HA3011: Fisher & Paykel Reporting Entity Analysis - Holmes Institute

This report examines Fisher & Paykel Healthcare as a reporting entity, focusing on its adherence to Australian Accounting Standards Board (AASB) guidelines and the significance of differential reporting. It delves into the concepts of general-purpose and special-purpose financial reports, highlighting the rules and regulations governing reporting entities. The analysis covers the fundamental characteristics maintained in the financial framework, including relevance, reliability, understandability, and comparability. It assesses Fisher & Paykel's characteristics, such as its size, global presence, and the number of dependent users, to justify its classification as a reporting entity. The report concludes by emphasizing the importance of general-purpose financial reports in differential reporting and the role of accounting bodies in regulating reporting entities. Desklib provides access to similar solved assignments and past papers for students.

Running head: FISHER AND PAYKEL HEALTHCARE - A REPORTING ENTITY
FISHER AND PAYKEL HEALTHCARE - A REPORTING ENTITY
Name of the student
Name of the university
Author’s note

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FISHER AND PAYKEL - A REPORTING ENTITY
Executive summary
The aim of the project is to discuss the reporting entity concept. It highlights the significance
of differential reporting standards used in Australia. The project highlights the related rules
and regulations related to reporting entity. The concept of general purpose financial report
and special purpose financial report are also discussed in this study. The project takes
example of Fisher and Paykel healthcare to highlight the key elements of a reporting entity.
The project concludes that the preparation of general purpose accounting reports are key
element of differential reporting. The role of the accounting bodies in regulating the reporting
entities is also discussed in this report.

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Table of Contents
Introduction.................................................................................................................................3
Definition of Reporting Entity......................................................................................................3
Definition of reporting entity as per AASB...............................................................................3
Identification of Reporting Entity.............................................................................................4
Fundamental Characteristics Maintained in Financial Framework.............................................4
Recognition of Fisher and Paykel Healthcare as a Reporting Entity......................................5
About the company.................................................................................................................5
Characteristics that Fisher and Paykel show as a reporting entity.........................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
AASB is a government body set up under the Australian Securities and Investments
Commission Act 2001. It helps to evaluate the accounting standard. It provides guidance that
are required to prepare financial reports. It also provides guidelines related to quality of
information that are required to be maintained in financial reports. The two basic quality
defined under this is relevance and the other is faithful representation. The standards related
to reporting entities were introduced in 1990. AASB defines the reporting entity under its
statement of accounting part 1. The corporation act 2001 specifies the different types of
entities and what are the types of financial reports, they need to prepare. Different
government bodies which are involved in making and regulating the rules and guidelines for
reporting entities in Australia are ASIC (Australian Securities & Investments Commission) and
Australian Accounting Standard Board. The different AASB sections which defines the
working of reporting entity are AASB 104, AASB 107, AASB 108 and AASB 101. These are
the major sections which defines the criteria of financial reporting by reporting entity
(Aasb.gov.au, 2020).
Definition of Reporting Entity
Statement of accounting concepts generally known as SAC discusses about the
reporting entity in detail. It defines the standards on which basis a company can be called as
a reporting entity. It clarifies the conditions following which an entity can start working as a
reporting entity. This statement defines the qualities of an entity to make the entity qualify as a
reporting entity. In addition to it, the statement also guides reporting entity to prepare general
purpose financial report rather preparing special purpose financial report which are prepared
by non-reporting entity. But it do not compel the reporting entity to follow any specific methods
and techniques for preparing and presenting the financial information because these are
discussed by the Australian accounting standard. When any entity is considered as reporting
entity, it is required to prepare general purpose financial report while a non- reporting entity
required to prepare special purpose financial report. SPFRs follow limited disclosure policy
as compared with GPFRs. SAC 2 defines the objective and aim of general purpose financial
statements and it was introduced in the year 1990. Moreover, SAC 3 defines the quality of
characteristics concerning information recorded in financial report while SAC 4 identifies the
financial elements to be recorded in accounting reports. These guidelines continue to serve
the accounting purpose until new statutory guidelines come replacing these (Stuchbery 2017).
Definition of reporting entity as per AASB
Australian accounting standard board states that any entity which prepares the financial and
accounting report as per the Australian accounting standard’s conceptual framework are
reporting entities.
The key terms needed to be discussed are:
Economic entities are organizations consisting of other controlling organizations to achieve
an organizational goal concerning with the controlling organization (Bulatova et al. 2019).
General purposes financial reporting- General purpose report used for financial information
presentation are the financial reports used for several accounting users and helps to achieve
several objectives at the same time. These are prepared by those entities who have wide
number of users and interested parties. The existence of these several users makes the
preparation of the general purpose accounting report, a crucial task for a reporting entity.
These statements are prepared to help the interested parties taking better decisions.

