Analysis of TPG Telecom: Accounting Theory and Current Issues 2017

This report provides an analysis of TPG Telecom Company's financial statements, accounting policies, and adherence to accounting standards such as AASB 101 and IFRS. It discusses the conceptual framework of reporting, compares TPG Telecom with competitor Telstra, and evaluates the accounting assumptions and disclosures made by the company. The report also investigates the managers' accounting strategy and reporting strategy, including the major accounting policies followed and potential red flags. The analysis covers the influence of political factors on accounting standards and the importance of accurate disclosures in financial reporting. Desklib offers a platform to access this and many other solved assignments for students.

Accounting
Theory and
Current Issues

1
By student name
Professor
University
Date: 30 September , 2017.
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Executive summary
The financial statements of the company are the snapshots of the company that provides necessary
details to the users that are helpful to them in taking important decisions with regard to the company
and its affairs. The various accounting standards and accounting policies have been set by law framing
bodies to make this process easy and clearer. In this assignment the different aspects of accounting will
be discussed with relevance to one of the top telecommunications company in Australia TPG Telecom
Company. The annual report of the company has been downloaded and various aspects related to the
same have been discussed in details.
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Contents
Introduction…………………………………………………………………...3
Section b…..…………………………………………………………………...3
Section c…..…………………………………………………………………...4
Section d…..…………………………………………………………………...8
Conclusion…………………………………………………………………..…12
Refrences.....……………………………………………………………….....13
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Introduction
The TPG Telecom Company is one of the oldest and the largest telecommunication company In
Australia. The business of the company is spreading to other countries also and it is opting for long term
expansion. The company specializes in providing various mobile and dth services. The company is the
highest supplier of mobile services in Australia and has its own personalized mobile network. The overall
performance of the company is really good and the company is trying to improve its overall revenue by
expanding its area of operation and uplifting its scale (Kew & Stredwick, 2017). Apart from Australia the
company is trying hard to make a mark in the international market and is focusing more on expanding its
overall services. In this report the annual report of the company of past two years will be discussed and
important points in regard to the same will be stated in brief. Main focus will be on the accounting
policies and estimates that the company has taken into consideration in preparation of its financial
statements and how helpful it is for the end users of the company. Other important aspects of the same
will be discussed with supporting extracts from the annual report attached to it (Prasad & Chand, 2017).
The conceptual framework of reporting has been stated for the preparation of these statements
that consists of a large number of accounting standards and accounting policies. It has been prepared
for helping the companies in the preparation and presentation of their financial statements to as much
accuracy as possible (Sweeting, 2017). These standards have been developed by the regulatory
authorities for solving the small issues of accounting that the company’s faces and these standards help
in solving the same. It helps in establishing uniformity by which the companies can compare their
progress with each other if they are preparing their statements following the same guidelines. With the
advent of IFRS establishing this uniformity has become easier as it will help in removing the trade
barriers and will make the overall process of accounting same for all the countries and organization
(Minnis & Sutherland, 2017). It is the global reporting framework that has been developed to help the
nations in the preparation and presentation of their financial statements to the best of their ability free
from all kind of errors. It helps in stating the rules for accounting and every company needs to follow the
same. In this case we will analyze the annual report of the stated company.
Section b
i)The company is following the AASB 101 conceptual framework of accounting which has been
issued by the Australian Accounting Standard Board for the preparation of its annual reports. The
statements of the company are prepared in sync with the IFRS and the company has also complied with
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the rules of the Corporation Act 2001. All the statements have been prepared in details and all the
necessary notes to account have been stated clearly. The company has given proper details about the
various accounting assumptions and accounting estimates taken by it.
ii) There is no flexibility in the accounting policies that are followed by the company. The
company needs to prepare its accounts as per the said standards, however in case there are any
deviations then the company needs to give proper disclosure and must justify the same.
