Contemporary Accounting Theory Analysis: Mesoblast Limited Report

This report provides a comprehensive analysis of contemporary accounting theory, focusing on the application of conceptual frameworks and reporting practices within Mesoblast Limited, an Australian-based regenerative medicine company. The report is divided into two parts. Part A examines the history and development of the conceptual framework for financial reporting globally, addresses Australian accounting profession concerns, and reviews academic perspectives on the framework. It then explains how Mesoblast Limited applies the conceptual framework in its financial reporting. Part B compares and contrasts sustainability reporting guidelines, specifically the Global Reporting Initiative (GRI) and the International Integrated Reporting Framework (IIRC). It assesses the strengths and limitations of conventional accounting based on the conceptual framework in relation to sustainability and integrated reports. The report also discusses the usefulness and limitations of theories explaining the content of integrated and sustainability reports, includes a checklist of Mediclini International PLC's Integrated Report, and compares Mesoblast's reporting practices with the index and integrated reporting practices of a selected South African company. The report concludes with an overall assessment of accounting theory and its practical application.

Contemporary
Accounting Theory

Table of Contents
INTRODUCTION...........................................................................................................................1
Part A: .............................................................................................................................................1
a) History and development of conceptual framework for financial reporting at globally ........1
b) Australian accounting profession’s concerns regarding the Conceptual Framework ............2
c) Academics concerns about the quality of conceptual frame work..........................................3
d) Explanation of how the conceptual framework has been applied by the selected Australian
company......................................................................................................................................4
Part B...............................................................................................................................................5
a) Comparison and contrast the sustainability reporting guidelines Global reporting initiative
and international integrated reporting framework.......................................................................5
b)Strengths & limitations of the conventional accounting, based upon the Conceptual
Framework for contents of sustainability as well as integrated reports......................................6
c) Usefulness and Limitations of theories that explain the contents of integrated and
sustainability reports...................................................................................................................7
(d) Checklist of Mediclini International PLC's Integrated Report..............................................8
(e) Comparison of Australian company’s reporting practices with the index and the integrated
reporting practices in the selected South African company .......................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Accounting theory refers logical reasoning in the form of set of board principles which
provide a general framework of reference by which accounting calculation can be analysis or
evaluated. Accounting is the part of any business organisation. It is given by Prof. Hendriksen
who tells that accounting theory is most useful in every business organisation whether small,
large and medium size of industry (Alim, 2014). The main aim of accounting theory is to
maintain the records and transaction within organisation and increase the profit margin.
Additionally, it help to evaluates the accounting practices which help to guide and development
of new practices and procedures. The present report will emphasis on Mesoblast Limited that is
Australian based regenerative medicine enterprise.
It provides treatment for inflammatory ailments, cardiovascular diseases and back pain.
Mesoblast was founded in 2004 by Silviu ltescu. It has highly experienced management team
who focused on accounting theory in order to maintain the profitability position of company. The
current report will considered different questions such as history and development of conceptual
frame work of financial reporting, Australian accounting profession's concern, sustainability
reporting guidelines initiatives and international international integrated reporting frame work of
IIRC and the strength and weakness of conventional accounting.
Part A:
a) History and development of conceptual framework for financial reporting at globally
Accounting theory is important in every organisation which is used to maintain the
accounts properly and give accurate results in business organisation. The conceptual framework
is more effective for annual reporting periods that help to give information about number of
business activities. According to IASB (international accounting standard board) financial
reporting is the standard which states that how organisation must maintain and report their
accounts by defining the types of transaction and other events with financial impacts. The
conceptual framework assist business organisation to prepare financial statement in developing
accounting policies for transaction or events which is not covered by existing standards
(Chambers, 2014).
