeke, 2018).

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ISSUES IN CONTEMPORARY ACCOUNTING THEORY
Recognition criteria for the financial components of the accounting statements
The criteria for recognition of the particulars of the accounting statements that has been
provided in the annual report of the company has been such that the revenue recognition in the
accounting statements of the companies have been carried out by the particular method of fair
value measurement. This means that the different types of revenues that have been included in
the accounting statements of the companies have been measured by a fair value measurement
method. Moreover, the other income and the income tax have also been valued by the utilization
of the financial statements. The different accounting Australian standards that have been applied
in case of the measurement of the different financial components have also been mentioned in
the financial report of the company. A particular disclosure that has been provided in the annual
report of the company has been as follows:
Figure: revenue recognition criteria
Fundamental features of financial reporting that define quality
The fundamental features of financial reporting that define quality can be defined as
follows:

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ISSUES IN CONTEMPORARY ACCOUNTING THEORY
 Relevance – the relevance of the financial statements have sufficiently satisfied the
fundamental quality standards of the company
 Faithful representation – it can be certainly deduced that the conveyed data or
information reflect a real and fair image of the liquidity position of the company.
Enhancing qualitative characteristic of the firm
The enhancing characteristic of financial reporting can be defined as follows:
 Comparability – the degree of the comparability of the accounting statement of the
company have been high.
 Clarity – the clarity of the information that has been obtained from the accounting
statements of the companies has been of a high degree
 Conciseness – the provided information in the financial report of the company has been
concise which has facilitated the economic decision making by the stakeholders and the
shareholders of the firm
 Verifiability – the verifiability of the information that has been disclosed in the financial
report of the company has been of a high degree. This has increased the trust between the
management and the stakeholders of the firm (Balsmeier & Vanhaverbeke, 2018).
Conclusion
The particular conclusion that can be arrived at is that the financial statements of REA
Group Limited for the financial year of 2017 have been created on the basis of the regulatory
standards as conveyed by the Australian Accounting Standards Board.

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References and Bibliography
Ali, A., Akbar, S., & Ormrod, P. (2016, March). Impact of international financial reporting
standards on the profit and equity of AIM listed companies in the UK. In Accounting
Forum (Vol. 40, No. 1, pp. 45-62). Elsevier.
Balsmeier, B., & Vanhaverbeke, S. (2018). International financial reporting standards and
private firms’ access to bank loans. European Accounting Review, 27(1), 75-104.
Dye, R., Glover, J., & Sunder, S. (2014). How Can Financial Reporting Standards Resist
Accounting-Motivated Financial Engineering?.
Graham, A., Nandialath, A. M., Skaradzinski, D., & Rustambekov, E. (2017). Macroeconomic
Determinants of International Financial Reporting Standards (IFRS) Adoption: Evidence
from the Middle East North Africa (MENA) Region.
Jibril, M. A., & Abubakar, M. (2016, October). Effect Of International Financial Reporting
Standards (Ifrs) On Corporate Financing In Nigerian Banking Industry. In Proceedings of
Economics and Finance Conferences (No. 4206880). International Institute of Social and
Economic Sciences.
Kim, J. B., Shi, H., & Zhou, J. (2014). International Financial Reporting Standards, institutional
infrastructures, and implied cost of equity capital around the world. Review of
Quantitative Finance and Accounting, 42(3), 469-507.
Lestari, D. (2015). The Effect OF Implementation OF Convergence International Financial
Reporting Standards (ifrs), Good Corporate Governance, And Disclosure OF Corporate
Social Responsibility (csr) ON Investor Reactions (in Manufacturing Companies Listed
ON Indonesia Stock Exchange Period 2011-2013).
Perkins, J. D. (2016). Discussion of “Security Returns and Volume Responses around
International Financial Reporting Standards (IFRS) Earnings Announcements”. The
International Journal of Accounting, 51(2), 266-270.

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Sunder, S. (2016). Rethinking financial reporting: standards, norms and institutions. Foundations
and Trends® in Accounting, 11(1–2), 1-118.
Tsunogaya, N. (2016). Issues affecting decisions on mandatory adoption of International
Financial Reporting Standards (IFRS) in Japan. Accounting, Auditing & Accountability
Journal, 29(5), 828-860.