You are required to prepare a comprehensive report directed to an Australian ASX Top 100 listed corporation detailing a critical analysis of the effectiveness of the corporation to meet the obligations of the conceptual framework of accounting.
The current study at hand elucidates in detail various systems along with methods of accounting that can consequently facilitate the system of tracking, assessing, scrutinizing, controlling and at the same time directing business operations of Carsales.com Ltd as the particular point of reference. In actual fact, the study aims to present investigative findings of various of different dimensions that again can assist in highlighting the necessities of evaluating conformity towards specific set of laws and purposes of conceptual framework. Also, the current study helps in analysing degree to which financial statements meet the necessities of recognition criteria from the financial reports of the firm (). Moving further, the current study carries out a detailed evaluation of fundamental qualitative along with enhancing features of financial reports.
Carsales.com Ltd (listed in the ASX as CAR) can be considered to be largest online company that operates in the automotive, motorcycle as well as marine classifieds sector in the nation Australia. The company attracts higher number of customers who are comparatively more interested in purchasing or else selling cars, trucks, caravans, motorcycles as well as boats than any other classified group of websites.
The objective of the general purpose financial reporting is deliver key financial information regarding the reporting entity. This information is said to be effective to various subsisting along with potential financiers, lenders and creditors in arriving at decisions about delivering resources to the reporting entity. In essence, the decisions include purchasing, selling else wise holding equity along with various debt instruments and presenting or settling loans as well as other forms of credit (Rankin et al. 2012).
The primary audiences of the general purpose financial report are existing and prospective financiers, debtor of the business as well as creditors in framing specific decisions about presenting possessions/resources to the entity (Ao 2015).
In essence, conceptual Framework indicates towards the intention as well as principles of the GPFR. Basically conceptual Framework is an effectual mechanism that can assist the entire Board of the business in augmenting financial standards founded on specific principles, notions and themes. In addition to this it can also be mentioned herein that individuals responsible for preparation of general purpose financial reports can design effectual and at the same time dependable strategies of accounting. On the other hand, financial standards can assist in improving the entire procedure of adoption of a definite accounting scheme (Henderson et al. 2015).
Essentially, review of financial pronouncements of the firm shows compliance with the directives of Conceptual Framework of Australian Accounting Standards Board. As such, this helps in gaining thorough understanding regarding intentions of financial declaration, qualitative exclusivity that in turn establishes efficacy of financial statements. Nonetheless, there are several components of financial declarations that can assist different users to use the acquired information to frame decisions concerning buying, selling otherwise holding on equity, diverse debt instruments in addition to settlement of loans or credit. Hence, this is the way in which financial statement satisfies the requirements along with the objectives of specific financial directives. Ryan et al. (2014) suggest that there are numerous items of financial pronouncements namely assets and liabilities (taking in both current and non current). Therefore, users of financial information of the business concern can learn about capabilities as well as financial resources of the firm. Also, the users can analyse prospects of the business concern in the future from statements on future flow of cash. Again, this too aids in the process of reviewing effectiveness of management of the firm in discharging their duties.
Analysing financial reports of the firm Carsales.com
Analysis of financial assertions mainly comprises of appraisal of consolidated financial declarations of the firm Carsales.com that indicates towards general purpose financial reports (GPFR). General purpose financial reports of the business concern consideration are developed and presented as per regulations stated under Australian Accounting Standard Board as well as Corporation Act of the year 2001. Besides this, corporation is also seen to financial information rules of International Accounting Standards Board together with the International Financial Reporting Standards.
Revenue:
Revenue is enumerated at the fair value of the deliberation received or receivable of the corporation (Deegan 2013). Revenue of the firm Carsales.com registered to be AUD 344010000 during the year 2016. Amounts of revenue that is disclosed are essentially net of returns, diverse allowances for trade as well as amounts acquired on behalf of diverse third parties. Revenue can also be enumerated reliably (Cordery and Sinclair 2016). In case when services are not delivered but the Group is obliged to deliver the services in the upcoming period, recognition of revenue is deferred.
