Financial Accounting Report: Metcash Limited Annual Report Analysis

This report provides a detailed analysis of Metcash Limited's financial accounting practices, drawing on its annual report to illustrate key concepts. It explores the application of accounting concepts such as going concern and materiality, examining how Metcash Limited addresses measurement issues within the conceptual framework. The report also evaluates the company's adherence to qualitative characteristics like relevance, reliability, and comparability, using examples from its financial statements. Furthermore, the analysis covers the impact of AASB standards and the company's approach to issues like de-recognition of assets and revenue recognition. The report highlights Metcash Limited's compliance with accounting standards, including those related to interim reporting, trade receivables, and the measurement of current tax assets and liabilities. Overall, the report offers a comprehensive overview of Metcash Limited's financial reporting and accounting practices.

FINANCIAL ACCOUNTING

Contents
Introduction...........................................................................................................................................3
From the annual report of your allocated company and in addition, to providing examples identify and
describe the accounting concepts used...................................................................................................4
With reference to the conceptual framework, and the debate over measurement in accounting. Using
your allocated company discuss the issue of measurement and provide examples................................5
Quantitative characteristics as per the understanding of the relevant and representational faith that are
related to information rlated to financial statements-.............................................................................6
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

Introduction
This report brings out a discussion on conceptual framework, other accounting procedures,
and policies. The chosen organisation is a Metcash Limited and accounting concepts have
been evaluated on the basis of process of handling each transaction and events from the each
account. The report provides and avails examples for the accounting concepts on the AASBs
(AASB standard, 2015). A debate over the measurement of assets and other intangible assets
has been given. Further, this report provides and uses all the qualitative characteristics with
the data and information as given in the financial statements while accounting the liabilities
and assets. Metcash limited is an Australian company associated with the producing fresh
alcoholic beverages, consumer goods, hardware, distributing goods, and marketing groceries.
The company deals in wholesaling, distributing, and marketing organisation operates in New
Zealand and Australia (Díaz et al., 2015).
Issues found to be as accordance with the AASs as they are issues but the company is not
effective as of 2016 financial statements. The company has not selected to these standards
and changes in the financial statements. The company started to fulfil the assessment
practises that effect the accounting standards and other alterations that it will have on fiscal
reports. In future, the company have planned to comply with the impactful AASBs such as
AASB 9 for financial tools, AASB 15 for the revenue generated from the contracts with the
clients and the AASB-16 for the leases. The main aim of AASB is to provide certain rules
and regulations in regards to each event and transactions. It provides a standard way of
treating the account and transaction. It helps to check and monitor the consistency of the
following of the conceptual framework and certain principles used (AASB standard, 2015).

From the annual report of your allocated company and in addition, to providing examples
identify and describe the accounting concepts used.
Going concern concept- The financial reports are made on the basis of the assumption where
organisation will remain in regards to the operation in future years. By using this concept,
expense and revenue recognition can be deferred for the future period when the organisation
is still working and operating. In the light of this framework, it is that Metcash sales revenue
was estimated at 7.6 percent (7.6 billion). Earnings before interest and Tax was nearly $152
million. Liquor segment of the company has the possibility growth estimates. The company
has released that half of the financial reporting is done and their remaining will be processed
(Díaz et al., 2015).
Materiality concept- this concept lay down that the readers of the company as this element
must record the transactions of the material level as small size growth are also recorded at the
financial outcomes, cash flows or the financial position of the company. Although the
company faces no issues in regards to the recognition while measuring the accounting
constraints (AASB standard, 2015). It is an third level of conceptual framework that is
included in financial accounting and E-commerce corporation. Metcash limited often conduct
additional committee meetings in the organisation to consider the material transaction or to
consider the issues related to materiality (Lewandowski, 2016). Some of the related issues to
materiality is de-recognition. In the case of Metcash limited, any note of plant, tools, and
plant are de-recognised on clearance and when no future monetary benefits as anticipated to
rise from the continuous assets. Any increase and profitability considered de-recognition of
assets (as calculated as the change between carrying amount and net clearance incomes). It is
inclusive of the statements of the comprehensive income in the time when de-recognition
item is identified. Cost incurred in relation to Greenfields development that includes
acquisition and lease of land and other construction of retail sector. On the part of conclusion,

