Qualitative Characteristics of Financial Reporting: Telstra Case Study

This report provides an analysis of the qualitative characteristics of financial reporting, with a focus on the application of AASB 18, related to the valuation of property, plant, and equipment. The report uses Telstra Corporation as a case study to illustrate the practical application of these principles. It discusses the conceptual framework of financial reporting, emphasizing the importance of relevant and reliable information for both internal and external users. The report examines the disclosures made by Telstra Corporation in accordance with AASB 18, including asset classifications, depreciation methods, impairment losses, and the impact of exchange rate fluctuations. The analysis highlights how Telstra has complied with IFRS and provides insights into how financial statements are prepared to ensure they are free from errors and useful for decision-making. The report also discusses the importance of comparability in financial statements and how effective reporting helps stakeholders make informed decisions. Finally, the report suggests potential improvements for the application of standards and the quality of financial reporting.

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University
Date: 27 September ,2017

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Executive Summary
In the given assessment, the qualitative characteristics of financial reporting will be dicussed. The mian
points to be highlighted will be the application of standard AASB 18 that is related to the valuation of
the property plant and equipment. Improtant points regarding the same will be discussed taking in
consideration one of the top companies of Australia Telstra Corporation.
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Contents
Written Activity (part a)..…………………………………………………………........2
Project (part b)....………………………………………………………………………......3
Project (part c)....……………………………………………………………………….......5
Project (part d)....……………………………………………………………………….......5
Refrences……………..………………………………………………………....................7
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a) The conceptual framework of reporting and financial accoungting was introduced to give a
basis to the companies for preparing and presenting their financial statements such that the company
can maintain the uniformity all across the world as per the relevant accounting standards and IFRS’s.
This also aims to provide the solution to day to day problems while accounting and other issues in the
normal course of the business. The main aim of these frameworks is to provide the user with the
relevant and reliable information with the help of which major financial and operational decisions can
be taken. (Kew & Stredwick, 2017) The company’s internal users include the employees, the customer,
the debtors, the creditors, etc whereas the external users include the government, the banks, the
financial institutions, the tax authorities, etc. All of them require the information to take major
economic and investment decisions (Trieu, 2017). The financial statements should be presentated in
such a fashion that it represents the definition, the measurement, the recognition and the disclosure
criteria. The users don’t only need the information of the resources of the company but on how well
they are being optimally utilised and what the change and reason of change in them over the past year.
General purpose financial statements should also aim at disclosing the major claims of the company and
what are the changes in it which can have a forebearing on the decision being taken by the
stakeholders. It also aims at ascertaining the cash flow of the company through the cash flow statement
and the statement of comprehensive income. The company also needs to present the qualitative
information besides the quantitative information which can have an impact on the company’s decision
(Visinescu, et al., 2017).
Qualitative information being provided is equally impoartant for the company to disclose in
order to help the users make the correct decision. Information is only useful and can be put to use in
case it is timely, comparable, understandable and verifiable. The information disclosed should be free
from errors and misstatement and must meet the criteria of the transparency and faithful
representation of the information on which the users can rely. Also, it should be complete in all the
respects and should be given at the right time in order to enable the timely decisions by the users. If at
all, it comes at the last moment, it loses its relevance (Kew & Stredwick, 2017). It should be made in such
a way that it is comparable from the past year data, the data for other company from the same industry
and also the budgeted and estimated data. The 3rd aspect being verifiability of the financials depicts that
the financials should present the data which it purports to represent and which gives the users a
reasonable assurance on the status of the company (Linden & Freeman, 2017). The 4th qualitative aspect
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must also be taken care such that the data is easy to read and understand and convenient to interpret. It
should be simple to a person who has lack of technical knowledge and not complex and complicated.
(Jones, 2017) It should not be misleading and hence it should be prepared by a personal having
reasonable knowledge of accounts.
b) In the given case of Telstra the management of the company has followed the basic principles
and methods that has been set by the International Framework of reporting and has prepared their
statements on the basis of the same (Jones, 2017). The company has followed the AASB 18 for the
valauation and calculation of the amount related to the property plant and equipment. The necessary
disclosures are also provided in relevance to the said standard. The users finds it very useful to make
effective analysis when the companies follow these standards. In case the companies deviate from the
same then they are penalised for the same. In the given case also the Telstra company has followed the
standard and has done the valuation of the asset accordingly.
