HA3011 Advanced Financial Accounting - Accounting and Reporting

This assignment delves into advanced financial accounting concepts, focusing on the accounting practices of Adelaide Brighton, an Australian construction materials company. It examines the company's adherence to International Financial Reporting Standards (IFRS) and Australian Accounting Standards Board (AASB) guidelines, including AASB 15 concerning revenue from customers and AASB 16 regarding leases. The assignment discusses the company's approach to fair value measurement, particularly for trade receivables and assets held for sale, and addresses the challenges in applying fair value principles. It also covers principles of consolidation, foreign currency translation, and the treatment of goods and services taxes within the company's financial statements. Desklib provides access to a wealth of similar solved assignments and past papers for students.

ADVANCED FINANCIAL ACCOUNTING 1
ADVANCED FINANCIAL ACCOUNTING

ADVANCED FINANCIAL ACCOUNTING 2
Contents
Introduction:...............................................................................................................................3
Accounting concepts:.................................................................................................................3
Fair value measurement:............................................................................................................5
Faithful representation:..............................................................................................................6
Conclusion:................................................................................................................................6
References..................................................................................................................................8

ADVANCED FINANCIAL ACCOUNTING 3
Introduction:
The company undertaken for review is Adelaide Brighton which is the company that deals in
the integrated construction materials in the country of Australia along with the production of
the lime.
The company manufactures a number of different products connected with the building,
construction, infrastructure and the processing markets of the minerals all across the country.
The main activities of the company include the production, importation and the distribution
of the clinker along with some of the other products. The company is listed on ASX 100 and
employs about 1500 employees. The company is very much passionate in terms of cultural
diversity and also has a friendly environment (ADBRI, 2019).
Accounting concepts:
The significant accounting concepts of the company includes the fact that the company has
shares invested in its business opertaions. The shares of the company re being traded on the
ASX. The financials of the company was issued by the board of directors as on March 19,
2019. It is within the rights of the directors to amend the financials. All of the accounting
policies connected with the company have been followed uniformly amongst all of the year,
unless otherwise mentioned in the annual report. The company has been operating for the
purposes of earning profits. Whenever the company feels the need, it has re-stated the
amounts of the comparative information. The company records all of its assets and liabilities
on historical costs. This concept is applicable except in the cases wherein the company has
employed the use of the fair values on the assets and the liabilities. The final accounts of the
company have been prepared as per the rules and the regulations laid down under the
International Financial Reporting Standards that have been duly issued by the relevant

ADVANCED FINANCIAL ACCOUNTING 4
authority. Many of the new standards have been adopted by the company. The company has
employed the AASB 15 which deals with the revenue that has been earned from the
customers. The company has duly adopted the regulations of the new accounting standard
and has applied the rules on the figures of the year of 2017. Any change that has taken place
in the accounting policy which relates with the contract with the stepped pricing has been
applied to the year of the contract. Where there is a contract for stepped pricing, there the
company has recognised the amount of the revenue on the basis of the estimated purchases
that have been made during the year under consideration. The revenue from the sale of the
goods have been reported in the final accounts when the risks associated with the loss of the
goods have bene transferred on to the customer and where it is evident that all of the criteria
with regard to the acceptance of those good have been duly met. The contract liability has
been recognised where there is a discount on the stepped pricing of the future purchases.
The company has chosen not be apply the relevant provisions of the AASB 15 in the cases
wherein the contracts have started and ended during the same period of the year. The amount
of revenue is recorded in the books of accounts when the receipt of the amount is
unconditional since it involves some time before the payment becomes due. These are the
receivables that are due within the period of 35 to 40 days from the date when the invoice has
been given to them. The company also applies the AASB118 which deals with the revenue
from the contracted goods and the AASB 111 which deals with the construction contracts that
covers the contract of construction. There is a new accounting standard that will be used in
the place of this accounting standard.
The company has successfully applied the amended standard on accounting which deals with
the Leases. This will replace the current accounting standard on the accounting of lease. The
standard on accounting deals with the use of one lessee model of accounting that requires the
lessee to report the various assets and the liabilities for all of the leases with the period of

