Medibank & Conceptual Accounting Framework: A Compliance Report

This report provides a critical analysis of Medibank, an ASX Top 100 listed company, and its effectiveness in meeting the obligations of the accounting conceptual framework. It addresses the conceptual framework's objectives, recognition criteria for assets, liabilities, revenues, equity, and expenses, and qualitative aspects such as relevance, verifiability, timeliness, comparability, understandability, and faithful representation. The analysis considers Medibank's adherence to Australian Accounting Standards Board (AASB) regulations and the Corporations Act 2001. The report highlights areas where Medibank complies with the framework and identifies potential issues, such as disclosures related to health benefits fund acts and control over assets and liabilities. It also discusses the company's revenue recognition, expense realization, and equity segmentation. The audit report of Ernst and Young indicates that the financial statements of the corporate firm are represented faithfully that compiles with all the required accounting standards.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the University:
Name of the Student:
Authors Note:

1CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
1. Introduction:....................................................................................................................2
2. Addressing conceptual framework objectives:................................................................2
3. Addressing conceptual framework-based recognition criteria:.......................................4
3.1. Assets........................................................................................................................4
3.2. Expenses...................................................................................................................5
3.3. Revenues...................................................................................................................6
3.4. Liabilities..................................................................................................................6
3.5. Equity........................................................................................................................7
4. Addressing qualitative aspects of conceptual framework:..............................................7
4.1. Relevance..................................................................................................................7
4.2. Verifiability...............................................................................................................8
4.3. Timeliness.................................................................................................................8
4.4. Comparability...........................................................................................................8
4.5. Understandability......................................................................................................9
4.6. Faithful Representation.............................................................................................9
5. Conclusion:......................................................................................................................9
References..........................................................................................................................11

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1. Introduction:
In recent business surrounding, relevance of the conceptual framework in financial
reporting of the companies is necessary for financial statements preparation. The companies are
offered with all important action course in alignment with doctrines and techniques needed for
financial statements preparation (Bamber and McMeeking 2016). Along with that with the help
of the doctrines and techniques of the conception of the conceptual framework, it is possible to
deal with various business concerns. This also validates that the functions of the conceptual
framework are considered in the context of the financial activities of the business companies.
Considering the same, IASB (International Accounting Standards Board) has introduced such
framework for effective financial reporting purposes.
For this reason, the report is intended to analyze the compliance with criteria of
objectives, recognition along with qualitative aspects of conceptual framework on the behalf of
the organizations (Brusca and Martínez 2016). The organization that is selected within the report
is Medibank that is listed within top 100 listed ASX companies. Medibank is positioned as a
renowned health insurer that has more than 40 years of experience to offer health cover needs to
more than 3.7 million consumers by means of Medibank services such as ahm brands and life
insurance.
2. Addressing conceptual framework objectives:
It is gathered that financial reporting based conceptual framework is an important
requirement for financial management of the business companies. All the vital information is
present within the annual report of Medibank Company regarding the compliance with various

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aspects mentioned within the financial reporting conceptual framework (Bryce, Ali and Mather
2015). This is the reason for which all the corporate organizations totally comply with the norms
set by the conceptual framework of IFRS for better financial reporting. However, this framework
is deemed to have three specific objectives and it is vital for Medibank Company to satisfy all of
them. The 2017 annual report of Medibank indicates that all the doctrines along with regulations
of the “Corporations Act 2001’ and “Australian Accounting Standards Board (AASB)” are
implemented within general purpose financial reporting.
The share price graph of Medibank in above image indicated that the company is dealing
with loss of market share due to several reasons. These include tough competition, high price,
average business performance along with decrasing individual healthcare coverage levels that
aare causing problems for the company. However, investors are recommended to hold the share

