Analysis of Accounting Concepts and Framework for Seven West Media

This report provides a comprehensive analysis of advanced financial accounting, focusing on Seven West Media Ltd. as a case study. It begins with an introduction to financial accounting and its importance, followed by a detailed examination of various accounting concepts such as the accrual concept, conservatism, materiality, going concern, and the economic entity concept, all illustrated with examples from Seven West Media's annual report. The report then delves into the conceptual framework, including IFRS standards and measurement issues like reporting on financial forecasts and compliance with accounting principles. Furthermore, it explores fundamental qualitative characteristics, particularly relevance and representational faithfulness, and their significance in financial reporting. The analysis aims to provide insights into how these concepts and frameworks are applied in practice and their impact on stakeholders' decision-making processes. The report concludes by summarizing the key findings and emphasizing the importance of accurate and transparent financial reporting for attracting investors and ensuring business sustainability.

Advanced Financial
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of accounting concepts.........................................................................................1
2. Conceptual framework and measurement of issue..................................................................3
3. Fundamental qualitative characteristics such as relevance and representational faithfulness. 4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Advance financial accounting is a process of analysing transactions and then recording
them in to final accounts of the company in order to provide detailed information of
organisation's actual performance to internal as well as external stakeholders. With the help of it
business entities attract large number of investors and customers by showing that enterprise is
performing well in the market (Abdel-Maksoud, Cheffi and Ghoudi, 2016). The organisation
which is selected for this report is Seven West Media Ltd. which is listed upon Australian Stock
Exchange. It is Australia's largest diversified media business founded in year 1992. Its
headquarter is in Perth, Western Australia. Various topics are covered under this report such as
identification and description of accounting concepts used by company, issues of measurement
etc. Along with this, understanding of relevancy and faithfulness of financial statement covering
qualitative characteristics are also covered under this assignment.
MAIN BODY
1. Description of accounting concepts
There are various types of accounting concepts which are required to be followed by
business entities in order to formulate financial statements in appropriate manner. With the help
of it organisations can show actual performance of business to the stakeholders. Seven West
Media Limited is also comply with all of them while creating financial statements in order to
form them in appropriate manner. Some of the accounting concepts are described below:
Accrual concept: It is mainly used by accounting professionals to recognise expenses
and revenues generated by the company in a specific time period. It makes sure that all of them
are analysed for the accurate time when they are faced or generated. If business entities are not
able to comply with it then it is not possible for them to depict actual and transparent
performance of the company. This concept is considered as the key part of closing process which
is used to create final accounts and without it financial statements are considered as less accurate.
From the annual report of Seven West Media Ltd. it has been observed that it is also using this
concept in order to record different types of transactions in final accounts of the company
(Accrual concept, 2019). The elements are revenues, expenses, profits on sale of assets, taxation
etc. This concept guides accounting professionals of Seven West Media Ltd. to identify the
period in which incomes or losses have taken place and then they record them in the books of
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accounting. The annual report shows that the accrued interest of the company was recorded in
the trade payables and accrual head.
Conservatism: It is used by accountants of business entities in order to anticipate future
losses, liabilities and expenses rather than incomes, assets and profits. With the help of this
concept accounting professional undervalue the income and assets in order to ignore losses in
future. It provide guidance while recording cases of estimation and uncertainty in the books of
accounting. From the annual report of Seven West Media Ltd. It has been identified that
accountants of the company are also using this concept in order to maintain position of the
company and ignore losses in future. Impairment of assets is a type of future loss because if it is
used in future then it will increase costs in future. It is recorded in the statement of profit and loss
in order to reduce possible losses in future (Conservatism principle, 2019).
Materiality: According to this principle or concept an accounting standard could be
ignored by business entities if impact of taking this step is very low on financial statements of
the company which will not mislead the analyser or observer of it. According to this concept, if
organisation has made a transaction during an accounting year and may affect decisions making
of investor then it should be recorded according to accounting standards imposed by legal
authorities. It is also followed by Seven West Media Ltd. in order to record important
information in financial statements and provide a transparent view of them to stakeholders. From
the annual report of organisation it has been analysed that it is complying with this concept
appropriately because if any transaction which may affect EBIT are recorded in the books in
order to meet requirements of it (Annual report of Seven West Media Ltd., 2018).