iii) The competitors of the company mostly follow the IFRS that is a global reporting framework,
however in case of TGP the company follows the standards that has been defined by the AASB in
compliance with the IFRS. Mostly the countries are trying to bring uniformity in the policies followed by
the company so that overall comparability becomes easy and it will also help in removing trade barriers.
iv) One of the other top company in the field of digital communication and media is Telstra. The
company has the highest market share owning to its huge economies of scale. The company has
ventured into many areas apart from digital marketing and carters to a large number of people. The
annual revenue of the company goes into millions, and the employee base is more than thousands. The
annual reports of the company are prepared as per the global reporting framework IFRS (Maynard,
2017). The annual report of the company is downloaded and necessary comparison with the chosen
company is made. In case of TGP since the company is following the standards that has been set by the
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Australian board the company is missing the global touch. There is lack of uniformity in comparison to
the companies of the other countries.
On the basis of the comparison it can be said that the policies of Telstra are stronger than TGP
and it has abided with all the rules and regulations accordingly. The company has also provided
necessary disclosures in the notes to account and has made the overall annual report almost accurate
and free from errors. If we compare the two companies on the basis of the ratio analysis it can be said
that since the current ratio and quick ratio of Telstra is better than TGP, the liquidity position is better in
that case of Telstra. But the shareholders of TGP are in a better then Telstra because the overall return
on equity and return on assets is better in that case (Laursen & Thorlund, 2016). The overall market
position of Telstra is better owning to its strong economies of scale; hence among all the top companies
in this sector, Telstra has the highest market shares and is continuing to retain the same over the years.
v) Yes it is in agreement with the accounting policies and assumptions that are taken and
followed by the company because they are in sync with the standard accounting regulatory framework
and also proper disclosures and notes to account has been given in case there in any confusion.
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vi)The accounting strategy is not hiding, it discloses all the necessary information that must be part of
the annual report of the company and that will be helpful to the users of the company as per format
clearly and precisely. There is no hiding element in the books of accounts of the company.
vii) Red flags occur when the management of the company falsifies the accounts by indulging in
certain wrong practices for their own benefit. In case of the annual report of the given company there
are no such figures which may emphasis on such practices carried on by the company. For each of the
figures proper disclosures have been given and are supported by proper documentation. Hence there
are no such red flags that can be seen in the accounts of the company. It is free of errors and the same
thought has been supported by the auditors of the company. The auditors have given a clear report that
states that the books of the company are showing a true and fair view (Han, et al., 2017).
viii) In cases if there is any chances of any red flags in the system. It can be found by analyzing
the annual statements of the company, the balance sheet and the profit and loss and each and every
figure given in the same must be checked properly. The notes of accounts must be scrutinized properly
to find any such statements or figures that is somewhat fishy or in which there is certain element of
abnormality.
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Section c
i)The setting up of the accounting standards is done by the regulatory authority by following a
long process for the same. It requires a lot of contemplation and there are undue pressures from various
sources especially political forces. These try to control the formation of these standards for their own
benefits, taking into consideration their own needs. They don’t give importance to the development of
these standards to make the overall preparation of the statements better and free from all kind of
errors. The major political issue includes the various trade barriers between nations, complex trading
and political structure that govern the interfirm and intra firm transactions (Guragai, et al., 2017). These
have a lot of influence on these regulatory authorities. But few political factors are also in the favor of
the company like privatization and deregulation that helps in betterment of the overall scenario of
business and operations.
ii)It is important for the company to give necessary disclosures in regard to all the accounting
assumptions and estimates that has been taken by them in the preparation of their accounts. But the
companies needs to be sure that they do proper research and make the disclosures as accurate as
possible. In case of any falsification of the case the management of the company will be held responsible
(Given, 2016). The various accounting standards that has been followed by the company have their own
specific disclosure requirements that they must follow and the auditors needs to check whether the
companies have complied with the same or not. In case of the give n company there are certain
assumptions made by the company and for the same proper disclosure has been provided by them.
Certain extracts from the same has been attached in the report.
