Financial Accounting Report: ASX Listed Company Compliance

This report presents a comprehensive analysis of financial accounting practices and compliance for two ASX-listed companies, Woolworths and JB Hi-Fi Limited. It examines the concept of a reporting entity and its role in creating quality financial information for users. The report delves into the companies' disclosures related to liabilities, including provisions and contingent liabilities, assessing their adherence to Australian Accounting Standards (AAS). It further investigates the disclosure of intangible assets and compliance with relevant standards. Additionally, the report compares the companies' disclosure of income tax expenses, benefits, and obligations. The findings are supported by figures and tables extracted from the companies' annual reports, providing a detailed evaluation of their financial reporting practices.

Financial Accounting

Abstract
In Australia, it is compulsory for the reporting entity to comply with all accounting standard
approved by the Australian Accounting Standard Board. Effective and Qualitative information is
provided to the users of the financial statement with the help of the Reporting Entity. The
qualitative information assists the users to take the important decision. Further, the company also
comply with the disclosure required as per prescribed in the Accounting Standard related to the
provisions, contingent liabilities, Income tax and many other aspects.

Table of Contents
Introduction......................................................................................................................................4
Main Body.......................................................................................................................................4
Concept of Reporting Entity and how it assists in the creation of quality information for the
users of financial statement.........................................................................................................4
Analysis and comparison of Disclosures by both firms related to disclosure of liabilities
including provisions and contingent liabilities and compliance with the accounting standard...7
Analysis of disclosure of intangible assets in order to assess their compliance with relevant
accounting standard...................................................................................................................12
Analysis and comparison of both firms related to disclosure of Income Tax expense, benefits,
and obligation with relevant accounting standard.....................................................................15
Conclusion.....................................................................................................................................18
References......................................................................................................................................20

LIST OF FIGURES
Figure 1: Statement presenting movement for the year 2017 and 2018 of Woolworths Ltd........11
Figure 2: Intangible Assets of Woolworths Ltd. for the year 2017 and 2018...............................15
Figure 3: Intangible assets of JB Hifi for the year 2017 and 2018................................................16

LIST OF TABLES
Table 1 Statement of the current and non-current provision of Woolworth for the year ended
2018 (Amount in $M)....................................................................................................................13
Table 2 Statement of the current and non-current provision of JB hi-fi Limited for the year ended
2018 (Amount in $M)....................................................................................................................15

INTRODUCTION
The financial performance of the company can be evaluated by the financial information of the
entity stated in the financial reports. Usefulness and transparency of the information can be
enhanced by the disclosures by the firm in its annual report. The present study is related to the
concept of reporting entity and the manner in which it creates quality information for the users of
the financial statement. in the given study, disclosures of the two companies, namely Woolworth
and JB hi-fi Limited, also presented related to the provision and contingent liabilities. Further,
the comparison regarding the compliance of the Accounting Standard with the aspect of
expenses of income tax, intangible assets also stated in this report.
MAIN BODY
Concept of Reporting Entity and how it assists in the creation of quality information for the users
of financial statement
Reporting entities are that entity, in which the user for gaining the understanding related with the
financial position or performance of the company depends on the General Purpose Financial
Report. They make the decision On the basis of the information available in the financial report
of the company. The members of company, shareholders, investors, creditors, borrowers,
lenders, worker and others are included in the term of users of financial statement (Christensen,
Nikolaev, and Wittenberg‐Moerman, 2016). It is mandatory for the reporting entity to prepare its
financial statement as per the requirement of the General Purpose Financial Reporting
Framework. In, other words it can be said that they have to follow the all accounting standard
which are prescribed by the Australian Accounting Standard Board at the time of preparation of

the financial report (Leuz, and Wysocki, 2016). Further, public companies, private companies
who possess a number of external shareholders and others are included in the reporting entity
concept.
The main objective of the General Purpose Financial Reporting Framework is to provide useful
and reliable information to the lender, probable investors, creditors, and other users of the
financial report, related with the selling or purchasing of possessing equity, debt instrument,
disclosing the information related with taking or settlement of loan, right of action, bonus plans
and other information related with the actions taken by management which affect the economic
resources of the company (Ahmed, Mahmood, and Islam, 2016). The users of the entity required
the data related to the resources of the entity, by which they can access the ability of the
company regarding the generation of the probable future cash inflows. Along with this, it also
assists the user to identify about the efficiency and the effectiveness of the managers and key
executives of the company to make the use of the present resources of the company (Kim, Li, Lu,
and Yu, 2016).
The reporting entity assists for the formulation of the quality information for the users of the
financial report because of the following reason –
Reporting entity has to give information related to the economic resources, claims, and any
modification in the economic resources and change
It is compulsory for the reporting entity to present the economic resources and any claim of the
company. It assists the users to analyze the financial strength as well as weakness of the entity.
Further, the user can also observe the liquidity position of the company, and they can determine
any requirement of obtaining the funds by the company (Lourenço, 2015). Further, any