development of capitalised costs are to be transferred to the non-current assets that were held
for the development of sales.
In order to pursue the newly implementation of AASB on financial mechanisms, leases, and
revenue extracted from contracts from the clients. It is supposed to have a great impact on
implementation of AASB 16 on leases. This adoption had severe impact on company`s
balance sheet and its income statement too as prescribed to the given volume and its profile
maturity. Rental expenses as shown in the statement of incomes as it is expected to be
replaced from opposite loads interest expenditure with a straight-line depreciation method.
This group has also undertaken a view of the revenue as generated and represented in the
comprehensive statement of the revenue arrangements all ahead from the application of
AASB revenue generated from the agreements with the clients. From the annual reports, it
has been interpreted that other many standards and understandings issued but it is effective
much as it is effective on financial reports at the starting of using the application.
With reference to the conceptual framework, and the debate over measurement in accounting.
Using your allocated company discuss the issue of measurement and provide examples.
The organisation has to apply with accounting standards that covers from GAAPs to IFRSs.
AASB 134- Every interim report suggests that there is a reconciliation of equity according to
GAAP at the end of interim period as compared to equity under AASB. Reconciliation is the
summation of income as per AAS (Smieliauskas, Craig, and Amernic, 2017). As per this
policy, if company changes accounting policies then it should be in the consideration of the
company. This regulation needs minimum disclosures on the basis of interim reports of the
enterprise after accessing financial statements. It is mandatory to require organisation to
disclose events especially when the company has adopted it for the first time (AASB
standard, 2015).

While evaluating the key assumption of assessment, it is seen that company uses carrying
amounts used to support and enhance the amount associated with the carrying amounts in
regards to the intangible assets. This evaluation is based on the futuristic key assumption that
they are unclear. Operating cash flows are maintained and evaluated in the light of approved
strategic plans throughout measurement. Cash flow projection is based on estimated changes
in the volume growth, cost of conducting business, and the cost of goods sold (Smieliauskas,
Craig, and Amernic, 2017).
From the annual reports, it is seen that trade receivables are to be identified and foreseen at
the original invoicing amount that is less than the provisions in order to see uncollectable
obligations. The approximation of the doubtful obligations are made when assembly of full
amount is not at all probable and their allowance for the impairment are recognised on the
basis of measurement and its modification between carrying of receivable and its projected
cash flows have to be reported from the established from the correct and related debtors
(Smieliauskas, Craig, and Amernic, 2017).
Another issue related to de-recognition of the intangible asset are to be measured according to
the dissimilarity between the proceeds from and carrying amount from asset and it has been
recognised in the financial statements regards the comprehensive (inclusive) income
especially when the asset is recognised (Luke, 2019). Goodwill practices a part of collection
of other cash-generating unit and the operation disposed of when the goodwill is associated
with the disposed task that is included in carrying volume (Luke, 2019).
Quantitative characteristics as per the understanding of the relevant and representational faith
that are related to information related to financial statements-
Relevancy of data- According to the information that must be readily understood to the users
and practitioners of the financial reports. This characteristic reveals that information must be

relevant with the assistance of supporting footnotes and compliance with the AASB as
needed to assist in regards to clarification (Luke, 2019).
While complying with the qualitative characteristics, it is seen that the company will comply
with the concept to great extend. For example- The organisation’s short Term Incentive is on
the basis of cash based component of the total remuneration. The main idea to accomplish it
is to incentivise the senior executives so that it can deliver the annual outcome achieved
while aligning it to the awareness of the shareholders. Short-term incentive is based on
achievement regarding the predetermined measurement of performance that includes
performance targets on the basis of objectives and data that is relevant to the role of the
executive (Luke, 2019). From the annual reports, it is seen financial reports of the controlled
organisation that are prepared for same period as parent entity by using the consistent as per
the accounting policies. For example- well-ordered organisations with non-conterminous at
the end of the year, management accounts according to the relevant period for the reporting
of the group have to be consolidated. From the opinion of directors, it is seen that expense of
availing additional accounts delay with the giving them financial reports that could outweigh
other benefits from the shareholders (Gordon et al., 2015).
The organisation`s investment in the joint ventures and its association with the accountable
by using the equity method (Craig, Smieliauskas, and Amernic, 2017). The company exerts
greater control and joint control as per the operating and financial policies. A joint venture
has full arrangement of agreed control where it exists when the decision regarding the
relevant actions requires consent of the parties in order to share the control (Craig,
Smieliauskas, and Amernic, 2017).
Current tax assets and other liabilities for the prior periods are to be measured on the basis of
amount that are needed to be recovered from the and paid to the taxation authority. It is seen

