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.