Current Accounting Issues in Amcor Limited: A Theoretical Analysis

This report identifies and analyzes current accounting issues faced by Amcor Limited, including sustainability, corporate social responsibility, and key performance indicators. It explores the application of various accounting theories, such as the cost principle, matching principle, materiality theory, and stakeholder theory, as well as accounting models like the budget model and consolidation model, to address these issues effectively. The report emphasizes how these theories and models can assist Amcor Limited in improving its financial reporting, performance management, and overall stakeholder relationships. The paper also offers recommendations to Amcor Limited based on the application of these theories and models.

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Current Issues of Accounting in Amcor
Limited
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Executive Summary
Concepts of accounting theory are determined to be critical and need factors that must be used
while executing a business to manage data and records systematically. The study of accounting
theories and policies includes all types of practices such as accounting and historical practices.
Theories of accounting principles and standards are regarded as a major concept of the
breakdown of accounting theories while executing a business. Applying relevant accounting
theories helps in solving issues related to sustainability, corporate social responsibility, a key
performance indicator, and environmental performance and so on. Thus, the paper provides an
identification of accounting theories and models to overcome accounting issues. It also provides
an analysis of accounting theories and models related to accounting issues. It provided an
understanding of how the theories could be applied Amcor Limited in order to resolve the
accounting issues effectively.

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Table of Contents
Introduction.................................................................................................................................................4
Identify and analyze current theories and models in accounting..................................................................4
Theories...................................................................................................................................................5
Models.....................................................................................................................................................8
Apply theories and models in Amcor Limited...........................................................................................11
Discussions:...............................................................................................................................................14
Recommendations.................................................................................................................................18
Conclusion.................................................................................................................................................20
References.................................................................................................................................................21

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Introduction
The paper will provide an understanding of different accounting theories and models that would
be beneficial for the organization to deal with accounting issues effectively. Generally, the
accounting theories do not present the economic events that affect the business. The paper will
provide a clear understanding of the concepts of the accounting theories and how it could be
applied within the business organization. Moreover, the paper will discuss the accounting issues
of Amcor Limited in Australia. Amcor Limited is considered to be a global packaging company
that creates and manufacturer’s flexible packaging, closures, specialty cartons and rigid
containers and services for personal care, medical device, pharmaceuticals and beverages and
other such products. It has been listed on the Australian Securities Exchange (ASX).
Additionally, it also provides information regarding the concepts of financial accounting that
must be followed by the organization in Australia. Therefore, the paper will help in identifying
and analyzing relevant accounting theories and models.
Identify and analyze current theories and models in accounting
Accounting is an important part of a business within an organization. Detailed record-keeping
enables a business to furnish accurate financial reports to the internal revenue Service, lenders,
and shareholders, among others. Constant changes to the hiring and retaining employees, tax
system and the impact of technology are the challenges for the modern accounting industry,
especially in Australia (Stewart, Kent and Routledge, 2015). Thus, the accounting theories and
models are applied by Amcor Limitedin Australia. The accounting theories and models helps the
organization to explain the existing procedures and practices to get a better understanding and to
facilitate an appropriate set of logical principles.

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Theories
Cost Principle theory:-The theory of cost principle records all the assets on the books as
each asset is acquired. Assets could be real property or equipment. According to this theory,
transactions must be listed on the financial records as a historical cost, such as the real value of
cash at the period the asset was bought, rather than the current value of the market. It is defined
as one of the fundamental guidelines for accounting and bookkeeping and also known as the
concept of historical cost. Cost principle is more straight forward and much quicker to record the
assets at their real value than to constantly update financial reports to understand present market
value (Zyznarska-Dworczak, 2018). As this theory is easy and quick to verify the assets value,
auditors and accountants don’t require to spend more time in verifying financial records and also
make it inexpensive for the organization who hire them.
Matching principle theory:-This theory of an accounting holds a transaction as a unit
means it books all expenses related to a detailed revenue. Under the theory of matching
principle, the expenses are presented as the revenue generated at the same time such as a year or
month. In other word, the theory directs the organization to match the expenses and revenues at
the same time to the possibility of the highest extent, regardless of when subsequent events
happen. Such as, a sales commission might be paid in March for the products sold in February.
Therefore the expense in the theory accounts for the commission in February not in March when
it is paid. If the organization is using the theory of matching principle they must be consistent
with the monthly recording costs related to revenues. This theory exists only in the accrual
method of accounting. For example, if an organization has a salesperson who earns 2000 dollars
in commissions for work done in February, the expense for this should be recorded in the same

