Critical Analysis: Amcor Limited's Adherence to Accounting Framework

This report provides a comprehensive analysis of Amcor Limited's compliance with the accounting conceptual framework, focusing on the objectives, recognition criteria, and qualitative characteristics outlined by the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS). The analysis covers Amcor's adherence to general-purpose financial reporting objectives, satisfaction of recognition criteria for assets, liabilities, equity, revenue, and expenses, and compliance with fundamental and enhancing qualitative characteristics of financial information. The report uses information extracted from Amcor Limited's annual reports and relevant accounting standards to assess the company's effectiveness in meeting the obligations of the conceptual framework, concluding that Amcor Limited demonstrates a high level of compliance with these standards and principles.

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

1CONTEMPORARY ISSUES IN ACCOUNTING
Abstract
The main aim of this report is to analysis and evaluation of the level of compliance with the
standards and principles of conceptual framework by Amcor Limited. This report shows the
compliance of Amcor Limited with the objectives of conceptual framework. In addition, it also
shows the compliance of Amcor Limited with recognition criteria. Lastly, the report shows the
compliance of Amcor Limited with the qualitative and enhancing characteristics of financial
information.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Compliance with General Purpose Financial Reporting Objectives...............................................3
Satisfaction of Recognition Criteria................................................................................................9
Qualitative Characteristics of Financial Reporting........................................................................13
Satisfaction of Enhancing Qualitative Characteristics of Financial Reporting.............................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................16

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
In today’s business world, the business entities are facing different kinds of issues due to
the presence of complex business operations. One of these major issues is accounting and
financial reporting issues as these are considered as contemporary accounting issues in the
business organizations. These rise of these kinds of issue can be see due to the non-compliance
with the principles and standard of required financial conceptual framework. In this process,
International Accounting Standard Board (IASB) plays an integral part as it provides the
companies with the required standards and principles that the accountants are required to be
complied with for financial reporting. This report takes an honest attempt in the analysis and
evaluation of the level of compliance with the standards and principles of conceptual framework
by Amcor Limited. Amcor Limited is an Australian high-quality packaging company for foods,
beverages, pharmaceutical products and others. Amcor Limited is in the top 100 companies of
Australian Security Exchange (ASX) (amcor.com 2018). Different part of the report analyzes
various factors of conceptual framework with respect of this company.
Compliance with General Purpose Financial Reporting Objectives
From the above discussion, it can be observed that the business entities are required to
follow the standards and principles of accounting conceptual framework. More specifically,
Amcor Limited is required to meet the conceptual framework objectives. There are three major
objectives of IASB conceptual framework.
First Objective: The first objective of conceptual framework states that the companies must
give the users required information about the current financial position of the entity that must

4CONTEMPORARY ISSUES IN ACCOUNTING
include the information of their economic resources (aasb.gov.au 2018). The information related
o economic resources can be found in the statement of financial position. In case of Amcor
Limited, the company provides the users with all required current information related to
economic resources through the statement of financial situation and it can be seen as follows:
(Source: amcor.com 2018)
Apart from this, the recent information related to the current financial position of the
entity can be found in the income statements (amcor.com 2018).

5CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)
Second Objective: The second objective of accounting conceptual framework is provide the
users with the information related with the major changes in economic resources and financial
claims (aasb.gov.au 2018). These changes can be observed from the income statement and
statement of change in equity. From the analysis of the annual reports of Amcor limited, the
company provides all the information related to change in economic resources and financial
claims through the income statement and statement of change in equity (amcor.com 2018). It can
be found in below:

6CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)

7CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)
Third Objective: As per the third objective of conceptual framework, the financial performance
of the companies must reflect from the cash flow statement of the companies (aasb.gov.au 2018).
Thus, the companies are required to provide the users with all the information related to cash
flow. In the annual report of Amcor Limited, the company publishes all the information of cash
flow through their cash flow statement and it can be found as below:

8CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)
Moreover, Amcor Limited prepares their financial reports as per the regulations of
Corporation Act 2001 and Australian Accounting Standard Board (AASB). They have also
complied with International Financial Reporting Standards (IFRS) and International Accounting
Standards Board (aasb.gov.au 2018).

9CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)
Satisfaction of Recognition Criteria
Apart from conceptual framework objectives, the requirement for the business entities is
to satisfy the recognition criteria of conceptual framework for major financial elements; they are
assets, liabilities, equity, revenue and expenses. Three major dimensions related to the
recognition criteria are satisfying the definition, the flow of economic benefits to or from the
business entities and the presence of measurable value. The following discussion shows the level
of satisfaction of recognition criteria by Amcor Limited:
Assets
Amcor Limited has reported different operating assets. One of them is Property, plant and
equipment (PPE) and their recognition is done in cost value after the deduction of depreciation
and impairment losses. Straight-line method is used for depreciating PPE. These recognition
criteria can be seen in AASB 116 Property, Plant and Equipment under section 334 of the
Corporations Act 2001 (aasb.gov.au 2018).
(Source: amcor.com 2018)
The company has intangible assets. The recognition of goodwill is done on cost value
after the deduction of impairment losses. Same as, other intangible assets are recognized at coat
value after the deduction of any impairment and amortization costs. All these rules can be seen in
AASB 138 Intangible Assets and IAS 38 Intangible Assets (aasb.gov.au 2018).

10CONTEMPORARY ISSUES IN ACCOUNTING
(Source: amcor.com 2018)
In case of trade and other receivables, Amcor Limited recognizes them at the invoice
value and then adjusts them with the recoverable value. It can be seen in the standard of AASB 9
Financial Instruments (aasb.gov.au 2018).
(Source: amcor.com 2018)
Amcor Limited recognizes them inventories at the lower of costs and net realizable value.
This regulation can be seen in the standards of AASB 102 Inventories (aasb.gov.au 2018).
(Source: amcor.com 2018)

11CONTEMPORARY ISSUES IN ACCOUNTING
Liabilities
The presence of different liabilities can also be seen in Amcor Limited. The company
recognizes their interest bearing liabilities in fair value basis after considering net transaction
cost. It can be seen in the standard of AASB 132 Presentation of Financial Instruments
(aasb.gov.au 2018).
(Source: amcor.com 2018)
The company recognizes provisions in the presence of any legal or constructive
obligation and they are measured on present value basis (aasb.gov.au 2018).
(Source: amcor.com 2018)
Equity
In Amcor Limited, the classification of ordinary shares is done as equity and they are
fully paid with no par value. In case of treasury shares, their recognition is done at cost value
after the deduction of equity. For this aspect, the company follows the standard of AASB 1004
Contributions (aasb.gov.au 2018).