Advanced Financial Accounting Report: Brickworks Limited Analysis

This report provides an in-depth analysis of advanced financial accounting concepts, using Brickworks Limited as a case study. The report begins with an introduction to financial accounting and its role in reflecting a company's financial condition, setting the stage for international growth strategies. The core of the report discusses the concept of a reporting entity, defining its characteristics and features, and explaining how Brickworks Limited qualifies as one. The report then delves into the fundamental qualitative characteristics of financial information, as defined by the Conceptual Framework, including relevance and representational faithfulness, with detailed examples from Brickworks Limited's financial statements. The report explains how Brickworks Limited provides relevant information, including timely disclosures, and how the company ensures representational faithfulness through completeness, neutrality, and freedom from error. The report concludes by emphasizing the importance of a company accurately describing itself as a reporting entity, and it covers the application of Australian Accounting Standards and the preparation of consolidated financial statements. The analysis covers the application of accounting policies, measurement of assets, revenue recognition, and the impact of new accounting standards. The assignment is a report submitted by a student to Desklib, a platform offering AI-powered study tools.

Running Head: ADVANCED FINANCIAL ACCOUNTING
ADVANCED FINANCIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Background of Company.......................................................................................................2
Discussion..................................................................................................................................2
Reporting Entity.....................................................................................................................2
Fundamental Qualitative Characteristics...............................................................................5
Conclusion..................................................................................................................................8
Reference....................................................................................................................................9

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Introduction
Financial accounting has the responsibility for generating financial statements and
related disclosures, which fairly reflects financial conditions and results of company. It is
process of financial statement preparation, which is used by entities for showing their
financial performance to people outside of company. In this concern, different strategies are
employed by business to increase their share of market. The entity’s involvement in the
foreign currency transactions set the stage for international growth. These strategies affect the
financial reporting of organization (Grossi and Steccolini 2015). Hence, the aim of this report
is to discuss regarding reporting entity. Moreover, qualitative characteristics will be
explained relating to useful information of the financial statement and these explanations will
be in the reference to Brickworks Limited.
Background of Company
Brickworks Limited is Australian based and owned group of the companies that is
engaged in development, designing, marketing, manufacturing, sales and distribution of
variety of the building materials. It is ASX listed company, which derives its revenue from
distribution and manufacturing of building products and investing and developing of
properties. It employs approx. 1,480 full time employees all across Australia and it is
administered by the head office at New South Wales. During 2014, the major competitors of
brick includes Boral and CSR merged for creating Boral CSR Bricks Pty Ltd.
(Brickworks.com.au. 2020)
Discussion
Reporting Entity
“Reporting entity” concept is the restricted area of the economic activities in which
financial information is having potential to be significant for potential and existing lenders,

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equity investors and the other creditors, who are not having ability for obtaining information
directly, which they require in evaluating whether governing manager and the board of the
company have made effective and efficient uses of provided resources. One entity controls
other company when have the power for directing activities of the other company for
generating benefits for itself. The entity is required for presenting “consolidated financial
statements”, in case, if it controls one or more than one entity preparing financial statements
(Carey, Potter and Tanewski 2014). Moreover portion of company qualifies as “reporting
entity”, if the economic activities of that particular portion could be distinguished from rest of
company and financial information regarding that company’s portion is having potential for
being valuable in making the decisions regarding providing the resources for that portion of
company (Aasb.gov.au. 2020). The reporting entity is having three major features:
 The economic activities of organization are conducted, will be conducted or have
been conducted.
 These economic activities could be distinguished in objective way from those of the
other companies and from the economic environment, under which there is existence
of entity (Carini et al. 2018).
 Financial information relating to economic activities of the “reporting entity” is
having potential for being beneficial to make the decisions regarding providing the
resources to the organization and in the assessment of whether governing board and
management have able to made effective and the efficient uses of provided resources
(Barth 2014).
These characteristics are vital but it is not satisfactory always for identifying “reporting
entity”. The identification of “reporting entity” in particular circumstances requires the
consideration of economic activities boundary, which are conducted, will be conducted or
have been conducted. Further, legal entity existence is neither important or it is sufficient for

