Analysis of Financial Reporting: Mayne Pharma's Contemporary Issues

This report provides a comprehensive analysis of the general purpose financial reporting of Mayne Pharma Limited. It examines the company's adherence to the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS), focusing on measurement and recognition requirements, including the use of historical cost and fair value. The report also assesses Mayne Pharma's compliance with fundamental and enhancing qualitative characteristics of financial reporting, such as relevance, faithful representation, comparability, and understandability. Furthermore, it analyzes the use of general-purpose financial reports in providing information about the company's financial position, performance, and cash flows, referencing specific statements from Mayne Pharma's 2018 Annual Report. The report concludes by highlighting the knowledge required to analyze these reports and emphasizes Mayne Pharma's compliance with the relevant financial reporting standards and principles, including the Corporations Act 2001 and pronouncements from AASB and IASB.

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

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Executive Summary
This report discusses about different aspects of the general purpose financial reporting of
Mayne Pharma Limited (Mayne Pharma). This report sheds light on the measurement as
well as recognition requirements. In addition, it discusses about both the fundamental as well
as enhancing qualitative characteristics of financial reporting. Lastly, the requirements and
objectives of general purpose financial reporting is also considered.

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Table of Contents
Introduction................................................................................................................................3
Measurement Requirement........................................................................................................3
Fundamental Qualitative Characteristics...................................................................................5
Enhancing Qualitative Characteristics.......................................................................................6
Use of General Purpose Financial Reports................................................................................8
Knowledge Required for Analysing the General Purpose Financial Reports..........................11
Requirements of General Purpose Financial Reporting...........................................................11
Conclusion................................................................................................................................11
References................................................................................................................................13

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Introduction
Business organizations develop the General Purpose Financial Reporting with the aim
to provide their key stakeholders with the financial information of their businesses to aid in
the decision-making process. At the time of preparing these general purpose financial reports,
the obligation on the companies is to comply with the required financial reporting standards
and principles for avoiding different financial reporting issues. In Australia, it is required for
the ASX listed companies to comply with the financial reporting standards of the Australian
Accounting Standard Board (AASB) for the preparation and presentation of the general
purpose financial reports. At the same time, it is also needed for these companies to comply
with the standards of the Conceptual Framework of AASB and the International Financial
Reporting Standards (IFRS). This report aims at the analysis of different aspects of general
purpose financial reporting of Mayne Pharma.
Measurement Requirement
The AASB puts the obligation on the ASX listed companies to comply with the
measurement as well as recognition requirements of Conceptual Framework in their financial
reporting. According to the conceptual framework of AASB, the companies are needed to
adopt between the provided measurement bases; they are Historical cost and Current Value.
Two measurement bases under current value are Fair value and Value-in-use (aasb.gov.au,
2019).
In addition, it is also obligation on the companies to comply with the recognition
criteria provided by AASB Conceptual Framework for the recognition of assets, liabilities,
equity, income and expenses. Two specific requirements need to be considered for the
recognition of assets, liabilities and others. First, there is probability that the future economic
benefit associated with the financial item will flow to or from the entity. Second, the item has

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a cost or value and it can be measured on reliable basis (aasb.gov.au, 2019). Now, it needs to
ascertain whether Mayne Pharma has complied with these measurement and recognition
criteria or not.
The 2018 Annual Report of Mayne Pharma shows the use of both historical cost and
fair value by the company (maynepharma.com, 2019). Some examples from 2018 Annual
Report is provided below:

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(Source: maynepharma.com, 2019)
It can be seen from the above information that the company has used both the fair
value and historical cost process for the measurement as well as recognition of their business
assets based on the nature and composition of those assets (maynepharma.com, 2019).
(Source: maynepharma.com, 2019)
The above information indicates towards the fact that Mayne Pharma has used
amortized cost basis for the measurement as well as recognition of their business liabilities.