History and development of conceptual framework reporting
April 1989 April 1989 Framework for the preparation and presentation of
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financial statement which was approved by the IASC board
July 1989 Framework published
April 2001 Frame adopted by International Accounting Standard Board
September 2010 Conceptual Framework for Financial Reporting 2010 permitted by IASB
March 2018 Conceptual Framework for Financial Reporting 2018
Development of Financial Reporting
Financial reporting is helpful to meet with respective stakeholder needs. It provides
historical financial data which allow interpretation by stakeholders of their operating results. The
main purpose of financial reporting is to records the financial transaction and provide optimum
results for developing the financial data in order to increase the business activity globally. Such
as Mesoblast is multinational company who prepares financial statement and built a report I
order to get effective financial results.
The Conceptual Framework sets out the key concepts for financial reporting that suggests
or guide the board in developing IFRS standards. It help Mesoblast in order to provide useful
data for stake holders, investors, lenders and creditors (Davison, 2015).
b) Australian accounting profession’s concerns regarding the Conceptual Framework
A conceptual framework of accounting can be defined as normative theory of accounting
that help to maintain records properly. Within Australia and US, the conceptual framework is
defined as coherent system of interrelated objectives and fundamental which is expected to leads
towards consistent standards. In Mesoblast, it help to describe the nature, functions, benefits and
limits of financial accounting and reporting.
Accounting profession refers professional accounting activity that performs accounting
functions like as audits or financial statement analysis. It help to set up a business plan which is
used in organisation in order to set individual practices. Mesoblast is international company who
deals in medicine and health care issues is preparing accounting reports. The auditors of the
organisation perform various function within business enterprise such as to review the financial
reports, auditing, tax reports and net profits of the organisation. According to IASB Accounting
profession are also helpful to define the key issues such as legitimacy, perspective and exact
results that needs conceptual framework. It has been stated that Conceptual framework also
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assists industry in developing accounting policies when no IFRS standard applicable to a specific
transaction, and it helps Mesoblast's stakeholders to understand and interpret the accounting
standard. The IFRS standard foundation is not for profit corporation incorporated in State
Delaware that help to follow the accounting policies and maintaining the profitability (Falzon,
2016).
c) Academics concerns about the quality of conceptual frame work
Mesoblast Limited is a world leader in development of biologic products for regeneration
of medicine. It focused on conceptual accounting theory by preparing financial accounts and
maintaining the reports. The advantages and disadvantages of conceptual framework are
described as-
Advantages
 Accounting standard provides consistent and logical information which is
developed by applying the content of conceptual framework.
 Many countries adopts different accounting standards and conceptual framework
which leads to a greater consistency and comparability between international
financial reports.
 Additionally, conceptual framework provides the fundamental of accounting
system and standards that makes more accountable for decisions.
 Such as the manager of Mesoblast get information about conceptual framework
that help to make effective business decision by identifying the key issues.
 It also provides true and fair view within Mesoblast by applying the conceptual
framework.
 It also provides guidance to reporting entities in case of no specific standard
addresses for particular issue (Guthrie, 2014).
Disadvantages
 The conceptual framework are costly to develop so it may be difficult for
Mesoblast to develop this.
 There is need to have high skills and knowledge in order to adopt conceptual
framework.
 It may be difficult for organisation to tackle the difficult issues.
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 It focuses on economic performance such as it ignore the social and
environmental performance of a reporting entity.
 It represent a systematization of existing practice and does not provide ideal
methods of accounting.
 It act to give a mean of legitimising a profession under threat (Gynther, 2014).
d) Explanation of how the conceptual framework has been applied by the selected Australian
company
Mesoblast Limited is multinational Australian medicine and health care company that
follows conceptual framework and IASB which help to maintain the business records and
provide effective results. Its financial information are defined as-
i) Mesoblast prepares income statement and balance sheet as per conceptual framework
that provides financial information to the organisation. It is important for organisation is to apply
the conceptual framework which gives effective results by maintaining financial reports. The
major components of income statement are defined as revenue, expenditures, income tax etc. that
shows profit and loss situation of the company. On the other side the major component of
balance sheet is share capital, current liabilities and other liabilities, current assets, and cash
which is available within organisation. It help to state the total equity of the business enterprises
which help to define the total assets and liabilities.
