Accounting Theory: Critical Analysis of GPFR - AGL Energy Limited

This report critically analyzes the application of General Purpose Financial Reporting (GPFR) to AGL Energy Limited, an Australian public corporation involved in electricity and gas generation and retailing. The analysis evaluates various factors on different measurement bases, relying on the conceptual framework and compliance with the Corporations Act 2001 and AASB 1039. It examines the intended audience and objectives of the conceptual framework, emphasizing its role in enhancing financial standards. The report also assesses AGL Energy Limited's financial statements, including assets, liabilities, equity, revenue, receivables, plant, property, and equipment (PPE), and depreciation, in relation to the conceptual framework. The study concludes that AGL Energy Limited adheres to the stipulations of the Corporation Act-2001 and ASX listing rules and recommends the presentation of continuous disclosures to aid investors in understanding the corporation's financial performance.

Running head: ACCOUNTING THEORY
Accounting Theory
University Name
Student Name
Authors’ Note

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Table of Contents
Introduction................................................................................................................................2
Analysis: Theory Support..........................................................................................................3
Conclusion and Recommendation..............................................................................................8
Reference..................................................................................................................................10

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Topic: Critical analysis with application to General Purpose Financial Reporting
(GPFR) by corporations
Introduction
The general purpose financial reporting (GPFR) is necessarily a means of communicating
pertinent as well as dependable information regarding a reporting entity to various users.
Essentially, the primary purpose of the general purpose financial reporting (GPFR) is to
deliver the base of conceptual framework. Also, the objective is also to present pecuniary
information as regards the reporting unit that is effective for subsisting as well as potential
financiers, lenders along with creditors in arriving at decisions. The main purpose of the
study at hand is to elucidate illustratively regarding application to general purpose financial
reporting with special reference to the reporting entity AGL ENERGY LIMITED.
AGL ENERGY LIMITED is fundamentally an Australia listed public corporation engaged in
the process of generation as well as retailing of electricity as well as gas particularly for the
residential along with commercial usage (Agl.com.au 2018).
Analysis: Theory Support
The report necessarily explicates in detail evaluation of various factors on different
measurement bases relying upon conceptual framework of AGL ENERGY LIMITED. The
financial statements of the firm are prepared as per the Corporations Act of the year 2001 and
Accounting Standard of AASB 1039 Concise Financial Reports. As presented in the annual
report of the corporation, the concise financial assertions are necessarily an extract from the
specific financial statements and disclosures stated in the concise financial assertions
(Deegan 2013). These are deduced from entire financial statements of the firm AGL Energy
Limited. The concise financial assertions in their viewpoint comply with the Accounting

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Standards AASB 1039 Concise Financial Reports. As per AASB 1039, The Australian
Accounting Standards Board prepares Accounting standards to be prepared and implemented
by different units. The units include entities as required by directive of Corporations Act of
the year 2001 to present financial assertions, government bodies to prepare financial
assertions for government or government sector and entities operating in the private/public
sector (Watts and Zuo 2016). These are reporting business entities or else the ones that
prepare General purpose financial statements. It primarily emphasizes on specific governance
that involves analysis of conformation with directives along with directives of general
purpose financial reporting. This study also illustrates comprehension regarding measurement
concepts along with proper justification from the financial report of the firm AGL ENERGY
LIMITED (Agl.com.au 2018).
Particular audience of General Purpose Financial Report
The main audience of this GPFR are subsisting as well as potential financiers of a business,
debtors along with creditors of the business that are responsible for framing economic
decisions as regards presenting resources to the business enterprise.
Chief objectives/aims of the conceptual framework:
Conceptual framework refers to intentions as well as principles of the general purpose
financial report (GPFR). Fundamentally, conceptual framework can be effective mechanism
that can aid the board of the firm in enhancing financial standards based on particular
principles, ideas as well as themes (Watts and Zuo 2016). Furthermore, it can be hereby
mentioned that individuals accountable for both preparation as well as presentation of
financial assertions can formulate effective and at the same time dependable financial
stratagems of accounting. Contrarily, financial standards can aid in enhancing overall
procedure of adoption of particular scheme and arrangement of accounting.