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of Medibank in the long term as government legislated boots in premium per year that causes
revenue of the organization to maintain its market share. There are three objectives based on
which a company can abide by the conceptual financial reporting framework that are explained
below:
Offering Helpful Financial Information
Based on the conceptual framework it can be stated that all the companies are responsible
for offering meaningful and valuable financial information to its investors that can facilitate them
in better decision making (Camfferman and Zeff 2015). Through analyzing the annual report of
Medibank Company, it is gathered that vital information is offered to its investors through timely
publishing financial statements. The financial statements of all the listed companies in Australian
stock exchange must include the balance sheet statement along with the cash flow statements in
its finical statements. Along with the same, accounting notes are explained within the annual
report that facilitates the users in gathering necessary information.
Evaluating Amount, Uncertainties and Timing
Another conceptual framework objective is that all the companies is responsible for
offering important and reliable financial information to its investors in analyzing amount, timing
along with uncertainties related with the company’s cash flow position (Di Pietr, Ay, Art and
Ronen 2016). Evaluation of the annual report of Medibank validates the company’s statement of
cash flow in a timely manner and it offers important information to the investors related with the
financial statements.
Organizational Resource Based Information

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As per the third objective of financial reporting conceptual framework, companies require
reporting all important information concerning its resources that assists Medibank Company’s
process of financial decision making. Medibank Company develops its financial position
statement in a manner so that it is in adherence with the AASB regulations (Henderson, Peirson,
Herbohn, and Howieson 2015). The company also offers important information concerning
economic resources is disclosed.
3. Addressing conceptual framework-based recognition criteria:
It is necessitated by the financial reporting conceptual framework that all the corporate
organizations must address the criteria of recognition that is related with the assets, liabilities,
revenues, equity as well as expenses. In addition to that, it also requires to company with three
major needs (James and Prout 2015). The first need is focused on the financial factors that is to
be represented with important information. The second requirement necessitates ensuring faithful
representation of all the financial factors. Finally, the requirement is related with such factors
those are advantageous for the company’s investors. The evaluation carried out in this section
will indicate representation of recognition criteria fulfillment on the behalf of the Medibank
Company.
3.1. Assets
A company is considered to attain different asset groups. In consideration to the property,
plant and equipment aspect it us disclosed through deducting depreciation from the expenses of
assets. The expenses associated with these assets are realized in a situation where the future
advantages are transferred within the company (Junior, Best and Cotter 2014). For the intangible
assets maintained by the company, impairment is observed to be imposed on it. Realization of

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the impairment loss is conducted on the carrying amount of such certain asset classes mentioned
within the financial statements of the company. In case of Medibank Company, there are specific
useful lives for all the tangible assets and for such reasons no amortization is deemed to be
applicable on them (James and Prout 2015). Certain issues have been faced by the company in
maintaining compliance with the division 131 of health benefits fund act that did not consider
disclosing any relevant information about benefits in addition to those payable within public
hospital cover. This also did not cover regaining the ways in which the company maintains
adequate control over all its assets in its custody.
3.2. Expenses
In consideration to the expenses of Medibank Company, the realization of the company’s
expenses is conducted through being relied on distinct segment (Schaltegger and Burritt 2017).
The vital expenses associated with the company includes the amortization as well as depreciation
expenses, financial expenses, employee benefit expenses as well as net losses and gains on the
foreign exchange. Disclosure and realization of such expenses takes place at the time they occur
in the Medibank Company.

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3.3. Revenues
In consideration to the revenues, the management of Medibank Company considers to
understand them at the time of point of sale after proper deduction of the taxes. In addition, the
provisions associated with the sales are realized relied on the overall analysis. For this reason,
the value of sales is deemed to include the revenue from the product sale (Scott 2015).
3.4. Liabilities
There are few types of liabilities that is deemed to be present in Medibank Company. In
case of deferred tax liabilities, the realization of liabilities is observed to be made relied on
differences in the rate of tax. In consideration to the contingent liabilities, the primary aspects
incudes the matters related with the income tax in the nation, few otherf mattes along with bank
guarantees (Williams 2014). Medibank did not follow the standards of the Australian Accounting
Standards Board in disclosing information about maintaining adequate control over the incurring
the liabilities by Health Benefits Fund. The company also did not disclose information about
meeting liabilities to pay benefits in compliance with fund rules.