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In this context, it needs to be mentioned that amortized cost is the historical cost process
(maynepharma.com, 2019). Thus, the above discussion indicates that Mayne Pharma has
complied with the measurement as well as recognition requirement of AASB Conceptual
Framework for the purpose of general purpose financial reporting.
Fundamental Qualitative Characteristics
As per the AASB conceptual framework, there are two fundamental qualitative
characteristics of financial reporting; they are Relevance and Faithful Representation.
Relevance – Relevance financial information has the capability of making a difference in the
decision-making process of the users (Barth, 2013).
Faithful Representation – In order to become useful, financial information must not only be
relevant, they must be faithfully represented (Adrian-Cosmin, 2015).
Application of these fundamental qualitative characteristics is important for the
entities and there is no exception of this for Mayne Pharma. There are three steps in the
appropriate application of these characteristics. First, the company needs to identify an
economic phenomena crucial for the decision-making process of the users such as non-
current assets of Mayne Pharma. Second, it is needed to identify the type of information
related to the non-current assets that is most relevant in case they are available and faithfully
presented such as the values, measurement process, recognition criteria, depreciation and
impairment (maynepharma.com, 2019). Third, it is needed to determine whether this
information is available and can be faithfully represented. Mayne Pharma has recorded their
non-current assets in their Consolidated Statement of Financial Position. In addition, the
company has disclosed all the relevant information about these assets in Note. 7, 13 and 14
within the Notes to the Consolidated Financial Statements. Like these non-current assets, the

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company has disclosed all the relevant information about their economic phenomena of their
financial statements (maynepharma.com, 2019).
Enhancing Qualitative Characteristics
Like fundamental qualitative characteristics, there are four enhancing qualitative
characteristics; they are Comparability, verifiability, Timeliness and Understandability. It
needs to be mentioned that these enhancing qualitative characteristics cannot make financial
information useful in case they are not relevant and faithfully represented.
Comparability – As per this characteristic, financial information is more useful to the users
when they can be compared to the similar information of the other entity or same entity’s
different timeline (Palea, 2013). In the 2018 Annual Report, Mayne Pharma has disclosed
information of the previous year so that the users can compare them to other entities or
previous year (maynepharma.com, 2019).
Verifiability – Verifiability assists the users in assuring that the financial information
faithfully represents the economic phenomena it significances to represent (Wang, 2014). It is
not possible for Mayne Pharma to provide direct verification of certain financial information.
Thus, to maintain verifiability, Mayne Pharma has disclosed all underlying assumptions for
their general purpose financial reporting in the Notes to the Consolidated Financial
Statements (maynepharma.com, 2019).
Timeliness – This characteristic implies having financial information available to the
decision-makers in time for influencing the decision-making process (Kim, Kraft and Ryan,
2013). Hence, older information is less relevant for the users. The 2018 Annual Report of
Mayne Pharma includes the current information for 2018 and 2017. In addition, Mayne
Pharma publishes their financial reports in timely manner for assisting the users in decision-
making (maynepharma.com, 2019).

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Understandability – This characteristic classifies, characterise and present the financial
information in clear and concise manner for making it understandable (Carraher and Van
Auken, 2013). Mayne Pharma has ensured the exclusion of complex financial information
from the financial statements to make them understandable to the users of the financial
statements (maynepharma.com, 2019).
Use of General Purpose Financial Reports
There are three objectives of the general purpose financial reporting; these are to
provide information about the financial position of the entities, financial performance of the
entities and cash flows of the entities useful in the decision-making process (Lawrence,
2013).

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(Source: maynepharma.com, 2019)

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(Source: maynepharma.com, 2019)

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(Source: maynepharma.com, 2019)
It can be seen from the above that Mayne Pharma has published the Consolidated
statement of profit or loss and other comprehensive income, Consolidated statement of
financial position and Consolidated statement of cash flows that provides the users with the
necessary financial information for decision-making. The first statement provided
information on the company’s financial performance, the second statement provides
information on the entity’s financial position and the last statement provides information on
the cash flows of the business (maynepharma.com, 2019).