Accounting Theory and Contemporary Issues: Medibank Annual Report 2018

This report provides an in-depth analysis of Medibank's 2018 annual report, evaluating its adherence to accounting standards and the conceptual framework. It examines the issues faced by the company, including customer dissatisfaction and loss of market share, linking these problems to the application of agency and stakeholder theories. The report highlights the importance of the conceptual framework in financial reporting and assesses Medibank's compliance with AASB standards. It also discusses the qualitative characteristics of financial reports, such as understandability and comparability. The analysis includes recommendations for the management of Medibank to improve customer satisfaction, restore public confidence, and increase market share. The report emphasizes the need for transparent reporting and effective stakeholder management to ensure the long-term success of the business.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting Theory and Contemporary Issues
Name of the Student:
Name of the University:
Author’s Note:

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................4
Issues/ Problems faced by the Business.......................................................................................4
Accounting Requirements...........................................................................................................6
Theories which are Applicable....................................................................................................9
Theme of the Theories...............................................................................................................10
Recommendations..........................................................................................................................10
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

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Introduction
The assessment aims to evaluate the annual report of Medibank for the year 2018 for the
purpose of assessing the conceptual framework which is followed by the business. The
assessment also aims to analyze a new article which is related to the company and the article is
related to the dissatisfaction of the customers and also loss of market shares from the core
products of the business. The article clearly states that the business is well run by a successful
management but the business is not able to satisfy the customers with the core product which is
offered by the business and therefore tend to lose out on market shares.
Medibank is regarded as one of the leading private health insurer company which
provides different range of health insurance services to the clients as per the requirements of the
clients. The company has a range of brands and also ahm brands along with different types of
health services which is offered by the business across Australia (Medibank.com.au. 2018). The
company has vast experience of 40 years in delivering better health services to the resident of
Australia. The company is estimated to cover around more than 3.7 million customers through
Medibank and ahm brands.
The issue which is faced by the business is related to compliance with the AASB
standards ion reporting which is minor in nature but the major problem is the lack of proper
services which is provided to the customers of the business and therefore the business in recent
times has faced record breaking complaints from clients.
There have been significant changes which are being brought about by AASB in
reporting framework in order to comply with the IFRS standards (Nobes 2014). These are
important in order to ensure that the business has protection from frauds and errors in a business.

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The management of Medibank company needs to follow conceptual framework while reporting
financial information of the business.
The assessment aims to show the problems and issues which are faced by Medibank
Company and also establish whether the business has followed conceptual framework while
reporting of financial information. In addition to this, the assessment would be including the
stakeholder’s theory which will state the responsibility of the business towards the clients.
Discussion
Issues/ Problems faced by the Business
Overview of the Problem Faced by Medibank
Source: (Australian Financial Review. 2018)

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Image showing Changes in the Market Price of the Share of Medibank Company
Source: (Australian Financial Review. 2018)
The above figures shows that the business of Medibank is significantly affected by fall in
the share prices of the business and also there is an issue that the business has inefficient client
management system which is the main reason that the customers of the business are dissatisfied
with the services which is provided by the business. The above graph shows that the share prices
of the business increases, however the company is losing out on market shares which is a major
concern for the business (Australian Financial Review. 2018). The main reason due to which the

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business is losing out on market shares is due to unaffordable prices which is charged by the
business for the health services which is offered by the business and also due to the ineffective
customer grievance system. This can be attributed as the major reasons for the fall in the market
shares of the business (Weil, Schipper and Francis 2013). The management of the company
needs to focus on maintaining the market shares and also ensure that the business is customer
oriented in order to maintain the status which the company has in Australian market. The high
prices which is charged for the health services is the reason why some of the customers are
switching products or even opting for the competitor’s products.
Accounting Requirements
In a business, a general conceptual framework is required to be followed by businesses in
case of reporting for financial information in the annual report of the business. The annual report
of Medibank for the year 2018 shows that the business has followed all relevant accounting
standards which are applicable to the business for the purpose of preparing the financial
statements of the business (Beattie and Smith 2013). The annual report of the business also
confirms that the business has appropriately followed all rules and regulations of Corporations
Act 2001 and also with all requirements of AASB (Palea 2013). The financial information is also
presented in the standard manner as classified as items of income statements, balance sheet and
cash flow statement respectively.

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Image showing Disclosures of Annual Report of Medibank
Source: (Medibank.com.au. 2018)
The above image which is shown reflects that the business of Medibank appropriately
follows all relevant accounting standards for the year 2018 and the business has prepared the
financial reports complying with all Australian regulations.
The management of the company has also shown the five elements of the conceptual
framework which are income, expenses, assets, liabilities and equity in appropriate manner and
in respective statement. In addition to this, the management has also provided a list of accounting
standards which is followed by the business in preparing the financial statements and also
provided appropriate disclosures for all transactions which are undertaken by the business
(Henderson et al. 2015). The business has also appropriately reported on different segments and
reporting criteria which is followed by the business in financial reporting. The annual report