As per the standards of the PPE , following are the relevant disclosures that the companies must abide
with-
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 The various classes of assests and the basis of bifurcation of the assets in those classes.
 The method of depreciation and amortisation that is followed, the useful life of the asset that is
taken into consideration, the rate of depreciation that is applied, the cost of any addition or
deletion made in the classess of asset during the said period (Werner, 2017).
 The total carrying amount of the assets and the method of calculation of the same. Any
impairment loss that might occur must also be recognised and proper disclosure must be given
(Dichev, 2017).
 The exchange rate fluctuations that had affected the overall value of the assets, and the policies
of the management of the company that ahd affect on that assets must be taken into
cosndierations. All the relevant facts and figures that are related to these points must be
properly disclosed by the companies. It must be support by proper documentations and
effective amount of precision must be maintained in case of the same (Belton, 2017).
In the given case we see that the Telstra Corporation has made all the necessary disclosures. The
management of the company has stated briefly about all the assets of the company, all the necessary
disclosures regarding amortisation and depreciation is given. The impairment cost of the assets and all
the other points that have been stated above have been taken care of. The management of the
company and the directors have clearly stated that the accounts of the company are in sync with the
relevant standards and all the necessary notes to accounts have been given in brief (Bromwich &
Scapens, 2016).The auditors have also supported this view of the management and have stated the
same in their audit report. Brife extracts from the annual reports of the company are attached here
under to give a clear idea about the policies of the management and how they have done the same.
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c)One of the most important aspect of financial reporting framework is that it gives absis on
which the companies can prepare their reports that are free from errors and are useful for the people
who are dependant on the same. It is one of the most important aspect of reporting and it helps the
management in the long run to take important decisions (Abbott & Kantor, 2017). The users of the
financial statements of the companies that includes the various investors and the shareholders knows
that the accounts of the company are free from errors and they can take important decisions by relying
on the same. In case of Telstra the company has abided with all the requirements of the IFRS and have
presented all the information very clearly that can be helpful for the investors and the other
stakeholders. The previous year figures with relation to the gross block and net block and the over all
valuation of the assets and the other liabilities was also stated. It helps in making effective comparison
with the basis of which the investors can judge whether the company is growing or not. Hence it helps in
lending one of the most important characteristics to the financial statements that is of comparability. It
will help in making important decisions with more precsision.
d)On the basis of the given facts and figures it can be said that the company has effectively
complied with all the necessary requirements of these standards and has made the specific disclosure. It
has presented a clear and transparent position of the overall accounts of the company with the help of
the reporting framework policies. All the necessary figures that are related to the cost of the asset, the
overall depreciation, the effect of the management decision everything is stated in clear terms. The
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company ahs helped in justification of the fact as in why these standards must be used by the
companies and how useful they can be to the end users.
The international standards framing bodies considers the view point of both the users and the
companies while framing these standards and make the necessary changes in the same
accordingly.While making amnemdnets the feedbacks from all parties are taken and then applied.In
case of Telstra, the management of the company can reduce the overall complication and make the
application of these standards more easy so that base level users can understand.The international
bodies can also opt for maintaining uniformity in the standards that are overall appliacbel to only one
type of company and should not be open for all the companies. These are the few ways in which the
board can improve the quality of the financial reporting and also reduces the errors that might be
involved in the same (Alexander, 2016).
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Refrences
Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of
the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp.
411-431.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat
International ltd.
Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on. Management
Accounting Research, Volume 31, pp. 1-9.
Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), pp. 617-632.
Jones, P., 2017. Statistical Sampling and Risk Analysis in Auditing. NY: Routledge.
Kew, J. & Stredwick, J., 2017. Business Environment: Managing in a Strategic Context. second ed.
London: Chartered Institute of Personnel and Development.
Linden, B. & Freeman, R., 2017. Profit and Other Values: Thick Evaluation in Decision Making. Business
Ethics Quarterly, 27(3), pp. 353-379.
Trieu, V., 2017. Getting value from Business Intelligence systems: A review and research agenda.
Decision Support Systems, Volume 93, pp. 111-124.
Visinescu, L., Jones, M. & Sidorova, A., 2017. Improving Decision Quality: The Role of Business
Intelligence. Journal of Computer Information Systems, 57(1), pp. 58-66.
Werner, M., 2017. Financial process mining - Accounting data structure dependent control flow
inference. International Journal of Accounting Information Systems, Volume 25, pp. 57-80.
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