With the growing competition in the corporate world in the current century, there is success of business organisations to register comprehensive progress for obtaining greater profitability and business growth. However, as the business operations have become complicated with the passage of time, certain issues tend to crop up for the organisations and one of the highly significant issues is accounting issues. Categories of accounting issues vary from organisations to organisations and certain influential dynamics precede such kinds of issues. Hence, this has necessitated the need of the business entities to conform to the needed financial principles and standards and the ASX listed entities are obliged to do the same as well (Barth 2015).
In case of Australia, the necessary rules and principles of financial reporting could be obtained from AASB conceptual framework. It is noteworthy that this specific framework is developed with the help of IASB and this mandates the need of all the organisations to follow such rules. The intention of this report is to develop a thorough evaluation of the doctrines and principles of the conceptual framework of AASB. In this report, Wesfarmers Limited is considered, as it is the leading retailer of the nation listed in ASX 100 (Wesfarmers.com.au 2018).
From the above discussion, it is evident that the ASX listed entities are obliged to conform to the principles and norms laid out in the AASB conceptual framework. It is to be taken into account that certain objectives are present before introducing the conceptual framework in case of the Australian business organisations.
In order to ascertain the current financial condition of the corporate entities, the users of the financial statements want to obtain information about the economic resources of the entities and such resources are current and non-current assets, current and non-current liabilities and equity (Birt, Muthusamy and Bir 2017). Due to this, the conceptual framework of AASB intends to provide information related to the financial statements for the above-depicted resources that would enable in ascertaining the financial health.
For evaluating the financial performance of the organisations, there is huge need for information regarding the primary financial factors like profit margin, revenue, expenses and others so that suitable decisions could be undertaken. Thus, the users could seek better insight of the financial condition of the firms. Hence, the AASB conceptual framework intends to provide change in financial position for delivering useful information to the users (Cordery and Sinclair 2016).
The below-stated evaluation represents the degree of compliance to which Wesfarmers has complied with the above-stated objectives related to the conceptual framework of AASB.
In accordance with the above figure, Wesfarmers Limited has presented its balance sheet statement in 2017 in its annual report where all the necessary information about the financial resources could be observed. As a result, the users are benefitted in ascertaining the financial standing of the organisation in the market (De Villiers, Rinaldi and Unerman 2014).
In accordance with the above tables, Wesfarmers Limited has disclosed its income statement and statement of comprehensive income in its 2017 annual report. Crucial information could be obtained regarding the aspects such as income, revenue, expenses, profit and others from such statements and thus, the financial performance of the organisation could be evaluated in order to make appropriate decisions (Filip et al. 2017).
In accordance with the above tables, Wesfarmers Limited has disclosed its cash flow statement and statement of changes in equity in its 2017 annual report. With the help of these statements, it becomes easy for the users to review the financial performance of the organisation over the years and thus, they could identify any variation in profit, sales revenue and others (Garrett, Hoitash and Prawitt 2014).
Based on the evaluation of the 2017 annual report of Wesfarmers Limited, it could be stated that the organisation has shown its conformance to the Australian standards of accounting, AASB conceptual framework and Corporations Act 2001 for preparing and disclosing the financial statements. Along with this, compliance could be observed with the guidelines proposed on the part of IASB for financial reporting and International Financial Reporting Standards (IFRS). Furthermore, it publishes various notes that support the accounting treatments of the various influential dynamics. Hence, it is clearly evident from the above discussion that Wesfarmers Limited prepares the financial statements in a manner that all the AASB objectives related to the conceptual framework are fulfilled appropriately.
Besides the objectives of the conceptual framework proposed by AASB, certain guidelines or criteria are present in order to realise various financial aspects. These aspects primarily constitute of assets, liabilities, equity, revenue and expenses (Henderson et al. 2015). These constitute of the recognition criteria of AASB and the ASX listed firms are obliged to follow such criteria for the procedure of recognition. Hence, in this regard, two significant aspects need special consideration. The management of the firms need to take into account information associated with the significant financial aspects in their recognition procedures. After all the significant information is taken into account, the business organisations are needed to assure their faithful representation (Hodgson and Russell 2014).
The below-stated discussion represents the adherence of Wesfarmers Limited with the recognition criteria stated above in relation to the conceptual framework of AASB:
As observed from annual report, various asset groups are present in Wesfarmers Limited. Out of those assets, property, plant and equipment are significant and they are realised at cost less accumulated depreciation and impairment in accordance with AASB 116. Moreover, the realisation of landfill assets is made based on fair value approach.
Wesfarmers Limited realises goodwill based on cost and it is subject to impairment losses in compliance with AASB 136.
In accordance with AASB 9, Wesfarmers Limited realises trade and other receivables on ongoing basis and fair value is used for measuring them. The period of settlement of trade and other receivables is 30 days.
Liabilities:
In case of liabilities, trade and other payables are a significant liability for Wesfarmers Limited and it is realised against the liability in contrast to goods and services purchased from the suppliers. The payment is made within 45 days of realisation in accordance with AASB 9.
For Wesfarmers Limited, another significant liability is borrowings and fair value is used for realising the same after the consideration of issuance cost is made.
Wesfarmers Limited realises its provision in the statement of financial position at the time the organisation has current legal obligation because of any past event (Holland 2016).
Equity:
In order to recognise issued capital, Wesfarmers Limited utilises the technique if fair value measurement of the received consideration. In this method, the organisation takes into account the costs that are attributed directly towards the issuance of shares in accordance with AASB 1004.
Revenue:
Based on AASB 118, it could be stated that Wesfarmers Limited realises revenue as the amount based on fair value method on the received consideration.
Expense:
In case of Wesfarmers Limited, all expenses are realised in the income statement at the time when they are incurred and not when the payment is made.