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month, even if the company does not pay the staff until the next month. Matching Principle
wants accountants to be always consistent and careful in their documentation.
Figure: Matching Principle of accounting
(Sources:Sunder, 2015)
Materiality theory:-The theory express that the standard of accounting could be ignored
if the net outcome of doing so will have a small enough effect on the books that no one
reviewing them would be missed. When the owners of an enterprise can get caught up in the
counting pending monetary transactions before they are recorded. The theory ensures an
enterprise only records monetary deals which are finished (Lee and Green, 2015). This stops an
owner from getting a wrong sense of security when factoring in pending contracts they might not
come to an end. The principle of materiality is mainly vital when determining whether a
transaction must be noted as a part of the final procedure, as eliminating some of the transactions
can considerably decrease the required time amount to problem financial statements. It is also

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beneficial to discuss with the auditors of an organization what comprise a material item, hence,
there will be no problem with these items when the reports of financial are audited.
Stakeholder theory:-It is a theory of business ethics and organization management that
states values and morals in managing a company. In addition, it also suggests that the purpose of
an enterprise is to make as much value as the potential for stakeholders. In order to be
sustainable and succeed, managers should keep the interests of suppliers, consumers, staffs,
communities, and shareholders going and aligned in the same direction. The innovation of
keeping these interests aligned is more vital than the easy strategy of trading off the stakeholder's
interest against each other. Therefore, by managing for stakeholders, executives would also make
value as possible for financiers and shareholders. Stakeholder theory explains the behavior of the
supermarkets to their stakeholders such as suppliers and customers. It provides an insight as to
how the organization operates in a rapidly changing business environment.

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Figure: Stakeholder Theory
(Sources:Created by author)
Models
Budget Model:-It is a finance plan of expected cash outflows and inflows that an
enterprise creates. A sound budget provides information to the managers based on effective
spending of the funds and funds at hand. Having a strict budget policy is crucial for any company
that needs to succeed. With this model, an enterprise may as well be shooting in the dark. It sets
the boundaries for any company. It also represents the maximum financial resources at their
disposal using which they should achieve all targets of business. With a budget policy, the
organization will always be aware of the cash on hand and save itself from running into debt.
Different types of budget models are static budget, zero-based budgeting, rolling budget, and
flexible budget. In addition, it uses a set of assumptions as well as historical data to forecast a
future state of a business. Budget is usually utilized in firms and it is essential to know where
The stakeholder Theory
view of the company
Staffs
Suppliers
Financiers
Communities
Trade unions
Political groups
Trade associations
Competitors
Consumers

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staffs are likely to meet them. Budget model is also utilized to assess special ventures (Hocke,
Meyer and Lorscheid, 2015). If an organization is seeing the price of a special order whether to
buy or make a manufactured good or even to expand operations, in many cases the management
accounting function would make a budget forecast to regulate if the proposed action is gainful.
Figure: Budget Model
(Sources:Henry, Murtuza and Weiss, 2015)
Consolidation model:-This model involves the financial results of many business units
supplement into a single model. Normally each enterprise unit is its own tab, with consolidation
tab that basically adds up the other business units. This model is typically utilized when a parent
entity owns more than 50% of the shares of another entity. This model can only be utilized when
the stockholder has real control of the subsidiary, which frequently, assumes the stockholder

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owns at least 50.1percent of the subsidiary shares. This method works by present the balance of
subsidiary in a joint statement along with the balance of main industry, therefore consolidated.
Under this method, a parent organization joints its two revenue with hundred percent of the
subsidiary revenue.
The major organization would present the ‘investment in subsidiary’ as an asset with the
subsidiary presenting the equivalent equity owned by the main organization as equity on its
personal accounts. At the level of consolidation, an elimination adjustment should be added so
that the statement of consolidation is not excessive by the equity held by the main company. The
adjustment of elimination is made with the determination of offsetting the intercompany
transaction so that the values are not counted double at the level of consolidation.
Figure: Consolidations model of accounting
(Sources:Ioppolo et al., 2018)

