AP Eagers Limited: Analysis of Conceptual Framework Compliance

This report provides a comprehensive analysis of AP Eagers Limited's financial reporting practices in relation to the conceptual framework. It begins with an executive summary and an overview of the company's background as an ASX-listed automotive retail group. The report then delves into the measurement requirements of the conceptual framework, examining the company's use of historical cost and fair value in measuring assets and liabilities, and its adherence to relevance and faithful representation. The analysis continues with an assessment of the fundamental and enhancing qualitative characteristics of financial information, including comparability, verifiability, timeliness, and understandability. Furthermore, the report evaluates the ability of users to utilize AP Eagers Limited's financial statements for decision-making, considering the objectives of the conceptual framework, such as disclosing information about financial position, performance, and cash flows. It also addresses the knowledge needed for business analysis and the requirements for general-purpose financial reporting. The report concludes with recommendations for improving financial reporting practices, such as implementing internal audits and ensuring proper revenue recognition and disclosure of goodwill impairments.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
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Executive Summary:
The report focused on evaluating the various aspects of the conceptual framework for AP Eagers
Limited, an ASX listed organisation. The paper has highlighted the adherence to the
measurement requirements of the conceptual framework in the context of the organisation.
Secondly, it has emphasised on analysing the compliance of the company to the qualitative
features of the framework. The next segment depicts the validity of the financial statements of
the firm in order to assist the users in making effective decisions. Finally, the report has
concentrated on evacuating whether more than primary accounting knowledge is needed for the
users to analyse the financial reports.

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Table of Contents
Introduction:....................................................................................................................................3
Background of AP Eagers Limited:.................................................................................................3
Measurement requirements of the conceptual framework:.............................................................3
Fundamental qualitative characteristics:..........................................................................................7
Enhancing qualitative characteristics:.............................................................................................9
Ability of the users to use the report for making decisions:..........................................................11
Knowledge needed for business analysis:.....................................................................................16
Requirements for general purpose financial reporting:.................................................................16
Conclusion and recommendations:................................................................................................16
References:....................................................................................................................................18

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Introduction:
The accounting norms are to be complied by all listed entities for performing their
financial reporting initiatives. With the help of such compliance, certain accounting as well as
financial reporting related issues could be avoided. The identical situation could be observed in
case of ASX listed entities, as it is necessary for them to conform to the required guidelines of
the conceptual framework. The conceptual framework for financial reporting could be observed
in Australia, which is provided by IFRS and the standards are to be complied with the business
organisations. The report is prepared with the intent of analysing the extent of conformance to
the different accounting sections of the conceptual framework by AP Eagers Limited.
Background of AP Eagers Limited:
The organisation is one of the oldest listed automotive retail groups in Australia (AP
Eagers 2018). The core business of the entity comprises of the operations and ownerships of
motor vehicle dealerships. It provides facilities including the sale of used and new vehicles,
parts, services along with facilitating allied consumer finance.
Measurement requirements of the conceptual framework:
All ASX listed entities are required to take into account the measurement requirements in
their process of financial reporting for complying with the conceptual framework and AP Eagers
Limited is not an exception to this case as well. According to this framework, the entities require
reporting their liabilities and assets via two bases of measurement and they constitute of
historical cost and fair value (Beattie 2014). Moreover, in this framework, assets are to be treated
as resources for the organisations and they develop due to the future economic benefits and past

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events. Conversely, liabilities are the present obligations for the entities arising out of past events
leading to resource outflows (Aasb.gov.au 2018). Equity could be deemed as residual interest
after total liabilities are subtracted from total assets.
In a similar manner, it is necessary for the entities to take into account the realisations of
the various financial statement elements. For this, two particular conditions are to be considered
at the time of realising the financial statement elements. Firstly, categorisation needs to be made,
if it is probable that future benefits associated with the items would stream from the listed
entities. Lastly, recognition is needed for these items; in case, they have specific cost values for
reliable measurement (Chen, Feldmann and Tang 2015).
After analysis of the annual report of AP Eagers Limited in 2017, the entity has used fair
value and historical asset for measuring its assets and liabilities.

