Financial Principles and Theory Report - Premier Investment Limited

This report provides an in-depth analysis of financial principles and theory, focusing on the compliance and applicability of accounting standards for Premier Investment Limited, an ASX-listed Australian company operating in the retail fashion industry. The report examines the objectives of general-purpose financial reporting, the social and economic role it plays, and the interpretation, application, and evaluation of accounting standards. It also delves into current accounting issues, such as international accounting differences, harmonization, and convergence of accounting standards. The methodology used is qualitative, incorporating a questionnaire for stakeholders and management to address emerging accounting issues. The findings highlight the company's efforts to comply with ASIC and AASB standards, while also emphasizing the importance of minimizing accounting issues for clearer financial statement presentation. The report concludes with recommendations for enhancing financial reporting practices.

Running Head: FINANCIAL PRINCIPLES AND THEORY
FINANCIAL PRINCIPLES AND THEORY
Name of the Student
Name of the University
Author Note

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Executive Summary
The aim of this report is to do analysis on the financial principles and theory. Under
this assignment discussion will be on compliance and applicability status of the accounting
standard for the company Premier Investment Limited. It is Australia based company in the
specialty retail fashion chains across many countries. Hence, under this assignment, research
will be done on the accounting standards, general purpose financial reporting, corporate
reporting practices as well as current accounting issues in order to determine whether the
financial statements of the company are faithfully represented or not. Therefore, it being
analyzed that apart from the emerging accounting issues all over the world, the company tries
for complying with the guidelines of the ASIC and AASB standard. However, accounting
issues should be minimized as far as possible for more clarity in financial statement
presentation and serving the interests of the stakeholders.

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Table of Contents
Introduction................................................................................................................................3
Methodology..............................................................................................................................3
Findings......................................................................................................................................4
Accounting Standards............................................................................................................4
Current Issues in Accounting.................................................................................................6
Objectives of General Purpose Financial Reporting..............................................................8
Social and Economic Role Played by General Purpose Financial Reporting......................11
Interpretation, Application and Evaluation of Accounting Standards.................................12
Research Findings on Corporate Reporting Practices and Current Accounting Issues.......19
Implications of Findings..........................................................................................................20
Conclusion and Recommendations..........................................................................................21
Reference..................................................................................................................................22
Appendix..................................................................................................................................28

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Introduction
The aim of this report is to do the analysis on to do the analysis of on the compliance
and applicability status of the accounting standards of ASX listed company. For this, analysis
will be done on Premier Investments Limited. This Australian public company operates in
various retail fashion chains in the New Zealand, the United Kingdom, Malaysia, Australia
and Hong Kong. This company operates through the segments of retail and investments. The
company generally offers women’s wear, casual wear as well as non-apparel products
(premierinvestments.com, 2019). Therefore, under this analysis will be done on the
objectives of the general purpose accounting standards. Moreover, social and economic role
played by the general-purpose financial accounting will be discussed. Further, discussion will
be done on the interpretation, application and evaluation of the accounting standard. In
addition, relationship and the impact of the applicable accounting standards in the context of
the financial accounting theories, regulations, concept as well as other topics will be
discussed in detail (premierinvestments.com, 2019).
Methodology
The methodology that is adopted for the analysis on the compliance and applicability
status of the accounting standard is done by the method of qualitative method. For the
analysis the company that is chosen for the analysis from ASX 200 listed company is Premier
Investment Limited. Thorough analysis is done of the company regarding compliance and
applicability of the accounting standard. Questionnaire has been selected for the emerging
accounting issues from the group of stakeholders and company’s management
(premierinvestments.com, 2019).

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Findings
Accounting Standards
Accounting standard stands for the written documents and the policies, which
provides the principles for the recognition, presentation, treatments, measurements as well as
disclosures of the accounting transaction in financial statements. The accounting standards
are introduced with the aim of standardizing the accounting practices as it helps in the
comparison of the financial statement for the different organizations that fall in the same
industry for which the accounting standards are applicable (Brown, Preiato & Tarca, 2014).
Therefore, the government agency, Australian Accounting Standards Board is responsible for
the development as well as maintaining the applicable financial reporting standards to the
private as well as public sector entities of Australian economy. Conceptual framework is used
by the AASB for the development and evaluation of the accounting standards. The Australian
Securities and Investments Commission Act 2001 set the functions and the power of AASB
(Henderson et al., 2015). ASIC is the independent body of Australia that is the regulator of
the corporate of Australia. The role of ASIC is for enforcing and regulating the company as
well as the laws of the financial services for protecting the Australian investors, creditors and
the consumers. The responsibility areas of ASIC include corporate governance, securities and
derivatives, insurance, consumer protection and financial literacy (Lovell, 2014). The act of
ASIC requires the following aspects:
 Maintaining, facilitating as well as improving the financial system and entities.
 Promoting the confidence as well as informed participation by the consumers as well
as investors in financial system.
 Administering effectively law with the minimal procedural requirements.
 Enforcing and give effect to law.