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The management of Medibank Company indicates that the provision is not required for
such matters as there is decreased probability in the reaps of future outflow of the economic
advantages or the amount is not capable to gauge reliably.
3.5. Equity
The ordinary shares are deemed to be segmented in the equity form for the Medibank
Company. For this reason, the deduction of incremental is considered from the company’s total
equity (Bryce, Ali and Mather 2015).

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4. Addressing qualitative aspects of conceptual framework:
Different qualitative characteristics related with the financial reporting conceptual
framework are there for enhancing the overall quality associated with the company’s financial
reporting. It is vital for Medibank Company in addressing al the qualitative characteristics. The
below-stated explanation indicates the extent of conformance with these qualitative features of
the financial reporting conceptual framework on the behalf of the company.
4.1. Relevance
This aspect indicates that relevance must be signified in the company’s financial
statements that can facilitate effective decision making of the company’s investors. Medibank
Company remains aligned with all the recent doctrines and regulations elated to AASB, IFRS
along with Corporations Act 2001 (Bryce, Ali and Mather 2015). In addition to the same, the
company also considers the present rates that is associated with depreciation, tax and few more
aspects. For this reason, the disclosed financial information within the yearly report of Medibank
Company is important for effective investment decisions.
4.2. Verifiability
This factor indicates that the investors of the financial reports are needed to be able to
verify all the reported financial statements on the part of the company. In order to address the
same purpose, Medibank Company offers the segmentation of all the accounting aspects within
the notes of its financial statements (James and Prout 2015).
4.3. Timeliness
This factor indicates that financial information requires to be offered in this particular
schedule. For Medibank Company it is also been observed that the company represents all its

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financial statements within a decided timeframe to all its investors to take effective investment
decision (Bryce, Ali and Mather 2015).
4.4. Comparability
With the support of this particular part of the financial reporting conceptual framework,
the stakeholders are capable to obtain a viewpoint regarding the differences and similarities
within the provided financial information among district financial statements. It is highly
important to explain that Medibank Company has represented its financial position statements in
graphical manner and through tables (James and Prout 2015). This can facilitate its investors to
understand financial position of the company in a clarified manner. For this reason, the investors
and the creditors might compare the financial situation and performance of Medibank Company
with its competitors in the industry.
4.5. Understandability
In adherence to this feature, the corporate organizations are required to disclosure their
financial information in a way that becomes simple for all its investors to analyze their financial
statements. Medibank Company discloses all its financial statements in definite format for better
understanding for its investors.
4.6. Faithful Representation
Relied on this aspect, it ca be indicated that it is vital for all the corporate organizations to
report their financial statements in a transparent and fair manner. This also indicates that
attaining the trust of all its stakeholders is of great relevance (Bryce, Ali and Mather 2015). As
per analysis of the audit report of Ernst and Young, the financial statements of the corporate firm
are represented faithfully that compiles with all the required accounting standards. Portfolio

11CONTEMPORARY ISSUES IN ACCOUNTING
offers liquidity to cover the insurance liabilities associated with health insurance businesses.
Moreover, in such scenario, non-compliance with the faithful representation of extraordinary
items, revaluation of plant, property and equipment and valuation of inventories is observed in
case of Medibank Company. For this reason, it could also be revealed that Medibank Company
has not represented its financial statements faithfully and adequately.
5. Conclusion:
The report is intended to analyze the compliance with criteria of objectives, recognition
along with qualitative aspects of conceptual framework on the behalf of the organizations. It is
gathered from the paper that All the vital information is present within the annual report of
Medibank Company regarding the compliance with various aspects mentioned within the
financial reporting conceptual framework. Moreover, through analyzing the annual report of
Medibank Company, it is gathered that vital information is offered to its investors through timely
publishing financial statements. It is also gathered that another conceptual framework objective
is that all the companies is responsible for offering important and reliable financial information
to its investors. This is ensured by Medibank to analyze amount, timing along with uncertainties
related with the company’s cash flow position.