The conceptual framework states the concepts related to presentation and preparation of financial reports for external users. Main purpose of the framework is assisting AASB in developing the future AAS (Australian accounting standards) and includes the evaluation criteria proposed by IASB (international accounting standards board) pronouncements. It further assists AASB to promote harmonisation of the procedures, regulations and accounting standards involved with the presentation of financial statement through providing the basis to reduce number of alternative accounting treatments those are permissible as per AAS. Main objective of the GPFR (general purpose financial reporting) is providing financial data for the reporting company which are useful to potential as well as existing investors, lenders and various other creditors while they make any decisions regarding providing the resources to the company (Mca.gov.in 2018).
Auctus that is listed under ASX is focussed on the investment in global technology sector. The company prefers in global investment and generally invests in the global technology, Proptech, Fintech and frontier tech. Looking into the annual report of the company for the year closed on 30th June 2018 it is identified that the financial statement of the entity is GPFR and is prepared as per the requirement of Corporations Act 2001, AAS and the interpretations issued by AASB. Further, the notes attached to the financial reports are also complied with the IFRS released by IASB (Auctusinvest.com 2018).
As per the requirement of GPFR the financial reports shall provide adequate information that will assist the users to make required decision. It is identified from the annual statements of the entity that it provides adequate information with appropriate disclosures those will assist the users to make appropriate decisions.
GPFR requires that the items recorded in the financial reports of the entity shall be presented in such way that it can be assessed in timely manner. From the annual statement of the company it is recognised that the organisation prepares its annual statements on annual basis those includes the items with its amount for 1 year period ended on 30th June 2018. Moreover, details break-up for each item is properly disclosed through notes to accounts (Frias?Aceituno, Rodriguez?Ariza and Garcia?Sanchez 2013).
In accordance with the conceptual framework the annual statement of the company shall present the clear data regarding various resources available to it and from the sources the resources are acquired. From the annual statement of the organisation it is recognised that the entity presents the details regarding the resources available to it and the sources through which those are obtained (Noon, Blyton and Morrell 2013).
Conceptual framework requires that the annual statements shall be organized on going concern basis that reflects continuity of the normal business conducts and the settlement of obligation and realisation of the assets under normal business course. Auctus prepares its consolidated financial reports in accordance with the requirement. The company incurred loss from the continuing operations amounting to $ 33,94,382 for the year ended 2018 (Cheng et al. 2014)
Recognition is procedures to incorporate any item under balance sheet or income statement that meets the characterization of element and fulfils the principles of recognition. It includes depiction of item by monetary items as well as in words presented under balance sheet or income statement. Items those satisfy the recognition criteria shall only be included in the balance sheet or income statement.
Asset shall be reported in balance sheet if it is likely that forthcoming economic benefits will flow to the entity and the value or cost of the asset can be reliably determined. From the annual report of the company dated at 30th June 2018 it is noticed that the assets are reported when they meet the recognition criteria. Further, the assets like plant and equipment are measured at cost basis and reported in the balance sheet at the cost reduced by the amount of accumulated depreciation and the amount of impairment loss, if any. Assets are broke up into current assets including cash and cash equivalents, other current assets and trade and other receivables and non-current assets including plant and equipment, financial assets and intangible assets (Francis, Hasan and Wu 2013).
Liability shall be reported in balance sheet if it is likely that resource outflow embodying the economic benefits will take place for settlement of current obligations and the amount at which the obligation is to be settled must be determined reliably. From the annual report of the company dated on 30th June 2018 it is noticed that the liabilities are reported when they meet the recognition criteria. Liabilities are broke up into current liabilities including current tax liabilities, trade and other payables, short-term provisions and borrowings. The company did not have any non-current liabilities for the year ended 2018. Liabilities like trade receivables are reported at fair values initially and at amortised cost subsequently through the effective interest method reduced by impairment provision, if any.
Incomes are reported under the income statement when increase in the upcoming economic benefits associated with increase in assets or decrease of liability has generated that’s value can be determined reliably. In other words, the income recognition takes place simultaneously with recognition of the asset increase or liability reduction. From the annual report of the company dated on 30th June 2018 it is noticed that the incomes are reported when they meet the recognition criteria (Miller and Power 2013). Further, the revenues are measured at fair value of the consideration receivable or received after considering trade discounts and volume rebates, if any.
Expenses shall be reported under income statement when the reduction in the upcoming economic benefits associated with reduction in assets and increase in liabilities has been generated and value of which can be determined reliably. In other words, the expenses recognition takes place simultaneously with recognition of the liabilities increase or asset reduction. From the annual report of the organisation dated on 30th June 2018 it is noticed that the expense are reported when they meet the recognition criteria (Li 2013). Further, the expenses are segregated under proper accounting heads like employee benefits expenses, finance costs, rent and utilities, impairment and depreciation.
Financial reports to be useful shall be represented faithfully and must be relevant for the purpose to which it is represented. Usefulness of the financial information is augmented if it is understandable verifiable, comparable and presented in timely approach.
Understandability, verifiability, comparability, and timeliness are the qualitative characteristics that improve usefulness of the information those are presented relevantly and faithfully.
Conclusion
It is concluded from the above discussion and analysis that the Auctus is complying with all the conceptual framework requirements for preparing its GPFR. Financial information involved details regarding going concern and resources those enable the users to make proper decisions. Further, the assets, liabilities, expenses and incomes are recognised and measured as per the recognition and measurement criteria. Further, it followed all the qualitative characteristics while preparing the financial reports for enabling the decision makers decisions and enhancing the usefulness of financial information.
References
Auctusinvest.com. 2018. Auctus Alternative Investments. [online] Available at: https://auctusinvest.com/ [Accessed 10 Dec. 2018].
Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39(6), pp.395-413.
Chen, L.H., Folsom, D.M., Paek, W. and Sami, H., 2013. Accounting conservatism, earnings persistence, and pricing multiples on earnings. Accounting Horizons, 28(2), pp.233-260.
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international integrated reporting framework: key issues and future research opportunities. Journal of International Financial Management & Accounting, 25(1), pp.90-119.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Francis, B., Hasan, I. and Wu, Q., 2013. The benefits of conservative accounting to shareholders: Evidence from the financial crisis. Accounting Horizons, 27(2), pp.319-346.
Frias?Aceituno, J.V., Rodriguez?Ariza, L. and Garcia?Sanchez, I.M., 2013. The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), pp.219-233.
Griffith, E.E., Hammersley, J.S. and Kadous, K., 2015. Audits of complex estimates as verification of management numbers: How institutional pressures shape practice. Contemporary Accounting Research, 32(3), pp.833-863.
Li, J., 2013. Accounting conservatism and debt contracts: Efficient liquidation and covenant renegotiation. Contemporary Accounting Research, 30(3), pp.1082-1098.
Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting accounting research and organization theory. Academy of Management Annals, 7(1), pp.557-605.
Mca.gov.in. 2018. [online] Available at: https://www.mca.gov.in/XBRL/pdf/framework_fin_statements.pdf [Accessed 10 Dec. 2018].
Noon, M., Blyton, P. and Morrell, K., 2013. The realities of work: Experiencing work and employment in contemporary society. Palgrave Macmillan.
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