Financial Reporting Analysis: IFRS, PPE Disclosures at Telstra

This report provides a comprehensive analysis of financial reporting practices, adhering to International Financial Reporting Standards (IFRS), with a particular emphasis on Property, Plant, and Equipment (PPE) disclosures. The assignment delves into the conceptual framework of financial rep...Read More

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Date: 29 September ,2017

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Executive Summary
The financial statements are to be prepared and presented as per the IFRS guidelines and per the
rules and regulations being presecribed by the relevant accounting standards boards in order to
meet the requirements of the users. In the given assignment, it has been asked for the purposes of
general purpose financial statements and qualitative characteristics to be taken care off while
preparation of the financials. Also, one of the listed companies on ASX has brrn chosen for
analysis on PPE disclosures, the methods followed and if it fulfils the requirements of the user
and whether there is need of improvement or not.
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Contents
Executive Summary…………………………………………………………………………1
Introduction………….………………………………………………………………………3
Written Activity (part a)..…………………………………………………………................4
Project (part b)....………………………………………………………………………........5
Project (part c)....………………………………………………………………………........7
Project (part d)....……………………………………………………………………….......8
Conclusion/Recommendation…..…………………………………………………………..9
Refrences……………..………………………………………………………....................10
Appexdix……………..………………………………………………………....................11
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Introduction
The financials are being prepared with IFRS guidelines for users to take the relevant decisions on
time but there is a basic requirement of the disclosures in financials statements without which the
stakeholders won’t be able to make correct and timely decisions. This assignment forcuses on
what are those qualitative aspects which holds relevance and which needs to be disclosed.
Further the analysis has been done on one of the biggest telecommunication companies in
Australia listed on ASX and whose revenue deals in millions.
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Written Activity
a) The conceptual framework and general purpose financial statements was introduced to
help the companies prepare and present the financials in a way which would make it relevenat
for the stakeholders and the users of the financial statements. They are not only helpful in annual
report of the companies but the regular day to day operation of the company. These are the
information basis which the auditor expresses his opinion on the financial statements whether
they are showing the unbiased view or not and are free from errors. They meet the information
requirement of both the internal and the external users like the government, the tax authorities,
the bank the financial institutions, the creditors, the employees, the directors, etc. This helps
them to take various financial and operational decisions. These information help the investors to
decide whether to invest or not in the company’s debt and equity segment by lloking at the
present status of the company. (Kew & Stredwick, 2017). Further, they also need the
information on the cash flow requirements of the company, and whether the management and the
directors are adhering to their responsibilities while preparation of the financials statements. The
framework of conceptual accounting warrants for the relevant and reliable information and
workings in the notes on accounts and disclosures for the users to understand the financials. It
may be that the objective of the management and users is differnet and hence, it should be taken
care of that no material information is missed out, no material misstatements is being reported
and whatever is disclosed meets the qualitative aspects of the financial statements like timely
information, relevant and understandable, verifiable and comparable. Th directors report
generally give the declaration as to the financials have been prepared as per the relevant
standards and discrepancies, if any have been reported. The final assurance on the financials
however comes only when the same has been audited by the auditors and they give their views
on the same.
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b) AASB 116 guides the valuation and reporting requirements of the fixed assets,
property, plant and equipment in the financials of company. It is critical for the users to know
and understand the standards being complied by the company while preparing the financials.
(Trieu, 2017) The standards gives the guidelines basis which the valuation and representation of
PPE should be done in the financials. In the given case study, one of the listed
telecommunication companies in Australia “Telstra” has been chosen for analsyis and they have
tried to comply with all the objectives of the standards and GPFS while preparation of financials
and valuation and presentation of PPE over there.
The standards prescribe the following relevant and critical disclosure requirements which should
be there in financials. The company is required to give the bifurcation of the class of the assets
which which all its assets are divided, the estimated useful life of each one of them, the rate of
depreciation being charged to the P&L. (Linden & Freeman, 2017) the method of depreciation
being followed year on year, the effect of the management estimates and judgements if any on
the financials and how are they being disclosed, the basis of measurement of the gross block, the
carrying value, how the purchase and sale of the assets during the year is being accounted, the
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exchange rate fluctuation arising on the assets, etc. The company should represent and disclosure
all the above mentioned useful information in the financials (Visinescu, et al., 2017).
In the case of Telstra incorporation, the company has tried to abide by all the important