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The above extracts make it evident that AP Eagers Limited has utilised historical cost and
fair value for measuring assets and liabilities based on business requirements. In accordance with
the historical cost method, the company has measured its assets and liabilities in a way providing
monetary information about all the line items in its various financial statements. However, in fair
value accounting, AP Eagers Limited has measured liabilities and assets based on the current
value by giving necessary information at the measurement date.
However, the organisation is required taking into account other factors for choosing the
bases of measurement. Out of such factors, one of them is relevance that could be identified from
the annual report of the entity, as it has published financial information for both 2016 and 2017.
Along with this, adequate conformance has been assured with IFRS, AASB and Corporations
Act 2001 ensuring faithful representation of the published financial information.

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Fundamental qualitative characteristics:
Two fundamental characteristics are evident in the conceptual framework and they are
demonstrated briefly as follows:
Faithful representation:
If faithfulness is ensured in financial information, it becomes easy for the users to make
effective decisions. In order to assure faithful representation, it is necessary that the financial
information should be complete, free from errors and neutral (Cheng et al. 2014). From the 2017
annual report of AP Eagers Limited, it is evaluated that the organisation has complied effectively
with Corporations Act 2001, AASB and IFRS. Since compliance is made effectively with these
aspects, the financial information of AP Eagers Limited could be said to have faithful
representation.
Relevance:

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When relevancy is present in financial information, the users would be affected positively
for undertaking decisions. Hence, it is essential to ensure the presence of predictive as
confirmatory values in the financial statements of the organisation (Henderson et al. 2015).
When there is presence of predictive values, the users would find it easy in projecting future
results. By using the latest annual report, the users could project future results by assessing
financial position of AP Eagers Limited in 2016 and 2017 (Apeagers.com.au 2018).
In addition, confirmatory value is evident in financial information at the time the users
possess the ability of providing feedback about the previous accounting events. From the annual

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report of AP Eagers Limited in 2017, the users could gather financial information for the past
year 2016 as well.
Enhancing qualitative characteristics:
In accordance with the conceptual framework, four enhancing qualitative characteristics
are evident in financial information, which are stated as follows:
Comparability:
In the presence of this specific characteristic, the users could find it easy to identify and
understand the common features and differences associated with the different financial items of
the listed entities. It has been identified from the annual report of AP Eagers Limited in 2017, all
financial information related to the mentioned year and that of the previous information is

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published in tabular formats. With the help of these formats, the users could compare the
financial information of the organisation with its rivals and different timeframes.
Verifiability:
If there is evidence of this specific characteristic, the users of financial information could
utilise independent observations and knowledge for reaching a conclusion (Lang and Stice-
Lawrence 2015). There could be direct or indirect verification. In accordance with the 2017
annual report of AP Eagers Limited, considerable disclosures are made as financial notes. This
has helped the users to utilise direct or indirect knowledge so that the accounting information of
the entity could be verified.

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Timeliness:
Timeliness ensures that the necessary financial information is delivered at the time of
making valuable decisions. The past information is less effective in the decision-making process.
It has been identified from the annual report of AP Eagers Limited in 2017; it has disclosed
essential financial information for 2016 and 2017.
Understandability:
By using this characteristic, the organisations find it easy to categorise and depict
financial information in a clear and concise way so that the users could understand in a better
manner (Spiceland et al. 2018). It could be observed from the annual report of the organisation
that it has published its financial information in an understandable and simple format supported
by relevant justifications of the various accounting treatments to be published as financial
footnotes. Such aspects have helped in increasing the overall user understandability.
Ability of the users to use the report for making decisions:
Before the financial statements are used for decision-making purpose, all organisations
should comply with the conceptual framework objectives. The initial objective requires listed
entities to disclose essential information about their financial position as well as economic
resources that could be observed in balance sheets.