Financial Accounting Report: Afterpay Touch, Financial Analysis

This report offers a comprehensive financial accounting analysis of Afterpay Touch, an Australian-based technology company. It begins by outlining the fundamental accounting concepts employed by the company, including the accrual, going concern, consistency, conservatism, matching, and materiality concepts, providing specific examples from Afterpay Touch's financial statements. The report then delves into the changes introduced by AASB 16, the new accounting standard for leases, explaining its implications for lessees and lessors and how Afterpay Touch has implemented these changes. Finally, it summarizes the key disclosures made by the company in its annual report regarding lease accounting, including transitional provisions and the impact of transitioning from AASB 117, with relevant examples. The report aims to provide a clear understanding of Afterpay Touch's financial reporting practices and the application of relevant accounting standards.

Running head: FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................3
Overview of the Company.........................................................................................................3
Accounting Concepts.................................................................................................................3
Changes in AASB 16.................................................................................................................6
Key Disclosure in Company Annual Report..............................................................................7
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10

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Introduction
Financial accounting is accounting methods which help the entity to prepare their
books of accounts as per the norm mentioned in different accounting standard. An accounting
standard is a framework that shows the treatment of different accounting events which occurs
in the business operation (Beatty and Liao 2014). Company has to prepare the financial report
for the investors; it should be adequately prepared that will help the user to know about the
financial health of the organization and helps them to take proper decision in regard of
investment in the company. The report shows the accounting concepts which has been used
by the company to carry their business activities. It also emphasise upon the AASB 16 which
deals with accounting for lease as it shows the changes that have arise in the standard and
how the company can implement the same in their business activities (Bedford and Ziegler
2016). Lastly it shows the disclosure which company has made in regards to the lease and
other related information which have been provided in their notes on the account.
Overview of the Company
The report is based on After pay Touch which is an Australian based company and
deals in technology sector. The company is based on retail payment as it connects the retail
merchants and customers (Afterpaytouch.com 2019). The service that is provided by the
company receives now, buy =now and pay later services. The entity usually deals in three
units which are retail services, mobility and payment, and government and health.
Accounting Concepts
These are the concepts that signify the underlying assumption which an entity takes
while preparing their books of account (Granof, et al., 2016). These are the rules and
principles which an entity follows while recording their accounting transaction in their
financial statement and the entity should give proper disclosure in their notes of account

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about the accounting concepts used by the entity. The accounting concepts used by the
company has been shown below:
Accrual Concept – This concept signifies that the company should record their revenue only
when it able to earn and it should record the expenses only when there is consumption of
asset has taken place in the business (Harrison Jr, Horngren and Thomas 2014). These means
when the company can receive the amount of cash from business than only it should record
the same in their accounting books. The expenses should be recorded when the company has
paid some amount for the same.
As per the company financial statement it can be seen that they have followed the
same while preparing their books of account (Afterpaytouch.com 2019). The company has
recorded the income only when they able to receive the cash from its customers, and the
expenses are recorded when they were happening in the business.
Going Concern Concept – Company prepare their financial book for the investors and other
users, this concept state that the entity will carry their business for an extended period and it
is not going to shut their business operation in coming years (Henderson et al., 2015). A
company by using this concept recognize their income and expense in their accounting books
and carry forward them in coming accounting years.
The company financial information state that they have followed this concept while
preparing the financial books of account (Afterpaytouch.com 2019). The auditor of the
company has carried different audit procedure to check whether the company has followed
the going concern concept or not in the preparation of financial statement. In their auditor
responsibility paragraph, an auditor has stated the entity has followed the going concern
concept in their financial report.

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Consistency Concept – This concept states that the entity should follow same accounting
policies in each year while carrying their business activities (Kaplan and Atkinson 2015). As
this will help the user to understand and interpret the financial information quickly and able
to take necessary decision. The comparison of financial information becomes easy if the
company has used same accounting policy in their business activities.
The company financial reports show that there is no such change in the accounting
policy which is carried by the entity in their business activities (Afterpaytouch.com 2019).
These signify that the entity was able to follow the consistency concept properly in its
financial statement. Company is following same set of accounting policy in their business
activities, so this helps the user to understand the financial information quickly and take a
necessary decision in regards to entity financial health.
Conservatism Concept – Company should only record the revenue when there is certain
certainty of happening of the event in their business activities (Kieso, Weygandt and Warfield
2019). Expenses should be recorded when there is a possibility of happening the event in
their operations.