ADVANCED FINANCIAL ACCOUNTING 5
more than 12 months unless and until there is an underlying asset which is of a lower value.
The lessee is required to report the right to use that asset which indicates the leased asset and
the leased liability in order to make the payments pertaining with lease. The company has
assessed all of its existing agreements pertaining to the leases and the services. The company
has applied the provisions of AASB 16 from January 1, 2019. The impact of the application
of the AASB 16 as on the date of January 1, 2019 is the reporting of the right to use an asset
which comes out to be about $104 million along with the corresponding increase in the
amount of the liabilities connected with lease amounting to $104 million. This would lead to
a decrease in the amount of the taxation by an amount of $ 2 million. The company does not
have any such major impact over the cash flows of the company and the results of this is the
not much on the statement of the flows of the company.
With regard to the principles of consolidation, the company has subsidiaries wherein the
company along with its subsidiaries are called the “Group”. The subsidiaries are the units
over which the group has some significant control. The group helps in the controlling of these
subsidiaries and have some variable returns from the involvement with the unit. The group
has the ability of affecting the returns through its power to direct the various activities of the
company. The financial statements of the subsidiaries have been duly consolidated in with
that of the group and these are deconsolidated when the control of the group ceases to exist
over its subsidiaries. The company follows the method of acquisition as the method of
accounting which is used for the purposes of valuing the various business combination by the
group. All of the transactions, balances that occurs between the group and the subsidiaries
have been eliminated in full. Until and unless, there is an evidence of any sort of an
impairment, all of the unrealised losses have been eliminated in full. The accounting policies
of the company have undergone a change wherein the same was necessary to be consistent
with the various policies that have been adopted by the group. In respect of the employee

ADVANCED FINANCIAL ACCOUNTING 6
share trust, the group has formed a trust for the purposes of administering the share schemes
of the gro. The company acts as the trustee for the money and the trustee is consolidated since
the company is controlled in by the group. The group also has a trust that is not controlled by
the group.
In respect of the non-controlling interest, these along with the equity in the subsidiaries have
been reported separately in the financial accounts. The group treats the transaction’s that have
been entered into with the non-controlling interest that does not lead to a full of control as
being the transactions with the owners of the equity of the group. Whenever there is a change
in the amount of the ownership interest, the difference between the amount that has been paid
and the relevant shares that have been acquired of the net assets, the same has been deducted
from the amount of the equity.
In respect of the foreign currency translation, all of the functional and the presentation
currency items have bene duly included in the financial accounts of the group and this has
been done on the basis of the currency in the economic environment of the country in which
the group operates, which is Australia. The financial accounts of the group have been
prepared in Australian dollars. All of the transactions along with the various balances of the
transactions entered into in the foreign currency have been converted into the functional
currency using the rate of exchange which was prevailing as on the date of the transaction.
All of the gains and losses of the foreign exchange resulting from the conversion have been
reported in the statement of profit and loss.
With regard to the foreign operations, all of the foreign operations that have been expressed
in the functional current. This amount has been converted into the reporting currency using
the relevant exchange rate.

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All of the assets and the liabilities have been reported in the financial accounts using the
closing rate of exchange as on the date of the statement of financial accounts whereas all of
the incomes and the expenses for the income statement along with the statement of
comprehensive income have been translated suing the average rate of exchange. The resulting
difference in the exchange shall be reported in the statement of final accounts. Any amount
arising from the translation shall be disclosed in the relevant statement of financial reporting.
All of the goods and the services taxes of the revenues, expenses have been reported at their
respective net amounts unless the same is recoverable from the authority of taxation. The
amount which is to be received and which is to be paid have been reported at being GST
receivable and GST payable (Annual report, 2019).
Fair value measurement:
The trade receivables of the company have been reported at their respective fair values. This
is after they were measured at the amortised cost less any amount of allowance. The trade
receivables are the ones that are settlement within the period of 30 to45 days from the day on
which the invoice was raised by the company.
With regard to the foreign exchange risk, the carrying values of the current receivables are
always assumed to be at its fair value. With regard to the accounting policies, in respect of
the assets that have bene held for sale, these have been classified as being held for sale at the
lower of the carrying value and the fair value less the costs to sell. This is done when the
carrying value would be recovered through the sale of the transaction rather than being
continued used and the sale of the same is quiet likely. Any loss on impairment is reported in
the financial accounts after the initial or the subsequent write down of the assets to the fair
value of the assets. Any amount of gain is reported in the final accounts after the initial