information connected with the claims assist in the identification of the distribution for the funds
by the company. Further, data related with the application of the funds also presented by the
company, by this the user of the financial report can ascertain the effectiveness and efficiency of
the management related with the utilization of the existing resources of the company(Abbott,
Daugherty, Parker, amd Peters, 2016).
In addition, the financial reports are prepared by the entity on the basis of several qualitative
features, which are as follows –
All features of the qualitative information are applied by the reporting entity.
Relevance
The information presented in the financial statement is relevant; therefore, the users can make
the differences in the decision on the basis of the relevance of the information (Flower, 2015).
Reliable representation of the information
In the numerical value or by the description in the financial report, an economic phenomenon is
represented by the reporting entity as per the General Purpose Financial Reporting Framework.
On the basis of the substance of the transactions, the report is made by the company, rather than
only on the basis of legal form (Tschopp, and Huefner, 2015). Further, it should be free from
error and complete in all aspects. Further, the manager also takes care of the concept of prudence
while preparing the financial statement. It means at the time of uncertainty regarding any
transaction; judgments are taken carefully.
Comparability

Since the information presented in the financial report contains the information of the previous
year along with the current year. By which the user can make a comparison of the performance
of the company. Along with they can also predict about the growth of the company in the future
(Dumay, Bernardi, Guthrie, amd Demartini, 2016).
Timeliness
It is compulsory for the reporting entity to present the financial report in the specified time limit.
By which the users can make their decision.
In addition, the aspect of the quality also represented in the SAC (Statement of Accounting
Concepts) 3, which states about the incorporation of the quality features in the financial
statement.
In the present case of Woolworth and JB hi-fi, both companies are listed on the stock exchange if
Australia. Since they fulfil the criteria of the reporting entity. Therefore it is essential for them to
prepare the financial statement by complying with all accounting standard. On the basis of the
observation in the annual reports of the entity, the disclosure is made by the company that it has
complied all relevant accounting standard. Further, the company also gives information about the
economic resources. Along with this, the data of the previous year also incorporated in the
current year information, by which the user can make an effective decision. Thus, it has been
seen that the concept of reporting entity to assist in the building of quality information for the
users of financial information.

Analysis and comparison of Disclosures by both firms related to disclosure of liabilities
including provisions and contingent liabilities and compliance with the accounting standard
Australian Accounting Standard 137 deals with the provisions, contingent liabilities and
contingent assets. It is mandatory for the company to follow all rules and regulations which are
prescribed in the standard. The main objective of this standard is to provide the sufficient and
proper information to the user of the financial statement so that they can get the knowledge about
nature, amount, and timing related with the provision, contingent assets, and contingent liability
of the company (Schneider, Michelon, and Maier, 2017). As per this standard, liability means
the present obligation of the company raised due to the past event, and it is certain that for
settlement of the obligation entity has to incur some economic resources. It is recognized by the
company in the financial statement. Further, a contingent liability is a possible obligation that
rose from the past events; however the occurrence of this liability will be ascertained by
happening or non-happening of any future events (Acar, amd Ozkan, 2017). Further, the
contingent liability is not recognized by the company because it is not probable that the entity
will incur the economic resources for the settlement of the liability. Further, even if there is the
present obligation of the contingent liability, but the company cannot meet the recognition
criteria, then also it is not recognized as a liability of a company (Mügge, and Stellinga, 2015).
However, it is essential for the company to make the proper disclosures. Further, the provisions
are recognized by the company as a liability; however, for this, a reliable estimation has been
made by the managers. In addition, in the case of the onerous contract, the present obligation as
per the contract is recognized and measured as a provision (Canzoneri, Cumby, and Diba, 2016).
With the aspect of disclosures, for each class of provision, the company should disclose the
carrying amount of provision at the starting date and ending date of the reporting period. The

company should also disclose the additional provision made in the period, consisting increases to
current provision (Marshall, and Lennard, 2016). Further, the amount applied or charges against
the provision amount should be disclosed. In addition to the above aspects, the company should
also state about the nature of the obligation and any assumption made related to the future event
by the management. Further, in case of the contingent liability, the company should disclose the
nature of the contingent liability, and any impact on the financial statement if the estimation is
possible. If there is any signal related to the uncertainties of the value and timing, then the same
should be disclosed by the company in the financial statement (Adhariani, Sciulli, and Clift,
2017).
By considering the annual report of the Woolworth, it has been observed that the main objective
of the company is to increase the long term value of the shareholders. It is stated that the Board
of directors of the company and management is promised to comply with all policies and
practices that satisfy the high level of compliance and the disclosure requirement. In the year
2018, the total current liabilities of the company $9175 M, in which the amount of provision of
$1451 is included. The non-current liability is recognized by the company in the year 2018 was
$3513 M, in which the amount of provision of $ 942 is included (Woolworth Group 2018).
Table 1 Statement of the current and non-current provision of Woolworth
Particulars Amount in M $
Current
Employee Benefits 1018
Self-insured risk 177
Restructuring, onerous contracts, store exit 256

costs and others
Total 1451
Non-Current
Employee Benefits 100
Self-insured risk 419
Restructuring, onerous contracts, store exit
costs and others
423
Total 942
The total amount of the provision is $ 2393 M is recognized by the company in the financial
statement of the year ended 2018.
Further, the company has also disclosed the changes in the amount of provision, which are
shown in the given image –
Figure 1: Statement presenting movement for the year 2017 and 2018 of Woolworths Ltd.