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 Making information about the entities as well as other bodies for availability to the
public as early as possible.
 Taking the necessary action for enforcing and giving effect to the law.
ASIC provides the access to the legislation that is applicable regarding the requirements,
regulatory documents and professional standards. They regulates whether the entities are
complying with the requirements of the financial reporting. The active monitoring of the
compliance of the entities with the requirements does contribute directly to the confidence of
the investor and integrity of the market (Brusca & Martínez 2016). It helps in ensuring that
the issued financial reports are relevant as well as reliable and ultimately helps the users for
making better-informed decisions in market place. In case of non-compliance with the
accounting standards, ASIC seeks for to get revised financial statements, either by the
negotiation with the involved company or if necessary using the power for enforcing the law
(Bazley, Hancock Robinson, 2014).
The accounting standard that is used by the entities for the preparation of the financial
reports under Corporations Law is made by AASB. The reporting entities must have to
comply with the Australian Accounting Standards as well as interpretations issued by
Australian Accounting Standards board and its applicability with the Corporations Act 2001
requirements (Pacter, 2014). The reporting entity is the entity, under which is it is reasonable
to expect that the existence of the users that rely on the general purpose financial statements
of the entity for the information which will be useful for making as well as evaluating the
decisions about resource allocations. The reporting entity may be single or the group that
comprises of parent as well as its subsidiaries (Budding, Grossi Tagesson 2014).
AASB is the agency of government of Australia. The standards of AASB are defined
as Australian Accounting Standards that includes Australian similar to the International

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Financial Reporting Standards. When they first began for adapting to the IFRS as the
Australian Accounting Standards, AASB made some of the modifications to the IFRS that
includes removing of the some options as well as addition of the some disclosures (Bamber &
McMeeking, 2016). Under the year 2007, Australian Accounting Standard was modified by
the AASB so that the requirements are similar to the IFRS as issued by IASB for the profit
entities. The basis for preparing financial statements notes defines reporting framework as the
‘Australian Accounting Standard’. The note depicts the compliance with the International
Financial Reporting Standards (Edgley, 2014).
Current Issues in Accounting
There are many issues that are faced in the accounting these days. Some of the most
important and key issues are international accounting differences that exist between the
countries, harmonization of the accounting standards and last but not the least convergence of
the accounting standards (Rossi et al., 2016).
International Accounting and the differences between the countries
The first issue in the accounting is the accounting differences between the countries.
Regulations, mode of regulations and practice usually differs by countries to countries. These
differences exists across the many countries in the treatment of the accounting of many items
such as the firms in United States are generally not allowed for reporting the plant,
equipments and property at the amount that is greater than the historical cost. However,
companies in European Union are allowed for reporting their assets at the market values in
the balance sheet (Perera & Chand, 2015). Moreover, the cost that is involved in the research
and development may be recognized as expense in Japan but in Canada and France,
development cost is considered as the asset. Therefore, these differences in the accounting
may result in the significant different amounts that are being reported on the income

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statement as well as the balance sheet. Various factors have been hypothesized by the
scholars regarding these differences. Some of the causes for these differences include the
system of political nature, economic development stages, accounting state education and
research (Newberry, 2015).
Harmonization of Accounting
The harmonization of the international accounting is defined as that process which
brings the international accounting standards in the some sort of the agreements that
preparation of the accounting standard should be based on the common set of the principles
for the measurement as well as the disclosures. Harmonization of the accounting standards
does not focus on eliminating the differences rather it focuses on reducing the rules that are
contradicting. Therefore, international harmonization of the accounting standard will help in
reducing the differences as much as possible for enhancing better comparability of the
financial statements internationally (Cheng et al., 2014). According to Robert Buchanan, the
decision makers recognize the need for understanding the financial documents with the
clarity as well as transparency. So that the rules of the accounting are in convergence to the
single international standards. Harmonization may be divided into two aspect, material as
well as formal harmonization. Former is referred as the research from the practical point of
view. This involves harmonization of the practices of accounting by different organizations.
Later is referred as theoretical point of view that means similarity and the diversities among
the rules as well as regulations of the different counties or groups. Harmonization will help
the countries in standardization of the accounting practices and the standards, reduction of the
cost (Gray, 2014).
Convergence of the Accounting

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The issue of convergence of accounting is not new idea, as it first aroused in late
1950s, which was in response to the increase in the cross border capital flows and economic
integration post world war II. Hence, it is referred as the high quality of the accounting
standard that is to be used internationally as well as standard setters’ efforts for the goal
achievement. The effort that is taken towards the convergence includes improving of the
respective standards of accounting as well as those which aims for reducing the differences
between them. The motivation for the convergence includes belief for increased
comparability between the financial statements, which will benefit majority of the
stakeholders such as FASB has stated in one of their comment that, convergence will benefit
the investors, auditors, companies as well as the other participants in the financial reporting
system of US (De Villiers, Venter & Hsiao, 2017). However, the issue of the convergence
has been criticized also by many, calling convergence as “shelved indefinitely” and advising
IASB for improving its own standards as compare to focusing on convergence. The other
criticism includes nature of converged accounting standards such as this convergence will
increase the using of the fair value accounting. In addition, some has criticized it for its
principal based standards because it allows different interpretation for the transaction of
similar nature; it has been criticized for its less precision. According to Robert h. Herz, the
single set of the high quality international standards of accounting is desirable because the
uses of it will improve the comparability of the financial information by reducing the cost of
the users of the financial statements; its preparers, auditors as well as others by helping for
promote the capital market of world. FASB continues to invest its considerable time and
resources in the efforts of the convergence (Beattie, 2014).
Objectives of General Purpose Financial Reporting
General purpose Financial Reporting is defined as those financial statements that are
released to the users of broad group. It is generally issued throughout the year for aiding the