ADVANCED FINANCIAL ACCOUNTING 8
recognition has been made would go on to increase the fair value of the asset less the costs to
sell but this shall not be in excess of the cumulative loss on impairment which was recognised
earlier in the books of accounts. Any amount of gain or loss shall be de-recognised in the
financial accounts that was recognised earlier.
In respect of the borrowings, these are being measured at their fair values, net of any amount
that has been incurred. These are the amounts that are reported at their respective amortised
costs. Any amount of difference between the proceeds and the redemption part shall be
reported in the statement of income over the period of the borrowings by the way of using the
effective rate of interest method (KPMG, 2019). The amounts of the borrowings must be
reported at its historical costs. This due to the fact that the borrowings that were borrowed
from the outside agencies would be required to be paid.
The issue with the measurement of the fair values is the fact that not always is the fair values
of the assets, liabilities, incomes and the expenses are available to be able to be used by the
company. Also, many a times, more than 1 market values are available for the assets or the
liabilities, then the company faces the dilemma as to which market value to accept and report
in the financial accounts. This gives to disparity since the correct amount cannot be then
reported in the financial accounts. Also, at times, only 1 market value for an asset or a
liability is available, at that time, though the company could go for the adoption of that price
but that price does not necessarily represent the correct fair value of that asset, liability,
income or an expense (Small business chron, 2019).
Faithful representation:

ADVANCED FINANCIAL ACCOUNTING 9
The concept of faithful representation is something which should form the part of the
financial accounts. This goes on to include the results of the operations, the financial
position of the company along with the statement of the cash flows (Bragg, 2019). For
the financial accounts to be faithfully represented, it should be complete. This is in the
sense that all of the true facts and the figures that have been incurred during the year by
the company must be well reported in the financial accounts. This would mean that any
information omitted from the financial accounts would lead to different opinion of the
management and the user of those financial accounts (Accounting simplified, 2019).
Also, these facts contained in the financial accounts must be free from any error since an
incorrect amount reported in the financial accounts may again result in different opinions
of the users of the financial accounts and the management. The basic purpose of the
preparation of these final accounts could be very different and may result in bad options
and wrong decisions being taken up by the management (IAS plus, 2019).
Then these financial accounts must be unbiased. These should not be prepared as per the
convenience of any one person since there are many users that use these facts and figures
and following one wishes for the purposes preparing these could result in again incorrect
and inaccurate decision making. It is for this reason that the relevant authorities have
developed some accounting standards that have to be followed by each company when it
comes to the preparation of the financial accounts. This has been done in order so that
there can be no manipulation in the facts and the figures contained in the financial
accounts.
Conclusion:

ADVANCED FINANCIAL ACCOUNTING 10
In order to conclude, the concept of faithful representation is concreted with the accounting
of the various transactions and the events that must be reported in the final accounts which
indicates the fact of economic substance over the legal form. This is the concept which is
termed as the substance over form.
This further requires the fact that in case, the substance over form exists, then it merely
means that the transactions must exist in substance and economic reality.
The main reason behind this is the fact that the financial facts reported in the final accounts
must go on to represent the basis essence of the transactions and the events should not
represent only the legal aspects or these transactions.
Further, there are many issues related with fair value measurement, the main being the fact
that fair values are not always available for all of the assets and the liabilities of the company.
This creates an issue since then the correct and the accurate amounts cannot be reported in the
final accounts of the company.

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References:
Accounting-simplified.com (2019). Faithful Representation | Accounting Concept &
Examples. [online] Available at:
https://accounting-simplified.com/financial-accounting/accounting-concepts-and-principles/
faithful-representation.html [Accessed 27 May 2019].
Adelaide Brighton, Australian construction and lime group of companies. (2019). [online]
Available at: https://adbri.com.au/ [Accessed 27 May 2019].
Adbri.com.au. (2019). Annual report 2018. [online] Available at:
https://adbri.com.au/-/adbri/lib/pdfs/2016/asx%20announcements/ASX%20-
%202018%20Annual%20Report%20to%20Shareholders%20100419.pdf [Accessed 27 May
2019].
Bragg, S. and Bragg, S. (2019). Faithful representation. [online] AccountingTools. Available
at: https://www.accountingtools.com/articles/what-is-faithful-representation.html [Accessed
27 May 2019].
KPMG (2019). Fair value measurement. [online] Available at:
https://home.kpmg/content/dam/kpmg/pdf/2015/12/fair-value-qa-2015.pdf [Accessed 27 May
2019].
Iasplus.com. (2019). Conceptual Framework for Financial Reporting 2018. [online] Available
at: https://www.iasplus.com/en/standards/other/framework [Accessed 27 May 2019].
Smallbusiness.chron.com. (2019). Advantages or Disadvantages of Fair Value Accounting.
[online] Available at: https://smallbusiness.chron.com/advantages-disadvantages-fair-value-
accounting-20577.html [Accessed 27 May 2019].