Accounting Concepts and Measurement in Ramsay Healthcare: A Report

This report examines the application of accounting concepts within Ramsay Healthcare, a major healthcare provider. It identifies and describes key concepts such as cost, accrual, matching, realization, dual aspect, going concern, accounting period, money measurement, and business entity concepts. The report then explores measurement issues, contrasting historical cost with fair value methods, and analyzing their application within Ramsay Healthcare. Furthermore, it discusses the fundamental qualitative characteristics of relevance and representational faithfulness in relation to the valuation of assets and liabilities. The report concludes with recommendations for best practices and a summary of the key findings, providing a comprehensive analysis of accounting practices in the context of a multinational healthcare organization.

Accounting Concepts IN CONTEXT OF RAMSAY HEALTHCARE
Module Number

Table of Contents
Introduction...........................................................................................................................................2
1. Identify and describe the accounting concepts used..........................................................................2
2. 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......................4
Conceptual framework and debate over measurement.......................................................................4
Measurement applied at Ramsay Health Care...................................................................................5
3. As fundament qualitative characteristics of relevance and representational faithfulness in relation to
the assets and liabilities recorded in the books account.........................................................................5
Which kind of qualitative characteristic is more important for valuation of assets and liabilities......7
Recommendation..................................................................................................................................7
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10

Introduction
With the introduction of 21st century, new technologies have been introduced all over
the world. World has become one global village. New technologies, introduction of internet,
open communication worldwide, easy access to information has led to complexities in many
systems. With the information being shared and passed at so many platforms, the need for the
transparency, easy understanding has led to formulation of some general concepts and
principles among various things. The accounting and financial world is no different. With
introduction of so many systems and software for accountancy, the need has been arose for
common general standards within the industry and financial world. IASB AND GAAP are
two such bodies which govern all the concepts, principles and standard being introduced and
amended from time to time. In the following report, the study of these concepts, principles
and conceptual framework would be done in the context of RAMSAY HEALTHCARE
(Ramsay Health care. 2018).
Ramsay Healthcare is founded by Paul Ramsay in 1964, in Sydney, Australia. It is a provider
of private healthcare and specialises in surgery, psychiatric care and rehabilitation. It is
present in countries like Australia, UK, France, Indonesia and Malaysia and have presence in
total 221 locations with over 30,000 employees. It has partnered with a private and non
governmental health system named Ascension in 2018 to venture in new global supply chain
venture. Ramsay is largest healthcare provider with almost 100 operational health facilities in
Australia (Ramsay Health Care., 2018).
1. Identify and describe the accounting concepts used
Accounting authorities in all over the world formulates the accounting concepts which leads
to the uniformity in data presented by the financial team of company. Financial team uses
these concepts as a base to prepare and present their company financials. The companies not
only at national but also at international level need to present their financial reports and
therefore need the international standards to follow (Ramsay Health care. 2018). These
standards are formulised by the international bodies like GAAP and IASB. These concepts
act as the foundation for accounting systems and adopted by majority of companies. Ramsay
Healthcare being a multinational company with presence in almost all the major countries
follows these concepts and framework religiously. The concepts being in use by Ramsay are
listed below (Ramsay Health care. 2018).

a) Accounting cost concept: This concept is also known as historical cost method. In Ramsay,
the cost charged in the expenses for the material purchased is usually the cost incurred for the
acquisition of that material at the time of purchase. It includes transportation cost, installation
cost and miscellaneous cost. It does not consider the market price of the material otherwise
amends have to be made every year to include market prices in accounts. And balance sheet
would have to be updated (Ramsay Health care. 2018).
b) Accrual concept: it states that company need to put the transaction in accounts when it has
legal right to receive it and not when the actual cash is received. The revenues in the
organization is put in balance sheet when they are realised and the same is true for expenses
as well. The expenses and revenues both should be recorded as per their realization time and
year in same accounting year (Ramsay Health care. 2018).
c) Matching concept: this concept being used in Ramsay states that the expenses and revenues
of company in one accounting period should be matched. That is for every expense
transaction recorded, there should be equal revenue coming in balance sheet. This helps in
correction of any error made during the preparation of financial statement and the balance
sheets.
d) Realisation concept: the concept is widely acceptable in all organizations for preparing the
financials. It states that the organization can recognize their revenues in accounts only when
they have right to receive it. The cash receipts becomes a non requirement if the revenue is
certainty. This helps the accounts department to put revenues in the financial year of
realization (Ramsay Health care. 2018).
e) Dual aspect concept: the dual affect simply states that every transaction have two affects and
it affect the credit as well as debit side of balance sheet. The expense incurred in one side is
always followed by the revenue on the other side. It helps in formation of balance sheet
equation. This is followed to reduce the errors and mistakes in the process. However, by
using it, accountant could easily determine the issues and inherent errors in recording of the
financial data in the books of account.
f) Going concern concept: This concept is the most basic and applied in Ramsay as well
clarifies that a business always assumed to go on for indefinite period of time. It is assumed
that the business is not going to shut down in near future making losses for the investors. This
concept helps in building confidence among shareholders, investors and employees. Because
of this concept the expenses of of any big investment is distributed among the years and not
in just one financial year (Ramsay Health care. 2018).