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The analysis of company notes of account shows that the company has followed this
concept while carrying their business activities (Afterpaytouch.com 2019) as the entity is
only able to record the revenue when their proper certainty that the company will able to earn
from the event and it recorded the expense on the possibility of certain events.
Matching Concept – This concept state the entity should record the expense that is related to
revenue in the same accounting year in which the revenue had taken place (Simkin, Norman
and Rose 2014). These help the entity to provide better financial information to the investors
and other financial users.
As per the entity financial statement is considered, the company can carry their
business activities by following these accounting concepts in their business activities
(Afterpaytouch.com 2019). It able the expenses as and when they are incurred while carrying
the business activities.
Materiality Concept – Company should record all the transaction which are happening in
their business activities, as this concept suggests that an entity should disclose all the material
information in their financial statement that gives a proper viewpoint to its financial user
(Warren Jr, Moffitt and Byrnes 2015).
Company financial report shows that the entity has recorded each transaction properly
in their books and even the auditor has given a reasonable assurance that the entity financial
statement is free any material misstatement which gives proper information to the company
financial users (Afterpaytouch.com 2019).
Changes in AASB 16
This standard has overcome the problem which the user was facing in AASB 117.
This standard is related to accounting for lease as to how the company should carry the

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accounting treatment related to the lease accounting in their financial statement (Aasb.gov.au
2019).
This standard came up with a single lease model which help the user to do accounting
easily in their books of account (Parker and Northcott 2016). As per the changes it required
the lessee to record all the asset and liabilities which have been leased for a term of more than
12 months, the only exemption which the lessee will get that if the underlying asset value is
low that it can skip the recording the asset and liabilities in their financial information.
The lessee should measure the value of the right-of-use-asset similarly like it
measures the value of other non-financial asset and for the liability it should carry the same
valuation method (Lovell 2014). The lessee should measure the asset and liability on a
present value basis.
The lessee should clarify the cash repayment of the liability in the principal and
interest portion and should present them in their cash flow statement as per the AASB 107 in
their financial report (Aasb.gov.au 2019).
AASB 16 also mention the disclosure that is to be given by lessee in regards to the
asset and liability (Phillips, Libby and Libby 2015). Proper judgment is to be taken by the
lessee about the information which should be disclosure in their books of account. It helps to
represent proper financial performance, cash flow, and financial position.
This standard also carries forward the lessor requirement which has been mentioned
in AASB 117 (Aasb.gov.au 2019). The lessor should terminate the lease as finance or
operating lease and should give the proper amount of disclosure for both the accounts. It also
adds more amount of disclosure that should be given by the lessor which help them to give
more amount of information and help the user to know the risk associated in the business as
well as the residual value of the asset and liabilities.

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As per the company After pay touch it can be seen from the financial report that they
have followed all the required in the preparation of lease account (Aasb.gov.au 2019). It has
given proper amount of disclosure in the notes of account so that the user can able to take the
necessary decision in regards to the financial health of the organization.
Key Disclosure in the Company Annual Report
The annual report of the company shows that they have correctly followed the
accounting standard in their financial books of account (Schaltegger and Burritt 2017). As per
the Notes No 11 which is based upon the interest-bearing borrowing it states that the financial
lease which is represented in the company annual report show about the remaining
outstanding office fit-out expenditure which should be paid within 12 months.
Note No 20 which is based upon the Commitments and Contingencies state that the
entity has entered into a commercial lease in regards to the Sydney and Melbourne. The lease
in regards to Singapore office was terminated in August 2017 (Afterpaytouch.com 2019).
The significant accounting policy of the company shows that the entity considers the
arrangement of the lease is based upon the dependent of use of specific asset, or it conveys
about the right to use of asset (Schroeder, Clark and Cathey 2019). The entity records an
operating lease payment as an expense in their comprehensive income on a straight-line basis
over the lease term. Finance lease is recorded as a lease of asset and liability in their
consolidated financial report which is calculated on the net present value in regards to the
minimum lease payment.
The notes on account also state the summary about the changes that are incorporated
in AASB 16 which able to replace the old accounting standard AASB 117. It states that the
lessees should recognize all the leases amount in their balance sheet (Afterpaytouch.com
2019). All the other points which been mentioned in AASB 16 stated in company notes on

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accounts. It states that the entity has to recognize the liabilities that are reflecting the future
lease payment and also the right of use of the asset in the business.
Conclusion
The above discussion shows the financial accounting method in the company.
Financial accounting helps the company to prepare its financial reports as per the accounting
standard, and other guidelines mention in different regulations. Accounting standard shows
the framework which the entity had to follow while preparing their financial books of account
and another financial report of the business. It deals with the entity After Pay Touch which is
an Australian based company and deals in technology business. The report state about the
different accounting concepts which the company has to follow while preparing the financial
report. The concepts which shown in the report are Accrual Concept, Going Concern
Concept, Conservatism Concept, and Consistency Concept. It also shows the changes which

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came up in AASB 16 and also showed the disclosure which was given by the company
following AASB 16 in their books of accounts.
Reference
Aasb.gov.au (2019). [online] Aasb.gov.au. Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 25 Sep.
2019].
Afterpaytouch.com (2019). [online] Afterpaytouch.com. Available at:
https://www.afterpaytouch.com/images/APT_2018_Annual-Report.pdf [Accessed 25 Sep.
2019].
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
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thought and practice. Memorial Articles for 20th Century American Accounting Leaders, 49,
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Harrison Jr, W.T., Horngren, C.T. and Thomas, C.W., 2014. Financial accounting. Pearson
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accounting. Pearson Higher Education AU.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

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Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2019. Intermediate accounting. John Wiley
& Sons.
Lovell, H., 2014. Climate change, markets and standards: the case of financial
accounting. Economy and Society, 43(2), pp.260-284.
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1131.
Phillips, F., Libby, R. and Libby, P., 2015. Fundamentals of Financial Accounting. McGraw-
Hill Education.
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