University Finance Assignment: Financial Reporting and AASB 116

This report provides an executive summary and detailed analysis of financial reporting standards, focusing on the conceptual framework and AASB 116. It explores the objectives of the general-purpose framework and its implications, particularly in relation to property, plant, and equipment valuatio...Read More

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Date: 23 September ,2017

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Executive Summary
The financial statements are prepared as per the standards that are guided by the reporting framework
and it is important for all the companies to follow the same. The needs of the end users must be fullfiled
and the qualitative characters of these statements must be evolved. In this assignment we will discuss
the objectives of the general purpose framework and also discuss the implication of the same in
refrences to the AASB 116. A particular company is selected to make the overall valuation more precise
and throw better light on the matter.
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Contents
Written Activity………………………………………………………………………........3
Project……………..……………………………………………………………………….......5
Question ……….……………………………………………………………………….........6
Refrences……………..………………………………………………………...................8
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a)The conceptual framework has been designed to provide the companies a basis for the
preparation and presentation of their financial statements as per the said accounting standards. The
IFRS framework provides the basis to the board for the preparation of the future IFRS and help them in
that regard. It also helps in providing a basis for solving these problems that are related to the
accounting and that arises in the normal course of business. The main aim of these frameworks is to
help the companies in the preparation and presentation of these statements free from errors that can
be helpful to the users of these statements. The main users of these statements include the investors,
the public, and the government, who needs to take important decisions regarding the company on these
statements. These statements provides the users with a snapshot of the financial position of the
company and it helps the users to take decisions regarding the selling or buying of the equity and the
debt instruments of the company. The users requires these instruments to not only access the future
cash flows of the company but also to make an analysis of how the management of the company have
discharged their duties and how effective they have been. There are notes provided in the IFRS
framework that they may provide all the information that the company needs and hence they need to
make their own analysis and then base their decisions on the same. It may be possible that the
objectives of the board and the standards that have been defined may not be consistent with each
other, in that the companies need to take important decisions on how well they can apply these
standards in their general purpose reporting (Kew & Stredwick, 2017). The information provided by
them must be as precise as possible and there must not be any loopholes from the management side.
The objectives and the framework that has been followed by the company can be seen in the annual
reports, where the directors declare that the financial statements have been prepared as per the said
standard and also they have provided proper notes in case of any deviation from the same. The
companies also need to get their books audited, where the auditors check how well the companies
have complied with the said standards and give their report on the basis of the same.
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b)The AASB 116 is an accounting standard that has been developed in context of the valuation
of the fixed assets of the companies that consists of property plant and equipment. It is important for
every company to comply with the same while preparing their statements. It is has set the standards
that the companies need to follow while valuation of their properties and the way they deal with the
same. In case of Telstra the company that has been selected, the management of the company has
followed the required standard while valuing their assets and proper description of the same has been
provided.
As per the PPE standards the disclosure requirements are-
The company will disclose all the classes of the assets, the measurement basis for calculating
their gross amount, the method of depreciation used, the useful live or the various rates of depreciation
used, the carrying amount of the assets at the beginning or the end of the financial year, the various
changes that takes place during the year in the overall value of the assets because of the policies of the
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management of the company is also disclosed in detail. The companies must try to satisfy the various
compliance needs and make the necessary disclosure (Visinescu, et al., 2017).
In case of Telstra, the company has provided proper disclosure about the various assets that the
company has held along with the various methods of depreciation, the details about the useful life, the
carrying cost of the assets at the beginning and end has also been defined very clearly (Bromwich &
Scapens, 2016). The residual value of the assets, the net impairment losses that has been written off and
that has been reversed has been stated very clearly. The director has stated in its declaration that the
company has taken the necessary steps to make sure that the books of the company are prepared as per
the said conceptual framework and the given standards has been shown in detail to provide more clarity
to the overall valuation done by the company (Linden & Freeman, 2017). Few extracts from the annual
reports of the company are attached to show how well the management of the company has complied
with the said standards of accounting and the necessary disclosures that has been given by them in that
regard. The company whose analysis has been done is one of the biggest telecommunication company
in Australia that has large amount of assets and whose revenue runs into billion (Werner, 2017). The
company is listed on the Australian Stock Exchange and the various investors that deal in the equities of
the company depends on the validation of these financial statements to take important decisions
regarding the company and also its various assets. The books of the company have been prepared as per
the AASB framework in compliance with the given financial reporting framework (Trieu, 2017).
c)One of the useful enhancing characteristics of the financial reporting framework is that it
provides proper basis to the companies for calculation of the value of their assets on the basis of which
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they can calculate the correct revenue of the company and its financial position. This is one quality of
the financial reporting framework that it provides basis to the companies for the calculation of the
relevant figures. It is very helpful in many ways for the company and its overall operation. This is an
integral part of the company accounts and helps them in making effective decisions that the company
can use for their overall growth and development (Linden & Freeman, 2017). It also provides an insight
to the members who are dependent on these statements for taking important decisions. The members
are able to judge what methods are the company using for their calculation and on the basis of the same
they can make their own judgments and do their own analysis that can help them in the long run. In
case of the given standard the companies needs to provide necessary disclosure regarding their various
depreciation methods, along with the method of valuation of their assets and also analyzing the method
of calculation of the carrying amount of these assets (Kew & Stredwick, 2017). It helps in improving the
overall transparency in the books of accounts of the company and provides a clear picture to the users
on the basis of which they can do their judgments. Thus this standard is in sync with the element of
transparency that the financial statements states and thus helps the company in taking effective
decisions that provides clear picture to the stakeholders of the company (Dichev, 2017). It is thus helpful
for the companies to comply with these standards and make the relevant disclosures for the company
and its accounts.
d)On the basis of the above findings it can be said that the financial reporting standards that
have been presented by the financial reporting framework is that the accounts of the company provide
a clear transparent and accurate details about the company and its various aspects. The disclosures
that have been provided in case of the various requirements of the PPE are that the company must
disclose each and every aspect of the company assets, which includes its depreciation policies, its
impairment strategies, its carrying amount and the other residual disclosures. Thus it can be said that
the said standards is in sync with the various requirements of the financial statements and their
respective strategies (Alexander, 2016). The company has also followed all the details and all the
requirements policies of the company are in sync with the various requirements that have been stated
by the financial reporting framework. It can be said that the standard that has been designed has
justified the need of why these standards are important for the preparation of these statements and
how helpful they can be for everyone who are dependent on these statements (Belton, 2017).
The framing bodies can take feedback from the various users and the companies who are using
these standards for the preparation of these statements and ask them about the issues that they are
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facing. By doing this the authorities will be able to understand the loopholes in these standards and how
they can improve the same (Abbott & Kantor, 2017). The authorities can reduce the various
complications that can be there and also should try to enhance the overall transparency of the accounts
and the statements. The method of applying these standards can be made simple and also care should
be taken to see that all the companies on which it is applicable are following the same.
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Bibliography
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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