Analysis of REA Group's Annual Report and Accounting Framework

This report provides a detailed analysis of the REA Group's annual report, evaluating its compliance with the conceptual framework of accounting. The report examines the company's adherence to measurement requirements, qualitative characteristics (understandability, relevance, reliability, faithful representation), and enhancing qualitative characteristics (timeliness, verifiability, materiality, comparability). It assesses whether the users of financial reports, including stakeholders and investors, can effectively utilize the information provided in the annual report to make informed decisions. The analysis also addresses whether the company has met the requirements of the general purpose reporting framework, concluding that the company has generally followed the basic policies of the conceptual framework in the preparation of the annual report. The report uses screen prints and academic research to support its arguments and is properly referenced using Harvard style.

Accounting
Assignment

David FERNANDES SAIBRO
KINGS OWN INSTITUTE
Date: 26th March, 2019.
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EXECUTIVE SUMMARY
In the following assignment the annual report of REA group has been downloaded and analyzed to see whether the
company has complied with the provisions of conceptual framework of accounting and included all the qualitative
and quantitative characteristics in preparation of the same. It is very important that companies based on these
framework as it is helpful to the users of the financial statement and annual report to understand what are the areas
in which the company has failed in case it has. These qualitative and quantitative features help in making the annual
report of the company more user friendly.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY................................................................................................ 2
INTRODUCTION........................................................................................................... 4
ANALYSIS.................................................................................................................... 4
1) MEASUREMENT REQUIREMENTS............................................................................4
2) QUALITATIVE CHARACTERISTICS OF ANNUAL REPORT...........................................4
3) ENHANCING QUALITATIVE CHARACTERISTICS.......................................................7
4) ARE THE USERS OF FINANCIAL REPORTS................................................................8
5) THE CONCEPTUAL FRAMEWORK SAYS USERS ONLY NEED A BASIC KNOWLEDGE OF
ACCOUNTING.............................................................................................................. 8
6) MET THE REQUIREMENTS OF GENERAL PURPOSE REPORTING FRAMEWORK............8
CONCLUSION............................................................................................................... 9
REFERENCES............................................................................................................. 10
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INTRODUCTION
In the given case the company that has been selected is REA group which is one of the biggest global online real
estate advertising company. It is listed on the Australian Stock Exchange and the overall revenue of the company
goes into million. In the given case the annual report of the company has been downloaded and analyzed and
necessary recommendations have been given (Boghossian, 2017). Conceptual framework helps in defining the
overall nature and purpose of accounting and thus if the users have knowledge about that they can study the annual
reports of the company easily. Most of the annual reports of the companies are easily understandable and there is
very less issues that are involved in reading them given that conceptual framework has helped in making these
statements more easy and reliable and it is very easily understandable and readable.
ANALYSIS
1) MEASUREMENT REQUIREMENTS
Measurement requirements leads to the basic principle of making sure that accurate information is presented and
that is correct and not misleading. In case there are any specific methods followed then necessary disclosures are
given in the books of accounts of the company for the user. It helps in making the users aware and helps them in
understanding the specific items that are more important and that will require more focus from the management
(Webster, 2017). It helps them in understanding the view point of the management in preparation of the financial
statements of the company. In this case the company has followed the same and is relevant from their annual report.
2) QUALITATIVE CHARACTERISTICS OF ANNUAL REPORT.
Understandability - It is important that annual report of the company should be easily understandable as the users
do not have that great knowledge about accounting. So, it is important that organization uses clear terms and provide
necessary disclosures where ever needed. In case of REA group also the company has provided necessary
disclosures in the notes to accounts and t (Kaufmann, 2017)hat makes it more understandable to the users.
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Relevance – It is important that the annual report of the company should be prepared as per the guidelines of the
authority and the financial statements of the company should be prepared based on the relevant accounting
standards. In case of the given company it is given in disclosure that the financial statements of the company are
prepared based on the provisions of the Australian Accounting Standard board and the financial statements also
comply with the IFRS and the going concern assumptions have been followed (Kusnadi & Wei, 2017).
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Reliability – It is important that the financial statements of the company should be free from all kind of errors and
mistakes and the material that is stated there in should not be misleading. Thus, same has been followed in case of
the given company also (Kusolpalalert, 2018). The auditors of the company have stated the same in their audit report
that the annual statements of the company are free from all kind of errors and necessary disclosures have been given
there, an extract has been given –