g) Accounting period concept: This concept divides the life of business into certain intervals
like monthly, quarterly, half yearly or yearly. The transactions made by company in that
period are the only ones registered in that accounting period. The accounting period followed
by the Ramsay is calendar year that is from January to December. This helps in strengthen
the overall reporting frameworks of organization.
h) Money measurement concept: the businesses only record the transaction in accounts which
can be quantified and are in monetary terms. The transactions mentioned in balance should be
in monetary value with local currency being prevalent. No non monetary items should be
registered. Because of this concept, many qualitative characteristics are not get mentioned in
balance sheet like productivity and output by employee (Ramsay Health care. 2018).
i) Business entity concept: it helps in making it clear to all that business and its owner are two
separate entities and transactions made by one is not the responsibility or liability of other
one. If the owner is bringing some money in business it would be consider as liability by the
business and not its own money. Similarly if the owner is taking any money from business it
would reflect in the expense part of business. This concept is followed with a view to set up
strengthen the overall outcomes (Ramsay Health care. 2018). This helps in complying the
accounting concepts in the books of accounts.
2. 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.
Conceptual framework and debate over measurement
The conceptual framework of the company reveals that company record its financial assets
and liabilities in the specific format. Many companies uses different framework to compute
the values of income, revenue, assets and liabilities. Most common being Historical Cost
method, Fair Value method, net realisable value method and current cost method. (Ball, 016).
This conceptual framework is used to strengthen the reporting framework and helps company
to align the harmonization in the international reporting frameworks.
Historical cost method is the most widely used method amongst all followed by most of the
companies. This method states that the cost recognised by the company is the value which
was incurred during the purchase of assets. The current market value is not considered
irrespective of increase or decrease in price (Brasel, et al. 2016). The value method considers

the current market value in one or another way but in historical method, cost of purchase is
the only recognisable cost (Brunelli, 2018). The transportation cost, installation cost and
other miscellaneous cost are included in the purchase cost. This method is the least
complicated method because it helps accountants in the way that they only have to calculate
and recognise the cost once only and not every time the price changes. Calculations have to
be made once only during purchase. But in recent times it has been criticised because the
method use the outdated values and company faces loss if the prices increase exponentially
(Carson, Fargher, and Zhang, 2016).
The companies are now shifting towards the fair value methods because the benefits it
provides to the organization. The method uses the current market values of assets in the
financials. Thus the old and outdated values are not used. This method is especially useful in
the case of increase in price. †his method is also criticised because companies sometimes use
this for earning money through inflated assets prices. This method is costly as well due to
calculations and work involved (Cordoş, and Fülöp, 2015).
Measurement applied at Ramsay Health Care
The company uses the historical cost method mainly for the preparations of their financial
statements except some exceptions where fair value method used. They used the actual cost
incurred by the company during purchase. The property, hospitals, equipment all are
recognised at cost price including there transportation cost, installation cost and some
miscellaneous cost. Also the software used by company are realised by historic cost value
and not the current market value. The current market price are normally ignored no matter
how inflated or deflated they are (Ramsay Health care. 2018).
There are some purchases and assets which need the fair cost method while their realization.
Along with fair value method, sometimes net realisable values are used in finances as well
(Ramsay Health care. 2018).
3. As fundament qualitative characteristics of relevance and representational
faithfulness in relation to the assets and liabilities recorded in the books account.
There are some qualitative characteristics which company needs to follow in order to make
their financials to international level. Especially the companies operating in more than one
country needs the finance to be in a manner that it can be understand by all the parties

