Company and Financial Reporting: Australian Context Analysis

This report provides a detailed analysis of financial reporting, particularly focusing on the Australian Accounting Standards Board (AASB) 15, which governs revenue recognition from contracts with customers. The report explains the regulatory requirements and standard-setting within the Australian context, using National Australian Bank Limited (NAB) as a case study. It outlines the key aspects of AASB 15, including the five-step revenue recognition model, disaggregation of revenue, and contract balances. The report discusses the potential impacts of AASB 15 on NAB, including changes to revenue recognition, and provides an investor's perspective on evaluating the bank's financial performance. The report also examines the implications of the new standard across various areas of the business, such as systems, internal controls, business operations, tax, HR, and investor relations, while concluding that AASB 15 has worked effectively regarding to present financial information of bank.

Company
And
Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
PART B............................................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial reporting reflects the performance to the public and the management. Financial
reports of company has been provided financial information about how they are performing in
any quarter of the year (Noronha and et.al, 2013) . Most of the reports of the company has been
prepared on a quarterly and annual basis. Through these reports management can take effective
decision as well as prepare strategy for company to present data in the report. The objective of
the report to explain the regulatory requirements and standard setting of financial reporting in the
Australian context. To understand the concept national Australian bank limited which is listed
into ASX limited as public bank. In the report consist of revenue recognition and measurement
according to AASB 15. Apart from discuss about potential impact to follow AASB 15 in
National Australian bank limited.
PART A
1) The new revenue standard (AASB 15 Revenues from contracts with customers)
follows by each industry and every business from 1 January 2018. The new standard has been
designed to trading with customer contracts and involve business models, involve contracts that
bundle goods and services, contingency pricing arrangements, goods or services that are
delivered on time, licensing agreements and other complex arrangements. The particular
standards has been affected to individual companies in big way because changes can be
addressed. There are required to AASB 15 to disclose objectives, an entity must disclose
sufficient information to modify users of financial statement to understand the nature, amount,
uncertainty and timing of revenues and cash flows origin from contracts with customers.
The new standard has been introduced because Financial accounting standards board
(FASB) received many feedbacks regarding to revenue recognition guidance was fragmented at
best and confusing at worst. So as responses of feedback they were issued AASB 15 for revenues
with customers. To recognise revenues firstly identify of contract then combination of contract as
well as modify contract in appropriate manner. It further identify performance obligation in
reference to promise in contract with customers and different between goods or services. The
objective to disclose requirements due to sufficient information to alter users of financial
statements in order to understand cash flow, uncertainty, nature, amount and timing (Zeff, 2013)
. There are identified revenue recognition as per AASB 15 -
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 Contracts with Customer – There is need to revenue recognition because all amounts
related to income statement which have been disclosed to preparing report unless those
amounts are presented separately in the statement of comprehensive income as per new
standards. (1) The revenue has been recognised from contracts with customers, which the
entity shall disclose separately from its other sources of revenues. (2) To know
impairment loss need to analysis revenues on the basis of receivables or contract assets
origin. These are generated from different customers entity which can recognised
separately from other contracts.
 Disaggregation of Revenue – (1) Through an entity identified revenues which is related
to contracts with customer into divided that depict bout the nature, amount, timing and
uncertainty of revenues and there are cash flow affect by economic factors. An entity
shall can follow the guidance in particular paragraphs and there is categorised to use to
disaggregation revenue. (2) It further an entity can disclose all sufficient information in
front of users of financial statement because with the help of these information they can
understand relationship between the disclosure of disaggregated revenue. All specific
revenue information is disclosed for each reportable segment (Tanyi and Smith, 2014) .
 Contract balances – There are revenue recognised in the reporting period because it has
been included into contract liability balance at the starting of the period. As well as the
revenue recognised in the reporting time period because performance obligation need to
satisfied on the basis of previous period.
As per the AASB 15 need to require of revenues recognition in order to contract with
customers, disaggregation of revenues as well as for contract balances.
(2) Measurement of revenues means all types revenues has been measured on fair value
to receivables of consideration. The particular amount arisen on a transaction which is usually
determined through agreement between the entity and buyer or user of the assets. In the new
comprehensive framework of AASB 15 apply five steps revenue recognition model which can
help to recognise revenues as well as in measurement. These are -
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Identify the contract with the customer
↓
Analysis the performance obligation in the contract
↓
Evaluate the transaction price
↓
Circulate the transaction price to each performance obligation
↓
Recognise revenue when performance obligations are satisfied
As per the these models has been measured of revenues and there are following step by
step, in first step identify those customer who can relate to contract after then determine the
performance obligation regarding to contract. Analysis the transaction price which can written
into contract. The transaction price set by both parties and on the basis of the price analysis of
revenues for future aspects. To oblige of performance circulate to all people who is related to
these transactions. After than in effective manner recognise to revenues to satisfy in effective
manner other wise create many problems (Fernandez-Feijoo, Romero and Ruiz, 2014) . For
revenue measurement first need to analysis of transaction price which can recorded into financial
statements. The terms of the contract as well as customary business practices to analysis of
transaction price. These price based on the consideration amount where an entity expects to be
entitles and exchange to promised goods and services. After transaction price consider variable
consideration in order to know discounts, refunds, rebates, credits and incentives. With the help
of output methods recognise revenues after then direct measurement of the value to the customer
of the goods or services divert to as per the date recognition. It can affect to variable
consideration, constraining estimate of variable consideration, the existence of a significant
financing component in the contract, non cash consideration and consideration payable to a
customer.