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identifying reporting entity. The reporting entities is consisting of more than the one company
or this can be portion of the single company. The ‘single legal entity’, which conducts the
economic activities and it does not control any of the other company is likely that they
qualify as “reporting entity”. If not all, most of the legal companies are having potential for
being “reporting entities” (Flower 2015). Although, the “single legal entity” might not
qualifies as the “reporting entity” if such as the economic activities of entity are combined
with the economic activities of the other company and there includes no basis for
distinguishing in the objective way of their activities. Under certain jurisdictions, the
questions might arise regarding whether those companies are the “separate entities” under
the law (de Villiers et al. 2014).
The portion of company could be qualified as the “reporting entity”, in case, if
economic activities of that particular portion can be distinguished in the objective way from
rest of company and the financial information regarding that particular portion of company
has potential for being valuable in taking the decisions regarding providing the resources to
that particular portion of company,, instance of this is the potential investor of equity
considers purchase of division or branch of the entity (Barth 2014).
Brickworks Limited is “reporting entity” and is for the profit company, which is
limited the shares, domiciled and is incorporated in the Australia, the shares of which are
traded publicly on the ASX. Group’s financial statements is comprised of Brickworks and the
controlled companies. The “consolidated financial statements” of Group are the “general
purpose financial statements” that is prepared according to “Australian Accounting
Standards”, “other authoritative pronouncements of the Australian Accounting Standards
Board” and “Corporation Act 2001”. It complies with the IFRS that is adopted by IASB. The
Group incorporates results of each of the controlled entity from the date on which Brickworks
Limited has obtained control and until the time as it ceases for controlling the company.

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Further, the preparation of the “consolidated financial statements” is based on measurement
technique of the historical cost, which is expect for derivative financial instruments,
investment property and available for the sale that have been measured at the fair value
(Ewelt-Knauer 2014). Further, financial currency of Group is presented in the Australian
dollars. It adopts all the amended and new standards and the interpretations of accounting that
is issued by AASB and which are relevant to Group’s operations and effective for periods of
reporting that begins on or after August 1, 2017. The Group does not adopts early any
standards as well as interpretations of accounting, which have been amended or issued but are
not effective yet (Brickworks.com.au. 2020).
Fundamental Qualitative Characteristics
The financial information is having various qualities, which makes it valuable.
Further, these qualities are defined in “Conceptual framework” for the Financial Reporting
that is approved by IASB. As per “Conceptual Framework”, the financial information is
benefitial in the case when there is relevancy of information and when it represents faithfully
what it tries to represent. Moreover, enhancement of the financial information usefulness is
when it is timely, understandable, verifiable as well as comparable (Aasb.gov.au. 2020).
Relevance
The “Relevance” concept means that information that is generated by system of
accounting should impacts decision-making of the users who are perusing the information.
This concept is consist of content of the information and timeliness. Both impacts decision-
making of users. The relevant information is having capability for making the difference in
decisions that is made by the users. It needs the financial information to be associated with
economic decisions (Oprean and Podoaba 2016). The usefulness of financial information
depends on “confirmatory value” and “predictive value”. The “Confirmatory value” helps in

