This assessment is undertaken with an objective of analyzing the impact of conceptual framework in the reporting process of a business. The assessment would keep the conceptual framework of reporting as the base and identify whether the business which is chosen is facing any accounting problems. The company which is selected for this assessment is AGL energy ltd which is engaged in the field of energy sector. The new article which is selected states that the business of AGL has been facing a lot of criticism for driving the prices of gas higher by exporting the supplies to other countries.
AGL Energy ltd is one of the listed companies in the Australian stock exchange and the business is engaged in providing both retailing of electricity for domestic use and also provides gas to the customers. The company has further expanded the business in solar power (Agl.com.au. 2018). The company operates in customer markets, wholesale business and also in retailing business.
The business falls under the governance of AASB when it comes to financial reporting of all financial information of the business and the business is expected to follow all relevant accounting standards and also stick to the conceptual framework of reporting (Too and Weaver 2014). The discussion section would be showing the reporting framework which is followed by the business.
The main objective of the assessment is to analyze the problems which is faced by the business of AGL energy and how the same can be solved by the business. In addition to this, the assessment focuses on conceptual framework which is followed by the business or the purpose of reporting of financial information of the business,
Issues/ Problems faced by the Business
As per the new article which is present, the business of AGL Energy ltd is accused of driving the prices of gas products by suppling the products overseas. The problem which is associated with the business is that the management is facing criticism for driving the prices high for gas products and therefore the reputation of the business has slightly suffered due to such a situation.
Figure 1: (Article Extract Showing accusation on the business of AGL Energy Ltd)
Source: (Australian Financial Review. 2018)
The above extract shows that the management of AGL Energy ltd also has a project which imports gas products from USA and the business faces continuous criticism that the business is being managed with a view to deliberating forcing the prices of gas products and thereby affecting the demand and supply of gas products in the economy (Australian Financial Review. 2018). There is also an accusation that the business of AGL Energy ltd is focusing more on profits by driving the prices of gas products. The management needs to formulate strategies which can help the business in restoring the confidence of the public and the same can be done by appropriately demonstrating to the public that the business considers the needs of the public and also by maintaining transparency in the reporting framework of the business (Bon and Mustafa 2013).
The management of AGL Energy Ltd is expected to follow conceptual framework of accounting while preparing the financial statement of the business. In order to assess whether the business appropriately follows the conceptual framework of reporting, the annual report of the business is to be analyzed (Edwards 2013). Conceptual framework may be defined as the general pattern and presentation in which financial statement are prepared following certain principles and regulations. In order words, the conceptual framework is a guide for accounting professional for appropriate preparation and presentation of financial information in the annual report of the business.
The basic requirement of the conceptual framework is to ensure that the annual reports which is prepared by the management of the company is properly presented and follows all accounting standards applicable to such a company.
Figure 2: (Extract Showing basis of Preparation of the Financial Statement)
Source: (Agl.com.au. 2018)
The annual report of the business is prepared following all relevant accounting standards which are applicable on the business and also the presentation of the statements which are included in the annual report is also appropriate (Henderson et al. 2015). Another major requirement of the conceptual framework is to ensure that the financial statement which is prepared by the business is showing true and fair view and all relevant information are included in the annual report (Peecher, Solomon and Trotman 2013). The company has presented all the aspect of the financial reports such as assets, liabilities, equity, expenses and income in an appropriate manner and the same ensure that the business has followed all accounting requirement while preparing the financial statement of the business.
The annual reports which is prepared by the business also complies with the qualitative characteristics which should be present in the annual report of the business. The two types of qualitative characteristics of annual report are shown below:
As per this theory, the management is responsible for all activities to the stakeholders of the business and the company should be accountable to such stakeholders for all activities of the business. The management should also always act in the best interest of the stakeholders and the concerns of the stakeholders should be made the primary concern for the business. The stakeholders are the people who can affect or are affected by the activities of the business (Hörisch, Freeman and Schaltegger 2014). The problem which is being faced by the management of AGL Energy Ltd is that the business is facing lot of criticism from the public who also forms a part of the stakeholders of the business relating to the hike in the prices of the gas products which is offered in the economy. The management needs to effectively demonstrate to the public that the activities which are undertaken by the business are for the benefits of the society and thereby also restore the confidence of the public in the company.
The main theme of the stakeholder theory is quite clear as the emphasis is to be provided to the stakeholders of the business. The management of AGL Energy Ltd needs to actively demonstrate that management is dedicated towards the needs of the society and needs to formulate effective governance policies in order to restore the confidence of the public. The management of AGL Energy Ltd needs to discuss the implication and long term benefits which are associated with the policies which are formulated by the business. Another way of demonstrating effectiveness and efficiency by maintaining a transparency in reporting framework of the business and also ensuring that the business follows all relevant accounting standards and principles while reporting its financial position. The theory also states that interest of the stakeholders should be made the primary concern for the business.
Conclusion
The discussion which is show above clearly indicates that the management of AGL Energy Ltd effectively follows the conceptual framework which is approved by AASB in reporting financial information of the business. The problem which is faced by the business is related to the hike in the prices of gas products which has tarnished the reputation of the business as the factor contributing to such hike in prices of gas products. In order to reverse such a situation, the following recommendation is suggested to the management of AGL Energy Ltd:
The above principles would allow the management to effectively address the situation and also restore some level of confidence of the public on the company.
References
Agl.com.au. (2018). AGL Energy | An Electricity Provider & Gas Supplier | AGL. [online] Available at: https://www.agl.com.au/ [Accessed 22 Dec. 2018].
Australian Financial Review. (2018). How AGL Energy got caught out on gas. [online] Available at: https://www.afr.com/business/energy/gas/how-agl-energy-got-caught-out-on-gas-20180618-h11iox [Accessed 22 Dec. 2018].
Bon, A.T. and Mustafa, E.M., 2013. Impact of total quality management on innovation in service organizations: Literature review and new conceptual framework. Procedia Engineering, 53, pp.516-529.
Edwards, J.R., 2013. A History of Financial Accounting (RLE Accounting). Routledge.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.
Peecher, M.E., Solomon, I. and Trotman, K.T., 2013. An accountability framework for financial statement auditors and related research questions. Accounting, Organizations and Society, 38(8), pp.596-620.
Too, E.G. and Weaver, P., 2014. The management of project management: A conceptual framework for project governance. International Journal of Project Management, 32(8), pp.1382-1394.
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