Advanced Financial Accounting: CSR Limited Financial Report Analysis

This report provides an in-depth analysis of advanced financial accounting principles, focusing on the application of theoretical models and Australian Accounting Standards Board (AASB) standards. The report assesses the accounting concepts, including assets, liabilities, and non-current assets, through the lens of CSR Limited's financial report. It evaluates the conceptual framework, exploring issues of measurement and qualitative characteristics, such as relevance and faithful representation, within the context of financial reporting. The report highlights the importance of accounting policies, measurement bases (historical cost, fair value), and the impact of assumptions and estimates on financial statements. Furthermore, the report examines the treatment of specific accounts, including revenue, provisions, net finance costs, trade receivables, goodwill, and foreign currency transactions, to illustrate the practical application of accounting standards. The analysis provides a comprehensive overview of financial reporting practices and their impact on the interpretation of financial information.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
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ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction:..................................................................................................................2
Discussion:...................................................................................................................2
Description of accounting concepts:.............................................................................2
Issues of measurement and conceptual framework:....................................................2
Fundamental qualitative characteristics:......................................................................2
Conclusion:...................................................................................................................2

ADVANCED FINANCIAL ACCOUNTING
Introduction:
In the current paper, understanding of the various theoretical models has
been assessed by applying the knowledge of financial reporting issues in reference
to the AASB standards. The development of the conceptual framework has been
evaluated by gaining an understanding of the accounting for accounts. All such
evaluation has been done by analyzing the financial report of one of the listed
companies on ASX (Australian stock exchange). CSR limited is a leading product
company operating in Newzealand asnd Australia and is one of the oldest
manufacturing companies of Australia (Csr.com.au 2019). The products of company
form a part of industry that helps in creating building and home for the people. CSR
prepares its general purpose financial report according to the applicable Australian
accounting standard board requirements and its interpretation along with Corporation
Act 2001. The accounting regulatory framework has been understood by accounting
for the liabilities, assets and noncurrent liabilities. In addition to this, the paper also
demonstrates the understanding of the fundamental qualitative characteristics in
relation to the financial information presented in the financial report of CSR limited.
All the contents presented in the report is addressed by taking examples from the
CSR limited.
Discussion:
Description of accounting concepts:
In this section of the paper, the accounting concepts have been described and
illustrated using the examples of CSR limited and what types of accounting is used
for identifying and treating different accounts. Accounting concepts can be defined

ADVANCED FINANCIAL ACCOUNTING
as the conditions, postulates and assumptions for stating and recording various
accounts. Every organization prepares their financial statement in accordance with
the rules and criteria’s that are laid down in the accounting concepts. However, the
organizations depending upon their suitability and requirements, adopt specific
accosting concepts for preparing the financial report. The financial report of CSR
limited provides the significant and other accounting policies summarizing the basis
of measurements and is relevant in understanding the financial statements of the
users (Bailey and Samuels 2018). There is a consistency between the accounting
policies that are adopted in the current year for analysis and the previous financial
years. All the amendments to the accounting standards of Australia have been
adopted by the group which was applicable from 1st April, 2017. The financial report
of the company is not materially impacted by the revision of accounting standards or
adoption of any new standards.
The management of CSR limited has made key assumptions and critical
judgments in the process of application of key accounting policies with the
assumptions and judgments having significant impact on the amounts recorded in
the financial statements are recorded in the notes. A breakdown of the individual line
of items in the statement of financial performance is provided in the overview of the
financial performance of CSR limited. The accounting policies in the internal
reporting of segments used by the group are those which have been disclosed in the
significant accounting policies.
Assets that are transferred between the segments are recognized at the book
value with some specific treatments of expenses and revenue as per the accounting
policy of the group. The liabilities and assets associated with the segments and are
allocated to them if they are not allocated to operating segments (Schaltegger and

ADVANCED FINANCIAL ACCOUNTING
Burritt 2017). Some of the items that are not allocated to operating segments include
provisions, restructuring, corporate overhead, net finance cost and other significant
items. The accounting for the acquisition transactions is done according to AASB 10
Consolidated financial statements and the acquisition accounting at the fair value is
not required by the group. Some of the accounting policies used by organization in
relation to the accounts are listed below.
The property, plant and equipment of the organization are tested for the
impairment for ensuring that they are not recorded above their carrying value. Group
performs the assessment of each of the individual assets for impairment by
assessing their recoverable amount. The discounted cash flow forms the basis of
calculations of value in use that is expected to arise from cash generating unit or
assets. A significant improvement in the associated profitability and utilization is
forecasted by value in use projections that is prepared for the testing purpose of
impairment (Andon et al. 2015).

