The accounting policies are mainly the bases, rules or norms, principles, conventions as well as processes adopted by the organization at the time of preparing and presenting the financial statements. The selection of the accounting policies has a significant level of different impact on the financial results of the business organization. In the selection and use of the proper accounting policies, few basic conceptions contradict to each other. Therefore, in order to select usage of proper accounting policies, some aspects must be measured so that the appropriate financial results can be obtained (Appannaiah, Reddy and Putty, 2010). There are several theories that help in the selection of appropriate accounting policies in order to perform the accounting tasks of the organization. Apart from this, the accounting policies also help in preparing the financial statements of the organization. The accounting policies are one of the most important aspects and play a vital role in providing an appropriate understanding of the data and information given in the financial reports of the organization.
The business organizations must clear about the accounting policies used at the time of preparing the financial statements of the organization. The disclosure is one of the important matter in the financial statements and various accounting policies have different policies for disclosure. There are several different accounting policies, which have different accounting standards that allow alternate treatments for the similar types of transaction for the same item (Besley, 2016). The users of the financial statements will unable to make the comparison of the financial information with other business organizations in case the accounting policies are not clearly outlined. As there are different accounting policies and with the changes of the accounting policies the treatment of the accounting items uses to be changed so that the end result is also changed inevitably. Hence, the financial result of the organization immensely affected by the changed accounting policies and that reflect on the financial statements of the business organization. The material disclosure is one of the most important aspects of the financial reports as it helps in providing appropriate information about the financial position of the business organization and the treatment of different accounting policies and accounting standard use to make alteration in the value of the material disclosure of the business organization (Bragg, n.d.). Hence, the value of the end financial result is changed; thus, the value of the business organization is also changed and the financial reports of the business organization present the dissimilar values of the vital accounts of the business organizations. As the use of different accounting policies changes the treatments of the transaction; thus provide different values accounting process that has a significant impact on the financial result of the business organizations. Therefore, it is most important to disclose about the applied the accounting policies during the preparation and presentation of financial reports to the users of the financial statements. There are many aspects which are considered at the time of selecting the proper accounting policies. In order to take the accounting policies, it is seen that the business transactions along with other financial event must be accounted and presented according to their substance plus financial reality. The accountant must be objective at the time of presenting the financial information (Britton and Waterston, 2013). The maker of the financial report must not be biased to any specific segment of the users of financial reports. The financial statements must be fair and must not be biased to any specific users. The financial reports must disclose the entire items that are material ample to affect the evaluation of decisions. Hence, the accounting policies affect the financial results of the organization.
ASIC’s selection of the material disclosures is made for the purpose of representing the useful information for supporting the structure of the study. It defines the ways for the representation of the appropriate information which is are fruitful for the investors and also the significant supporting accounting estimates, and the significant accounting policy choice can be easily made. Therefore the arrangements are easily included in this case which is showing the off-balance sheet arrangements, expensing of costs and the revenue recognitions. The impact of the new reporting standards is clearly identified in the form of the report which is being made by showing the variations of the policies (Cosserat and Rodda, 2009). The variations of the ASIC standards are depicted to be not pursuing the immaterial disclosures which are depicted as the unnecessary materials added for cluttering the financial reports. Therefore the ASIC is depicted to be encouraging the preparers to consider the needs of the goodwill, other assets and the inventories in the financial reports. This enables in impairing the calculations which are depicted to be based on the unrealistic assumptions and also the unrealistic cash flows are considered. Therefore the mismatching of the materials is easily made with the continuation of the assumptions. The recoverability regarding the carrying amounts is easily made which are the goodwill, intangibles and the property, equipment and the plants. Thus the focus is only made on the prices that enable in evaluating the substances that are included in the form of the pricings, valuations and the accountings. The inclusion of the realizable materials is made by the net income which is being made by the technical and the other realistic values which are being included in the form of the technical or the commercial obsolescence (Dassen, Schilder and Wallage, 2005). Thus the attribution of the fair values is represented for the purpose of showing the appropriate models, and the assumptions in the form of the inputs and also the observations are also included in this case as illustrated. As per the AASB 101 standard, the management makes an ease assessment of the ability of the entity for the purpose of continuing the ongoing concerns, and the ongoing concerns make the preparation of the financial statements. Therefore, the management is depicted to be aware of the assessments and the uncertainties which are included in the form of the financial statements and also the reason is being clearly presented in the form of the disclosures that are made for the financial statements (Dauber, 2005).
