Discuss about the Measuring Quantities or Enhancing Qualities.
Twenty-first centuries is considered as the era of business as massive progress in the business all over the world can be seen. With this huge progress, the business entities are facing some major complex business problems. One of such issue is Accounting and Financial reporting related issues that occur due to the non-compliance with the standards and principles of accounting conceptual framework. The Australian business entities are needed to follow the provided standards of accounting in the conceptual framework of International Accounting Standard Board (IASB) and Australian Accounting Standard Board (AASB) (aasb.gov.au 2018). This report aims to analyse and evaluate different kinds of requirements of accounting conceptual framework like the objectives of conceptual framework, the recognition criteria of conceptual framework and both the fundamental and enhancing qualitative characteristics of accounting conceptual framework. For this report, CSL Limited is taken into considerations. CSL Limited is an Australian biotechnology company manufactures and markets the biological products. This company is taken into consideration as the company is listed under Australian Security Exchange (ASX) top 100 (csl.com 2018).
The above discussion shows that the Australian companies are required to follow the rules and regulations of IASB and AASB conceptual framework. In order to bring accuracy in financial reporting, the AASB conceptual framework provides three major objectives of general-purpose financial reporting (Shivakumar 2013). Expressing the true financial position of the business entities is considered as the first objective of conceptual framework. Companies provide this information thorough the statement of financial position (aasb.gov.au 2018). After that, conveying the financial performance of the companies is the second objective of conceptual framework. Business entities provide the financial performance related information through the income statement (aasb.gov.au 2018). Showing the changes in the financial position and performance of the companies is the third major objective of conceptual framework. Information related this can be provided through the statement of change in equity and the cash flow statement (aasb.gov.au 2018).
The above discussion shows the major objectives of conceptual framework. It can be observed that CSL Limited almost complies with all the objectives of conceptual framework.
The above figure shows that CSL Limited has published their consolidated balance sheet for the latest year. This balance sheet includes all the relevant information about the financial position and economic resources of CSL Limited. It indicates towards the fulfilment of firm objective of conceptual framework (annualreport.csl.com.au 2018).
From the above, it can be observed that CSL Limited has published their consolidated statement of comprehensive income for the year ended 2017. The above figure contain all the necessary information to judge the financial performance of CSL for the current years and this shows the fulfilment of the second objective of conceptual framework (annualreport.csl.com.au 2018).
The above study shows that CSL Limited has published both the statement of change in equity and cash flow statement for the current year that contain all the information related to the change in financial performance of the company. It indicates towards the fulfilment of the third objective of conceptual framework (annualreport.csl.com.au 2018).
As per the conceptual framework of AASB and IASB, the users of the financial information are the target audience of general-purpose financial reporting. Different types of users of accounting information can be seen. They are investors, creditors, lenders, banks, government authorities, tax authorities, customers, employees and management of the companies (Zeff 2013). All these users collect financial information for different decision-making process. The latest Annual Report of CSL Limited indicates that the company provides necessary financial information with the help of the necessary financial statements like income statement, balance sheet, cash flow statements and others. Apart from this, the company also publishes the necessary notes to financial statements for providing necessary justification and clarification of financial statements (aasb.gov.au 2018). Hence, on the basis of the above study, it can be said the target audience can get all the information from the financial statements of CSL Limited as per their needs.
The financial statements of the companies have some major elements; they are asset, liability, equity, revenue and equity. As per the AASB and IASB conceptual framework, there is some major recognition criteria that the business entities are required to comply with for the recognition of the above-mentioned elements. According to the first criteria, the business entities must take into consideration all the relevant information of the above-mentioned financial elements (aasb.gov.au 2018). As per the second criteria, the business entities are needed to take into consideration the concept of faithful representation of the above-mentioned elements of financial statements. As per the third criteria, business entities are needed to take into consideration all the crucial and relevant information related to the above-mentioned financial elements in the process of financial reporting. Hence, it is required for CSL Limited to follow all these criteria for the recognition of the above-mentioned aspects of financial statements. The analysis of the latest annual report of CSL Limited shows that CSL Limited has prepared their general-purpose financial reports as per the standards of Australian Accounting Standard and AASB. In addition, CSL Limited also follows the regulations of International Financial Reporting Standard (IFRS) and IASB for the recognition of various financial elements (annualreport.csl.com.au 2018).