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Apply theories and models in Amcor Limited
In today's business context, Amcor Limited is facing issues related to accounting. The
auditing and accounting systems of the company are considered to be the control systems that
need maximum reliability along with minimum cost. The issues related to accounting puts a
negative impact on the financial conditions of the business to a great extent. Such types of
negative impact due to accounting not only hampers organizational activities but it also
decreases employee revenue. The organization is facing various issues based on accounting such
as sustainability, ethics, Key performance indicator (KPI), employee tax, environmental factors
and corporate social responsibilities (CSR) (Tucker and Schaltegger, 2016). These issues put a
great impact on performance management, interfirm relationships, management control systems,
and education management. Such types of issues put a direct impact on the financial statements
of the company. Amcor Limited has recognized the importance of addressing a wider group of
stakeholders, thus, reporting relating to corporate social responsibility (CSR), has become a
significant issue for the company. As a result, in order to deal with this issue, Amcor Limited in
Australia is applying accounting theories and models. Accounting theories comprise of certain
standards and rules that set limits, function, and nature of financial statements and accounting.
Therefore, the organizationis implementing accounting theories and models to overcome
accounting related issues. The accounting theories such as cost-principle theory, matching
principle theory, materiality theory and stakeholder theory could be applied within the
organization (Ratcliff et al., 2016). Moreover, not only theories but accounting models also help
in overcoming with accounting issues. The accounting models such as the budget model and
consolidation model would help the organization to manage accounting issues effectively.

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Amcor Limited must apply cost principle theory as it helps in identifying the historical
cost instead of reselling cost of an item. Additionally, by applying matching principle theory the
organization in Australia would be able to match each item of revenue with an item of expense.
When the organization would start applying matching, expense and revenue principles in
practice than they are executing their business under the accrual accounting method. The cash
principle theory could be applied within the organization with the help of two basic methods
such as accrual method and cash accounting method. It has been observed that the KPI of the
company is little stale that affects the strategies based on decision-making process. Thus, the
accrual method where profit is considered by matching the earned revenues with incurred
expenseswould be beneficial for Amcor Limited (Howieson, 2017). Cash accounting where
profit is measured by matching received revenue with paid expenses. Hence, applying this theory
would help thecompany to manage the accounting problems effectively. The KPI of the company
is considered to be outdated hence, applying stakeholder theory to analyze the environmental
performance of the business would be helpful. Implementation of this particular theory helps in
addressing the changing demands in an organizational environment. The organization requires
three measures to implement stakeholder theory such as government power, creditor power, and
shareholder power. Therefore, the items would create a separate disclosure of expense and
income of items (Cuozzo et al., 2017). As the company is in need to disclose any item separately
that were present outside the normal operations of an entity and are determined to be abnormal.
Thus, it becomes significant for the organization to apply materialistic theory to determine the
minimum relative size of an item before considering itself abnormal. For example, during the
pre-2000 period, Australian companies were required to disclose abnormal items separately in
their financial reports where the firms got a unique opportunity to apply materialistic theory.

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This clearly states that the organization is making use of this theory in order to overcome KPI
based accounting issues.
The model helps the organization to recognize non-controlling interests, liabilities and the
cost of assets. It also helps in identifying the carrying cost investor’s engagement with the
investee (Lemishovska, 2018). Accounting issues also affects the employees of the organization
that causes poor performance. Therefore, based on Australian Accounting standards the model
could be applied to manage performance of the organizational employees. The organization also
faces tax related issues due to accounting. Thus, an efficient use of the modelreduces the need for
disclosure as per Australian Accounting Standards that solves tax related issues. On the other
hand applying budget model also helps Amcor Limited in creating a budget for the organization.
The budget model would help in developing a time frame, variable costs, fixed costs, and income
effects. By applying a budget model the organization could evaluate the actual expenses and
income at the time of the budget period. It also helps in calculating the difference between the
actual expenses and income and budgeted amount.