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In essence, assessment of financial pronouncements of the corporation replicates adherence to
the stipulations mentioned in the directives of particularly Conceptual Framework of
Australian Accounting Standards Board (AASB). For itself, this essentially helps in acquiring
thorough understanding and deep insight regarding purpose of financial announcements,
qualitative exclusivity that consequently institutes efficacies of financial assertions. Even so,
there are different elements of financial statements that can aid users to utilize the acquired
information to formulate economic decisions pertaining firms’ sales, purchases as well as
holdings portfolio, debt instruments as well as settlement of borrowed finances (Watts and
Zuo 2016). Therefore, information regarding revenue, assets, liabilities, equity, receivables
and many others can help users of this financial information regarding capabilities as well as
resources of the corporation. This too can help in analysis of prospects of the enterprise in the
future period.
Analysis of general purpose financial reports:
Diverse measurement concepts (Conceptual Framework):
As rightly indicated by Whittington (2016), the conceptual framework necessarily reflects
intentions along with principles of general purpose financial reporting. In actual fact, the
conceptual framework is an effective tool that can aid the entire board of the firm in the
procedure of development of financial standards based on diverse notions. Also, conceptual
framework also assists preparers of particular financial assertions to develop effective and
simultaneously reliable stratagems of accounting whilst the financial standards can validate
the selection of specific plan of accounting (Christensen et al. 2016). Apart from this, the
conceptual structure also upholds the entire course of understanding with analysing standards
of accounting. Furthermore, specific intention as well as functions of the conceptual structure

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is also to augment entire structure of firm’s financial coverage by delivering an absolute,
reframed as well as understandable set of principles.
The financial assertions of the firm AGL ENERGY LIMITED, conforming to the
“Conceptual Framework” assists in handling different intentions of the financial statements,
different quantitative exclusivity that consequently assists in establishment of usefulness of
financial reports of the firm. Nevertheless, there are necessarily various components that can
facilitate in the process of devising the whole economic reports (Baxter 2014). As such, the
obligatory workings of financial declarations comprise of assets/ liabilities (including both
current as well as non-current ones) as well as shareholders’ equity. Diverse items of
financial assertions explicates overall financial state of affairs of the business enterprise (Hui
2015). In addition to this, the framework also aids in procedure of investigation of financial
state of affairs of business enterprise from standpoint of income, functional expenditure as
well as earnings. Above and beyond, the conceptual framework (CF) also explicates
illustratively varied principle together with important features for identification and
acceptance of diverse items in pecuniary assertions of enterprises.
Evaluation of different items of financial reports of AGL Energy Limited
Analysis of financial statement primarily refers to review of consolidated financial
declaration of the corporation AGL Energy Limited. The pronouncements of the firm are
presented according to directives stated under Australian Accounting Standard Board
(AASB) 1039 and Corporation Act of the year 2001. In essence, AASB 1039 cannot spell out
whether a particular concise financial report formulated under the derivative 314 of the Act is
a general purpose financial report (GPFR) within the connotation illustrated in “Accounting
Standard AASB 101” as preparation as well as presentation of firm’s financial Statements.

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Assets: As said in the yearly pronouncements of the enterprise AGL Energy Limited”, assets
recorded for AGL Energy Limited is $14604 million (Agl.com.au 2018). The assets of the
firm possessed are necessarily expressed in terms of operational currency that is essentially
Australian Dollars. Nevertheless, process of analysis of assets mentioned in financial
assertions replicate that the assets can be classified as held for sale (Ryan et al. 2014). The
fair value of the current assets of the firm is necessarily presented at current value.
Liabilities: As mentioned in the economic pronouncements in the yearly report of the firm,
liabilities of the corporation AGL Energy Limited is listed to be apprpoximately $6678
million (Agl.com.au 2018). In actual fact, balance sheet of the firm mentions about the
liabilities of the firm that reflects funds that is used for financing various business operations.
Evaluation of financial assertion represents that liability is presented in terms of operational
currency of the firm (Newberry 2015). The liability registered for the firm is specified at
specific fair value of diverse plan liabilities after appropriate subtraction of definite present
worth of distinct benefit necessities.
Equity: A methodical study of balance sheet of the business enterprise reveals that equity
recorded for firm’s shareholders stands at $7926 million during the year 2016 (Agl.com.au
2018). According to the annual financial pronouncements of the firm, AGL utilizes financial
instruments (that is specifically derivatives), derivatives is presented at fair value in the profit
as well as loss statement enumerated at fair value (Luke 2016). Thus, it can be said that
company utilizes diverse models/themes on accounting the derivatives that has the need of
fair value measurement.
Revenue: Revenue of the firm is recorded to be $11150 million during the year 2016
(Agl.com.au 2018). The financial statements of the firm reveal that the revenue of the firm is
calculated at the fair value received. Revenue can also be calculated dependably (Dagwell et