that Metcash Limited comply with the standards and compute the amounts for tax laws and
tax rates and enact them on the basis of reporting date conducted relevantly (Smieliauskas,
Craig, and Amernic, 2017).
Comparability- it includes the information that must be comparable to the financial
information that are presented according to the accounting periods so that user can identify
the trends while the financial position and performance of the entity that reports
(Smieliauskas, Craig, and Amernic, 2017).
In order to comply with these characteristics, it is seen that the company maintains a
disclosure of comparative statement of income as restated to identify automotive pillars to be
discontinuing the procedure (Yong, Lim, and Tan, 2016). The company clearly fulfils
qualitative characteristic as the company maintains comparable data in form of comparable
balance sheet, income statement, consolidated data of whole group (Yong, Lim, and Tan,
2016).
For instance- the company have disclosed the automotive business as contributing the cash
flows of negative reflecting 1.2 million dollars. It excludes the proceeds, financing cash
flows, and investing cash flows were not representing materiality (Smieliauskas, Craig, and
Amernic, 2017). The company often certain the comparative data and amend it as per the
financial statements in order to confirm to comply with the current year`s presentation. Most
importantly, these adjustments are not meant to create any great impact on balance sheet
(Yong, Lim, and Tan, 2016).
Reliability- the financial information must be free from the errors of material and biasness
that is not misleading. Information must be faithful as represented in the transactions. It
should reflect underlying substance of events that reflect and represent estimates and other
uncertainties with the help of proper disclosures (METCASH LIMITED, 2018).

To check the reliability, it is seen that this discussion and example will include provisions and
revenue recognition. The company has recognised the provisions as the present obligation
resulting from legal pat events. It is quite credible that several outflow of resource embed
several economic benefits that will be further required to settle the obligation and the reliable
estimations that has to make as per the amount of the obligations (METCASH LIMITED,
2019). The reliable characteristic also imply on reimbursement (Barker, 2015). For instance-
Group expects that all the provisions are needed to be reimbursed as a separate asset
especially when the reimbursement is credible. The expense is often relatable to provisions
that are presented in the comprehensive statements of the income regarding the
reimbursement (METCASH LIMITED, 2018). Another element is revenue recognition as it
is recognised the probability of the economic benefits that flow into the group and the
revenue of the company is already recognised properly. Elements of this sub head is
transactions of goods and interpreting the services are recognised as there is significant risks
are its rewards in regards to goods ownership passes to buyer that usually accept delivery of
goods (METCASH LIMITED, 2018).
Consistency- it reduces the risk associated with the measurement technique used where the
underlying interaction will be in relation to measurement and valuation (Barker, 2015). In
regards to check the consistency, the auditors of the company have reported that there is a
consistency with ASX 150 practises as the chairperson is paid on the fixed annual fees rather
than board fee including chair fee. For example- on the date of chairman fees has been
increased from $309565 to $309,565 per annum. This reflects that on the basis of role of
chairman, similar size and its complexity on the basis of market median (Barker, 2015). The
group have adopted new and other amended AAS (Australian Accounting standards) and
interpretations, which have become applicable with the existing fiscal year. From the
adoption of accounting standards, it has been seen that there is a significant effect on the

financial data from the financial outcomes from the accounting policies are consistent to the
of the previously applied in the financial year (AASB standard, 2015).
Conclusion
From the discussion, it is seen that Metcash limited has been preparing financial reports for
the organized entities that are arranged for the recording in the base group by using the
consistent accounting policies and presenting them. The main aim of the study was to find
and identify the accounting information and data and its relation to three main levels such as
recognition, measurement in regards to the conceptual framework in the light of financial
accounting. As of in 2016, the company has identified the use of AASB 9 and AASB 15 in
such a way where fiscal instruments and the treatment of revenue gained from the contracts
from clients. Identify the framework of accounting principles, constraints, and assumptions
on the basis of accounting profession. The company has delivered strong cash flows in the
half of 2017 as $161.4 million. This strong performance has led to the reduction in the net
sum of debt with net cash balance $14 million at end of the October 2017. The company has
been maintaining great portfolio of business activities with capable and strong management
team and its strength of the financial position as it has strategic flexibility for the sustainable
future.

References
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METCASH LIMITED, (2018) METCASH LIMITED – 2018 HALF YEAR RESULTS AND
FINANCIAL REPORT. Available on:
https://mars-metcdn-com.global.ssl.fastly.net/content/uploads/sites/101/2017/12/04085314/4-
december-2017-metcash-limited-fy2017-results-announcement.pdf [Accessed on:
27/05/2019]
Metcash Limited, (2019) Annual reports. Available on:
http://www.annualreports.com/HostedData/AnnualReportArchive/m/ASX_MTS_2016.pdf
[Accessed on: 27/05/2019]
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Financial Reporting: Implications for Truthfulness, Auditability, and the IASB's Proposed
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