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Discussions:
Applying the consolidation Issues such as taxation, employees, and environment, social and
corporate issues should be sorted out within the organization, to help in understanding and
fulfilling consolidation requirements such as a consolidated financial requirement. Amcor
Limited is facing problems related to Safety Environment and Sustainability that puts a negative
impact on creating innovative packaging. As a result the organization applies this model in
relation to Accounting Policies and changes in accounting errors and estimates. During the
annual period of the company, the model is applied by the organizations to disclose the essential
factors.
1. Taxation issues:
Discussion: the biggest issues related to taxation includes timing, ambiguous deductions and
market fluctuations, between daily operation of the company and finance department are related
to long term management issues, which becomes a big hat to worry about addition of heap of tax
connections at the starting of the year. A taxation issue basically comes when company needs to
make proper records of the books, utilize similar and effective taxation deduction methods etc.
Company needs to track all transactions related to revenue and expenses, purchases related bills
and proper access may be needed to sort out best solutions by scanning different books and
financial statement. In the financial statement of Amcor Limited, FY17 states that company was
in beneficial conditions in the situation of ambiguous deduction. But in the FY18 Amcor limited
financial statement states different story, company has deducted and expended much amount on
taxation, which creates confusion by the nature of deductions.
2. Employees Issues:

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Discussion: in the common place of work, some time company needs to take care of work, some
time due to internal conflicts, communication gaps, gossips, bullying, harassments,
discrimination and problem related to job satisfaction and low motivation, increase the number
of employee turnover and attritions. In the situation of Amcor Limited, company believes in
making proper engagement for their employee so that each and everyone can work in the flexible
working environment. Company believes in higher motivation and low employee turnover so
that performance issue can be sorted time to time. For this purpose, company needs to make
strong employee handbook, determine the real issues into pocket and resolve the queries of
employees and staffs on time. Applying this issues with better manner, within the organization
would help in measuring the economic performance of employee in the firm and get better
results. Therefore, the organization implement materiality theory to materialize expense or item,
hence the theory judges the material based on its nature, cost and examining whether the material
is a single item or combination of other items.
3. Environment Issues:
Discussion:
Environmental issues are related to internal and external environment such as market changes,
customer’s preferences, changes in company’s strategies and many more. Amcor Limited
basically believes in sustainability performance against total international n regional indices. In
the financial year of 2018, the environmental changes in the company might be include:
recognition in Fortune magazine, changes in world financial report due to improvement in
company’s product packaging, labeling in more aid in order to reach potential client and people
on urgent requirement. The company has got an ‘A-’ grade for Climate Change by CDP and
recognition for ‘best performance across program’ for Australia and New Zealand.

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In January 2018, Amcor pledged to develop all our packaging to be recyclable or reusable by
2025, significantly increase our use of recycled materials, and help drive consistently greater
recycling of packaging around the world. Much of our packaging is already designed to be
recyclable or reusable and the challenges that remain will be overcome through Amcor’s
leadership and innovation, in close collaboration with others. Amcor’s lifecycle assessment tool,
ASSET, helps customers identify packaging solutions that reduce their overall environmental
impact and meet sustainability goals. ASSET, which is certified by The Carbon Trust, calculates
the environmental footprints of packages across their full lifecycles, including the energy and
water used and greenhouse gas emissions produced during manufacture. ASSET also compares
the effects of any potential changes in product weights or materials.
4. Social Issues:
Discussions: ethics, sustainability, compliance and low dedication towards the work and goals in
business are related to social issues which creates overlooking related to strategies in order to
address such problem in market by boosting social impacts on time. The concept of social
cultural responsibility is totally based on company’s accountability towards their wide range of
stakeholders, company’s members, shareholders, boards of directors and employee. Management
plays a great role in the management of social and effectiveness of reducing social problems on
time. Amcor Limited should take care of such problems which are related to social
responsibilities and corporate holdings of duties. Amcor should get the solutions related to social
problems such as changes in governmental policies, customer’s demand and market policies and
figures. Working with colleagues, customers, suppliers, industry groups, investors and non-
governmental organization, Amcor identifies, assesses, prioritizes, and manages sustainability-
related opportunities using an enterprise risk management framework.

