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.
“AGL Energy Ltd” has been discerned as one of the most notable Australian public listed company under ASX 100 is responsible for retailing, consideration and generation of electricity for commercial use. The source of the energy generated by AGL has been mainly depicted in form a hydroelectricity, thermal Power, power stations, solar energy and coal steam. It has been depicted that the company is having an overall customer base of “3.6 million both residential and business” located in “New South Wales, Victoria, South Australia and Queensland”. In July 2017, AGL decided to enter commercial gas market sector located in Western Australia (Drew and Dollery 2015).
The report has selected AGL Energy Ltd to depict whether the company has been able to meet the objective of theoretical background for reporting. The study will be able to recognise the observance of the company for recognition of “assets, liabilities, equities, expenses and revenues”. The next section of the study will deal with evaluating the quality of characteristics in the financial report which has been discerned in form of reliability and authenticity in description of the financial events. The last section of the study has been able to depict the excellence characteristics of the report which has shown the comparability and timeliness of information presented in the financial report (Guthrie, Evans and Burritt 2014).
The main governing body of conceptual framework in Australia is “Australian Accounting Standards Board (AASB)” is responsible for developing financial report in both public and private sectors. The important form of the contributing role of AASB has been taken into consideration with the financial reporting of “Australian securities and investment commission at 2001”. As per the data published in December 2013, significant number of amendments had brought the existing reporting framework which aimed at improving measurement, presentation, reporting entity and de-recognition. The important amendments have also brought in significant changes in management stewardship associated to several entities (Goodacre, Gaunt and Henry 2017).
As per the information depicted in AGL financial report 2017, it has been discerned that the reports are prepared as per the standards prescribed by AASB and all the other types of standards has been acceptable to ASX. The preparation of concise financial statement is done in compliance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports”. The report associated to the financial statements is seen to be based on audited report and the same is attached with the AGL financial report 2017. The primary operating segment of the company has been further depicted with group operations, investments and markets. In addition to this, the preparation of the product segments has been done as per “Australian Accounting Standard AASB 8” (Lodhia 2015). The company has been seen to report segment information as per internal as structure. This has been seen to be evident with the fact that company has operating segment seen majority locations and margin of AGL’s activity exhibited with operating segments taken from variety of expenses group. It has been further discerned that company has implemented the conceptual framework of AASB in terms of recognition and measurement of financial instruments (Henderson et al. 2015).
Figure: Information on conceptual framework
(Source: Navarro-García and Madrid-Guijarro 2014)
The significant amount of deviations in the financial instrument has been considered with “Australian Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement”. This particular standard has been further considered with liabilities and derivatives reported as per fair value and the values in financial statements. “Australian Accounting Standard AASB 139 Financial Instruments” is seen as the main equity taken into consideration for adjusting the hedging reserve is seen to be effective for conducting hedges and determining any changes in the fair value of the item which is being held at fair value of derivative (Guthrie and Parker 2014). A significant consideration of the deviations of fair value of the derivatives as depicted the need for liquidity adjustment in the hedge reserve. The important form of changes in the value of derivatives in the reported period is seen to be carried as per fair value and considered with P/L statement of the company. It has been further seen that the AGL has restated about the information on adoption of accounting standards for employee benefits which is seen with “AASB 119 Employee Benefits” in the financial year 2013 (Dellaportas, Kanapathippillai, Khan and Leung 2014).
Considering the numerous changes in the current energy system, the financial attention of cost for AGL is considered to be powerful enough with “affordable, reliable and orderly depiction of the financial data”. The important reflection for deviations in fair value is seen as an added enhancing quality characteristic of financial report. The changes in the fair value of the derivatives along with the periodic reporting it is seen to be based on ineffective hedges and the assets and liabilities has been carried out at fair value for which the acknowledgement of same is needed for the assessment of profit or loss. As per the consideration of AASB 139 definition the results of hedge have been seen with the appropriate outputs for interest rate and foreign exchange rate. The significant variations in the fair value and financial instrument is further seen to be discerned with P/L statement published for the year ended 30 June 2017. The main form of the consistency of the data is evident with consideration of total changes in the fair value (Martin- Biondi and Lapsley 2014)
It has been further seen that the immersion outcome of the various result discerned with statutory profit and the board has been able to access the statutory profit for different types of non-cash fair value movements. The board has been able to determine the several outcomes of immersion as per long-term and short-term incentives which has been able to ensure that management is not taking any undue advantage by getting things outside their control (Jacobs and Cuganesan 2014).