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investors as well as the creditors in the process of the decision-making. It is the financial
report for meeting the needs of the information that are common to the users, for those who
are not able to command for the reports preparation that are tailored specifically for all their
needs of the information (Achim & Chiş, 2014). The set of general purpose financial
reporting includes income statement, balance sheet, statements of retained earnings or
owner’s equity and cash flows statements. The set of the financial statements is known as
general purpose because it includes basic financial statements, which can be used by the
broad categories of people for the broad range of the activities (Ball, Li & Shivakumar,
2015). The companies use this particular set of the financial statements as the form of the
financial reporting for communicating the performance of the company with the people that
is outside of the entity (Zhang & Andrew, 2014). However, much specific financial reports
such as market analyzes and production flow processes are not considered as the part of the
general-purpose financial statements, it is because these reports are available for only
managements of the company. Therefore, financial reports are intended for providing the
information that would meet external users’ need who cannot prepare special reports for
meeting their needs of specific information (van Mourik & Katsuo, 2014). Following are the
objectives of the General purpose financial reporting are as follows:
 The general purpose financial reporting is intended as the means for communicating
the information that is relevant as well as reliable about the reporting of entity to the
users. The objectives are derived from the needs for the information for the identified
users of the reports of the general-purpose financial reports. These needs depend upon
the reporting entities activities as well as users of the decision that make about them
(Davidson, Dey & Smith, 2015).
 The reporting entities are responsible for controlling of the resources as well as
influencing the community members through providing of the goods and the services,

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charges, acquisition and investments of the resources, rates and taxes as well as
levying of the prices. The interest of the community is best served in case if controlled
scarce resources are served in most efficient manner for providing of the goods and
services (Leuz & Wysocki, 2016). The output are raised by the efficient use of the
resources, which has effects of desirable macro economics with the enhancement of
standard of living and the employment as well as enabling the objectives of social
policy for achieving it at the lowest cost. The member of community makes the
decisions for allocations of the resources in relation with the reporting entities (Feng
et al., 2014).
 Efficient allocations of the scarce resources can be enhanced only when the sufficient
information is available to the groups and the identified groups, based on that
information, they take decisions. Therefore, general purpose financial reporting helps
in providing this information (Lourenço, 2015).
 It also helps in providing the mechanism for enabling the managements as well as
governing bodies for discharging their accountability. The managements as well as
the governing bodies are accountable for those who helps in providing the resources
to entity for the controlling and planning for the business entity operations (Robinson
et al., 2015). In the broader context, the reporting entities are accountable for the
public at large because the influence of the reporting entities on the community
members at both the levels of micro as well as the macroeconomic. It provides the
means through which there is discharging of the responsibility (Gomariz & Ballesta,
2014).
 However, the needs of the information of users at times are distinguishable between
the business as well as non-business entities. The common objectives that are
specified in the statement show the inherent similarities that exist between these two

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types of the entity. While the business organization seeks for earning more profits or
the desired rate of the return, the non-business organizations aim for the non-business
organizations (Tschopp & Huefner, 2015). Both the types of the types of the
organizations provides the community with the goods and services by using the scarce
resources in process, both the organizations obtain the resources from the external
sources and are accountable for their representatives or the providers of resources. In
addition, the entities incur the obligations, both control the stocks of the resources and
both must be viable financially for meeting their operating objectives (Yahaya, Kutigi
& Mohammed, 2015).
Social and Economic Role Played by General Purpose Financial Reporting
General purpose financial reporting enhances social welfare by look it into the interest
of the employees, government and the trade unions. The entities provide the information to
their various stakeholders in regarding the performances of the company in relation to its
management and their diligence and ethics in relation to their discharge of their fiduciary
duties as responsibilities. Further, the economical role played by the company includes
providing the information in relation to one or more important variables such as income,
liabilities, assets and overall all financial position of the company (Oulasvirta, 2014). These
information provided by the organization would be very important for the stakeholders
because based on these decisions, they would be able to take their decisions. It enables the
investors for predicting the timing as well as amount of the future cash flows while making
decisions relating to investments (Brown & Dillard, 2014). The main aim of the general-
purpose accounting is providing the information that will assist in making the decision
relating to economical aspect of the organization. Moreover, financial reporting helps in
providing the information about the performance of the organization in terms of its financial