Contemporary Issues in Accounting: AGL Energy Ltd Analysis

This report assesses AGL Energy Ltd's adherence to the Australian Accounting Standards Board (AASB) conceptual framework in its financial reporting, specifically focusing on the 2017 financial report. It examines whether AGL meets the objectives of the framework, including the recognition criteria for assets, liabilities, equity, revenue, and expenses, particularly concerning Australian Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement. The study evaluates the qualitative characteristics of the report, such as faithful representation and reliability, and its adherence to enhancing characteristics like comparability, demonstrating how AGL presents current year data alongside prior year figures for key financial metrics. The report concludes that AGL's financial reporting aligns with AASB standards and provides a fair representation of its financial performance, with appropriate measures in place to prevent management from taking undue advantage of factors outside their control.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of Student:
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Author’s Note:

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Executive Summary
The main intention of study focus on whether AGL Energy Ltd is able to meet the objectives of
conceptual framework of reporting. The report will be further able to recognise the main criteria
followed for recognition of expenses, equity, liabilities, assets and revenues. The third section of
the study will be able to evaluate the quality has the characteristics which has been shown with
the events of the report and faithfulness representation. The latter part of the study has been able
to state the comparability of the information provided in the report. AGL financial report 2017
has been depicted to be prepared in accordance with standards prescribed by AASB and in
addition to this the concise financial statements have been further seen to be prepared in
accordance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise
Financial Reports”. Fair value of financial instruments has been taken into consideration with
“Australian Accounting Standard AASB 139 Financial Instruments: Recognition and
Measurement”. The comparability aspect has been duly presented with the resultant value in the
present year and comparing the same with the prior year.

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Table of Contents
Introduction......................................................................................................................................3
Adherence to the objectives of the conceptual framework with its reporting.................................3
Adherence with the recognition criteria for reporting Assets, Liabilities, Equity, Revenue and
Expenses..........................................................................................................................................4
Adherence with the qualitative enhancing characteristics of financial reporting............................5
Adherence with enhancing characteristics of financial reporting....................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................9
List of appendix.............................................................................................................................11

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Introduction
AGL Energy Ltd is considered as the most prominent Australian listed public company
involved in the telling and generation of gas and electricity for commercial uses. The energy
generated by AGL are mainly from sourced from power stations, natural gas, hydroelectricity,
thermal power, posting gas and solar energy. The company claimed to be having a customer base
of more than 3.6 million both residential and business across “New South Wales, Victoria, South
Australia and Queensland”. It has been further discerned that AGL decided to enter the
commercial gas market and residential market in July 2017 situated in Western Australia
(Agl.com.au. 2018).
The important facets of the study will be able to identify whether the company is able to
meet the objectives of conceptual framework of reporting. The report will be further able to
recognise the main criteria followed for recognition of expenses, equity, liabilities, assets and
revenues. The third section of the study will be able to evaluate the quality has the characteristics
which has been shown with the events of the report and faithfulness representation. The latter
part of the study has been able to state the comparability of the information provided in the
report
Adherence to the objectives of the conceptual framework with its reporting
It has been discerned that “Australian Accounting Standards Board (AASB)” is
responsible as the main government agency for developing of the financial report which is
mainly seen to be applicable to both public and private sectors of the economy across Australia.
The main contributing role of AASB is further seen to be based with the financial reporting

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stated as per the “Australian securities and investment commission at 2001” (Legislation.gov.au.
2018). In December 2013 several amendments were brought to the existing reporting framework
which aimed at better measurement, presentation, de-recognition and reporting entity. The
important objective was also seen with bringing out management stewardship with several
entities (Financial Accounting Standards Board (FASB) 2013).
Based on the information on audits, “AGL financial report 2017” has been depicted to be
prepared with standards prescribed by “AASB” and various types of other standards which are
acceptable by ASX. The concise financial statements have been further seen to be prepared in
accordance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise
Financial Reports”. The report of the financial statements further seen to be audited and audited
report is unmodified and is attached to “AGL financial report 2017”. The main business of AGL
has been seen to be managed under the operating segments namely group operations,
investments and markets. The operating segments has been prepared as per “Australian
Accounting Standard AASB 8” (Agl2017.reportonline.com.au). The company reports segmental
information on similar basis as its internal management structure. This is evident with the fact
that the company the face energy markets operating segments in majority of the area is
associated to revenue and margin from AGL’s activities while group operations has been taken
to operating segments reported from a variety of the expenses group. It has been further depicted
that the company has implemented the conceptual framework of AASB in recognition and
measurement of financial instruments (Aasb.gov.au. 2018).