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enabling users for checking and confirming previous evaluations or the predictions. The
“Predictive value” helps the users for anticipating or predicting the future results. Moreover,
materiality is aspect of the relevance that is organization-specific. This signifies that what is
being material for one company might not be material to the other. This is relative. The
information provided by the company is material if it is important enough for influencing
user’s decisions. The materiality is affected by magnitude as well as nature of item
(Aasb.gov.au. 2020).
Brickworks Limited aims for providing relevant information to the shareholders in the
timely manner that is being supported by the policy of constant disclosures. The notes to
consolidated financial statements provides information, which is considered to be most
relevant for understanding Group’s financial performances. It provides breakup of the
individual line items in company’s balance sheet, which are considered as most relevant to
financial report’s users. It provides most relevant considered information for understanding of
adopted treatment of the taxation by Group during the financial year (Adrian-Cosmin 2015).
It provides information regarding practices of capital management of the Group as well as its
exposure for the different financial risks. Further, it provides information on the items that
requires disclosures for complying with AASBs and the other regulatory pronouncement as
well as any other information, which is relevant for financial statement’s users that has not
been disclosed in the other sectors (Brickworks.com.au. 2020).
Representational Faithfulness
“Representational faithfulness” is concept in which produced financial statement
accurately reflects conditions of the business. It is extent to which the information reflects
resources of company, transactions and claims and others. For instance, if it is reported by
company in its balance sheet that it is having $1,350,000 of the accounts receivables as of

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June end then that particular amount should indeed have to be present on that date. There
includes three main characteristics of “faithful representation”, which is consists of
“completeness”, “neutrality” as well as “free from bias” (Krismiaji, Aryani and Suhardjanto
2016). The “completeness” of information means that any transactions should not be
excluded from the financial statements. “Neutrality” is degree to which the information is
free from the bias. Further, estimation and subjectivity are involved in the financial
statements, hence information could not be truly neutral. “Free from error” means degree to
which the information provided by financial statements is free from the errors. This means
that there includes no errors in process used for producing no errors and information in its
description (Joung and Lee 2017).
In case of Brickworks Limited, the financial information of company is expressed in
the words and numbers. Brickworks Limited is for the Profit Company. Group’s
“consolidated financial statements” is consists of financial statements of the Brickworks
Limited and company’s all subsidiaries. In process to apply accounting policies of Group, the
management has made various judgements and have applied the estimates of the future
events. Moreover, areas is consist of higher degree of the complexity and judgement or the
areas, where estimates and assumptions are important to the financial statements are being
disclosed. Further, adopted accounting policies have been throughout being applied on
consistent basis.
Measurement of PPE is at the cost minus impairment losses and depreciation. There is
inclusion of subsequent costs in carrying amount of assets only when there is probability that
the future associated economic benefits with the item will be flowing to the Group and
measurement of the item’s cost can be done reliably. Estimation of the useful lives of the
assets is based on the historical experiences. Assessment of the asset’s conditions is done at
least on annual basis and it is considered against residual lives. Whenever required,

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adjustments are made to the useful lives (Nobes and Stadler 2015). Further, the recognition of
revenue is when key rewards and risk of the ownership of sold items have passed to buyer
and measurement of revenue amount could be done reliably. During financial year of July 31,
2018, the business and assets of Urban Stone, which is distributor and manufacturer of
masonry block and premium paving products, were acquired by Group. The business of
acquired company is having manufacturing operations that is based in the Perth, which is
accompanied by distribution and network of sales. The consideration of purchase was paid
fully in the cash and it has been allocated on provisional basis. The liabilities as well as the
assets are being measured at fair value. In addition, Group adopts new standard on required
effective date. Any adoption of new standard of accounting has greater impact on financial
statements (Krismiaji, Aryani and Suhardjanto 2016).
Conclusion
Therefore, the conclusion can be reached that it is important for making it sure by
company that they aptly described as the “reporting entity” and they matches the financial
reporting framework. In addition, “reporting entity” concept is tied up with GPFR objectives
and it requires all companies with dependent users on the GPFR for information to prepare
these reports. Further, this report has analyzed that Brickworks Limited is “reporting entity”.
In addition, for significance of financial statements to company’s stakeholders, certain
qualitative characteristics should be embodied such as “relevance” and “faithful
representation”. “Qualitative characteristics” are that attributes, which helps in making
financial information significant to the users. Hence, it can be said Brickworks Limited
possess qualitative characteristics. This makes the financial statement information of
company significant for the users.

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