Accounting Standards: Coca-Cola Amatil's Financial Reporting Analysis

This report analyzes Coca-Cola Amatil's financial reporting practices to determine the extent of its compliance with the conceptual accounting framework set by the IASB. It examines whether the company's financial statements meet the general objectives of financial reporting and effectively cater to the needs of its target audience, including investors and creditors. The report further investigates the criteria used by Coca-Cola Amatil for recognizing financial statement elements, as well as how the company adheres to the fundamental and enhancing qualitative characteristics of the conceptual accounting framework, such as relevance, faithful presentation, comparability, verifiability, timeliness, and understandability. The analysis is based on Coca-Cola Amatil's 2016 annual report, concluding that the company effectively complies with the IASB's framework in its financial reporting.

Contemporary Issues in Accounting

Executive Summary
The report is undertaken to analyze whether the business corporations listed on ASX are
implementing the conceptual accounting framework for developing their financial reports. Fir the
purpose, the financial reporting process of Coca-Cola Amatil, listed on ASX, is analyzed for
examining the compliance of its different sections with the accounting framework of IASB. It
has been depicted that the company has applied the standard principles of accounting framework
during its overall financial reporting process.

Contents
Introduction......................................................................................................................................4
General Objective of Financial Reporting Met by Coca-Cola Amatil............................................4
Analysis of the Effectiveness of Financial Reports of Coca-Cola Amatil by Target Audience......5
Criteria of recognizing the Financial Statement Elements Used by Coca-Cola Amatil..................5
Fundamental Qualitative Characteristic of Conceptual Accounting Framework Met in Financial
Report of Coca-Cola Amatil............................................................................................................6
Enhancing Qualitative Characteristic of Conceptual Accounting Framework Met in Financial
Report of Coca-Cola Amatil............................................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

Introduction
Australian Accounting Standards Board (AASB) is currently placing large emphasis on
implementation of the conceptual accounting framework in the financial reporting process of
business corporations operating within Australia. This is done to ensure that financial reports are
developed as per the needs and requirements of the end-users by providing them all the
necessary information for decision-making. IASB (International Accounting Standards Board)
has developed the standard framework of accounting for providing a clear direction to the
business corporations worldwide regarding the nature of developing financial reports. The
adoption of this conceptual accounting framework will also benefit the business corporations of
Australia by increasing their global competitiveness through achieving the trust and confidence
of investors worldwide (Van der Meulen, Gaeremynck and Willekens, 2007). In this context, the
report provides an analysis of the extent of adoption of conceptual accounting framework by
selected business corporations listed on ASX, that is, one of the largest bottlers of non-alcoholic
ready to drink beverages in the Asia-Pacific region.
General Objective of Financial Reporting Met by Coca-Cola Amatil
The conceptual framework of accounting has described the major objective
behind the development of financial reports by business entities to support the decision-making
process of end-users. The end-users of financial information are present and future investors that
need to gain an analysis of the overall performance of a business entity through examining its
present financial growth and success. The general purpose financial statements developed by a
business corporation provide all the required information to the end-users about its financial
condition that can prove to be useful in decision-making (Conceptual Framework, 2017). Coca-
Cola Amatil has met the objective of developing financial reports through development and
presentation of its financial statements. The financial report of the company has disclosed the
consolidated financial statements that are, income sheet, balance sheet, statement of profit and
loss, statement of change sin equity and cash flow statement. All these general purpose financial
statements are developed in accordance with the AASB standards and Corporations Act 2001 to
comply with the standard principle of conceptual accounting framework (Coca-Cola Amatil:
Annual Report, 2016). The investors can review the general purpose financial statements for

analyzing the profitability, liquidity, efficiency and other financial metrics of the company before
making the investment decisions (Rezaee, 2003).
Analysis of the Effectiveness of Financial Reports of Coca-Cola Amatil by
Target Audience
Coca-Cola Amatil financial reports is developed and presented on yearly basis in its
annul report. The company integrates the financial performance of all its subsidiaries during the
development of its consolidated financial statements as per the principle of consolidation (Tarca,
2004). This facilitates the target audience, that are, present and future investors, analysts,
creditors and lenders to gain an overview of the performance of the company as a Group and
analyze its potential worth (Soderstrom and Sun, 2007). There is a separate section of the
financial report in the annual review provided by the company to the target audience. All the
consolidated financial statements are presented clearly and separately in the financial report so
that target audience can develop an overview of the integrated performance of the company and
its various subsidiaries as a single economic entity. The target audiences can easily and quickly
develop an analysis of the key financial performance indicters that helps them to take decisions
within a shirt-period of time. The financial reports are developed as per the standard accounting
principles and rules to ensure that it is reliable and capable of supporting the decisions of the
target audience (Coca-Cola Amatil: Annual Report, 2016). There is synchronized flow of
information through the overall financial report so that target audience can easily extract the
information they need and therefore fulfilling their varying requirements (Psaros and Trotman,
2004).
Criteria of recognizing the Financial Statement Elements Used by Coca-
Cola Amatil
The conceptual framework of accounting has directed all the business entities to
recognize and measure the value of elements of financial statements only when there is
expectation that they will provide economic benefit to them in future context. The recognition
and measurement criteria used by business entities during development of financial reports need
to be described adequately (McDaniel, Martin and Maines, 2002). The notes to financial
statements section of Coca-Cola Amatil has adequately disclosed all the key information about