ii) Mesoblast applied IFRS 15 Revenue from contract with customers on July1, 2018
by using retrospective approach. It is measured and recognised in accordance with
the five step model prescribed by standard. The five step model are defined as
contract with customer within scope of IFRS 15, the transaction price of contract
is measured based on value of consideration, different factors such as variable
consideration, significant financing components and non cash consideration help
to define the transaction price. Additionally, by following revenue recognition
principle it can revenue, assets and liabilities of the Mesoblast (Haynes, 2017) .
iii) The qualitative characteristics are describes as-
 It help to understand the financial reports and can be compare with past year's
information in order to generate profits.
 It is useful to verify and get information on time to time that make effective
results.
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 It is used to improve the business decision in case of fundamental qualitative
characteristics are formed.
 It focuses on financial reporting that help to maintain the transaction properly.
Part B
a) Comparison and contrast the sustainability reporting guidelines Global reporting initiative and
international integrated reporting framework
International integrated reporting council was formed in August 2010. its main object is
to create a globally accepted framework for a process that help to create the value for creation
over time period. Its first version was established in December 2013.
GRI refers Global Reporting initiative promotes the use of sustainability reporting as a
way of industry to become more sustainable. Moreover, it help to contribute for a sustainable
global economy. This is an international not for profit association who provides network base
structure. Its main object is to make sustainability reporting standard practice that help to make
report on economic, social, environmental and governance performance (Hribar, Kravet and
Wilson, 2014).
Sustainability reporting disclosers provides a wider view of company's performance than
financial disclosers. In case of using integrated reporting, it can help to reveal value creation
around the six capital like financial, intellectual, human, social, manufactured and natural
relationship. It is powered by unique collaboration among GRI and international integrated
reporting council (IIRC). Its aim is to clarify how GRI sustainability reporting standards and
international framework which is used collectively in order to provide insights in to value
creations (Ji, 2017).
Comparison
GRI International Integrated reporting council
(IIRC)
GRI provides integrated reporting in order to
use the GRI standards.
It provides Mesoblast with a broad perspective
on risk that can be remove.
GRI standards help to improve the corporate
reporting.
It mainly focuses on value creation for short,
medium and long term.
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GRI is a international non profit organisation
which is based on network structure.
It is globally based network structure which
focused on profits and value creation.
Corporate social responsibility as described as actions which is done by the organisation
for social welfare which is required by law. The main objects id to provide the maximum
satisfaction to the customers and society by providing better quality of products and services. It
help to maintain the customer loyalty by fulfilling their needs and wants. Such as Mesoblast is
multinational company who deal in medicine and health care issues (Kim and Zhang, 2016). It
analysis the market and get the diseases which people are facing in the world. After knowing the
diseases the research and development manager find the solution and get research to remove the
disease. The main object of this organisation is to provide better quality of medicine at
reasonable cost which help to attract the customers. It is extensive research which has been
conducted by organisations to assess the empirical association between corporate social
responsibility and corporate financial performance that help to provide correct information and
increase the goodwill of the organisation.
Mesoblast is using international integrated reporting framework in order to focus on
corporate social responsibility. Its main aim is to provide maximum satisfaction to customers and
create the value for organisation. It help to provide the sustainable report which is important for
organisation. Such as Mesoblast is preparing the financial statement by containing the financial
information that help to maintain the profitability within organisation.
b)Strengths & limitations of the conventional accounting, based upon the Conceptual Framework
for contents of sustainability as well as integrated reports
Conventional accounting is most powerful tool for business management which is used
for money reporting profit performance to investors and also used within internal business. It
help to optimize the performance of the organisation by reducing the costa and maximize the
profits. Mesoblast is medicine and health care company which is using conventional accounting
in order to overcome the cost and raising the profitability. The main aim of applying this
accounting is to control over cost and maintain the liquidity (Krahel and Titera, 2015).