ASIC in the recent list regarding the financial reporting improvements clearly states the improvement of the focus areas that have remained on the ASIC’s radar. This simply included the impairments of the policies and the recognition of the assets in the form of the accounting policies and also the revenue, and the expense recognition of the disclosures are clearly made. This clearly explains the impact of the new accounting standards. The ASIC highlights are clearly made by showing the explanation of the accounting standards and also the personal experts and the professional advice and the explanations (Helbæk, Lindset and McLellan, 2010). The care is being ensured for showing the cash flows and also the assumptions are used in the form of the extractive industries. These are illustrated in the form of the supporting the services in the form of showing the explanation of the work which is being made by showing the respect of treating the accounting measurements in the form of the risks regarding the digital disruptions (Holton, 2012). Therefore the announcements are made by the ASIC are depicted to be showing the enhancement of the adjustments which is being made by showing the improvement of the measuring and determining the asset values. As the accounting policies are determined by showing the sensitive determination of the work, the explanation of the accounting policies is determining the requirement of the AASB10 with showing the consolidation of the financial statements. The AIC is depicted to be continuing the remaining sensitive, and also the requirement is being made by showing the appropriate application of the requirements with including the auditors and also the expansion of the work is being made by showing the illustration of the recognition and also the substances are depicted to be underlying the transactions (Khan and Jain, 2007). This simply explains the appropriate, suitable recognition policy with showing the underlying transactions undertaken in this case.
The different regulations have a dissimilar impact on the revenue recognition. The business organizations recognise revenues at the time it makes any transactions means it sells products or gives services to its clients in the usual course of business. The quantity or amount of revenue, which a business organization recognizes is on the basis of the considerations, which the consumer does promise in exchange for that product or services (KIESO, 2016). The information on revenue is crucial to any evaluation of the financial performances of a business organization. The investors and shareholders as well as other users of the financial statements required identifying the amount of revenue an organization earns in a specific time period. Besides this, the investors also need to know the information about the nature of the revenue in order to make effective decisions about the performances of the organization (O’Regan, 2004). The investors also want to compare the revenues with the various organization in each period.
The Australian standard of revenue recognition which is issued by the International Accounting Standard Board (IASB). These revenue standards lead to inconsistencies among the different organization at the time of reporting revenues. Principally, at the time, a business organization recognize revenue in long term contract and contract which bundle together products and services. Hence the user of the financial reports has also wanted more information about the revenues in order to analyze the financial performance of the organization (Pandey, 2015). The inconsistencies in reporting of the revenues of various organizations under the present Australian standard are valid uses of those standards as well as better impose of the standard can solve the issue of inconsistency. However, few organizations voluntarily provide a report of useful information on their revenues, which is usually not comparable between the different organization. Hence, a revised standard is required to remedy of the inconsistent revenue recognition. The IFRS 15 Revenue from the contract with the consumers as a replacement for its present revenue standard which were adopted to use in Australia from the year of 2005. The IASB has issued the IFRS 15 to address the inconsistencies plus weakness in revenue recognition. As a result, the users of the financial reports will get better reports and can be able to recognize the revenues and also compare the revenues with a different organization. Hence the investors and shareholders can take more appropriate decisions about the financial performance of the business organization. That help them in making an effective decision.
|
Fiscal year ends in June. AUD in millions |
2014-06 |
2015-06 |
2016-06 |
|
Revenue |
60952 |
60868 |
58276 |
The income statement of the company shows the sales revenue during a specific period of time. With respect to the new standard, AASB15 revenue from contracts with customers, the company has started an assessment of the of the impact of the standards on the financial position, disclosure and result of the group. The standard AASB 15 revenue from contracts with customers will be effective from 1 January 2018 (Annual Report, 2017). The disclosure in the notes depicted that in the Unallocated group, the revenue from the sale of goods relates to the Ezibuy and the unallocated revenue consist of rent and other revenues from the non-operating activities. The sales revenue is measured at fair and true value of consideration receivable or received on the basis that it meets the criteria of recognition. The revenue is recognized in the income statement when the significant rewards and risks of ownership have been transferred to the customer. It is probable that the revenue would be received and revenue amount can be measured reliably (Welch, 2014). The service revenues are recognized on the basis of the contract completion with the customer. The sales revenue of Woolworths has been decreasing from the year 2014 to 2016 which shows a decrease in the financial performance of the company.
The accountants and auditors have to follow the accounting rules and policies for the preparation of the financial statements. The financial report of Woolworths shows income, expense, assets, liabilities, cash inflow, and cash outflow. The shareholders determine and analyses the financial statement of the company in order to make investment decisions. The annual report of the company shows how the sales revenue is recognized. The sales revenue has been decreased over the period which is not good for the company. The company will adopt and make into effective the new standards as per the accounting rules, regulations and policies (Wolf, 2010). The consolidated financial statements of the organization incorporate liabilities, assets and financial results of all the subsidiaries. The group manages and controls the organizations. Intra-group transactions and balances and any unrealized losses and gains arising from the intra-group transactions are not taken into account during the preparation of the financial statements. Assets, expenses, and revenue are recognized net of goods and service tax. Payable and receivable are stated with a number of goods and service tax included. The flow of cash is included in the cash flow statement on the gross basis. The company has adopted all the relevant amended and new accounting standards and interpretations that are issued by the Australian Accounting Standards Board (Weil, 2017). The management team plays a significant role in the development of an organization.