For the recognition of property plant equipment, CSL Limited recognizes them in historical cost price after considering depreciation and amortization. Straight-line method is used for depreciation. In order to recognize the intangible assets, the company used the fair valuation method. At the time of the recognition of inventories, the company takes into consideration all the necessary aspects having impact on the value assessment of inventories. Fair value method is used for the recognition of trade and other receivables (annualreport.csl.com.au 2018).
In case of liabilities, CSL Limited uses fair value method for the recognition of trade and other payables. For the recognition of interest bearing liabilities, fair value method is used. In case of provisions, the company recognizes them when the company has a present obligation from the selling of goods and services. It needs to be mentioned that the recognition of revenue of the company is done based on the fair value of the consideration that has been or will be received (annualreport.csl.com.au 2018). In case of expenses, CSL Limited recognizes them in the income statement at the time of their occurrences. Ordinary shares are considered as the equity in CSL Limited. Hence, the above analysis states that CSL Limited complies with the criteria of IASB and AASB conceptual framework in order to recognize their major aspects of financial reporting (annualreport.csl.com.au 2018).
As per the AASB and IASB conceptual framework, financial information of the companies must contain the fundamental qualitative characteristics so that they become more useful (Palea 2013). There are two major fundamental characteristics of financial information; they are Relevance and Faithful Representation (Barth 2013). Financial information needs to be relevant in order to become more purposeful for the companies. Apart from this, the management of the companies is required to faithfully present the financial statements (Gebhardt, Mora and Wagenhofer 2014). The financial information of CSL Limited is presented faithfully as the company complies with the standards of both IASB and AASB for the preparation of the financial statements. In addition, the provided information is relevant as the provided financial information expresses the value of the economic phenomena of the company (annualreport.csl.com.au 2018).
Apart from the fundamental qualitative characteristics, there are four major enhancing qualitative characteristics. They are Comparability, Verifiability, Timeliness and Understndability (De Beelde and Tuybens 2015). In the presence of comparability, users can identify the similarities and differences in the financial elements. Verifiability assures the users about the faithful representation of the financial statements. Timeliness helps the users in getting the required financial information on timely basis for decision-making process. Understandability helps in classifying, characterising and presenting the required financial information (Richardson 2013).
The main aim of CSL Limited is to enhance the qualitative characteristics. In order to enhance the qualitative characteristics, financial information needs to be relevant and faithfully represented. It can be seen that the users of the financial statements can easily compare the provided financial information of CSL Limited. The financial information of CSL Limited is verifiable as they are faithfully presented (annualreport.csl.com.au 2018). It can be seen that CSL Limited provides their financial statements at the specific time of the year and this aspect fulfils the criteria of this enhancing characteristic. The compliance with the standards of IASB, AASB and IFRS makes it easy for the users to understand the contents of the financial statements of CSL Limited (annualreport.csl.com.au 2018).
Conclusion
As per the above discussion, one aspect is clear that CSL Limited complies with all the required standards and principles of the conceptual framework of AASB and IASB. More specifically, the company satisfies the objectives of conceptual framework through their financial reporting. After that, the company fully complies with the recognition criteria of AASB conceptual framework for their financial reporting. Based on the above discussion, it can be recommended that all the Australian companies are required to follow the standards of AASB and IASB conceptual framework in order to avoid accounting issues.
References
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 12 Apr. 2018].
csl.com. (2018). Our Company. [online] Available at: https://www.csl.com/our-company [Accessed 12 Apr. 2018].
Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.
Gebhardt, G., Mora, A. and Wagenhofer, A., 2014. Revisiting the fundamental concepts of IFRS. Abacus, 50(1), pp.107-116.
Palea, V., 2013. IAS/IFRS and financial reporting quality: lessons from the European experience. China Journal of Accounting Research, 6(4), pp.247-263.
De Beelde, I. and Tuybens, S., 2015. Enhancing the credibility of reporting on corporate social responsibility in Europe. Business strategy and the environment, 24(3), pp.190-216.
Richardson, J., 2013. Accounting for Sustainability: Measuring quantities or enhancing qualities?. In The Triple Bottom Line(pp. 56-66). Routledge.
Zeff, S.A., 2013. The objectives of financial reporting: a historical survey and analysis. Accounting and Business Research, 43(4), pp.262-327.
Shivakumar, L., 2013. The role of financial reporting in debt contracting and in stewardship. Accounting and Business Research, 43(4), pp.362-383.
Annualreport.csl.com.au. (2018). CSL LIMITED ANNUAL REPORT 2016/2017. [online] Available at: https://annualreport.csl.com.au/docs/802/1/CSL_AR17%20(secured).pdf [Accessed 12 Apr. 2018].
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