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Adherence with the recognition criteria for reporting Assets, Liabilities, Equity, Revenue
and Expenses
The different types of changes in fair value of financial instruments has been taken into
consideration with “Australian Accounting Standard AASB 139 Financial Instruments:
Recognition and Measurement”. This particular standard is seen to be requiring certain assets,
derivatives and liabilities reported at fair value and the financial statements. “Australian
Accounting Standard AASB 139 Financial Instruments” has been also seen to be conducive in
recognising equity as an adjustment to the hedging reserve it is considered with the derivative to
be effective for the hedges and any variation in the fair value of the item being hedged and fair
value of the derivative which is substantially offset against each other (Legislation.gov.au.
2018). The consideration of all other hedges are seen to be unsuccessful hedges. The several
types of deviations in the fair value of derivatives has been further depicted to be effective for
hedges is recognised in equity as an adjustment to the hedge reserve. The several types of
changes in the value of derivatives between the reported period is carried at fair value and
recognised in the P/L statement of the company. The company restated the adoption of
accounting standards for employee benefits as per AASB 119 Employee Benefits in the financial
year 2013 (Legislation.gov.au. 2018).
Adherence with the qualitative enhancing characteristics of financial reporting
As per the recent energy system and the various financial consideration for the cost of the
same, it can be discerned that AGL is following a powerful blueprint to an affordable, reliable
and orderly depiction of the financial data. The significant consideration of the changes in fair
value of the financial instrument has been regarded as an added security measure for financial
performance depiction from the annual report of the company. It has been further seen to be

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considered the fluctuations in the fair value of the derivatives with the reporting periods and the
periods which are based on ineffective hedges other than the assets and liabilities carried at fair
value and the recognition of the same which is needed to assess the statement of profit or loss.
Based on the point of view of AGL as per the AASB 139 definition, the effective hedge results
have been seen with the suitable outcome for the interest rate and foreign exchange rates which
are currently favoured by many experts. The changes in fair value of the financial instrument is
reported with profit and loss for the year ended 30 June 2017. The reliability of the day ties
further evident with the total change in the fair value (Agl2016.annual-report.com.au. 2018).
The immersion outcomes have been further able to consider the statutory profit aspect.
The board is seen to adjust the statutory profit for the “non-cash fair value movements” in the
financial instruments. It has been further discerned that board uses to determine the immersion
outcomes under company’s LTI and STI which has been ensured with the management for not
taking any unfair advantage or disadvantage by matters which are outside their control
(Agl2016.annual-report.com.au. 2018).
Adherence with enhancing characteristics of financial reporting
The basic comparability aspect has been duly presented with the resultant value in the
present year and comparing the same with the prior year. This has been implemented in several
areas of financial report including “earnings before interest and tax, underlying profits every, net
finance cost and income tax benefit. In a similar fashion the company has reviewed the
operations on the basis of comparing financial data of present year with previous year. The
clearer segregation of generation mix has been discerned with extreme relation, short-term
incentive and long-term incentive (Agl2016.annual-report.com.au. 2018). The same has been