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Faithful Representation - It is important that the management of the company shall make sure that there is faithful
representation of the data and there are no errors and omission, as the user depends on this data to take important
decisions with regards to the company. Hence in this case also we see that faithful representation of the data has
been done and same has been stated in the annual reports of the company along with proper verification of the same
by the auditor in their books of accounts. Thus we see that this quality is very helpful for the users (Norberg, 2018)
3) ENHANCING QUALITATIVE CHARACTERISTICS
Timeliness - It is important that the information that is stated should be such that it should help the managers in
taking effective decisions related to that period. In case of the given assignment the company has prepared its
information based on its period and has also made it updates based on the changes that might have occurred.
Verifiability – It helps in making sure that the company is showing correct information that it needs to show based
on its economic prospects. It refers that people from different fields can access the information provided and check
whether its correct or not. So we see this in case of the given company also where the information provided is clear
and precise and can easily be verified by the users of the company (Vieira, et al., 2017).
Materiality – It is important that the concept of materiality is followed while representing the assets and liabilities
in the books of the company. It helps in making sure that none of the items are over or under stated. When we go
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through the financial statements of the REA group we see that they have agreed to that and have prepared their
financials based on that and have also given disclosures regards to that in their notes to accounts and the auditors
have reflected the same in their audit report. Thus we see that the management has made its compliance with the
qualitative characteristics.
Comparability – It is important that the annual statements of the company should be prepared in such a manner that
all the information stated there in can be easily compared with other companies based on their annual reports. Thus,
we see in this case also the company has followed the basis of annual report preparation based on the standard
accounting standards and IFRS and hence comparison with other companies becomes easily. Hence, we see that the
annual report of the company and the financial statements have complied with the basic qualitative characteristics of
conceptual framework
4) ARE THE USERS OF FINANCIAL REPORTS
Yes the users of the financial statements and the annual report of the given company that includes the stakeholders,
the investors, the general public, potential investors, employees, government etc. have been able to use the financial
statements as the annual reports have been prepared based on the conceptual framework of accounting and auditing
standards and the data that is given is clear and free from all kinds of error and there is no misleading information
there in as the users can see from the audit report of the company. Hence the users can use the annual report and the
financial statements conveniently (Webster, 2017).
5) THE CONCEPTUAL FRAMEWORK SAYS USERS ONLY NEED A BASIC
KNOWLEDGE OF ACCOUNTING
Conceptual framework helps in defining the overall nature and purpose of accounting and thus if the users have
knowledge about that they can study the annual reports of the company easily. Most of the annual reports of the
companies are easily understandable and there is very less issues that are involved in reading them given that
conceptual framework has helped in making these statements more easy and reliable and it is very easily
understandable and readable. Hence, we see that if the users have basic knowledge of accounting they can easily
apply the same and read the annual statements of the company accordingly.
6) MET THE REQUIREMENTS OF GENERAL PURPOSE REPORTING
FRAMEWORK
Yes, the company has met the requirements of general purpose reporting framework and have prepared their
financial statements based on the rules and regulations as set by the regulating authorities and have provided
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necessary disclosures for all the items that they have in their financial statements. This make it very user friendly.
They have included the qualitative characteristics of conceptual framework and enhanced the same in their reports.
The main aim is to make sure that the correct financial position of the company is depicted through the annual report
and the company has done that.
CONCLUSION
Based on the overall analysis it can be said that the company had followed the basic policies of conceptual
framework in the preparation of the annual report of the company. They have included the qualitative characteristics
of conceptual framework and enhanced the same in their reports. Thus, we see that there are many benefits of using
accounting framework while preparing the annual reports and if same is followed it will help the company to grow
and benefit. Also, timely updates keep happening which also helps in removing the issues that companies face and
makes the accounting process more better.
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REFERENCES
Boghossian, P., 2017. The Socratic method, defeasibility, and doxastic responsibility. Educational Philosophy and
Theory, 50(3), pp. 244-253.
Kaufmann, W., 2017. The Problem of Regulatory Unreasonableness. First ed. New York: Routledge.
Kusnadi, Y. & Wei, K., 2017. The equity-financing channel, the catering channel, and corporate investment:
International evidence. Journal of Corporate Finance, Volume 47, pp. 236-252.
Kusolpalalert, A., 2018. The relationships of financial assets in financial markets during recovery period and
financial crisis. AU Journal of Management, 11(1).
Norberg, P., 2018. Bankers Bashing Back: Amoral CSR Justifications. Journal of Business Ethics, 147(2), pp. 401-
418.
Vieira, R., O’Dwyer, B. & Schneider, R., 2017. Aligning Strategy and Performance Management Systems. SAGE
Journals, 30(1), pp. 23-48.
Webster, T., 2017. Successful Ethical Decision-Making Practices from the Professional Accountants' Perspective.
ProQuest Dissertations Publishing, 3(1), pp. 142-156.
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