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which is prepared by the management of the company shows that all relevant segments and
reporting which is required as per insurance accounting standard is followed by the business.
The annual reports of the business is as per conceptual framework which is generally
followed for the purpose of reporting of key information in the financial statement of the
business (Zeff 2013). The conceptual framework states that the annual report which is prepared
by the business should contain fundamental and enhancing qualitative characteristics in order to
ensure that the financial reports contains all the valuable information of the business.
Fundamental Qualitative Characteristics
The fundamental qualitative characteristics states that a business needs include
information which are faithfully represented in the annual report of the business and also
information which are relevant for the process of decision making (Barth 2013). The annual
report which is prepared by Medibank Ltd for the year 2018 shows that all relevant information
which is related to the business is appropriately included in the financial statements. The
information which are included in the financial statement would help the users of the financial
statement to effectively take decisions for the business. The annual report of the business also
faithfully represents the information which are accurate and the same is confirmed by the report
of the auditor.
Enhancing Qualitative Characteristics
The enhancing qualitative characteristics of a financial reports are understandability,
comparability, verifiability and timeliness. These characteristics allow the business to further
enhance the quality of reporting which is included in the annual reports of the business. The
annual report of Medibank company shows that the information which are included are easily

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understandable as the business has included all the relevant information in the form of
disclosures (Abernathy et al. 2014). The information which is included in the annual report are
also verifiable and comparable in nature and therefore the same confirms with the conceptual
framework of the business. Thus, it can be said that the annual report which is prepared by the
business of Medibank appropriately follows fundamental and enhancing qualitative
characteristics which should be present in an annual report.
Theories which are Applicable
The theories which are applicable to the business and which are related to the problems
which are faced by the business are discussed below:
 Agency Theory: The theory states that the organization should be considered as an
agency and the same represent association with complicated groups of contracts and due
to this the agency costs increases which is mainly owing to such contracts and various
aspects which are included in such contracts. As per this theory, the management of the
Medibank company should act as an agent of the business of Medibank. The theory also
states that the management should take all the decisions with regard to the benefit of the
organization (Bosse and Phillips 2016). As per the problem which is faced by the
business of Medibank, the business losing out on market shares which is a serious
concern and the management needs to formulate plans which reverse such a situation
(Song, Wang and Cavusgil 2015). The management can give confidence to the
shareholders that all relevant accounting standards are being followed and the business is
including all information in the financial reporting framework so that the confidence of
the public is restored in the company.

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 Stakeholder Theory: The theory states that the stakeholders are the main concerns for the
business and they have legitimate interest in the overall operations of the business. The
theory further states that the stakeholders of the business should be made a primary
concern for the management while taking any decisions. In other words, the stakeholder’s
interest is to be considered while undertaking any activity of the business (Jensen 2017).
One of the main problems which is faced by the business of Medibank is that the business
does not effectively solve the grievances of the shareholders of the business and thereby
the customers are highly dissatisfied with the company. The stakeholder theory states that
the interest of the stakeholders which also includes the shareholders should be the
primary concern for the business. The management needs to follow strategies which
would ensure that the shareholders of the business are satisfied with the business.
Theme of the Theories
The theories which are discussed above shows that the shareholders of the company are
the major concerns for the business. Both agency theory and stakeholder’s theory aim at ensuring
that the interest of the shareholders are the primary concerns. The main problems which are
faced by the shareholders of the business are related to the shareholders itself and therefore the
management needs to formulate strategies in order to ensure that the shareholders are satisfied
with the overall management and reporting framework which is followed by the business.
Recommendations
The management of Medibank Company needs to formulate strategies which can help the
business to restore the confidence of the public in the company and thereby also lead to increase

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
the market share of the business. The management can effectively prepare the annual reports of
the business following all relevant AASB accounting standards and generally accepted
framework for the purpose of reporting of financial information. The information that are
contained in the annual report should be accurate and relevant so that the users of the financial
statement can use them for the purpose of taking decisions for the business. This strategy would
invoke confidence in the stakeholders of the business and ensure that the management of the
company is maintaining transparency in reporting and thereby attract and retain investors.
The management needs to formulate strategies in such a manner that the customers of the
business is satisfied with the services which is provided by the business. The management needs
to reduce the complaints and effectively respond to the needs of the shareholders. This will help
the business in restoring the confidence of the public and thereby increase the market share of the
business.
Conclusion
The above discussion clearly show that the business of Medibank effectively follows all
relevant accounting standards and conceptual framework for the purpose of reporting of financial
information of a business. The above discussion also shows significant problems which are faced
by the business which is related to fall in the market share of the business and dissatisfaction of
the customers of the business. The theories which are linked to the problems faced by the
business are Stakeholder Theory and Agency theory and the management need to follow such
theories in order to take care of the problems and issues which is faced by the business. The
assessment concludes with recommendation as to how the business can restore the confidence of
the public.

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Reference
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Jensen, M.C., 2017. Value maximisation, stakeholder theory and the corporate objective
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Medibank.com.au. (2018). [online] Available at:
https://www.medibank.com.au/content/dam/medibank/About-Us/pdfs/Medibank_Annual_Report
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