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5. Corporate issues:
Discussion: Corporate issues are related to company’s compliance, sustainability and
organizational behavior. Corporate and social issues are inter-related to each other. Amcor
limited has made many changes in their corporate sustainable policies in order to survive in the
market and management of sustainable development.
1. Supply chain management: Amcor works with sustainable and flexible supply chain
management and safety group. It helps the company to manage the supply of their product in
sustainable, responsible and ethical manner. Amcor’s core policies related to corporate issues are
management of code of conduct that includes principles of business integrity, labor standards,
and environment and related to occupational health.
2. Safety: Amcor is an obligation and their most important commitment is safely for everyone at
the end of each day. Company continues to focus on: 1. eliminating serious injuries by managing
critical risk areas 2. Determination of integrity and compliance on which operating sites may
require specific attention to further improve safety 3. Strengthening processes and knowledge
sharing about fire prevention, and 4. Adopting best practices across all business groups to ensure
a safe and healthy workplace.
Sustainable compliance and performance: Amcor’s lost-time injury frequency rate (LTIFR) is
measured by calculating the number of injuries resulting in at least one full work day lost per
million hours worked. In 2017/18, the LTIFR was 1.0, corresponding to 82 cases across our
global business. Amcor’s recordable-case frequency rate (RCFR) is measured by calculating the
number of medical-treatment cases and lost-time injuries per million hours worked. In 2017/18,
the RCFR was 2.6, corresponding to 207 injuries across our global business.

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Recommendations
The accounting principles and accounting policies of Australia state that all the monetary
terms data and accounting information must be consistent, comparable, reliable and relevant with
the accounting rules. In order to deal with accounting issues, it is highly recommended to Amcor
Limited that it must make use of an accounting framework that gives clear guidance on how to
follow accounting concepts and principles while preparing the financial statements. The
organization in Australia must make efficient use of accounting discipline while executing a
business for recording the needed data. It has been observed that the company is facing
accounting to issues; hence it is significant for the organization to make compliance while
preparing general accepting financial statements. This could be done by complying with
assumptions such as CSR, KPI, environmental performance and sustainability. It would help the
organization to prepare a financial statement on annual basis.
In order to overcome the accounting issues, the organization must create an account of a
provision in its business functions. Thus, the organization must take into account that accounting
theory should be evolved consistently for preparing financial statements and avoid the
occurrence of any issues related to accounting. It is strongly recommended that the organization
must create a direct nexus with companies such as international accounting standard board. As a
result, it would help the firm to make relevant changes in the accounting theories according to
the required changes in the business within ramification of the economy. Along with the
accounting policies, the firm should follow the rules and regulations of Generally Accepted
Accounting Principles (GAAP). Such rules and regulations, as well as other GAAP policies,
would help the organization to manage financial statement systematically and overcome the
issues such as, CSR, KPI, environmental, tax and employees. Therefore, the company must
increase their reporting guidelines based on international accounting standards. Following this

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strategy would help the company to manage their accounting issues effectively. In order to deal
with such taxation and environmental issues, is highly recommended to Amcor Limited that it
must make use of proper compliance and sustainable developed policies that gives clear
guidance on how the above mentioned concepts and principles & issues work, while preparing
the financial statements. The organization in Australia must make efficient use of accounting
discipline, taxation issues and corporate sustainable compliance, while executing a business for
recording the needed data.

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Conclusion
In this paper, various accounting theories and models are discussed that helps in
overcoming Australian accounting issues within the organization. It provides a critical evaluation
of the accounting theories and models to deal with accounting issues. It has been observed that
applying different accounting theories helps the organization to manage accounting related issues
and prepare appropriate financial statements effectively. It has provided a deep understanding of
basic accounting theories, models, standards and concepts. It can be seen that the organizations
making efficient use of accounting theories to deal with certain situations. Therefore, the paper
provides an analysis of accounting theories and models that would be beneficial for the
organization. This reading give the knowledge about managerial, corporate, social and taxation
issues occurred in general companies and how would be sorted in the case of urgency with the
example of Amcor Limited. Amcor Limited basically follow sustainable, compliance and safety
policies to tackle such issues specially in case of corporate and social risk management.

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