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depicted with a donut chart. In addition to this, the performance and executive immigration
outcomes has been presented with a clear depiction of the results as per previous five years of
financial data. This has included elements such as statutory profit or loss, underlying profit,
statutory EPS, underlying EPS, closing price of shares etc. Along with this the companies and of
actual growth in the last five years of AGL has been clearly presented with the bar diagram. The
line chart has been able to depict a more qualitative enhancing characteristic thereby showing the
total shareholder return for AGL vs. ASX 100 index from a time period of July 2012 to July
2017 (Agl2016.annual-report.com.au. 2018).
Conclusion
The given study has been conducive in addressing the main adherence of AGL with
Australian conceptual framework. “AGL financial report 2017” has been depicted to be prepared
in accordance with standards prescribed by “AASB” and various types of other standards which
are acceptable by ASX. The concise financial statements have been further seen to be prepared in
accordance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise
Financial Reports”. The significant agreement with the recognition criteria for reporting Assets,
Liabilities, Equity, Revenue and Expenses has been discerned in form of “Australian Accounting
Standard AASB 139 Financial Instruments: Recognition and Measurement”. This particular
standard is seen to be requiring certain assets, derivatives and liabilities reported at fair value and
the financial statements. The company restated the adoption of accounting standards for
employee benefits as per AASB 119 Employee Benefits in the financial year 2013. Adherence
with the qualitative enhancing characteristics of financial reporting has been discerned with
significant consideration of the changes in fair value of the financial instrument has been
regarded as an added security measure for financial performance depiction from the annual

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report of the company. It has been further discerned that board uses to determine the immersion
consequences under company’s LTI and STI which has been ensured with the management for
not taking any unfair advantage or disadvantage by matters which are outside their control. The
several factors responsible for enhancing characteristics of financial reporting is evident from
comparability aspect. The basic comparability aspect has been duly presented with the resultant
value in the present year and comparing the same with the prior year. This has included
elements such as statutory profit or loss, underlying profit, statutory EPS, underlying EPS,
closing price of shares etc.

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References
Aasb.gov.au. (2018). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 24 Jan. 2018].
Agl.com.au. (2018). Our Company | AGL. [online] Available at: https://www.agl.com.au/about-
agl/who-we-are/our-company [Accessed 29 Nov. 2017].
Agl2016.annual-report.com.au. (2018). Business Highlights | AGL 2016 Annual Report. [online]
Available at: http://agl2016.annual-report.com.au/business-performance/business-highlights
[Accessed 29 Nov. 2017].
Agl2016.annual-report.com.au. (2018). Financial Highlights | AGL 2016 Annual Report.
[online] Available at: http://agl2016.annual-report.com.au/business-performance/financial-
highlights [Accessed 29 Nov. 2017].
Agl2016.annual-report.com.au. (2018). Independent Auditor’s Report | AGL 2016 Annual
Report. [online] Available at: http://agl2016.annual-report.com.au/financials/independent-
auditors-report [Accessed 29 Nov. 2017].
Agl2016.annual-report.com.au. (2018). Remuneration Report | AGL 2016 Annual Report.
[online] Available at:
http://agl2016.annual-report.com.au/financials/directors-report/remuneration-report [Accessed
29 Nov. 2017].
Agl2017.reportonline.com.au. (2018). [online] Available at:
http://agl2017.reportonline.com.au/sites/agl2017.reportonline.com.au/files/
sustainability_report_full_report_0.pdf [Accessed 29 Nov. 2017].
Financial Accounting Standards Board (FASB) (2013) ‘Recognition and Measurement of
Financial Assets and Financial Liabilities, Exposure Draft: Proposed Accounting Standards
Update’, Financial Accounting Standards Board, Norwalk. doi: 10.1002/jcaf. Available at:
http://fasb.org/cs/ContentServer?
c=FASBContent_C&cid=1176156902600&d=&pagename=FASB%2FFASBContent_C
%2FNewsPage [Accessed 29 Nov. 2017].

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Legislation.gov.au. (2018). AASB 119 - Employee Benefits -September 2011 . [online] Available
at: https://www.legislation.gov.au/Details/F2015C00428 [Accessed 24 Jan. 2018].
Legislation.gov.au. (2018). AASB 139 - Financial Instruments: Recognition and Measurement -
July 2004 . [online] Available at: https://www.legislation.gov.au/Details/F2015C00113
[Accessed 29 Nov. 2017].
Legislation.gov.au. (2018). Australian Securities and Investments Commission Act 2001 .
[online] Available at: https://www.legislation.gov.au/Details/C2017C00326 [Accessed 29 Nov.
2017].

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List of appendix

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