Strength
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Flexibility and accountability: Mesoblast is using conventional accounting that is
flexible and accountable in order to improve the performance. This method is offers flexibility in
order to use resources that contains contains income and expenditures.
Ease to use: Conventional accounting is easy to find budget expert who help to maintain
the cost and increase the profit margin.
Decision making: Mesoblast can make effective business decision by using conventional
accounting. Such as it analysis the cost which is incurred and make efforts to control the cost.
Maximum satisfaction: Mesoblast is using conventional accounting in order to provide
maximum satisfaction to customers. Such as it dealing in medicine which help to provide
satisfaction to customer so it help to provide satisfaction to customers (Ruch and Taylor, 2015).
Weakness
 It may be costly for Mesoblast because it follows the traditional accounting.
 It is based on certain rules and regulation which can not be change so it may be
difficult for by organisation.
 It is time consuming convention so Mesoblast need to more time for following
the conventional accounting.
 It can not identify the accurate results because it contains number of transactions.
 There is a high possibility in conventional accounting that data could be lost by
accounting professionals. In this situation it will become difficult for them to
analyse actual position and performance of the company. As data is not recorded
in any software so it is also very difficult to get information back in case of loss
of data.
c) Usefulness and Limitations of theories that explain the contents of integrated and
sustainability reports
The following theories explain the contents of integrated as well as sustainability reports
1) INSTITUIONAL THEORY:
This theory explains the manner in which certain processes are established in accordance with
authoritative guidelines in order to enhance societal behaviours. It helps in clearly identifying the
manner in which the business such as Mesoblast respond to their institutional environments. One
of the biggest usefulness of this theory is that it enables investigation of the needs and
preferences of the public at large (Singh, 2015). This ensures that while development of reports
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stakeholders' needs are of the highest priority. Hence, such reports may mainly include CSR
activities or practices so as to establish transparency in a legal, customary, religious or any other
manner. A limitation of this theory is the occurrences of Isomorphism or Isporaxism may result
in convergence or divergence of interests which are potentially helpful in creating the
interpretation of such reports. Isomorphism can be defined as the process through which an
organisation such as Mesoblast may adopt existing practices, procedures, structures or systems,
thus, ensuring that their practices are identical to those followed among the other players of the
industry (Theoretical Perspective on Integrated Reporting, 2019). However, this may develop
unexpected coercive, normative as well as mimetic pressures in regards to the sustainable
practices carried out by business in order to create the integrated reports.
2) LEGITIMACY THEORY:
Legitimacy, in its literal sense, means how authentic a particular thing or matter is. In the context
of given scenario, institutionalization of normative values, for ensuring concrete behaviours,
helps in strengthening the existing social values system. This theory is useful in exhibiting the
acceptability as well as voluntary effort made by business entity such as Mesoblast to disclose
the activities in their reports. This theory is also helpful in assuring the operations carried out by
business in accordance with societal norms and limits. As per this theory, CSR disclosure is
given utmost priority. However, one of the biggest limitation of this theory is that it results in
overtly focusing on the Corporate Social Responsibility while formulating integrated reports.
This can result in deviation from voluntary guidelines that are in accordance with the society's
norms and limits (Watson, 2015).
(d) Checklist of Mediclini International PLC's Integrated Report
Components of Integrated Report:
Component Availability
Integrated Business Overview Yes
Performance and Future Outlook Yes
Operational Reviews Yes
Governance and Sustainability Yes
Abridged Financial Statements Yes
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Shareholder Information Yes
The South African Business, Mediclinic International PLC, has prepared an Integrated
annual report which includes the following components (Mediclinic Integrated Report, 2013):
1) Integrated Business Overview: This component covers the performance highlights,
organisational information as well as strategic and investment cases that are of critical
nature as well as utmost interest for the stakeholders of Mediclinic. Apart from this it
provides a comprehensive view of Board of Directors, visions and values of the business.
