In today’s business world, one cannot ignore the importance of conceptual framework as its helps the companies in dealing with various kinds of accounting issues like objectives of the financial statements, their uses along with their characteristics and others. At the same time, it assists the companies in the development and presentation of the financial statements like income statement, balance sheet, cash flow statements and others. The presence of accounting conceptual framework can be seen in Australia developed by Australian Accounting Standard Board (AASB) (Henderson et al., 2015). It is the obligation on the companies to follow all the principles and rules of AASB for ensuring the correct development and true presentation of their financial statements. The main aim of this report lies in the analysis and evaluation of the compliance of Crown Resorts Limited with the conceptual framework of AASB in the process of financial reporting.
Crown Resorts is regarded as the largest entertainment group operating in different regions of Australia. The presence of the core businesses and investments of this company can be seen in the integrated resorts sector of Australia. Crown Resorts was established in the year of 2007 and the company is headquartered at Southbank, Melbourne, Australia. The two major subsidiaries of Crown Resorts are Crown Melbourne Limited and Crown Perth Limited. In the overseas market, the name of the fully owns subsidiary of Crown Resorts is Crown Aspinalls in London. The Australian resorts of the company are considered as the largest single-site private sector employers; and the employee base of Crown Resorts is 15,600 positioned in 700 different roles (crownresorts.com.au 2018).
(Source: crownresorts.com.au 2018)
From the above table, it can be seen that there is decrease in the revenue as well as in all the profits like EBITDA, EBIT, NPAT and others.
(Source: asx.com.au)
It can also be observed from the table that there is decrease in the share price of the company in the recent months. Hence, it can be observed that the recent financial performance of the company is not good as compared to the previous period; and the loss of business can be held responsible for this.
Conceptual Framework provides the companies with all the required guiding principles for gaining understanding about the purposes and objective of General Purpose Financial Reporting. At the same time, it works as a tool for the International Accounting Standard Board (IASB) for the development of various accounting standards (aasb.gov.au 2018). The following discussion shows the basis of the preparation of the financial statements of Crown Resorts:
(Source: crownresorts.com.au 2018)
It can be observed from the above tables that the company prepares and presents their financial statements by complying with the standards and principles of Corporations Act 2001 and AASB. At the same time, they comply with the standards of both International Financial Reporting Standards (IFRS) and International Accounting Standard Board (IASB).
The main contribution of Conceptual Framework towards AASB can be notices in the promotion and maintenance of accounting standards, regulations and procedures. Moreover, it can be regarded as a statement of Generally Accepted Accounting Standard (GAAP) for the creation of structure for reviewing standards along with the development of the same (aasb.gov.au 2018). Most importantly, it helps in delivering crucial information to the investors for assisting in the indecent decision-making process. Additionally, the auditors can use it as a major tool in order to ensure that the financial statements are developed as per the required standards or not.
The main contribution of GPRF can be seen in providing assistance to the investors and creditors for the purpose of investment decision-making. The major components of GPFR are income statement, balance sheet, cash flow statement and statement of change in equity. The corporation is responsible for the preparation of GPFR so that valuable information can be delivered to the shareholders for decision-making process (Zeff 2013). It is also the responsibility of GPFR to provide information to the existing as well as potential investors for the decision-making process. The main qualitative fundamental and enhancing characteristics of GPFR are relevance, faithful representation, understandability, verifiability, timeliness and comparability. The presence of all of these characteristics makes the financial information more useful and acceptable for their users. From the earlier discussion, it can be seen that Crown Resorts follow the principles and standards of Corporations Act 2001, AASB, IFRS and IASB as a part of GPFR (Warren, Reeve and Duchac 2013).
From the 2017 Annual Report of Crown Resorts, it can be observed that the company prepares their remuneration report for the executives as per the policies and standards of Corporations Act 2001 and the Corporations Regulations 2001. According to the remuneration policy of Crown Resorts, the main aim of the company is to make it sure that the remuneration package of the executives properly reflects their roles and responsibilities. The presence of three major parts can be seen in the remuneration structure of the company; they are Fixed Remuneration, Short-Term Incentives (STI) and Long-Term Incentives (LTI). The main aim of fixed remuneration is to provide the executives with a base level of remuneration as per the responsibilities and roles of them. On the other hand, both the STI and LTI are based on the performance of the executive directors.
The below table shows the financial performance of Crown Resorts from 2013 to 2017:
(Source: crownresorts.com.au 2018)
It can be seen from the above that there is a drop in the normalized EBITDA by 10.7%%. At the same time, 15.5% fall in the normalized NAPT can be seen in the company for the year 2017. Apart from this, increase in the share prices can also be seen. This situation indicates towards the failure of the directors to achieve the Key Performance Objectives (KPO) of the company.
In the year of 2017, the company has adopted some changes in their executive remuneration framework that is shown below:
(Source: crownresorts.com.au 2018)
Hence, from the above discussion, it can be observed that Crown Resorts has complied with the principles of Conceptual Framework at the time of the preparation of their remuneration report. In the presence of accurate and effective remuneration structure, the employees as well as senior executives of Crown Resorts become motivated to achieve the organizational goals with their good performance.
All the required accounting requirements for treating property, plant and equipment can be seen in AASB 116 Property, Plant and Equipment and the Australian Standard Board (ASB) has developed this requirement under section 334 of the Corporations Act 2001 (aasb.gov.au 2018). As per this standard, the companies are needed to determine the carrying value of these assets along with depreciation and the amount of impairment losses. The requirement is to recognize them at the cost value after the deduction of depreciation. The following figure shows the accounting treatment of PPE by Crown Resorts:
(Source: crownresorts.com.au 2018)
It can be seen that Crown Resorts follows the AASB conceptual framework for the accounting treatment of PPE.