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iii) It is important for the companies to making proper disclosures but they must make sure that
there are no errors in the same. In case there is any falsification then the management of the company
will be held liable and will be punished for the same. The auditors who verify the accounts are also
responsible in case there is any error found in the records of the company. Thus it is important that the
companies must take proper care whenever they are stating anything in their notes to account and it
must be in sync with the reporting frameworks and the accounting standards of the company.
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Part d: Investigative report on the Managers’ Accounting Strategy and Reporting Strategy
The managers are the people who are responsible for running the organization and framing the
most important rules and regulations for running the same. They are given the major responsibility of
managing the preparation of the annual reports of the company and give their opinions as and when
needed. In case the auditors of the company find any issues they will consult the management and they
need to take care of the same. In this report we will present an investigate report of the manager in
relation to the accounting policies and procedures that are followed by the company and what are the
major issues that was faced in the same.
Section 1: The major accounting policies
The manager needs to check whether the company has prepared its reports following the key
accounting policies and standards as per the major regulatory framework bodies. All the necessary
disclosures in case of major accounting assumption and accounting estimates must be checked. In case
the management feels that the company has not managed to follow the standards accordingly, then
necessary recommendations must be provided to make sure that the statements of the company are
free from all errors (Given, 2016). The manager must also seek the opinion of the auditor is case of the
same and should take the recommendation of the auditor to make the overall process more clear and
correct. The major while investing the key policies must check that they are in sync with the standard
regulation for that they must read the framework very nicely to have proper knowledge about the same.
They must provide proper guidance to the employees to follow these policies effectively and precisely.
Section 2: Assess Accounting Flexibility
The manager needs to check how flexible the approach of accounting is in the system. The
manager will check the same by seeing how easily changes in the reports can be made once they are
finalized and what is the process of doing the same. The manager will check whether the people who
are responsible for formation of the accounts are following the standards as precisely as possible and
there is no deviations from the same (Dichev, 2017). It is important to make sure that in case some
major changes are happening in any of the items like any cash or bank transaction or one that is related
to the creditors of the company or anything that has some material effects on the financial statements
must be reported for and the effect of the same must be included. In that way it is important that
accounts must be flexible enough (Fay & Negangard, 2017). The managers needs to access how flexible
the accounts are, how easily the changes can be included and whether and how much effect do the
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same have on the financials of the company and the overall accounting system. It will help the managers
while taking important decisions with regard to the company.
Section 3 : Accounting Strategies
It is important that key accounting strategies must be properly defined and identified and the
same must be applied while preparation of the accounts of the company. The management must see to
it that the accounting strategies that are developed are free from all kind of biasness, it must convey the
true pictures to the people (Crosby & Henneberry, 2016). The basic accounting concepts that includes
materiality, prudence, going concern assumption etc must be followed. These strategies must be
developed after a lot of contemplation and the management must see to it that they are properly
applied. It is very important in the long run as it will help the management in being clear in their
approach and providing a clear picture.
Section 4: Quality of Disclosure Made
The managers must check that whatever disclosures the company is making in its annual report
is in sync with the various disclosures of the accounting standards that the management of the company
is following in their annual reports. It is important for the managers to properly check all the records to
make sure that there is no falsification, else the managers will be held liable and will be punished
(Chiapello, 2017). The managers need to make sure that these disclosures that are provided in the
annual reports are as detailed and as accurate as possible, so that they are able to deliver the best
information to the users of the financial statements. These are the few steps that the mangers must
take to ensure the quality of the disclosures that are made in the annual report.
Section 5: Potential Red Flag Identification and Analysis
Red flags occur in the annual report when the management of the company or the employees
indulges in certain malpractices for their own benefit. The falsify the accounts and the records to
present wrong information to the users so that it will provide them a wrong information that will be
helpful to the management (Burke & Clark, 2016). The managers in their investigative report must look
for any such potential red flags and in any case they come across such incidents, immediate actions
must be taken. In case of TGP it can be seen that there are no potential red flags so the management
can give a clear report for the same. The main purpose of the investigative report by the mangers is to
make sure that all such red flags and potential errors in the system must be identified and must be
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removed (Chariri, 2017). The probable areas of these red flags are changes in the accounting policies
that have led to poor performance of the company and that is not properly explained. Unexplained
increase or decreases in the assets of the company like inventories or investments of the company.