Based on the above discussion, there is clear evidence of an aspect that Wesfarmers Limited adheres to each criteria of recognition mentioned in the AASB conceptual framework in order to realise the main financial aspects and it represents the overall compliance with the necessary guidelines.
The fundamental qualitative characteristics constitute of a significant dimension of the AASB conceptual framework for suitable financial reporting. The incorporation of two fundamental qualitative characteristics makes the financial statements useful for aiding the users in making important decisions (Kogan, Sudit and Vasarhelyi 2018). The two significant characteristics include faithful representation and relevance. Relevance is highly beneficial for the users of the financial statements to aid in their decision-making process. Besides relevance, the presence of faithful representation assures the financial information is provided correctly to the users of the financial statements (Macve 2015).
It could be observed from the annual report of Wesfarmers Limited that both these characteristics are present while depicting the financial information to its users. The recent annual report of the organisation carries all the pertinent statements such as the balance sheet statement, income statement and others containing all the pertinent financial information. As a result, it has positive impact on the users in relation to undertaking decisions
(Morioka and De Carvalho 2016).
Based on the above statement, Ernst & Young has opined that the financial statements of the organisation are developed in accordance with AASB, IFRS, IASB and Corporations Act 2001. Hence, it has maintained both relevance and faithful representation while presenting financial information to the users.
As proposed by the conceptual framework, the enhancing qualitative characteristics enable in improving the overall quality of the financial statements for the listed companies in ASX. These characteristics comprise of comparability, verifiability, timeliness and understandability (Nobes 2014). Comparability enables the users to detect the similar stuffs and differences in various financial aspects (Zhang and Andrew 2014). The financial statement users could review the financial information through knowledge application. The timeliness characteristic enables in supplying financial information to the users at the right time. With the help of understandability, the financial statements are prepared in such a manner that they become user-friendly (Simnett and Huggins 2015).
Verifiability and comparability have positive relationship with faithful representation. With the help of faithful representation, Wesfarmers Limited complies with all the standards of the conceptual framework of AASB. Such faithful representation results in verifiability and comparability of the financial statements of Wesfarmers Limited. Wesfarmers Limited discloses its financial outcomes via the financial statements at a specific time in a year for ensuring their availability of information to the users. Along with this, the users of the financial statements could gain an insight of the financial information of Wesfarmers Limited, when reasonable financial knowledge is present.
Conclusion:
Based on the above evaluation, it could be stated that the ASX listed entities are obliged to conform to the principles and norms laid out in the AASB conceptual framework. It is to be taken into account that certain objectives are present before introducing the conceptual framework in case of the Australian business organisations. Wesfarmers Limited has presented its balance sheet statement in 2017 in its annual report where all the necessary information about the financial resources could be observed. As a result, the users are benefitted in ascertaining the financial standing of the organisation in the market. The other statements are prepared accordingly for providing maximum usefulness to its users.
Besides the objectives of the conceptual framework proposed by AASB, certain guidelines or criteria are present in order to realise various financial aspects. These aspects primarily constitute of assets, liabilities, equity, revenue and expenses. There is clear evidence of an aspect that Wesfarmers Limited adheres to each criteria of recognition mentioned in the AASB conceptual framework in order to realise the main financial aspects and it represents the overall compliance with the necessary guidelines. In addition, Ernst & Young has opined that the financial statements of the organisation are developed in accordance with AASB, IFRS, IASB and Corporations Act 2001. Hence, it has maintained both relevance and faithful representation while presenting financial information to the users.
As proposed by the conceptual framework, the enhancing qualitative characteristics enable in improving the overall quality of the financial statements for the listed companies in ASX. These characteristics comprise of comparability, verifiability, timeliness and understandability. Wesfarmers Limited complies with all the standards of the conceptual framework of AASB. Such faithful representation results in verifiability and comparability of the financial statements of Wesfarmers Limited. Wesfarmers Limited discloses its financial outcomes via the financial statements at a specific time in a year for ensuring their availability of information to the users. Along with this, the users of the financial statements could gain an insight of the financial information of Wesfarmers Limited, when reasonable financial knowledge is present.
References:
Barth, M.E., 2015. Financial accounting research, practice, and financial accountability. Abacus, 51(4), pp.499-510.
Birt, J.L., Muthusamy, K. and Bir, P., 2017. XBRL and the qualitative characteristics of useful financial information. Accounting Research Journal, 30(01), pp.107-126.
Cordery, C.J. and Sinclair, R., 2016. Decision-Usefulness and Stewardship As Conceptual Framework Objectives: Continuing Challenges.
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), pp.1042-1067.
Filip, A., Hammami, A., Huang, Z., Jeny, A., Magnan, M. and Moldovan, R., 2017. Literature Review on the Effect of Implementation of IFRS 13 Fair Value Measurement.
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp.1087-1125.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hodgson, A. and Russell, M., 2014. Comprehending comprehensive income. Australian Accounting Review, 24(2), pp.100-110.
Holland, D., 2016. Simplifying income recognition for not-for-profit entities. Governance Directions, 68(11), p.666.
Kogan, A., Sudit, E.F. and Vasarhelyi, M.A., 2018. Continuous online auditing: A program of research. In Continuous Auditing: Theory and Application (pp. 125-148). Emerald Publishing Limited.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Morioka, S.N. and De Carvalho, M.M., 2016. A systematic literature review towards a conceptual framework for integrating sustainability performance into business. Journal of Cleaner Production, 136, pp.134-146.
Nobes, C., 2014. International Classification of Financial Reporting 3e. Routledge.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Wesfarmers.com.au., 2018. [online] Available at: https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-report.pdf?sfvrsn=0 [Accessed 19 Apr. 2018].
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), pp.17-26.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
