Discuss about the Social and Governance Assurance and Consulting.
For developing the financial statements, the conceptual framework associated with the financial reporting is vital for the companies in the recent years. This is due to the fact that it offers significant course of action as well as the principles along with techniques required to prepare all the financial reports (Biondi and Lapsley 2014). In addition to the fact that, the conceptual framework might facilitate in dealing with several concerns of the corporate firms. In order to improve the quality of the report Flight center travel company is chosen that is listed in ASX top 100 companies. The objective of the report is to analyze the adherence of this company in alignment with the conceptual framework.
The conceptual framework has an important function to play in dealing with the financial factors of the companies. For addressing the needs of the financial reporting, such framework was developed from the behalf of the “International Accounting Standards Board (IASB)” in the year 1989 (Brown, Preiato and Tarca 2014). For this reason, the conceptual framework can support in dealing with an organization’s financial aspects. Based on the company’s recent annual report of 2017, the principles are presented within “Corporation Act 2001” and AASB are ensured for general purpose financial reporting. Along with the same, the consolidated financial statements are prepared relied on standards and principles of “International Financial Reporting Standards (IFRS)” as well as “International Accounting Standards Board (IASB)”. For this reason, the organization totally confirms with the regulations of financial reporting conceptual framework of IFRS (Christensen, Lee Walker and Zeng 2015). For aligning with such framework, it is also vital for the companies to address three specific objectives. These objectives along with the degree to which the organization aligns with such objectives are examined below:
With alignment with the AASB financial accounting conceptual framework, to is vital for the companies to report its financial information in adherence to the recognition criteria associated with the asset, revenues, expenses, equity along with the liabilities (Fctgl.com. 2018). From another perspective, it is vital for them in addressing three basic criteria. The second criteria are to offer a viewpoint on the financial aspects that have important information in a faithful manner. The final criteria are to enhance the usefulness of such aspects for the investors. Such criteria are analyzed with respect to Flight center travel company in order to determine its adherence with AASB conceptual framework that is explained below:
Considering the case of Flight center travel company, the major equity items encompass the reserves, issued capital along with the retained earnings (Firth and Gounopoulos 2017). The incremental amount is substracted from the overall equity of the organization.
It is observed from the case of Flight center travel company that it is likely to include certain asset classes. One among such assets in the case of this company is plant, property and equipment that is mentioned within the company’s financial statements after depreciation is decreased from the asset cost. The asset expense is just recognized in a situation the company expects future advantages from it (Lovell 2014).
Flight center travel company has two distinct capability types that is evident from its annual report. It identifies the deferred tax liabilities relied on the variations in the tax rate. Through observing the contingent liabilities, the major items are taken into account in case the company includes guarantees, capital expenses, joint expenses as well as legal along with regulatory surroundings (Mayne 2017). As per the views of Flight center travel company’s management the company do not need any provision for such obligations because of the decreased chance that economic advantages can get decreased in future or unreliable amount measurement might take place.
In consideration to the expenses related to Flight center travel company, they are recognized through taking into consideration these aspects (Palea 2014). Certain significant cost associated with the company includes direct raw materials, consumables, depreciation, amortization, impairment, labor and tax. Certain other expenses are recognized and revealed at the time thy take place. For this reason, the analysis of all the recognition aspects are represented within the financial reporting conceptual framework. This signifies that Flight center travel company has aligned its financial statements with all the important guidelines that offers vital and advantageous information to its investors (Soh and Martinov-Bennie 2015).
Flight center travel company’s management considers to conduct revenue recognition at the selling point after reducing the tax expenses. In addition, recognition of the sales provision is recognized through focusing on the overall analysis. For this reason, the selling value encompass the revenue gathered by means of the product sale (Vafaei, Ahmed and Mather 2015).
Conceptual framework of financial reporting as per AASB includes some qualitative characteristics that is helpful in attaining the quality of financial reporting of a corporate firm. Flight Centre Travel company requires to maintain such characteristics and considering the same critical analysis is carried out. This is in order to recognize the extent of adherence with the qualitative characteristics explained within AASB framework (Vafaei, Ahmed and Mather 2015).