Unexplained large write offs in case of property plant and equipment. In case the auditor gives an
unqualified audit or if there are any unwarranted changes in the audit report then that must also be
taken care of by the managers (Birt, et al., 2017). All the related party transactions must be properly
checked because they are very sensitive areas in which there can be huge falsifications that might affect
the overall report of the company. These are the probable areas in which there might be potential red
flags that might affect the overall system of the company and hence the mangers must check these
reports to make sure that these damages are taken care of. The managers must state all these in their
investigative report. The managers must do this investigation in detail and state all the points clearly.
Section 6: Compliant With the Framework of Accounting
The managers must check that the company as prepared the annual reports of the company
following the defined standards as per the conceptual framework of accounting followed by the
company (Abbott & Kantor, 2017). Like in case of TGP the company has prepared its accounts in
compliance with the Australian Standards of accounting and the managers must see that all of this is in
compliance with the conceptual framework of reporting and proper disclosure in case of any deviation is
given or not. These are the few steps that the managers must follow in their investigative report of the
company.
Conclusion and Recommendations
After the entire analysis it can be said that preparation of the annual reports of the company as per the
framing reporting concepts is very important and all the companies must comply with these accounting
policies and accounting concepts. In case of TGP it can be said that the company has done its work
properly and has complied with all the requirements and has given necessary disclosure as and when
needed (Alexander, 2016). The companies on a global basis can try to be more organized in their
approach so that loopholes from the system can be removed so that the end users get the best results
that will help them in taking important decisions.
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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.
Birt, J., Muthusamy, K. & Bir, P., 2017. "XBRL and the qualitative characteristics of useful financial
information". Accounting Research Journal, 30(1), pp. 107-126.
Burke, J. & Clark, C., 2016. The business case for integrated reporting: Insights from leading
practitioners, regulators, and academics. Business Horizons, 59(3), pp. 273-283.
Chariri, A., 2017. FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING
WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
Chiapello, E., 2017. Critical accounting research and neoliberalism. Critical Perspectives on Accounting,
Volume 43, pp. 47-64.
Crosby, N. & Henneberry, J., 2016. Financialisation, the valuation of investment property and the urban
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Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business
Research, 47(6), pp. 617-632.
Fay, R. & Negangard, E., 2017. Manual journal entry testing : Data analytics and the risk of fraud. Journal
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Given, L., 2016. 100 questions (and answers) about qualitative research. s.l.:Sage.
Guragai, B., Hunt, N., Neri, M. & Taylor, E., 2017. Accounting Information Systems and Ethics Research:
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Han, B., Subrahmanyam, A. & Zhou, Y., 2017. The term structure of credit spreads, firm fundamentals,
and expected stock returns. Journal of Financial Economics, 24(1), pp. 147-171.
Kew, J. & Stredwick, J., 2017. Business Environment: Managing in a Strategic Context. second ed.
London: Chartered Institute of Personnel and Development.
Laursen, G. & Thorlund, J., 2016. Business Analytics for Managers: Taking Business Intelligence Beyond
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Maynard, J., 2017. Financial accounting reporting and analysis. second ed. United Kingdom: Oxford
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Minnis, M. & Sutherland, A., 2017. Financial Statements as Monitoring Mechanism: Evidence from small
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Prasad, P. & Chand, P., 2017. The Changing Face of the Auditor's Report: Implications for Suppliers and
Users of Financial Statements. Australian Accounting Review.
Sweeting, P., 2017. Financial Enterprise Risk Management. Second ed. UK: Cambridge University Press.
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