2) Performance and Future Outlook: Like every business, Mediclinic also aims to
undertake certain stance which will help in providing it the competitive advantages and
returns it seeks. Hence, this component includes chairman's report as well as other top-
management authorities along with their future plans of action.
3) Operational Reviews: This component describes the international operational areas
which are controlled by Mediclinic. This provides a detailed account of how, when and
what is being carried out in these countries as well as how well have they been able to
achieve their goals through such actions.
4) Governance and Sustainability: This element of integrated report consists of various
reports related to Clinical Services, Risk Management, Corporate Governance, Social and
Ethics Committee, Sustainable Development and Remuneration.
5) Abridged Financial Statements: Similar to the annual report of the business, the
integrated report's element of abridged financial statements help in depicting the auditing
and assurance part of the company. Hence, it includes Independent Auditor's Report and
consolidated final accounts.
6) Shareholder Information: This head includes the analysis of shareholders, their
personal reviews, administration as well as glossary (Wilkinson and Durden, 2015).
(e) Comparison of Australian company’s reporting practices with the index and the integrated
reporting practices in the selected South African company
On comparing the reporting practices of Australian based business, Mesoblast Limited
with that of South African based Business, Mediclinic International Plc, it can be seen that the
former does not follow the practice of Integrated Reporting of CSR Activities. On the other
hand, Mediclinic has been following a practice of formulating Integrated Annual Reporting in
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regards to sustainability as well as CSR Activities. As per the guidelines followed by the
Australian Companies, their annual reports contain a detailed account of all the activities
including CSR Plans undertaken with a current as well as financial perspective. Due to this, they
do not require a separate reporting of their annual actions. Hence, unlike the South African
Business, Australian business' Mesoblast's Annual Report is much more accurate. Therefore, one
can say that due to lack of inaccurate or incomplete communication of business' operations,
South African Businesses such as Mediclinic requires formulation of an integrated annual report,
in addition to their yearly final reports so as to present their stakeholders with information
regarding CSR Activities in an accurate as well as detailed manner.
CONCLUSION
From the above report it can be concluded that accounting theory is important for every
organisation that help to understand the accounts and preparing financial reports. Accounting
also help to get better decision with enterprise that make confident to run a business. The
different organisation adopt different accounting theory in order to get best results. This report
has covered number of topics such as history and development of conceptual framework for
financial reporting, Australian accounting profession concerns, benefits and limitations of
conceptual framework and framework which is applied by Australian company that help to
provide useful information. A part from this, the report has been discussed about comparison of
sustainability reporting and integrated reporting framework, strength and weakness of conceptual
accounting, application of theory and various components of integrated reports.
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REFERENCES
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Haynes, K., 2017. Accounting as gendering and gendered: A review of 25 years of critical
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Ji, X. D., 2017. Development of accounting and auditing systems in China. Routledge.
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evidence. Contemporary Accounting Research. 33(1). pp.412-441.
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Singh, J. P., 2015. Fair Value Accounting: A Practitioner's Perspective. IUP Journal of
Accounting Research & Audit Practices. 14(2).
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Online
Conceptual framework. 2019. [Online] Available through:
<https://www.iasplus.com/en/standards/other/framework>
Theoretical Perspective on Integrated Reporting. 2019. [Online]. Available Through:
<https://www.intechopen.com/books/accounting-from-a-cross-cultural-perspective/
theoretical-perspectives-on-sustainability-reporting-a-literature-review>
Mediclinic Integreated Report. 2013. [Online]. Available Through:
<http://annualreport2013.mediclinic.com/downloads/Mediclinic_IR_2013_WEB.pdf>

Appendix
Income statement of Mesoblast
Balance sheet of Mesoblast
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