AGL Energy Ltd: An Analysis of Accounting Theory and Reporting Issues

This report assesses AGL Energy Ltd's reporting framework, analyzing issues related to business conditions and public perception. It examines the role of the reporting framework in building public confidence and restoring the company's image, particularly in light of criticisms regarding gas pricing. The stakeholder theory is discussed in relation to the challenges faced by AGL Energy Ltd. The report concludes by recommending improvements to the company's reporting framework to enhance transparency and maintain public trust, including cost reduction strategies and clear communication of cost structures.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting Theory and Contemporary Issues
Name of the Student:
Name of the University:
Author’s Note

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Executive Summary
The assessment would be considering the business of AGL Energy Ltd for the purpose of
assessing the reporting framework of the business and also analyzing the issues which the
business faces in relation to business condition. The report discusses the role of reporting
framework in a business environment and how the same can be used by the business for building
confidence of the public and restoring the image of the business. The assessment also discusses
the stakeholder’s theory which is associated with the problems which the business of AGL
Energy Ltd faces in current situation. The assessment concludes with recommendations as to
how the business can further improve the reporting framework of the business and also ensure
that transparency is maintained in the preparation of annual reports of the business.

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Issues/ Problems faced by the Business.......................................................................................4
Accounting Requirement.............................................................................................................5
Theories Applicable to the Business............................................................................................7
Theme of the Theory...................................................................................................................8
Conclusion and Recommendations..................................................................................................9
Reference.......................................................................................................................................10

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Introduction
This assessment is undertaken with an objective of analyzing the impact of conceptual
framework in the reporting process of a business. The assessment would keep the conceptual
framework of reporting as the base and identify whether the business which is chosen is facing
any accounting problems. The company which is selected for this assessment is AGL energy ltd
which is engaged in the field of energy sector. The new article which is selected states that the
business of AGL has been facing a lot of criticism for driving the prices of gas higher by
exporting the supplies to other countries.
AGL Energy ltd is one of the listed companies in the Australian stock exchange and the
business is engaged in providing both retailing of electricity for domestic use and also provides
gas to the customers. The company has further expanded the business in solar power
(Agl.com.au. 2018). The company operates in customer markets, wholesale business and also in
retailing business.
The business falls under the governance of AASB when it comes to financial reporting of
all financial information of the business and the business is expected to follow all relevant
accounting standards and also stick to the conceptual framework of reporting (Too and Weaver
2014). The discussion section would be showing the reporting framework which is followed by
the business.
The main objective of the assessment is to analyze the problems which is faced by the
business of AGL energy and how the same can be solved by the business. In addition to this, the
assessment focuses on conceptual framework which is followed by the business or the purpose of
reporting of financial information of the business,

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Discussion
Issues/ Problems faced by the Business
As per the new article which is present, the business of AGL Energy ltd is accused of
driving the prices of gas products by suppling the products overseas. The problem which is
associated with the business is that the management is facing criticism for driving the prices high
for gas products and therefore the reputation of the business has slightly suffered due to such a
situation.
Figure 1: (Article Extract Showing accusation on the business of AGL Energy Ltd)
Source: (Australian Financial Review. 2018)
The above extract shows that the management of AGL Energy ltd also has a project
which imports gas products from USA and the business faces continuous criticism that the
business is being managed with a view to deliberating forcing the prices of gas products and
thereby affecting the demand and supply of gas products in the economy (Australian Financial
Review. 2018). There is also an accusation that the business of AGL Energy ltd is focusing more

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
on profits by driving the prices of gas products. The management needs to formulate strategies
which can help the business in restoring the confidence of the public and the same can be done
by appropriately demonstrating to the public that the business considers the needs of the public
and also by maintaining transparency in the reporting framework of the business (Bon and
Mustafa 2013).
Accounting Requirement
The management of AGL Energy Ltd is expected to follow conceptual framework of
accounting while preparing the financial statement of the business. In order to assess whether the
business appropriately follows the conceptual framework of reporting, the annual report of the
business is to be analyzed (Edwards 2013). Conceptual framework may be defined as the general
pattern and presentation in which financial statement are prepared following certain principles
and regulations. In order words, the conceptual framework is a guide for accounting professional
for appropriate preparation and presentation of financial information in the annual report of the
business.
The basic requirement of the conceptual framework is to ensure that the annual reports
which is prepared by the management of the company is properly presented and follows all
accounting standards applicable to such a company.

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Figure 2: (Extract Showing basis of Preparation of the Financial Statement)
Source: (Agl.com.au. 2018)
The annual report of the business is prepared following all relevant accounting standards
which are applicable on the business and also the presentation of the statements which are
included in the annual report is also appropriate (Henderson et al. 2015). Another major
requirement of the conceptual framework is to ensure that the financial statement which is
prepared by the business is showing true and fair view and all relevant information are included
in the annual report (Peecher, Solomon and Trotman 2013). The company has presented all the
aspect of the financial reports such as assets, liabilities, equity, expenses and income in an
appropriate manner and the same ensure that the business has followed all accounting
requirement while preparing the financial statement of the business.

