Financial Reporting Analysis: Accounting Standards and Theory Report

This report examines the significance of financial reporting and accounting standards, emphasizing their role in providing crucial information for stakeholders. It analyzes the financial statements of Woolworths Limited, an Australian-based organization, focusing on the disclosures made in their annual reports. The report evaluates the current financial performance of Woolworths, including key financial ratios and trends, and assesses the extent of disclosures made regarding Property, Plant, and Equipment (PPE) in compliance with AASB standards. Additionally, it explores how Woolworths addresses its organizational objectives through financial reporting, highlighting the importance of transparency and adherence to accounting principles. The report references various academic sources to support its analysis and conclusions, providing a comprehensive overview of financial reporting practices.

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ACCOUNTING STANDARDS AND THEORY
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Table of contents
Introduction......................................................................................................................................3
Significance of financial reporting and qualitative aspect of financial information........................3
Analysis of the disclosure made by the organization in the annual reports.....................................4
Critical analysis of the disclosures on PPE by Woolworths............................................................5
Analysis of the extent of disclosure made in regards to organizational objectives.........................6
Conclusion.......................................................................................................................................7
Reference list...................................................................................................................................8

Introduction
In light of the growing complexities in the business framework, the internal market has come to
become a competitive one and more dynamic. This necessitates organization to be effectively
meeting the financial reporting frameworks. This helps the users of the financial information to
gather useful data regarding the organization and thereby make effective investment decision. In
this regards, attempts has been made in the study to illustrate on the significance of financial
reporting to the organization as well as the users of the financial information. In addition to that,
attempts have been made in the study to present a discussion on the necessity of making proper
disclosures in the financial report of an organization. For the purpose of the study, Woolworths
limited, an Australian based organization has been selected.
Significance of financial reporting and qualitative aspect of financial
information
It is important for a firm to maintain their financial statements at the end of the year. It done
according to the requirements and the transaction and events occurred during an accounting year.
The financial statements are important for the firm point of view as the statements are essential
in order to prepare the dividend statements and share allocation (Cheng et al. 2014). The
significance of financial reporting to an organization are listed as below:
 The debtors, creditor’s bankers and many other interested parties of the firm are
observing the financial statements of the femur as the statements displays the financial
conditions of the firm and also the firm's ability to utilize their assets and liabilities
during the year end.
 The firm needs to maintain the systematic order to maintain the financial statements that
are utilized in the time of making the financial decisions of marketing strategies of the
firm to develop and improve their activities and performances in the present market as
well as in the future aspects (Zeff et al. 2016).
 The financial statements are made in order to maintain the financial balance of the
organization. The statements are used and observed by the authorities, directors and
investors of the company. Thus it could be stated that the financial statements are

prepared by the firm in order to obtain crucial financial information and undertake
beneficial al decisions for the firm’s future performances.
 The information regarding to the financial conditions of the firm are essential as the
information are being used by several other parties and entities that are directly or
indirectly involved with activities and financial transactions of the firm.
The financial statements that are made by using these statements are a part of the accounting
system of the firm that needs to be done at compulsory condition. Unless the firm observes and
analyses their financial statements and transactions of goods and services that are not eligible to
create such as statement that will reflect the summary of their overall performances of their
whole year activities (Chenget al. 2014).
The financial information is such information that will generate the essential aspects of the firm
financial conditions and the gaps in their accounting activities and organizational structures.
Thus the observation and proper implications of the accounting methods in regarding to the
accounting statements are important in order to set the financial targets and future objectives of
the firm. The shareholders and investors are also interested as they want to ensure the security
and proper utilization of their investments and monetary contributions. Thus the quality of the
information and statements should be up to the mark as the multipurpose use of the statements
(Dhaliwalet al. 2014).
Analysis of the disclosure made by the organization in the annual reports
Financial analysis
2016 2017
Current ratio 0.83 0.79
Quick ratio 0.16 0.15
Debt/equity ratio 0.46 0.29
Financial leverage 2.77 2.41
Current assets 31.6 30.52
Current liabilities 38.26 38.51