Going concern: This concept states that an organisation will continue its business
operations in future and will not liquidate or discontinue its operational activities. It is vital for
all the companies to follow it in order to show that business will be continued in future. Without
complying with this concept it is not possible for company to pay in advance and keep accrued
expenses. From the annual report of Seven West Media Ltd. it has been analysed that accounting
professional are complying with this concept to show future expenses such as depreciation
according to the life of asset (Beatty and Liao, 2014). It shows that organisation will continue it
operatio0nal activities in future.
Economic entity concept: This concept states that business and owner both are different
and have separate entity. Personal incomes and expenses should not be recoded in the books of
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business. If such types of transactions are added to the final accounts then it can leave negative
impact upon shareholders' decisions making if they identify the mistake made by accountant. For
all the organisations it is very important to comply with it as it helps to analyse actual position of
organisation (Cao, Chychyla and Stewart, 2015). Annual report of Seven West Media Ltd. shows
that this concept is followed by the company while formulating final accounts as there are not
personal transactions of owner in final accounts.
All the above described concepts are complied by Seven West Media Ltd. in order to
represent actual performance of the company in front of stakeholders. It allows investors and
other external parties to gather detailed information which is required by them to form strategic
decisions.
2. Conceptual framework and measurement of issue
Conceptual framework: It can be defined as analytical tool which several variations and
contexts. It could be applied by companies at different categories of work where direction is
required by stakeholders in order to formulate strategic decisions. For all the companies such as
Seven West Media Ltd. it is very important to formulate final accounts according to guidelines of
AASB and IFRS. It helps to attract foreign investment by showing actual performance of
company to stakeholders. Following are the conceptual frameworks which are required to be
focused by Seven West Media Ltd.:
IFRS 1: This IFRS is related to first time adoption of international financial reporting
standards in which business entities are directed to formulate their final accounts according to the
international standards.
IFRS 7: According to this standard it is very important for business entities to disclose
all the relevant information in final accounts in order to represent faithfulness in financial
statements.
IFRS 10: This standard states that business entities should formulate their financial
statements in consolidated format in order to show actual status of business to stakeholders who
are going to invest their monetary resources in the company (Hoyle, Schaefer and Doupnik,
2015).
IFRS 13: According to this standard, it is very important for organisations to measure
fair value of the assets and then record it in the financial statements in order to provide
appropriate information to the external parties.
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There are various types of measurement related issues which are faced by organisations
such as Seven West Media Ltd. All of them are as follows:
Reporting on financial forecasts and projections: Most of the business entities have to
deal with this issue in which information is recorded on the basis of forecasts and projections. It
is a type of measurement issue because due to this company will not be able to analyse actual
value of asset. This challenge is also faced by accounting professionals of Seven West Media
Ltd. as some of the elements such as other assets are recorded on forecasted value in the balance
sheet by deducting depreciation from it. In order to deal with this issue organisation is required
to comply with accounting standards such as IFRS 13 which is mainly related with measurement
of fair value of assets of the organisation (Kaplan and Atkinson2015).
Compilation with accounting principles: Business entities also face issues related to
compilation of accounting principles while recording information in final accounts of the
company. This may take place when accounting principles suddenly gets modified and
accountants are not aware of it. In this situation problem regarding measuring a transaction may
take place and affect accuracy of final accounts and interest of external parties within the
company. For example, if accounting professionals who are working in Seven West Media Ltd.
are not aware of some accounting principles due to lack in knowledge then organisation faces
this type of challenge in which all the transactions are not measured properly. In order to resolve
this issue top management can focus on IFRS 1 as it guides through out the way of formulation
of final accounts (Mügge and Stellinga, 2015).
Both the above described issues are faced by Seven West Media Ltd. while measuring
transactions from final accounts. In order to ignore all such types of problems accountants are
required to comply with conceptual framework's requirements.