The comparability aspect of the data has been discerned with resultant value in the present year and comparing the same with previous year. This particular facet has been implemented across several areas of financial reporting including “earnings before interest and tax, underlying profits every, net finance cost and income tax benefit”. In a similar way, the company has been able to review the operations as per comparing the financial data with previous year. The consideration of the chart for depiction of long-term and short-term incentive has shown the timeliness consideration and proper segregation of the data (COOPER and Guthrie 2017). Furthermore, executive immigration and performance outcomes has been clearly depicted with the results of previous five years of financial data. This has been able to include several aspects of elements such as “statutory profit or loss, underlying profit, statutory EPS, underlying EPS, closing price of shares” etc. along with the aforementioned elements, the actual growth in the last five years of AGL has been shown with bar diagram. In addition to this, the line chart has been able to give a clear picture of qualitative enhancing characteristics thereby depicting total shareholder return for AGL vs. ASX 100 index from a time period of five years (Benson, Clarkson, Smith and Tutticci 2015).
Figure: Using Bar Graph as qualitative enchanting characteristics
(Source: Navarro-García and Madrid-Guijarro 2014)
Figure: Using doughnut graph as qualitative enchanting characteristics
(Source: Benson, Clarkson, Smith and Tutticci 2015
Conclusion
Based on the analysis of the report the main compliance of the company with Australian conceptual framework is evident. the reports are prepared as per the standards agreed by AASB and all the other types of standards has been acceptable to ASX. The preparation of concise financial statement is done in compliance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports”. The acknowledgement of criteria for reporting “Assets, Liabilities, Equity, Revenue and Expenses” has been prominent with “Australian Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement”. This particular standard has been further considered with liabilities and derivatives reported as per fair value and the values in financial statements. The various types of characteristics relating to quality of financial reporting has been evident with consideration of “affordable, reliable and orderly depiction of the financial data”. The important consideration for deviations in fair value is seen as an added enhancing quality characteristic of financial report. Enhancing characteristics of financial reporting is apparent with resultant value in the current year and relating the same with previous year. The presentation of the data has been regarded as an important aspect of quality and this has been prominent with the use of bar graph, doughnut chart and pie chart.
References
Benson, K., Clarkson, P.M., Smith, T. and Tutticci, I., 2015. A review of accounting research in the Asia Pacific region. Australian Journal of Management, 40(1), pp.36-88.
Biondi, L. and Lapsley, I., 2014. Accounting, transparency and governance: the heritage assets problem. Qualitative Research in Accounting & Management, 11(2), pp.146-164.
COOPER, B.J. and Guthrie, J., 2017. Post the Watt review–Australian business schools and collaboration with industry. Improving collaboration and innovation between industry and business schools in Australia.
Dellaportas, S., Kanapathippillai, S., Khan, A. and Leung, P., 2014. Ethics education in the Australian accounting curriculum: A longitudinal study examining barriers and enablers. Accounting Education, 23(4), pp.362-382.
Drew, J. and Dollery, B., 2015. Inconsistent depreciation practice and public policymaking: Local government reform in New South Wales. Australian Accounting Review, 25(1), pp.28-37.
Goodacre, A., Gaunt, C. and Henry, D., 2017. Publication Records of Australian Accounting and Finance Faculty Promoted to Full Professor, Set within an International Context.
Guthrie, J. and D. Parker, L., 2014. The global accounting academic: what counts!. Accounting, Auditing & Accountability Journal, 27(1), pp.2-14.
Guthrie, J., Evans, E. and Burritt, R., 2014. Australian accounting academics: challenges and possibilities. Meditari Accountancy Research, 22(1), pp.20-37.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Jacobs, K. and Cuganesan, S., 2014. Interdisciplinary accounting research in the public sector: dissolving boundaries to tackle wicked problems. Accounting, Auditing & Accountability Journal, 27(8), pp.1250-1256.
Lodhia, S., 2015. Exploring the transition to integrated reporting through a practice lens: An Australian customer owned bank perspective. Journal of Business Ethics, 129(3), pp.585-598.
Martin-Sardesai, A., Irvine, H., Tooley, S. and Guthrie, J., 2017. Organizational change in an Australian university: Responses to a research assessment exercise. The British Accounting Review.
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