Advanced Financial Accounting Report: ARB Corporation, 2018 Analysis

This report provides a detailed analysis of ARB Corporation's financial statements for the year 2018, focusing on the application of advanced financial accounting principles. The report begins with an introduction that outlines the scope and objectives of the analysis, followed by a discussion of the accounting concepts used by the company, including revenue recognition, depreciation, lease policy, impairment of non-financial assets, and inventory policy, all in accordance with Australian Accounting Standards. The report then delves into the conceptual framework, examining how ARB Corporation adheres to it in presenting its financial performance and discussing the measurement challenges that arise in accounting. Furthermore, the report explores the fundamental qualitative characteristics of financial statements, such as relevance and faithful representation, and how these characteristics are reflected in ARB Corporation's annual report. The report concludes by summarizing the key findings and emphasizing the importance of sound accounting practices in financial reporting. The analysis is supported by references to relevant accounting standards and academic literature.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Accounting Concepts.............................................................................................................2
Conceptual Framework..........................................................................................................4
Fundamental Qualitative Characteristics...............................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

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Introduction
The analysis for the ARB Corporation was done for the year 2018 by taking the firm’s
recent annual report for the year. Accounting concepts used by the company and the
measurement approach applied for the various accounting perspective of the company were
some of the key facts that were analysed. It is important that the qualitative characteristics
and features applied by the management of the company in the management and recording of
the assets of the company be well explained and the same were examined with the help of the
financial footnotes given in the annual report of the company. The annual report for the
company has been in well compliance with the accounting principles as per the Australian
Accounting Standard Boards (Henderson et al., 2015). The conceptual framework of a
business deals with the reporting framework which is generally followed by companies for
presenting the financial performance of the business were discussed and analyzed. Key
features of having a conceptual framework and the benefit shareholders and other financial
users can get from the same were some of the key points taken into consideration (Newberry
2015).
Discussion
Accounting Concepts
The accounting concepts used by the company has been in well accordance with the
Australian Accounting Standards whereby the company has applied the same for accounting
of various assets and liabilities (View.publitas.com 2018).
 Revenue Recognition: The revenue recognition policy of the company is such that it
allows recognition of revenue when the ownership of the goods has been transferred
and the costs incurred for the goods can be reliably measured. The revenue

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recognition policy of the company has been in well accordance with the AASB 15
which has been applied to the company accounting policies (Islam et al., 2018).
 Depreciation: Depreciation and amortisation of the fixed assets of the company has
been done when the company reviews that there is a significant fall in the production
capacity of the plant. Depreciation is charged over the fixed assets of the company
and the assets of the company are depreciated according to the estimated useful life.
The accounting policy used by the company in contrast to the property plant and
equipment and depreciation of the same were well compatible with the AASB 116.
 Lease Policy: Operating or Finance lease are the two main classification in which the
company classifies there leasing activities before the inception of leasing of assets and
the same has been done for reflecting the relevant economic substance and risk and
reward benefit reward associated with each party. Operating leases undertaken by the
company are straight away charged as an expenses on a straight line basis. The
accounting policy used by the company in contrast to the leasing of assets were well
compatible with the AASB 16 (Joubert, Garvie and Parle 2017).
 Impairment of Non- Financial Assets: Assets with indefinite life are tested by the
management of the company in accordance with AASB 136 for the purpose of
impairment and not amortised. Assets that are subject to annual depreciation or
amortisation are reviewed for the purpose of impairment. Events and circumstance in
relation to the specific assets should clearly indicate the difference between the
carting value and the fair value determined for the purpose of impairment.
 Inventory Policy: The inventory policy of the company were prepared in accordance
with the AASB 108, where inventories are measured at a lower of cost or net
releasable value. Raw materials for the company is recorded on a FIFO basis and the

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finished goods are accounted after taking the cost of direct materials and overhead
expenses associated with the same.
Conceptual Framework
The conceptual framework of a business deals with the reporting framework which is
generally followed by companies for presenting the financial performance of the business.
The conceptual framework effectively allows a business to adopt accounting policies and
practices which are consistently followed across the world. The conceptual framework helps
businesses to appropriately present the financial information of the business in an appropriate
manner (Ifrs.org. 2019). The concept framework further requires accounting professionals to
adhere to accounting standards and appropriate measurement criteria for the purpose of
appropriately presenting the financial information of the business (Richardson et al. 2015).
The conceptual framework is used by most of the companies for preparing the financial
statements of a business and appropriately measure different items of the business
appropriately.
The company which is considered is ARB ltd for the analysis whether the financial
statements which is prepared by the management of ARB ltd adhere to the conceptual
framework or not. The financial statement which is prepared by the management of ARB ltd
is appropriately presented following all regulations of the accounting. The notes to account
section of the annual report shows that the business appropriately discloses relevant
accounting policies which is followed by the business along with important measurement and
recognition policies which are followed by the business. The measurement of relevant items
in terms of financial figures is not an easy process and requires proper knowledge and
judgment of the accounting professionals. The measurement of different items in the annual
report is considered so that the management and even the users of the financial statements
can effectively take decisions regarding the business (Kieso, Weygandt and Warfield 2016).