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
The annual reports which is prepared by the business also complies with the qualitative
characteristics which should be present in the annual report of the business. The two types of
qualitative characteristics of annual report are shown below:
 Fundamental Qualitative Characteristics: The fundamental characteristics states that
the information which are included are relevant in the nature of the business and the same
are also faithfully represented. The annual report of the business for the year 2018 shows
that all relevant information is included in the annual reports and appropriate disclosures
are also provided in the notes to account section of the annual report. In case of faithful
representation of the financial information, the auditor report provides assurance that the
business has followed all regulations of Corporation Act 2001 and also all relevant
accounting standards are followed in the preparation of the financial statement of the
business.
 Enhancing Qualitative Characteristics: These characteristics are supporting in nature
to the fundamental characteristics of the business. The management should prepare the
financial statement in such a manner that the same promotes that understandability,
verifiability, timeliness and comparability of the annual report of the business. The
annual reports contain appropriate disclosure for all accounting treatments which are
done by the business and therefore understandability is not a concern.
Theories Applicable to the Business

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Stakeholder’s Theory
As per this theory, the management is responsible for all activities to the stakeholders of
the business and the company should be accountable to such stakeholders for all activities of the
business. The management should also always act in the best interest of the stakeholders and the
concerns of the stakeholders should be made the primary concern for the business. The
stakeholders are the people who can affect or are affected by the activities of the business
(Hörisch, Freeman and Schaltegger 2014). The problem which is being faced by the management
of AGL Energy Ltd is that the business is facing lot of criticism from the public who also forms
a part of the stakeholders of the business relating to the hike in the prices of the gas products
which is offered in the economy. The management needs to effectively demonstrate to the public
that the activities which are undertaken by the business are for the benefits of the society and
thereby also restore the confidence of the public in the company.
Theme of the Theory
The main theme of the stakeholder theory is quite clear as the emphasis is to be provided
to the stakeholders of the business. The management of AGL Energy Ltd needs to actively
demonstrate that management is dedicated towards the needs of the society and needs to
formulate effective governance policies in order to restore the confidence of the public. The
management of AGL Energy Ltd needs to discuss the implication and long term benefits which
are associated with the policies which are formulated by the business. Another way of
demonstrating effectiveness and efficiency by maintaining a transparency in reporting
framework of the business and also ensuring that the business follows all relevant accounting
standards and principles while reporting its financial position. The theory also states that interest
of the stakeholders should be made the primary concern for the business.

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Conclusion and Recommendations
The discussion which is show above clearly indicates that the management of AGL
Energy Ltd effectively follows the conceptual framework which is approved by AASB in
reporting financial information of the business. The problem which is faced by the business is
related to the hike in the prices of gas products which has tarnished the reputation of the business
as the factor contributing to such hike in prices of gas products. In order to reverse such a
situation, the following recommendation is suggested to the management of AGL Energy Ltd:
 The management needs to reduce all costs of the business with a view point of bringing
down the prices which is charged for gas products.
 The management needs to effectively report all the costs which are incurred by the
business in case of gas product in order to make the people understand that no additional
charged are being charged by the business.
 The management needs to demonstrate transparency in reporting and ensure that
reporting process is efficiently conducted.
The above principles would allow the management to effectively address the situation and
also restore some level of confidence of the public on the company.

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Reference
Agl.com.au. (2018). AGL Energy | An Electricity Provider & Gas Supplier | AGL. [online]
Available at: https://www.agl.com.au/ [Accessed 22 Dec. 2018].
Australian Financial Review. (2018). How AGL Energy got caught out on gas. [online] Available
at: https://www.afr.com/business/energy/gas/how-agl-energy-got-caught-out-on-gas-20180618-
h11iox [Accessed 22 Dec. 2018].
Bon, A.T. and Mustafa, E.M., 2013. Impact of total quality management on innovation in service
organizations: Literature review and new conceptual framework. Procedia Engineering, 53,
pp.516-529.
Edwards, J.R., 2013. A History of Financial Accounting (RLE Accounting). Routledge.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in
sustainability management: Links, similarities, dissimilarities, and a conceptual
framework. Organization & Environment, 27(4), pp.328-346.
Peecher, M.E., Solomon, I. and Trotman, K.T., 2013. An accountability framework for financial
statement auditors and related research questions. Accounting, Organizations and Society, 38(8),
pp.596-620.
Too, E.G. and Weaver, P., 2014. The management of project management: A conceptual
framework for project governance. International Journal of Project Management, 32(8),
pp.1382-1394.