The directors of the company are required to make assumptions, estimates, and judgment in applying the accounting policies of the group that effects the values of the items in the financial report. The judgments and estimates involve a higher degree of complexities and significant risks causing the material adjustments to carrying amounts of liabilities and assets. The reporting segments are determined on the basis of the internal reports that are reviewed regularly by the Chief Executive Officer to allocate the resources to the segments (Burns, 2014). The accounting rules and regulations are followed by the accountants and auditors for the preparation of the financial statements. The income and losses are to be valued in the financial statements. The accounting rules, regulations, and policies are to be followed as per the AASB standard.
The introduction of new accounting rules and policies imposes a significant impact on the preparation of the financial statement of the company. The AASB 15 main objective is to establish the principles that the organization should depict all the useful information to the users of the financial statements about the amount, uncertainty, nature and timing of cash flows and revenues arising from the contract with the customers. The introduction and adoption of the policy will impose a significant impact on the preparation of the financial statements of the company (Parrino, 2015). The accountants and auditors have to the follow the accounting rules and policies. The positive accounting theory states that behavior, skill, and knowledge of the accountants and auditors influences the preparation of the financial statements. Thus, the accounting rules, regulations and polices helps to manage and control the behavior, style, and attitude of the accountants and auditors. The revenue amount is to be recognized at their fair and true value. The main objective of the AASB 15 standard is that the organization should recognize the revenue amount in order to show the transfer of the promised products and services to the customers in the amount that shows the consideration to which the organization is entitled to the exchange for the products or services (Powers and Needles, 2012). The organization should consider the contract terms and relevant circumstances and facts when applying the standard. The organization should apply the standard which includes the use of the practical expedients, similar circumstances and consistently to the contracts. The standard describes the accounting for the individual contract with the customer. The financial statement of the company has to disclose the sales revenue amount recognized at their fair value. The companies have to change their accounting policies in relation to the sales revenue contract with customers.
IAS 18 is defined to be showing the accounting treatment which is being considered for the revenue arising from the ordinary assets and also the certain types of the transactions, and the events must be considered for showing the growth in the economy. The gross income inflow is showing the economic benefits which are being indicated in this case (Ricchiute, 2006). Therefore the arising ordinary operating activities of an entity are being defined in the form of the sales of the goods, services and also the interest with including the royalties. Therefore, the exchanges are made in the form of the dissimilar items which are defined as the generating revenue. The sales of the goods must be appropriately recognized for the purpose of showing the explanation of the criteria that satisfies the customers which are as follows:-
The rendering of the services is depicted to be providing the recognition of the services which is being used to some extent and also it is recoverable during the time of setting the transactions on the balance sheet (Spiceland, 2010). Thus the amount is being recovered in the form of showing the enhancement of the work and also the economic benefits can be easily achieved.
References
Appannaiah, H., Reddy, P. and Putty, R. (2010). Financial accounting. Mumbai [India]: Himalaya Pub. House.
Besley, S. (2016). Corporate finance. [Place of publication not identified]: Cengage Learning.
Bragg, S. (n.d.). Accounting best practices.
Britton, A. and Waterston, C. (2013). Financial accounting. Harlow: Financial Times Prentice Hall.
Cosserat, G. and Rodda, N. (2009). Modern auditing. Chichester [u.a.]: Wiley.
Dassen, R., Schilder, A. and Wallage, P. (2005). Principles of Auditing. Pearson Education UK.
Dauber, N. (2005). 2006 Auditing standards. Canada: Thomson.
Helbæk, M., Lindset, S. and McLellan, B. (2010). Corporate finance. Maidenhead, Berkshire: Open University Press/McGraw-Hill Education.
Holton, R. (2012). Global finance. Abingdon, Oxon: Routledge.
Khan, M. and Jain, P. (2007). Financial management. New Delhi: Tata McGraw-Hill.
KIESO, D. (2016). INTERMEDIATE ACCOUNTING. [S.l.]: JOHN WILEY.
O’Regan, D. (2004). International Auditing. New York, NY: John Wiley & Sons.
Pandey, I. (2015). Financial management. New Delhi: Vikas Publishing House PVT LTD.
Parrino, R. (2015). Corporate Finance. Singapore: John Wiley & Sons.
Powers, M. and Needles, B. (2012). Financial accounting. [Mason]: South-Western, Cengage Learning.
Ricchiute, D. (2006). Auditing. Mason, Ohio: South-Western/Thomson Learning.
Spiceland, J. (2010). Intermediate accounting. Toronto, ON: McGraw-Hill Ryerson.
Stice, J. and Stice, E. (2014). Intermediate accounting. Mason: South-Western/Cengage Learning.
Weil, R. (2017). Financial accounting. [Place of publication not identified]: Cengage Learning.
Welch, I. (2014). Corporate finance. Los Angeles: Ivo Welch.
Wolf, M. (2010). Fixing global finance. Baltimore, Md.: Johns Hopkins University Press.
Annual Report (2017). Home – Woolworths Annual Report 2016. [online] Wow2016ar.qreports.com.au. Available at: https://wow2016ar.qreports.com.au/ [Accessed 23 May 2017].
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