Contingent liabilities are considered as the obligation of the companies occurring from any past event. Timeliness needs to be there in the contingent liability for the availability of proper information at the time to make the decisions related to these liabilities. All the required accounting principles and standards for the treatment of contingent liabilities can be seen in AASB 137 Provision, Contingent Liabilities and Contingent Assets under section 334 (aasb.gov.au 2018). There is a need to have verifiability characteristic in contingent liability so that the users can gain understanding about these liabilities. The following figure shows the contingent liability treatment in Crown Resorts:
(Source: crownresorts.com.au 2018)
The Australian Accounting Standard has provided all the regulations and standards for the treatment of inventories in AASB 102 Inventories under section 334 of the Corporations Act 2001 (aasb.gov.au 2018). As per the guidelines of this section, the companies are needed to recognize the expenses as well as the write downs to the net realizable value. The following figure shows the inventory treatment by Crown Resorts:
(Source: crownresorts.com.au 2018)
From the above, it can be seen that Crown Resorts follows all the principles of AASB 102 for the valuation as well as recognition of their business inventories.
At the time of the accounting treatment of revenues, the companies are needed to comply with the standards of AASB 118 Revenue under section 334 of Corporations Act 201 (aasb.gov.au 2018). Thus, the companies are needed to consider revenue as the income from the day-to-day activity of the companies from different sources like sales, dividends, interest, fees and others. The following figures show the revenue treatment of Crown Resorts:
(Source: crownresorts.com.au 2018)
It can be seen from the above figure that there is a decrease in the revenue of Crown Resorts in the year 2017 as compared to the year 2016. The measurement and recognition of revenue in Crown Resorts is done on the fair value basis. It can be seen that the company measure the revenue at the time of the flow of economic benefit to the company.
At the time of the accounting treatment of dividends, the companies are needed to comply with the standards of AASB 132 and AASB 137 (aasb.gov.au 2018). As per this regulation, it is required for the business organizations to disclose all the details of their dividend policy. The following figure shows the dividend treatment of Crown Resorts:
(Source: crownresorts.com.au 2018)
It needs to be mentioned that the main aim of Crown Resorts is to keep the shareholders motivating with the payment of the dividend. Crown Resorts pays dividend from one part of the company’s earnings. Dividend policy plays a crucial role in retaining the interest of the shareholders of the companies.
In the recent years, the involvement of Crown Resorts can be seen in a tax bill dispute case of over AU$362 million. This amount is 5 percent more than the normalized profit for the year 2017 and it comprises of both back taxes and penalties. The main reason for levying this tax is the tax dispute in the unsuccessful investment of the company in Las Vegas between 2009 and 2014. However, at present, the tax bill of Crown Resorts of AU$362 million is scheduled to be heard in an Australian court in the month of August, 2018 (reuters.com 2018). This particular tax dispute came into highlight after the failure of the expansion plan of Crown Resorts in Las Vegas and Macau. It needs to be mentioned that the court dismissed the objection of the company relayed to this matter. The link of this case can be found with the purchase of Cannery Casino Resort for $1.75 billion by Crown Resorts (reuters.com 2018).
Conclusion
From the above discussion, it can be seen that Crown Resorts is the largest entertainment group in Australia. From the analysis of 2017 Annual Report of Crown Resorts, one aspect is clear that the company has complied with all the required regulations as well as principle of the Conceptual Framework of AASB at the time of the preparation as well as presentation of their financial statements. It implies that Crown Resorts has been able in providing the true as well as fair financial picture of their business. As a part of the compliance with the required GPFR principles, Crown Resorts has provided all the required financial statements like income statement, balance sheet, cash flow statement and the statement of change in equity. However, from the analysis of the remuneration report, it can be seen that the senior executives of the Crown Resorts has failed in achieving the required financial target. At the time of the accounting treatment of assets, liabilities, contingent liabilities and others, the company follows different principles of AASB Conceptual Framework. However, one area of worry for Crown Resorts is their tax dispute of AU$362 million due to the failure in the investment in Las Vegas and Macau. Hence, based on the above discussion, it can be seen that Crown Resorts has complied with the conceptual framework for the purpose of their financial reporting.
References
Aasb.gov.au. (2018). Financial Instruments: Presentation. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB132_07-04_COMPoct09_02-10.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Framework for the Preparation and Presentation of Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-14.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-04_COMPjun09_01-09.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Presentation of Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Provisions, Contingent Liabilities and Contingent Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-14.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf [Accessed 3 Aug. 2018].
Asx.com.au. (2018). [online] Available at: https://www.asx.com.au/asx/share-price-research/company/CWN [Accessed 3 Aug. 2018].
Crownresorts.com.au. (2018). About Us | Crown Resorts – Crown Resorts . [online] Available at: https://www.crownresorts.com.au/about-us/crown [Accessed 3 Aug. 2018].
Crownresorts.com.au. (2018). Annual Report 2017. [online] Available at: https://www.crownresorts.com.au/CrownResorts/files/9d/9df41ad5-de12-465c-ad18-2925ad3533fa.pdf [Accessed 3 Aug. 2018].
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
U.S. (2018). Crown Resorts’ Australian tax dispute headed for court challenge. [online] Available at: https://www.reuters.com/article/us-crown-resorts-court-tax/crown-resorts-australian-tax-dispute-headed-for-court-challenge-idUSKBN1KF0CU [Accessed 3 Aug. 2018].
Warren, C., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage Learning.
Zeff, S.A., 2013. The objectives of financial reporting: a historical survey and analysis. Accounting and Business Research, 43(4), pp.262-327.
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