disclosure requirements w.r.t. the bifurcation of the assets in the asset class, the basis of doing
do, the range of estimated useful lives being used, the method of depreciation being straight line
method, the rates of depreciation, etc. It has also disclosed the purchase and sale of assets and the
sale proceeds received in the cash flow statement. (Bromwich & Scapens, 2016) It has also
shown the borrowing cost being capitalised in the value of the asset, the impairment being done
based on the indicators prevailing and the residual value of the assets. The extracts of the
directors report confirming the use of standards and other screenshots have been attached for
reference. All in all, it can be said that the company has complied with the AASB’s accounting
framework guidelines (Werner, 2017).
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c) This segment discusses on how the financials statements meet the qualitative
characteristics and the requirement of te general purpose financials statements. Basis these, the
company has been able to value its fixed assets and to estimate its revenue in the future. It helps
in the management of the overall operations of the company and thus, helps the management to
take the final decision which lead to growth and development of the company (Linden &
Freeman, 2017). This also helps the users to rely on the infirmationn disclosed by the company
and cross verify it from the calculations being shown. It aims to make faithful representation of
all the material information basis which the usr can take the decision. One of the qualititative
asspects is comparable information and the company has complied with the same in the best
possible manner by disclosing the last years’ gross block, accumulated depreciation, the net
block, the purchase and sale of the assets during the last year, the depreciation on PPE etc and
thus, it helps the user to compare the current year data with last year and understand the reason
of the variances basis which he can take various operational and financial decisions. It has
disclosed all the information in the most transparent manner with proper disclosures and basis in
place. Hence, it can be said the company has satisfied the qualitative requirements too. (Dichev,
2017)
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d) Based on the above facts and fugures and disclosures in financials, the company has
fulfilled most of the objectives of the general purpose financials statements basis which both the
internal and the external users can take the relevant decisions. (Alexander, 2016) It has complied
wit the requirements of IFRS and International Accounting Standards and the company has
presented its information in the most relatable and transparent manner which helps the users to
rely on these reports. Further, the information has been given timely considering the time frame
for releasing the annual reports and it has kept it comparable for user’s convenience and better
understanding (Belton, 2017).
Thus the company Telstra has justified all the requirements however, the sane can still be
given more improvement in terms of user understanding. The international accounting board
takes the suggestions of both the end users and the companies on how the data should be
presented in the financial statements such as to satisfy end user needs. In the sake of same,
Telstra can present the complex accounting and technical aspects of the presentation of PPE in a
more simpler and user friendly way such that the users are at ease when it comes to
understanding and properly interpreting the dat because only then the right financials decision
can be taken. This will also add towards the transparency in the disclosures (Abbott & Kantor,
2017).
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Conclusion/Recommendation:
In the given case study, the areas of focus has been the use of the general purpose
financial statements and how the annual report of the company and the disclosures therein meet
the meeds of the end user. Telstra has been in sync with all the informational reuirements and has
kept the annual reports timely, relevant, reliable, comparable, verifiable and transparent in all the
respects. Furthermore, the company can try to reduce the technical jargons being used so that the
same is understand to the person who does not have the in depth understanding of the financials.
Also, the board can bring in uniformity in applying the standards to a particular type of industry
rather than keeping it open for use by any of them (Abbott & Kantor, 2017).
Bibliography
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Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes:
The Case of the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education,
71(4), pp. 411-431.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London:
Macat International ltd.
Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on.
Management Accounting Research, Volume 31, pp. 1-9.
Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), pp. 617-632.
Kew, J. & Stredwick, J., 2017. Business Environment: Managing in a Strategic Context. second
ed. London: Chartered Institute of Personnel and Development.
Linden, B. & Freeman, R., 2017. Profit and Other Values: Thick Evaluation in Decision Making.
Business Ethics Quarterly, 27(3), pp. 353-379.
Trieu, V., 2017. Getting value from Business Intelligence systems: A review and research
agenda. Decision Support Systems, Volume 93, pp. 111-124.
Visinescu, L., Jones, M. & Sidorova, A., 2017. Improving Decision Quality: The Role of
Business Intelligence. Journal of Computer Information Systems, 57(1), pp. 58-66.
Werner, M., 2017. Financial process mining - Accounting data structure dependent control flow
inference. International Journal of Accounting Information Systems, Volume 25, pp. 57-80.
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Appendix:
1. The annual report pertains to year 2016.
2. Telstra incorporation is a telecommunication company listed on ASX (ASX: TLS)
3. IFRS refers to International Financial Reporting Standards.
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