Assets
Analysis of financial statement of the firm Carsales.com reveals that assets of the business concern are represented in Australian dollars that happens to be the functional currency. Fundamentally, analysis of asset stated in financial pronouncements reveals that assets can be hereby categorised as particularly held for sale (Deegan 2013). In itself held for sale is calculated at the lower value of cost identified in comparison in terms of fair values after proper deduction of cost for sales. Analysis of financial report reveals the fact that fair value of the business concern’s assets (planned) is presented at current value. Worth of Asset of the firm Carsales.com during the year 2016 is recorded to be AUD 545774000.
Liabilities
Liabilities of the business concern Carsales.com, as mentioned in the financial statement stands at AUD 285404000. In itself balance sheet presents liabilities that can be used for funding different operations of the business concern. Analysis of financial statement reflects the fact that liability is reflected in terms of historical cost consequently valued in terms of the operational currency that is in this case Australian dollar. Adding to this it can be said that defined liability of the business concern is enumerated at the fair value (Deegan 2013). In this case fair value of particular liabilities is taken into consideration only after subtraction of current value of specific defined benefit necessity.
Equity
Study of the balance sheet statement of the corporation Carsales.com helps in identifying the fact that equity possessed by corporation’s shareholders stands at AUD 2603 70 000. According to the annual financial statements business concern, derivatives stated in the report are necessarily presented at fair value by utilising earnings as well as expense of the corporation. Therefore it can be here by stated that the Corporation appropriately utilizes diverse models for calculating derivatives that subsequently scheme of enumeration at fair value (Ferguson et al. 2014).
Inventory
The financial condition as well as financial health of the Corporation can be analysed from inventory. Inventory as stated in the financial statement of Carsales.com stands at AUD 1112000. Inventory recorded in the financial statement shows decrease in the year 2016 as compared to the previous year 2015. This decrease in inventory can reflect of competence of the corporation to take hold of and deal with inventory in an improved manner. . This can help in controlling the level of inventory of the firm and might perhaps competitive edge of the firm (Gelmini et al. 2015).
Accounts receivable, provision for bad debts and provision for doubtful debt
According to the annual consolidated statement of the corporation Carsales.com accounts receivables is registered to be AUD 44722000. Receivables as mentioned in the financial statement include current as well as noncurrent receivables. Statement shows increase in account receivables during the year 2016. Analysis of the pecuniary statement can help in the process of analysing increase in receivables. It can be seen that receivables are in general registered at fair values and calculated at amortised cost rising interest method after subtraction of firm’s outlays for impairments. Especially this is an optimal structure for specifically capital that can help in lessening the level of debt and increasing liquidity (Goodwin et al. 2016). This can show the way to increase in return.
As rightly put forward by Harris and Roach (2013), features of effective pecuniary information includes relevance along with faithful representation specific information regarding the finances of the business unit. Henderson et al. (2015) suggests that relevance indicates towards financial information that helps in understanding variances in different economic decisions. Appraisal of financial information in the annual report of the firm Carsales.com helps in understanding variances present different economic decisions. In itself this has a predictive value and confirmatory value. In addition to this, faithful representation various economic happenings presented in numerical terms or literature.
Fundamental qualitative features of pecuniary information provided in financial statement includes relevance along with faithful representation of particular financial information.
Rankin et al. (2012) suggests that relevance of specifically pecuniary information can aid in presenting specific various money-making decisions of users in case if that has particular predictive value. Analysis of pecuniary information presented in the report can help in analysing variances in different economic decisions. Also, the same has specific predictive value apart from confirmatory value.
Williams (2014) says that faithful representation also assists in representing economic affairs presented in literature as well as number. With the aim of getting effective, financial information in itself needs to be relevant and have faithful representation. Detailed analysis of financial assertions of the business concern Carsales.com clearly mentions about level of confidence of consumers, various economic fundamentals of the nation Australia, specific growth dimensions, specific information on trading partners along with impact of global forces on the business.
As rightly put forward by Yong et al. (2016), enhancing qualitative features refer to comparability, timeliness, verifiability as well as understandability.
Comparability:
Cordery and Sinclair (2016) suggests that comparability indicates towards definite information regarding a reporting unit that can inevitably aid users in the process of detection and realization of existent similarities along with dissimilarities among different items accounting. Ryan et al. (2014) mention that critical analysis of various functions and business operations helps in carrying out comparative review of financial information and assessment of the global operating environment. In itself, definite figures presented for diverse metrics that is to say operating margin of firm, growth rate of firm’s revenue and worldwide capacity among many others considered for diverse period of time can assist in comparability of information.