ADVANCED FINANCIAL ACCOUNTING
Measurement basis of provisions:
(Source: Csr.com.au 2019)
The table above depicts the critical accounting estimated for provisions such
as product liability, provision for future claims and uninsured loss and measurement
of provisions for environmental rehabilitation and restoration along with legal claims.
Any investment in joint arrangements is classified either as joint ventures or
joint operations. The obligations and contractual rights of each investor form the
basis of the classification of such investments instead of the legal structure and
hence judgments are required for such classification.
Measurement basis of net investment:

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(Source: Csr.com.au 2019)
The table below depicts the accounting policies adopted by the group for
treating accounts such as foreign currency, tax consolidation, cash and cash
equivalent, goods and service tax and option liabilities on non controlling activities.
Other significant accounting policies:
(Source: Csr.com.au 2019)
The group uses the exchange rate at the date of transactions for accounting
all the foreign currency transactions during the financial year. Any differences in the
exchange are brought accounted in the profit and loss. Translation of all the assets
and liabilities are done at the exchange rate along with the expense and income

ADVANCED FINANCIAL ACCOUNTING
items being translated at average exchange rate at the end of reporting period
(Csr.com.au 2019). For the option liabilities on non controlling interest, the liability
that s initially redeemed is recorded against the equity along with recognition of the
financial liability at expected redemption amount present value.
Issues of measurement and conceptual framework:
Conceptual framework is the set of objectives and ideas that helps in creating
a consistent set of standards and rules for assisting the preparers of financial
statements. With the adoption of the framework by organization, practitioners are
provided with a base of discussion and consistency in the comprehension of the
financial elements. The basis of measurement is provided by the International
accounting standard board and there are different basis of measurement that can be
employed by organization in varying combination and in different degrees. There are
five different basis of measurement that are provided by the accounting standard
board that comprises of current cost, historical cost, present value of future cash
flows and net realizable value (Ifrs.org 2019).
Concerning the basis of preparation provided by the standard setter for
organization, it is seen that CSR limited has prepared its financial report on the basis
of historical cost. However, the company has used the fair value measurement basis
for certain financial liabilities and assets. It is required by the group to make the
assumption and estimates about the carrying value of liabilities and assets in
preparing the financial report. The assumptions and estimates made by the
management are based on the factors that under certain circumstances are
considered to be reasonable along with the historical experience. The historical
measurement basis is derived from the event of price of transactions that gave rise

ADVANCED FINANCIAL ACCOUNTING
to the items that are being measured. In the event of impairment, there is reduction
in the historical cost of assets. Furthermore, for the measurement of assets at
amortized cost for applying the basis of historical cost measurement of financial
liabilities and assets. The measurement basis has been selected by the organization
by accounting for the nature of information in both the financial performance
statement and statement of financial position (Iasplus.com 2013). It is likely that the
organization would select different basis of measurement for liabilities, assets,
income and expense when considering the factor and cost constraint. The issue of
measurement bases can be illustrated with the help of accounts as presented in the
financial report of CSR limited.
Measurement basis of revenue and provision:
(Source: Csr.com.au 2019)
Recognition of trading revenue is done when some of the conditions are met
by the firm and measurement is done at the fair value. Some of the conditions that
are required for recognizing the revenue include significant rewards and risk
attributable to the ownership of goods, existence of arrangement using persuasive

ADVANCED FINANCIAL ACCOUNTING
evidences and fixed seller price of seller to buyer. Payment on the operating lease is
done over the period of lease using the straight line basis.
Measurement basis of net finance cost:
(Source: Csr.com.au 2019)
Accrual of interest and income is done on the timely basis at the applicable
and effective rate of interest and refer to the principal outstanding amount.
Capitalization of the funding costs is done along with its amortization on subsequent
basis over the facility term. The interest components of discounted liabilities assets
and liabilities are unwinding by treating as a finance cost (Linsmeier 2016).

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Measurement basis of trade receivables:
(Source: Csr.com.au 2019)
The above table presents the measurement basis of one of the items of
statement of financial position. Recognition of trade receivables is done initially at the
fair value and subsequently they are measured at the cost of amortization. Valuation
of inventories on other hand is done at the lower of net realizable value and cost. In
addition to this, recognition of trade payables is done when there is obligation on part
of the group to make future payments resulting from the purchase of goods and
services.

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Measurement basis of goodwill:
(Source: Csr.com.au 2019)
The plant, property and equipment acquired by the company are recorded on
the historical basis that is it is measured at the historical cost of acquisition by
deducting the amount of depreciation. The initial measurement of the software is
done at cost irrespective of the fact that software has been developed internally or
acquitted externally. Intangible assets such as customer lists and trade names at the
date of acquisition are measured at fair value.
Fundamental qualitative characteristics:
The fundamental qualitative characteristics of faithful representation and
relevance help users and investors in providing information. The characteristics of
liabilities and assets and its contribution to the future flow of cash affects the
relevance of information that is provided by basis of measurement. Furthermore, the
material uncertainty and material inconsistency affects the basis of measurement
provided by the faithful representation of financial information. The basis of