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al. 2015). At the time when particular services are not delivered but the entire group is
obliged to present services in the future period, recognition of revenue gets deferred.
Receivable and bad debts and doubtful debt
As per the financial statement of the corporation, receivable of the firm AGL Energy Limited
is recorded to be $1975 million in 2016 in comparison to $1894 million in 2015 (Agl.com.au
2018). Receivables as stated in financial assertions take in current as well as non-current
receivables. Declarations replicate increase in receivables of the corporation. Essentially, this
increase in the accounts receivables shows the way towards increase in debtors as well as
sundry debtors (Henderson et al. 2015). In addition to this, the corporation necessarily
identifies the receivables at the fair value and calculates the same at amortised cost utilizing
specifically interest method after deduction of disbursements for the purpose of impairment.
In itself, it can be hereby mentioned that this is an optimal framework for capital that cam aid
in reducing overall debt level and enhancing firm’s liquidity. In essence, this can augment
overall return (Yong et al. 2016).
Plant, property as well as equipment: According to the yearly pronouncement of the
corporation, plant, property in addition to equipment (PPE) of the enterprise is registered to
be approximately $47 million in the year 2016 (Agl.com.au 2018). Nonetheless, plant,
property in addition to equipment (PPE) of the corporation has decreased considerably during
the current year 2016 in comparison to the previous year period. The reports reflected the fact
substantial decrease in PPE. Analysis of financial assertions replicated non-recurring fair
value enumeration for the PPE that can be categorised as held for sale. In essence, this can be
classified as the fair value platform that is founded on the use of diverse mechanisms for
review (Watts and Zuo 2016).

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Depreciation: According to the yearly monetary statement of the firm AGL Energy Limited,
it can thus hereby be pointed out that depreciation as well as cost of amortization is recorded
to be $99 million after reduction following from diverse non-cash impairment to the firm
(Agl.com.au 2018). This figure on depreciation and amortisation is said to have increased
from the level of $89 million registered during the year 2015.
Conclusion and Recommendation
Therefore, in the end it can be said that preparers of financial assertions necessarily adheres
to the stipulations mentioned under Corporation Act- 2001 in conjunction with listing set of
laws mentioned under particularly Australian Stock Exchange- ASX. In addition to this,
management of the firm has undertaken the stratagem of delivering constant disclosures that
sequentially can aid various investors in gaining a clear understanding as regards financial
performance and condition of corporation. In essence, AASB 1039 cannot spell out whether a
particular concise financial report formulated under the derivative 314 of the Act is a general
purpose financial report (GPFR). However, as per AASB 1039, The Australian Accounting
Standards Board prepares Accounting standards to be prepared and implemented by different
units. The units include entities ones that prepare General purpose financial statements
among others. Financial assertions of the firm AGL ENERGY LIMITED effectually adheres
to the conceptual framework Australian Accounting Standards Board (AASB) or else
principle models of IASB. Management of the firm can consider presentation of continuous
disclosures that can help in enhancing financier’s confidence as regards integrity,
dependability as well as transparency of functions of the corporation along with financial
statements presented by the firm. This can require faithful representation of information and
relevance (fundamental qualitative characteristics) and enhancing qualitative characteristics

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(comparability, verifiability, timeliness and understandability). This way user of information
can frame their economic decisions more seamlessly.

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Reference
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