3. Fundamental qualitative characteristics such as relevance and representational faithfulness
For all the business entities it is very important to add characteristics such as relevance
and representational faithfulness in the information which is recorded in the final accounts of the
company. With the help of it stakeholders will be able to analyse actual performance of the
company and form strategic decisions regarding different steps such as making investment,
providing credit, supplying goods and buying products which are taken by them (Ratiu, 2015).
Both the characteristics are described below:
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Relevance: For all the business entities it is very important to add relevant data in the
final accounts so that actual status and position of the business can be determined. With the help
of it strategies for future are formulated by managers for betterment of business so that growth
can be acquired. If final accounts are not having this feature then it can create various issues for
business such as decreased sales, bad market image, reduced interest of investors in the company
etc. From the annual report of Seven West Media Ltd. It has been assessed that the company is
having this feature in which all the relevant information is recorded by accounting professionals
in financial statements (Maynard, 2017). With the help of it organisation attract large number of
investors and clients for the purpose of increasing profitability, liquidity etc. In order to fulfil
economic requirements of external parties, it is essential for enterprise to provide them such type
of data which is required by them. It is an important characteristic which must be focused by
accountants in order to attain business objectives such as profit and sales maximisation.
Representational faithfulness: For companies such as Seven West Media Ltd. it is very
important to represent faithfulness in final accounts so that trust of stakeholders can acquired and
they could be retained for a long period in future. All the transactions which are recorded in the
books should represent faithfulness to the analysers of final accounts. By evaluating annual
reports of Seven West Media Ltd., it has been measured that information recorded in books of
accounting are faithful. Profit and loss statement and balance sheet of the company are free from
errors and these are not biased which may mislead stakeholders to take strategic decisions
(Warren Jr, Moffitt and Byrnes, 2015). There is a proper disclosure of all the elements of
company in final accounts which is beneficial for stakeholders to make judgement in favour of
Seven West Media Ltd.
Financial statement of Seven West Media Ltd. Have both the above described
characteristics which shows that company is performing very good and able to attain growth in
future. The above described features are vital to be focused by accounting professionals of
company in order to make sure that organisation will be able to attain its long term goals or not.
CONCLUSION
From the above project report it has been concluded that advanced financial accounting is
a process in which accounting professionals of business entities formulate final accounts
according to the rules and regulations that are imposed by legal authorities. There are various
types of concepts which should be analyse by accountants in order to represent actual position of
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the company in front of stakeholders. In order to help investors to form strategic decisions it is
very important for companies to show faithful and relevant information to external parties. There
are various types of issues such as reporting on financial forecasts and projections and
compilation with accounting principles. In order to deal with them accountants have to comply
with conceptual framework.
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REFERENCES
Books and journals:
Abdel-Maksoud, A., Cheffi, W. and Ghoudi, K., 2016. The mediating effect of shop-floor
involvement on relations between advanced management accounting practices and
operational non-financial performance indicators. The British Accounting Review.
48(2). pp.169-184.
Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the
empirical literature. Journal of Accounting and Economics. 58(2-3). pp.339-383.
Cao, M., Chychyla, R. and Stewart, T., 2015. Big Data analytics in financial statement
audits. Accounting Horizons. 29(2). pp.423-429.
Hoyle, J. B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
Maynard, J., 2017. Financial accounting, reporting, and analysis. Oxford University Press.
Mügge, D. and Stellinga, B., 2015. The unstable core of global finance: Contingent valuation
and governance of international accounting standards. Regulation & Governance. 9(1).
pp.47-62.
Ratiu, R. V., 2015. Financial reporting of European banks during the GFC: a pitch. Accounting
& Finance. 55(2). pp.345-352.
Warren Jr, J. D., Moffitt, K. C. and Byrnes, P., 2015. How Big Data will change
accounting. Accounting Horizons. 29(2). pp.397-407.
Online
Accrual concept. 2019. [Online]. Available through:
<https://xplaind.com/741603/accrual>
Conservatism principle. 2019. [Online]. Available through:
<https://www.wallstreetmojo.com/conservatism-principle/>
Annual report of Seven West Media Ltd. 2018. [Online]. Available through:
<http://www.sevenwestmedia.com.au/assets/pdfs/Annual-Report-2018.pdf>
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