Verifiability:
As recommended by Cordery and Sinclair (2016), verifiability assists users in understanding the fact that information reflects faithfully certain economic occurrence that it asserts to represent. Also, financial information of the Carsales.com Limited certainly sticks to the rules mentioned under Corporation Act of the year (2001) together with listing convention stipulated under the exchange that is the Australian Stock Exchange. Essentially, the financial declarations presented by the firm also reflect that the management has undertaken specific policies of arranging and thereafter presenting different disclosures (Carey et al. 2014). This in consequence is said to assist various investors of the said business concern under consideration to critically appraise financial health of the firm. Particularly, firms presenting continuous disclosures in their annual pronouncements can help in the procedure of enhancing the level of confidence among the investors by maintaining clarity and transparency, dependability as well as degree of integrity of operations of the business entity and that of the financial pronouncements of the corporation (Henderson et al. 2015.)
Timeliness
This factor refers to the available information that has the need to be accessed by different decision makers for arriving at their decisions.
Understandability
Analysis of financial declarations assists in the process of reflecting notes to pecuniary statements along with accounting policies (Bond et al. 2016). This too can enhance understandability of information. The entire procedure of preparation along with arrangement of financial declarations of the business concern follow specific conceptual framework under conceptual framework of Australian Accounting Standard Board. Conformation to various standards as well as guiding principles can thus help in analysing; exerting efforts for avoiding intentional misstatements and certifying stability of pecuniary information presented in the reports (Ao 2015).
Conclusion
In the end it can be said that the above study aids in analysing diverse financial items centred in pecuniary reports of the company Carsales.com along with different notions of accounting measurements. Additionally the study at hand also assists in comprehending particular issues linked to analysis of financial information with reference to the regulations of AASB. Also, current study aids in acquiring deep understanding as regards nature of association between measurements along with provision of different decisions.
References
Ao, X.P., 2015, June. The shortcomings of the current definitions of an asset and the substance of an asset. In Engineering Technology, Engineering Education and Engineering Management: Proceedings of the 2014 International Conference on Engineering Technology, Engineering Education and Engineering Management (ETEEEM 2014), Hong Kong, 15-16 November 2014 (p. 467). CRC Press.
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), pp.259-288.
Carey, P., Potter, B. and Tanewski, G., 2014. Application of the reporting entity concept in Australia. Abacus, 50(4), pp.460-489.
Cordery, C.J. and Sinclair, R., 2016. Decision-Usefulness and Stewardship As Conceptual Framework Objectives: Continuing Challenges.
Cordery, C.J. and Sinclair, R., 2016. Decision-Usefulness and Stewardship As Conceptual Framework Objectives: Continuing Challenges.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Ferguson, A., Pündrich, G. and Raftery, A., 2014. Auditor industry specialization, service bundling, and partner effects in a mining-dominated city. Auditing: A Journal of Practice & Theory, 33(3), pp.153-180.
Gelmini, L., Bavagnoli, F., Comoli, M. and Riva, P., 2015. Waiting for Materiality in the Context of Integrated Reporting: Theoretical Challenges and Preliminary Empirical Findings. In Sustainability Disclosure: State of the Art and New Directions(pp. 135-163). Emerald Group Publishing Limited.
Goodwin, J., Atilgan, Y., Simsir, S.A. and Ahmed, K., 2016. Investor reaction to accounting misstatements under IFRS: Australian evidence.
Harris, J.M. and Roach, B., 2013. Environmental and natural resource economics: A contemporary approach. ME Sharpe.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Rankin, M., Ferlauto, K., McGowan, S.C. and Stanton, P.A., 2012. Contemporary issues in accounting. Milton, Australia: Wiley.
Ryan, C., Mack, J., Tooley, S. and Irvine, H., 2014. Do Not?For?Profits Need Their Own Conceptual Framework?. Financial Accountability & Management, 30(4), pp.383-402.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.
Yong, K.O., Lim, C.Y. and Tan, P., 2016. Theory and practice of the proposed conceptual framework: Evidence from the field. Advances in Accounting, 35, pp.62-74
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