the criteria used for recognizing and measuring the value of financial elements. The revenue is
recognized and measured by the company at the fair value on meeting the following criteria, sale
of products, rental income, and services provided and interest income received. There are
different recognition and measurement criteria used for assessing the value of expenses that are,
employee-related costs, finance costs and operating leases. The value of trade and receivables are
recognized by taking the due amount in consideration and also making an allowance for doubtful
amounts and recognize it in the income statements. Property, plant and equipment are recognized
at cost through deduction of the depreciation and impairment occurred. Similarly, the recognition
criteria used for identifying and ensuring the value of income tax, tangible assets and intangible
assets, inventory, impairment testing and others are clearly disclosed by the company in the note
section of the financial report (Coca-Cola Amatil: Annual Report, 2016).
Fundamental Qualitative Characteristic of Conceptual Accounting
Framework Met in Financial Report of Coca-Cola Amatil
The major fundamental qualitative characteristic of financial report as provided in the
conceptual accounting framework is relevancy and faithful presentation. The financial
information can be regarded to be relevant if it has both predictive and confirmatory values.
Therefore, the financial information should provide a confirmed value and also estimated value
so that it is reliable in the mind of the target users (Gore and Zimmerman, 2007). The financial
report of Coca-Cola Amatil has provided both the confirmed and predictive value of different
elements of financial statements. The different general purpose financial statements has provided
the confirmed value of financial elements and also provided the predictive value based on the
accounting estimates and assumptions. The key assumptions used in estimating the future value
of certain financial elements is also disclosed in the financial report. The company has stated in
its financial report that management has used some key estimates and assumptions for predicting
the future value of some financial elements (Maines and Wahlen, 2006).
The key assumptions used are estimation in the useful lives of property, plant and
equipment and intangible assets. The assumptions are also applied in protecting the value of
impairment testing, income tax and promotional allowances. The other fundamental qualitative
characteristic of conceptual accounting framework is faithful presentation of financial
information. This means that financial information should be neutral, error-free and also

complete in all respects (Mazhambe, 2014). The financial report of Coca-Cola Amatil in order to
ensure that all the key financial performance indicators are faithfully presented has carried out
auditing of its general purpose financial statements. The auditing of financial reporting process is
carried out with the aim of reviewing the financial statements so that it can be assured that they
are free from any materialistic error. The independence declaration statement of auditor in the
financial report ensures that the financial elements values are free from any material error and as
such faithfully presented to the end-users (Coca-Cola Amatil: Annual Report, 2016).
(Source: Coca-Cola Amatil Annual Report 2016)
Enhancing Qualitative Characteristic of Conceptual Accounting
Framework Met in Financial Report of Coca-Cola Amatil
The conceptual framework of accounting has also stated some enhancing qualitative
characteristics for assisting the accountants in development of financial reports. These
characteristics are comparability, verifiability, timelines and understandability (Conceptual
Framework, 2017). The financial information disclosed should be comparable with that of the
previous year so that investors can asses whether there has been improvement in the financial

condition of a company or not (Gerber, Gerber and Van der Merwe, 2014). Coca-Cola Amatil
financial statements are developed as per this characteristic as the performance of the current
year is compared with that of the previous year as depicted:
(Source: Coca-Cola Amatil Annual Report 2016)
The financial information as per the verifiability principle can also be verified through its
quantitative measurement. Coca-Cola Amatil has disclosed all the relevant quantitative
information in its consolidated financial statements so that values of different financial
statements can be precisely ensured. The accounting methods applied for calculating the
quantitative value has also been stated in the financial report in the notes section. The
understandability characteristic indicates that financial report must be presented in an easy
format so that end-users can easily gain an overview of its different sections. As such, the report
has been prepared in a systematic way and the notes section has described in detail all the
relevant procedures and rules applied during development of consolidated statements. Also, in
accordance with timeliness characteristics, the financial information is disclosed on an annual
basis so that investors gain current information for decision-making (Coca-Cola Amatil: Annual
Report, 2016).

(Source: Coca-Cola Amatil Annual Report 2016)
Conclusion
Coca-Cola Amatil complies effectively with the conceptual accounting framework of
IASB. It has prepared differ sections of the financial report as per the qualitative characteristic of
financial reporting stated in the standard framework of accounting.

References
Coca-Cola Amatil. 2016. Annual Report. [Online]. Available at:
https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2017/CCA181-Annual-
Report-2016-low-resolution.ashx [Accessed on: 17 April 2018].
Conceptual Framework. 2017. IFRS Foundation. [Online]. Available at:
http://www.frascanada.ca/international-financial-reporting-standards/resources/unaccompanied-
ifrss/item71833.pdf [Accessed on: 17 April 2018].
Gerber, M. C., Gerber, A. J., and Van der Merwe, A. J. 2014. An Analysis of Fundamental
Concepts in the Conceptual Framework Using Ontology Technologies. South African Journal of
Economic & Management Sciences 17 (4), pp. 396–411.
Gore, R., and Zimmerman, D. 2007. Building the Foundations of Financial Reporting: The
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McDaniel, L., Martin, R. and Maines, L. 2002. Evaluating Financial Reporting Quality: the
Effects of Financial Expertise vs. Financial Literacy. The Accounting Review 77, pp.139-167.
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