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In the case of certain items which are shown in the annual report of the business, the
management of the company has disclosed certain measurement criteria which is followed by
the business. The main issue which arises in measuring different material items in the
financial statement is that many measurements requires judgement and estimation on the part
of the accounting professional which may not be accurate. In addition to this, there is may be
an alternative technique available to the business for measuring the item (Hasan and Rahman
2019). The management of the company focuses on different aspects of measurement of
financial information which are stated under the accounting standards and on the basis of the
same the management reports the information in the annual report of the business. An
instance can be provided of treatment of depreciation of assets of the business (Magnan and
Parbonetti 2018). The management the option of using straight line method as well as
diminishing value method for measuring the depreciation charge on the asset. As per the
annual report of ARB ltd, the management of the company follows straight line method of
depreciation for charging the depreciation of the business.
Another instances which can affect the measurement principle of a business is the
charge for impairment on the asset which depends on the judgment of the management of the
company. In addition to this, the application of Cash generating units for ascertaining the
impairment charge on an asset is a difficult process and therefore qualifies as one of the
issues which is faced by accounting professionals in measuring items in the financial
statements of the business. In the case of ARB ltd, the management of the company
demonstrates impairment charges on assets in the notes to accounts and reveals all assets
which are subjected to impairment charges. Therefore, after assessing the examples, it can be
clearly stated that there lie certain difficulties in measuring certain items in the financial
reports considering an appropriate conceptual framework. The notes to account section are

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only presented for appropriately presenting the treatments which is shown by the
management of the company in the financial statements of the business.
Fundamental Qualitative Characteristics
The fundamental qualitative characteristics of the business refers to the characteristics
which needs to be present in the financial statements of the business. As per the conceptual
framework, the financial statements should contain fundamental financial characteristics so
that appropriate quality of reporting for the business can be maintained. The fundamental
qualitative characteristics of the financial statements are provided below in details:
Relevance: The financial statements which is prepared by the management of the company
should be relevant which means that the information which is included in the financial
statements should assist the users of the financial statements to take important decisions. The
relevance of the financial information reveals how material is the information is for the users.
Am example which can be suggested for a material item is net profits of the business, net
cash available to the business. Such items indicate important aspects regarding the
performance of the business during the period (Ding, Hellmann and De Mello 2017). An
analysis of the financial statements of ARB ltd reveals that the management of the company
has appropriately presented profits and cash flows of the business effectively. The business
has provided appropriate disclosures regarding the same in the notes to account section of the
annual report of the business (Morioka and de Carvalho 2016). The annual report of the
business reveals that the management of the company has provided appropriate disclosures
regarding most of materials items of the business.
Faithfully Representation: The financial statement of the business which is prepared by
business should display appropriate financial information so that the users of the business can
take important decisions relating to investments. The information which is presented in the

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financial statements need to be faithfully represented so that a level of accuracy is maintained
in the reporting framework of the business (Azar, Zakaria and Sulaiman 2019). The
information which is shown in the financial statements are appropriately presented in the
annual reports as the auditor of ARB ltd has given an opinion that the financial statements are
showing true and fair view. This also means that the management of the company has
followed all relevant accounting standards while preparing the financial statements of the
business.
Conclusion
The financial statement of the business prepared by the company showed appropriate
financial information such that the users of the business can take important decisions relating
to investments. The conceptual framework of a business deals with the reporting framework
which is generally followed by companies for presenting the financial performance of the
business were discussed and analyzed. Accounting concepts used by the company and the
measurement approach applied for the various accounting perspective of the company were
some of the key facts that were analysed. On an overall basis the company has followed all
the necessary accounting concepts and disclosed key financial information in the financial
footnotes of the company thus helping the financial users of the company asses and compare
the performance of the company taken for the purpose of investment.

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References
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Relevance or Value-Relevance?. Asian Journal of Accounting Perspectives, 12(1), pp.1-21.
Ding, Y., Hellmann, A. and De Mello, L., 2017. Factors driving memory fallibility: A
conceptual framework for accounting and finance studies. Journal of Behavioral and
Experimental Finance, 14, pp.14-22.
Hasan, M.T. and Rahman, A.A., 2019. Conceptual Framework for IFRS Adoption, Audit
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accounting. Pearson Higher Education AU.
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Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The
Journal of New Business Ideas & Trends, 15(2), pp.1-11.
Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2016. Intermediate Accounting, Binder
Ready Version. John Wiley & Sons.

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Magnan, M. and Parbonetti, A., 2018. Fair value accounting: a standard-setting perspective.
In The Routledge Companion to Fair Value in Accounting (pp. 59-73). Routledg
Morioka, S.N. and de Carvalho, M.M., 2016. A systematic literature review towards a
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View.publitas.com. (2018). ARB Corporation. [online] Available at:
https://view.publitas.com/arb-4x4-accessories-1/2018-arb-annual-report/page/20-21
[Accessed 19 May 2019].