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PART B
The particular new standard is designed for industry and all enterprises have to apply the
same model and there are not provided specific guidance regarding to standards in reference to
any company. However, it is based on the nature of contracts which is different for all industries
in specific manner to these model might have more significant impacts as per the industries
rather than to others. In reference to annual report of national Australian bank limited, AASB 15
which name is “Revenues from contracts with customers” has been based on five step model and
apply on the bank to recognise revenues and introduce the concept of revenues measurement to
provide satisfaction through obligation. For prepare of financial report of the bank that time can
not applied because it can not effective (Huang, Tsaih and Yu, 2014) . The future impact of the
particular standard is still being determined and it can not applicable until 1 October 2018.
On the basis of annual report of 2018, group of bank followed AASB 15 from 1 October
2018. Following commission considers as basic revenue stream which can impact by the
transition to AASB 15 and the group of the bank analysis that it has no substantive ongoing
performance obligation in order to trailing commission and therefore is need to forecast the
present value of trailing commission it is entitled to gather and identify that forecast as a contract
asset. In the contact of asset has been adjusted to retained earnings which are not material to the
group's financial statements. There are not recognised material transition adjustments were
analysed.
As per the investor perspectives evaluate the financial performance and financial position
of the bank which can help to investors to determine performance of company. The bank adopted
on 1 October 2018 AASB 15 after that analysis all contracts with customers and statement of
comprehensive income present net profit for the year from continuing operations which is $5219
in 2018 as compare to 2017 in $4975. So after implementation there are not coming effective
effect. The particular standard after implication impact on the bank as timing and amount basis to
identified revenues. The particular changes has been showed implications in numerous number
to across the area in the business. There are point out some particular areas which is related to
implement business in effective manner -
 Systems and Processes – After apply the standard improve system to arrange financial
information and expand to reports as per requirement in additional way.
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 Internal control – It will influence to end to end process to modify principles which is
related to financial information (Serafeim,2015) .
 Business Operations and contracts – There is modifying to contracting procedure as well
as legal terms that will impact on potential deals and transactions.
 Tax – There are considering timing of revenue recognition that can affect to cash tax
paid. The tax has been showed how much profit earn by bank after on particular revenue
apply tax at fixed rate after that Remaining amount known as net profit of the year
(Trigo, Belfo and Estébanez, 2014).
 HR and remuneration structure – The compensation and short term incentive plans and
structure. There are formulating and apply efficient communication to produce plans to
affected business and stakeholders. There are developing and delivering training and
financial tools to understand the standards in efficient manner.
 Investor Relations – When bank has been presented reports in effective manner so they
are attracting from company and take interest to invest in company. To provide guidance
use key performance indicator which can show financial and non financial indicator. It
can fulfil the expectation of after adaptation of particular standard in impressive manner.
To analysis financial performance calculate financial ratio of the bank which can provide all
appropriate information and help to analysis potential impact of a bank, which is -
Profitably Ratio – The particular ratio has been classified in financial metrics which is
used to analysis of capability of business to gain much more earning and relative their revenues,
operating cost, balance sheet assets and shareholders equity over time to apply data from a
particular time period (Cheng and et.al, 2014) . There are calculate ratio of bank -
Net profit margin = Net profit / sales *100
5288 / 8986*100 = 58.84
After apply the new standard get much more benefits and they can take all appropriate
information which is related to financial performance. In 2019, annual report impact in positive
way and create good relation with investors and build up effective income statement where
present information in appropriate manner. From financial report it is getting that bank has been
fulfil their objectives and get sufficient amount of profitability. After apply the new standard the
bank has been use five model approach to show all transaction fees and show contacts with
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customers to their investors to attract for investment purpose and the standard make financial
performance strong.
CONCLUSION
As per the above report it has been concluded that the new standard AASB 15 has been
worked in effective manner regarding to present financial information of bank. The standard to
apply on the financial statement that to establish the principles that an entity shall apply to report
useful information to users of financial statements about the nature, amount, timing and
uncertainty of revenues and cash flow arising to tackle different types of customer. After
implication of particular standard on the company it can show good effect and help to shoe
financial information in effective manner. Readers easily get all appropriate information in
reference to revenue recognition and measurement.
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REFERENCES
Books and Journals
Noronha, C. and et.al, 2013. Corporate social responsibility reporting in China: An overview and
comparison with major trends. Corporate Social Responsibility and Environmental
Management. 20(1). pp.29-42.
Zeff, S. A., 2013. The objectives of financial reporting: a historical survey and
analysis. Accounting and Business Research. 43(4). pp.262-327.
Tanyi, P. N. and Smith, D. B., 2014. Busyness, expertise, and financial reporting quality of audit
committee chairs and financial experts. Auditing: A Journal of Practice & Theory.
34(2). pp.59-89.
Fernandez-Feijoo, B., Romero, S. and Ruiz, S., 2014. Commitment to corporate social
responsibility measured through global reporting initiative reporting: Factors affecting
the behavior of companies. Journal of Cleaner Production. 81. pp.244-254.
Huang, S. Y., Tsaih, R. H. and Yu, F., 2014. Topological pattern discovery and feature extraction
for fraudulent financial reporting. Expert systems with applications. 41(9). pp.4360-
4372.
Serafeim, G., 2015. Integrated reporting and investor clientele. Journal of Applied Corporate
Finance. 27(2). pp.34-51.
Cheng, M. and et.al, 2014. The international integrated reporting framework: key issues and
future research opportunities. Journal of International Financial Management &
Accounting. 25(1). pp.90-119.
Trigo, A., Belfo, F. and Estébanez, R. P., 2014. Accounting information systems: The challenge
of the real-time reporting. Procedia Technology. 16. pp.118-127.
Online
National Australian bank limited. 2018. [Online]. Available through:
<https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/2018-
annual-financial-report.pdf.
National Australian bank limited. 2017. [Online]. Available through:
<https://capital.nab.com.au/docs/NAB-2017-annual-financial-report.pdf>
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