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GPFRs are generally prepared by reporting entity but non-reporting entities may also prepare
it as it can help the non-reporting entity to market its business and can increase the users
base for its business. The GPFRs are prepared as per the statutory framework which require
full disclosures in the financial report but full disclosure can increase the threat of giving
competitive advantage to others, so the reporting entity should limit the disclosure under the
limit of statutory regulation (Łapińska et al. 2018).
Special purpose financial report- special purpose financial reports are the statements
which are prepared for general accounting usage and prepared for a limited number of users.
These financial statements are made in addition to the main financial statements to be used
as a summary of the main report for general use. These are made by those organizations
who do not have many interested parties depending on its financial report. The objective of
preparing these reports may be related to specific purpose like recording bank transactions or
tax related purpose (Łapińska et al. 2018).
Australian Securities and Investments Commission – ASIC is a government organization
which controls the activities and functioning of different organizations present in the country.
This organization was established under the ASIC act 2017. This body helps in maintaining
the working of financial industry. It encourages the participation of different users including
investors and public. It maintains the related law concerning reporting entities. The role of
ASIC is to ensure that the companies perform the obligations and practices required under
the corporation act. The companies are required to register their financial statements to the
ASIC registrar. It is concerned with registration of auditors and to look after the financial
reporting. Survey programs are conducted by ASIC to increase the relevance and faithfulness
of financial reporting (Bourova et al. 2018)
Identification of Reporting Entity
A reporting entity is defined and identified by the criteria given under the SAC.
SAC clarifies that the reporting entity status depends on the presence of large number of
users. The basic characteristics of a reporting entity is defined in SAC 1 which are explained
below:
Separation of management from economic interest – the management interest of a
reporting entity must be separate from the influence of economy and politics. If the
management start preparing GPFRs after getting influenced from the outside environment for
their interest, the financial report of the reporting entity cannot show full disclosures and may
not achieve the target of better decision making for its users (Abbott et al. 2016).
Significance of company in economy, politics and finance – those company which has
large market segment and size can have influence on the economy and politics. These large
size entities are generally considered as the reporting entity.
Number of users dependent on the company – High the number of users depended on the
company, higher the chances of making the entity a reporting entity. It is because the main
aim of the reporting entity is to make the decision making process easier and better for its
users. Large number of user means there is a greater chance of impacting the decision of
users by giving more clear information. It also provides a competitive advantage to the
company by gaining trust of the interested parties.
Fundamental Characteristics Maintained in Financial Framework
Relevance and Reliability – relevance is one of the important accounting principle which
help the interested parties in taking better decision. It states that every information recorded in

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financial statements must serve a purpose of decision making. For example- five years old
data may not be so important for the parties but the current year data can be more useful than
it (Herath and Albarqi 2017).
Faithfullness in representation- the concept of faithful representation means each
information which are recorded in financial statements must be true and accurate. It also
represents that the information which are recorded are complete in nature and are not
incomplete. The concept also sees that useful information is not omitted while recording data
as this can hamper the trust of accounting users. While recording any information, biasness of
the management should not be there as it can result in recording wrong and unfaithful data
(Alrabei 2017).
Understandability - the information recorded in the statements must be easily
understandable to the users. Understandability also makes the information relevant to the
users.
Comparability- the information should be recorded following accurate accounting standards,
so that the statements become comparable with one another. There should be consistency in
applying different relevant accounting standards in different accounting period.
Recognition of Fisher and Paykel Healthcare as a Reporting Entity
About the company
Fisher and Paykel Healthcare is a limited liability company which classifies itself as a
reporting entity as mentioned in its annual report. The main business of the company is to
design and make medical devices and medical products. These products are used in
hospitals as well as homes. The office of this company is mainly in New Zealand. It has
spread its market in more than 120 countries. It has been classified as a reporting entity
under part 7 of the FMC act (Financial Market Conduct Act) 2013. The financial reports of the
company are maintained following the Generally Accepted Accounting POLICY (GAAP). The
accounting statements of the company also comply with the International Financial Reporting
Standards (IFRS).
The company as a reporting entity follows all accounting standards as per IFRS and AASB. It
gives full disclosure of the accounting policies and conventions that it is using in its financial
reports and statements.
Characteristics that Fisher and Paykel show as a reporting entity
Size of the organizations and the dependent users – The Company sells its products in more
than 120 countries and is listed on ASX. The company has several users and interested
parties. Thus the company recognize itself as reporting entity to help its users in better
decision making. SAC considers many criteria like sales, volume of operations, assets and
liabilities to consider whether the company can be regarded as a reporting entity or not. The
company has a huge influential effect on economics and politics thus it has been considered
as a reporting entity and needed to prepare the general purpose financial report.
The company’s directors decide whether the company can be regarded as reporting entity or
not and thereafter it get registered under ASIC depending on the requirement of the
interested parties. The company’s directors has shown full disclosures as pre AASB
requirements as per the section 295(4). There is no such compulsion of complete disclosure
for non-reporting entities. These companies which are non-reporting need not to maintain
general purpose reporting statements but Fisher and Paykel is maintaining GPFR as it is a
reporting entity.
Some of the examples of disclosure policy of the company are shown below:

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 The company has stated that it is using historical cost method and unit of
measurement base is NZX in preparing its statements so that the reports can be made
easily understandable and comparable. It is using revenue recognition concept for
recording the revenues in financial statements.
 The company has shown assets and liabilities of all its subsidiaries. All subsidiaries of
Fisher and Paykel Healthcare is wholly owned by it.
 The company has disclosed its recent agreements concerning patents, copyrights and
capital expenditures. Separate notes are shown for patents and trademarks including
their detailed valuation in the annual report.
 The company has disclosed the detailed valuation and classifications of its tangible
and intangible assets and the related estimated and assumptions are also shown
clearly in the annual report.
 PWC, an audit firm worked as an independent auditor for the company. It audit report
shows that the company has made all the information available to the auditor for
auditing purpose. The independent auditor’s report of the company shows that the
financial statements are giving true and reasonable view to its users.
 The company prepares general purpose financial report as per the New Zealand
GAAP and IFRS. It prepares its financial reports as per the Going Concern Convention
which shows that the company is operating in compliance with all regulatory
requirements.
Conclusion
Thus, the project concludes that AASB is playing a significant role in framing the
accounting standards and policies related to different entities including reporting entity. The
study also tries to study the important role of ASIC in regulating the registration of the entities
as a reporting entity. It helps to study the concept like General purpose financial report and
Special purpose financial reports and their role in reporting entity’s evaluation. Different
statement of accounting concepts are studied in detail and shown how they are pertinent in
reporting entity. The study concludes that the Fisher and Paykel Healthcare is a reporting
entity and the same has been disclosed by the company in its annual report. It also gives
examples of its disclosure policy concerning assets and liabilities and regarding different
accounting policies & conventions.

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References
Aasb.gov.au. 2020. Accounting standards. [online] Available at:
https://www.aasb.gov.au/Pronouncements/Current-standards.aspx [Accessed 1 Feb. 2020].
Abbott, L.J., Daugherty, B., Parker, S. and Peters, G.F., 2016. Internal audit quality and
financial reporting quality: The joint importance of independence and competence. Journal of
Accounting Research, 54(1), pp.3-40.
Alrabei, A.M.A., 2017. Perception of Jordanian Banks Employees on the Relationship
between Accounting Information Quality (AIQ) and Documentary Credits. International
Journal of Applied Business and Economic Research, 15(19).
Baboukardos, D. and Rimmel, G., 2016. Value relevance of accounting information under an
integrated reporting approach: A research note. Journal of Accounting and Public Policy,
35(4), pp.437-452.
Bourova, E., Anderson, M.E., Ramsay, I. and Ali, P., 2018. Impacts of Financial Literacy and
Confidence on the Severity of Financial Hardship in Australia. Australasian Accounting,
Business and Finance Journal, 12(4), pp.4-23.
Bulatova, O., Shabelnyk, T., Chentukov, Y. and Marena, T., 2019, October. Modeling of the
Control System of Business Processes of Management of Region as an Economic Entity. In
2019 7th International Conference on Modeling, Development and Strategic Management of
Economic System (MDSMES 2019). Atlantis Press.
Herath, S.K. and Albarqi, N., 2017. Financial reporting quality: A literature review. Int. J. Bus.
Manag. Commer, 2(2), pp.1-14.
Łapińska, J., Voss, G., Huterski, R. and Huterska, A., 2018. The use of financial and non-
financial information from general purpose financial reports by tax advisers in Poland. of
Business Economics, Management and Marketing 2018, p.146.
Stuchbery, T.V., 2017. The Reporting Entity Concept in Australia: An Exploration of the
Impact and Comparison to International Standards (Bachelor's thesis, Università Ca'Foscari
Venezia).