From the above analysis it is observed that the financial operations of the company are in
decreasing trend. As it is seen in the comparative analysis above it is observed that the financial
ratios and activities are reducing ads the financial operations are as not as profitable. The is also
identified that the firm is unable to utilize their assets in order to maintain their activity flow and
reduction of liabilities as it increased. Thus the financial strengths have fallen down.
In view of the annual reports of Woolworth limited for the current financial year, It can b
apprehended that, the organization has made proper disclosures of the required disclosures in
their annual reports. The management of the organization is of the view that, disclosures of the
accounting estimates and assumptions are necessary in order to facilitate the users of the
financial information that includes the stakeholders of the organization with clear understanding
of the accounting principles and other policies adopted the organization in their operation (Frias‐
Aceitunoet al. 2014).
Notably, the financial reports of an organization help me to determine the performance of the
entity in the current financial year and the financial stability of the organization in the market. In
addition to that, it helps to get a clear understanding of the financial tools or various accounting
assumptions taught are adopted by the organization. In addition to that, it helps to make a note of
the accounting policies that are applied by the organization in the preparation of the financial
statements. Usually, it is seen that the materiality aspect of accounting is one of the key concepts
that is applied in the preparation of the books of accounts (Ioannou and Serafeim, 2016).
Similarly, there are several other financial aspects that need to be catered to while making
financial reporting. In regards to that, the Australian Accounting Standards Board has set out
several standards that caters to disclosures of accounting information and suggests that, every
organization needs to comply with the requirements of the board. In this context, it is noted that,
Woolworths limited has complied with all the requirements of the AASB in regards to Property,
Plant and Equipments held by the organization (Johnston and Petacchi, 2017).
Critical analysis of the disclosures on PPE by Woolworths
A thorough analysis of the annual reports of the organization revealed that, the management of
the organization has made extensive disclosures in the financial reports of the organization. In
addition to that, they are in compliance with the requirements of AASB 101, which is issued by

the Australian Accounting standard board for disclosures in the financial reporting (Nobes,
2014). From the annual reports of the organization in the current financial year, it is seen that, the
organization holds a significant amount of Plant and machinery as well as equipments. The
management has attempted to present a detailed report on the various accounting treatments of
the assets base held by the organization. In accordance with the management of the organization,
they try to provide all the required disclosures in the financial reports of the organization thereby,
maintaining a high level of compliance within the organizational structure (Lawrence, 2013). In
accordance with the financial reports and the annual reports of the organization of the current
financial year, it is noted that, proper disclosures regarding the PPE has been made by the
organization in the notes to accounts section. All the requirements of AASB 116 have been
complied with in the financial reporting of the organization.
Analysis of the extent of disclosure made in regards to organizational
objectives
In the annual report presented by Woolworths it has been seen that Woolworths has been
concentrated on evaluating the current financial status in order gain knowledge on how they are
meet three annual objectives. Eminently, the financial reports of an association help to decide
the execution of the objectives in the current monetary year and the budgetary strength of the
firm in the market (Loughran and McDonald, 2014). Notwithstanding that, it gets an
unmistakable comprehension of the money related instruments or different bookkeeping
presumptions instructed are embraced by the association. Notwithstanding that, it makes a note
of the bookkeeping arrangements that are connected by the association in the planning of the
money related proclamations. For the most part, it is seen that the materiality part of
bookkeeping is one of the key ideas that is connected in the planning of the books of records
(Leuz and Wysocki, 2016). Likewise, there is a few other money related angle that should be
taken into account while making budgetary detailing. Concerning that, the Australian
Accounting Standards Board has set out a few gauges that take into account. In order to meet
organizational objectives it is very important that the organization uses their financial report and
comparing the budget objectives with the actual result and then evaluating on the current
financial performance of the company. It is seen that the company has effectively prepared their

report in such a way that it is easy to interpret the current financial performance of the company
in the market (Martínez‐Ferrero et al. 2015).
Conclusion
It is observed that the project is based on the accounting methods and financial statements and
their implications and utilization. It is to be noted that the firm has various authorities and
interested parties that are involved with firms activities and thus these parties and authorities
keep a close observation on the accounting and financial aspects of the firm. Hence, the firm
needs to maintain the accounting statements and transaction entries properly that should be of
high quality. These are done for the smooth and efficient operations of the firm in the accounting
year.

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