involved. The companies which are publicly listed are among those which follows these
qualitative characteristics to the T. the main two qualitative characteristics company follows
are as listed below (Goodwin, and Wu, 2016).
 Relevance: the financial statements of the company should be such that it is relevant to all
involved (Ramsay Health care. 2018). The information given in the statement should be
useful for the people to make relevant and informed decisions. The important and material
figures should be included and immaterial information and figures should be excluded
(Hossain, Chapple, and Monroe, 2018). However, the bifurcation of the recorded data in the
income statement and balance sheet should be based on the proper concepts and relevancy of
the account. The nature of the business translations plays pivotal role in recording the books
of accounts.
Ramsay Health Care is using this characteristic which has increased the trust factor in the
investor because they are getting the information which is relevant and important to make any
decision (Ramsay Health care. 2018).
 Faithful representation: Faithfulness of the information is also a key factor along with the
relevance. The substance of the information is very important and the legal form of it is not
considered very much important. It makes sure of non existent of errors in the statements.
The information given should be simple, realistic and should make sense for the user. It
should be verifiable, understandable, and within timeframe otherwise it would be of no use
(Köhler, Ratzinger-Sakel, and Theis, 2016). This helps in reducing the errors and mistakes in
the accounting frameworks.
 There are some purchases and assets which need the fair cost method while their realization.
Along with fair value method, sometimes net realisable values are used in finances as well
(Ramsay Health care. 2018). Therefore, recording of the assets and liabilities in the books of
account of company is done by applying the cost assets method.
 There needs to be recording of the assets and liabilities by using the impairment testing
implicated with the IAS 136. This helps company to identify the true value of the recorded
data in the books of account by using the true and fair view of the recorded assets in the
books of account (Russell, 2017).

Which kind of qualitative characteristic is more important for valuation of assets and
liabilities
It has partnered with a private and non-governmental health system named Ascension in 2018
to venture in new global supply chain venture. Ramsay is largest healthcare provider with
almost 100 operational health facilities in Australia. This two characteristics are important in
organization as trust of investors and end users increases due to easy under stability, easy
verifiability, comparability and timeliness (Sánchez-Medina, Blázquez-Santana, and Alonso,
2019).
There is need to focus on the accounting concepts while recording and bifurcation of the
recorded assets in the books of account. It is analysed that company uses this accounting
concepts to strengthen the reporting framework.
While doing the valuation of assets and liabilities, the assumption made should also be
disclosed and how the calculations are done should be mentioned. Also it is the fact that
along with the correct calculation, the information used for calculation should be correct and
accurate (Sirois, Bédard, and Bera, 2018).
The accounting and financial world is no different and followed by organization to strengthen
the reporting framework. However, with introduction of so many systems and software for
accountancy, the need has been arose for common general standards within the industry and
financial world. IASB AND GAAP are two such bodies which govern all the concepts.
Company now align their accounting concepts and recording frameworks with these newly
developed system.
Recommendation
The information company is providing in the statements are easy to understand, shows
transparency and therefore the investors are always ready to invest money in the company. It
is believed that Ramsay should bet between investors and shareholders due to transparency
across all the system, concepts and frameworks to be followed. However, it is analysed that
the companies which are publicly listed are among those which follows these qualitative
characteristics to the T (Mita, Utama, and Wulandari, 2018). As we know that Ramsay is having
presence on global level, company should do its best to make process simplify by providing
all the relevant and useful information out there in open. Therefore, in order to align the

domestic reporting frameworks with the international reporting frameworks, company should
adopt the fundamental characteristics and intents to strengthen the financial reporting
frameworks.

Conclusion
It has been found after studying the annual report of Ramsay that most of the concepts
being used in company are updated and as per the standards set by the various boards whether
nationally and internationally. Now in the end, it could be inferred that if company wants to
reduce the errors and mistakes in its reporting framework then it will be done by complying
with the set accounting framework and process.

References
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Ramsay Health care (2018) annual report Available on:
https://www.ramsayhealth.com/Investors/Annual-and-Financial-Reports/Annual-Report-2018
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