BUS1000 Accounting Report: Company Financial Statement Analysis

This report presents a comparative analysis of the financial statements of two companies within the banking industry: the Australian Finance Group and the Agricultural Development Bank Ltd. The analysis focuses on the basis of preparation of financial statements, including compliance with International Accounting Standards (IFRS) and the use of judgments and estimates, as well as a comparison of the accounting policies employed by each company. The report highlights differences in financial statement presentation, such as the inclusion of income statements by the Agricultural Development Bank Ltd. and the consolidation practices of the Australian Finance Group. The study also references the Accounting Standards Board (ASB) followed by Agricultural Development Bank Ltd., providing a comprehensive overview of the companies' financial reporting practices and the challenges of implementing IFRS in different contexts.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Page 1

Table of Contents
Identification of the Two Companies in Brief...........................................................................3
Comparison of the Basis of Preparation of the Financial Statements........................................3
Comparison On The Basis Of the Accounting Policies in the Companies................................6
References..................................................................................................................................7
Page 2

Identification of the Two Companies in Brief
The two companies, which have been selected for the same industry of Banking, are the
Australian Finance Group, from the Australian Securities Exchange (ASX) and the
Agricultural Development Bank Ltd. listed under the Nepal Stock exchange Ltd. The former
company i.e. Australian Finance Group acts as a mortgage broker to its customers. There are
more services that are offered by the company to its clients such as personal loans, mortgage
brokerage services, commercial finance services and insurances. Throughout Australia, this
particular bank serves majorly for the institutions, individuals and organizations. The
company has started its operations in the year 1994 with its headquarters based in West Perth
of Australia (Bloomberg L.P., 2018). Agricultural Development Bank Ltd. is another
company, which has been taken from the country of Nepal. This bank serve as a cooperative
bank, which is aims to provide proper and required banking solutions to the people. The
services that are offered by this bank to its clients fall in the dimensions of saving accounts,
current and fixed deposit accounts. The company has therefore been founded in the year
1968, which mainly operates in Kathmandu, Nepal (Bloomberg L.P., 2018 a).
Comparison of the Basis of Preparation of the Financial Statements
Financial statements are prepared so as to be able to accurately present the financial reports
by the company’s management. This further helps to identify the financial performance and
position of the company at a specific period of time. There lies a great future of financial
statements in the future days (Barth, 2006). It actually serves as a guide that can enable the
business professionals to understand the financial situations of the organizations throughout
the financial years (Ittelson, 2009). The basis of preparation of the financial statements in the
Australian Finance Group are divided into five major factors, which involves the statement of
compliance, functional and presentation currency, basis of measurement, alterations in
disclosures and accounting policies and lastly through the utilization of judgments and
estimates (AFG, 2017).
Firstly, in the statement of compliance, a company’s financial report complies with the
International Accounting Standards (IFRS) and Australian Accounting Standards as issued by
the International Accounting Standards Board. The financial statement of a company
incorporates the consolidated financial statements. Secondly, the factor named functional and
presentation currency precisely identifies that these consolidated financial statements have
been presented in Australian Dollars. The third factor that constitutes the basis of
Page 3

measurement identifies the fact that the consolidated financial statements are formed on the
basis of the historical cost except in case of some of the material items, which primarily
comprises the payables and the receivables, which are related to the trailing commission and
are firstly measured at fair value followed by amortised cost. The fourth factor deals with the
changes taking place in accounting policies and disclosures. The accounting policies that are
implemented in the financial statements are mostly dependent on the previous year, except in
two cases, the first of which includes acceptance of revised and new accounting standards,
while in the second cases, the interpretations and accounting standards are issued but are not
effective till date. The last factor that explains the preparation of the financial statements
involves utilization of judgments and estimates. It actually identifies the preparation of the
financial statements in accordance with the AASBs, which compels the management to form
assumptions, estimates and judgments that would have a direct influence on the
implementation of accounting policies and amounts of expenses and income along with the
liabilities and assets (AFG, 2017).
The financial statement of Agricultural Development Bank Ltd is consolidated type. It
comprises all the factors that are required to be present in the financial statement. It consists
of total capital and liabilities, total assets, net interest income, total operating income,
operating profit before provision, operating profit, profit from regular activities, profit before
bonus and taxes and lastly the net profit or loss that is attained by the company. It also
provides a thorough understanding of the financial statement of the company, which makes it
easy for the decision-makers to access it at the time of urgency (Agricultural Development
Bank Limited, 2017). On the other hand, the financial statement as presented by the
Australian finance group, points out the necessities of the financial statements, which are
associated with the company. It precisely identifies the assets, liabilities, net assets and
equity, which misses out to represent the income that has been gained by the company and
creates a hurdle for the decision makers or the investors to evaluate it properly (AFG, 2017).
Page 4

Source: (Agricultural Development Bank Limited, 2017)
Page 5

Source: (AFG, 2017)
Comparison On The Basis Of the Accounting Policies in the Companies
The accounting policies that are implemented by Australian Finance Group Limited are
performed on the basis of consolidation. The financial statement of the company is managed
by the company and its subsidiaries. The control is imposed by the company in situations,
where the institution imposed power over the investee or at situations, in which the company
has the potential of utilizing its power to influence the returns (AFG 2017).
The accounting standards that are followed in the Agricultural Development Bank Ltd. are
entirely based on the Accounting Standards Board (ASB). It is actually an independent body
that has been established based on the requirements of Nepal Chartered Accountants Act of
1997. The objective that is oriented with ASB is this that it tends to serve the interest of the
public by evolving the accounting standards for the country of Nepal so that it can be
Page 6

successfully used in the preparation of the financial statements (Agricultural Development
Bank Limited 2017).
Page 7

References
AFG 2017, ‘Annual report’, Afgonline, pp. 1-78.
Agricultural Development Bank Limited 2017, ‘Annual report 2073’, Doc, pp. 1-106.
Barth, M.E., 2006, ‘Including estimates of the future in today's financial statements’,
Accounting Horizons, vol. 20, no. 3, pp. 271-285.
Bloomberg L.P., 2018 a, Company overview of agricultural development bank limited,
Bloomberg, viewed 26 September 2018,
<https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=59462892>
Bloomberg L.P., 2018, Company overview of Australian finance group limited, Bloomberg,
viewed 26 September 2018.
<https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=22815461>.
Ittelson, T.R., 2009, A step-by-step guide to understanding and creating financial reports,
Career Press, USA.
Page 8