All the Australian companies are obliged for making transparent and fair financial statements representation of the financial information. In order to make sure the same, the shareholders confidence has a considerable role from the perception of the company. Audit report developed by KMPG for Flight Centre Travel company also takes into consideration that faithful representation of the financial report is maintained for the reason that it has dealt with vital accounting standards considerably and faithfully.
As per this factor, relevancy is deemed to be important for information offered for enhancing the decision-making process of the company. Considering the case of Flight Centre Travel company, alignment was observed in consideration to AASB, IFRS and Corporations Act 2001 (Brown, Preiato and Tarca 2014). Additionally, it also takes into account the recent rates of depreciation, tax and few more. For this reason, efficient financial decisions might be considered as Flight Centre Travel company offers valuable information within the company’s financial statements.
It is needed or all the corporate firms to reveal their financial data in a way that its investors are capable to verify them in a better manner. For making sure of this particular characteristic, Flight Centre Travel company segments all its business conducts through offering notes within the annual report of a company and its financial statements (Soh and Martina-Bennie 2015).
This factor offers increased opportunities to its stakeholders that can facilitate in realizing the similarities along with deviations within the financial information among several financial reports. The important information is offered to the users by representing by means of charts and tables for better understanding (Soh and Martinov-Bennie 2015). For this reason, the financial report of Flight Centre Travel company can be compared with all its market rivals for attaining a viewpoint regarding real financial position of the company.
Through attaining the aspects of this factor, the financial information requires being reported in a manner that it turns out to be simple for the investors to understand the same in a better manner (Brown, Preiato and Tarca 2014). Flight Centre Travel company reports its financial information in aa format that is aligned with the financial reporting conceptual framework that facilitates all its investors to understand them in a better manner.
All the companies require to maintain a fixed timeframe for indicating its financial information to all its investors. Annual and quarterly financial reports are observed to be offers to be investors in the situation of Flight Centre Travel company. For this reason, timely information disclosure might facilitate in attaining the users trust as this might facilitate in attaining a fair perception regarding the position and performance of the company within the market (Vafaei, Ahmed and Mather 2015).
Conclusion
The objective of the report is to analyze the adherence of Flight Centre Travel company in alignment with the conceptual framework of AASB. It is gathered from the paper that the organization totally confirms with the regulations of financial reporting conceptual framework of IFRS. Moreover, in case of Flight center travel company, the balance sheet statement is developed in a way which supports investors to attain important information related with its economic resources aligned with AASB regulations. The annual report of the company indicates that it offers timely information regarding financial statements to its investors to make effective investment decisions.
References
Biondi, L. and Lapsley, I., 2014. Accounting, transparency and governance: the heritage assets problem. Qualitative Research in Accounting & Management, 11(2), pp.146-164.
Brown, P., Preiato, J. and Tarca, A., 2014. Measuring country differences in enforcement of accounting standards: An audit and enforcement proxy. Journal of Business Finance & Accounting, 41(1-2), pp.1-52.
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), pp.31-61.
Crawford, L., Helliar, C., Monk, E. and Veneziani, M., 2014, March. International Accounting Education Standards Board: Organisational legitimacy within the field of professional accountancy education. In Accounting Forum (Vol. 38, No. 1, pp. 67-89). Elsevier.
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), pp.1042-1067.
Fctgl.com., 2018. [online] Available at: https://www.fctgl.com/wp-content/uploads/2017/09/Flight-Centre-Travel-Group-Annual-Report-2017.pdf [Accessed 14 Apr. 2018].
Firth, M. and Gounopoulos, D., 2017. IFRS adoption and management earnings forecasts of Australian IPOs.
Lovell, H., 2014. Climate change, markets and standards: the case of financial accounting. Economy and Society, 43(2), pp.260-284.
Mayne, J., 2017. Accountability for program performance: a key to effective performance monitoring and reporting. In Monitoring performance in the public sector (pp. 157-176). Routledge.
Palea, V., 2014. Fair value accounting and its usefulness to financial statement users. Journal of Financial Reporting and Accounting, 12(2), pp.102-116.
Soh, D.S. and Martinov-Bennie, N., 2015. Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), pp.80-111.
Vafaei, A., Ahmed, K. and Mather, P., 2015. Board diversity and financial performance in the top 500 Australian firms. Australian Accounting Review, 25(4), pp.413-427.
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