The conceptual framework is considered to be a framework which consists of interrelated fundamentals and objectives. The objectives are to determine the purpose and goals of financial reporting. The fundamental is considered to be the underlying concepts that assist in achieving those objectives. The concepts provide direction to select events, circumstances and transactions which are to be accounted, recognized, measured, summarized and reported. Thus, it provides a framework for setting accounting standards, resolving accounting disputes and following fundamental principles. APA group is the leading energy infrastructure organization in Australia (APA, 2018). The company have more than 1700 employees and operates gas transmission networks all across the country. The organization delivers safe, reliable and smart solutions through interconnected infrastructure and adequate industry knowledge. The management of the APA group has managed the business operations in an efficient manner.
Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
The general purpose financial report of APA group has been prepared as per the requirements of the Corporations Act 2001, Australian Accounting Standards and complying with the International Financial Reporting Standards. The financial reports of the organization have been prepared based on the historical cost but excluding the financial instruments (Deegan, 2012). The finance leases under the assets are recognized initially at their fair value or at the amount which is equal to the minimum lease payment’s present value. The borrowings are initially recognized at the fair value deducting the transaction costs. The rate of interest swaps fair value at the reporting date is identified by the discounting future flow of cash. The financial instruments of the organization are carried out at the fair value in the financial position statement. The fair value can be examined from the quoted prices in the active market. The financial instrument if in the market is not active then the organization uses different valuation models for determining the fair value (Holton, 2012). The main objective of implementing valuation methods is to set a price that will be received for selling the asset or transferring the liability between the participants of the market. The fair value values of the financial liabilities and financial assets are being measured and evaluated at the end of the reporting period. The information depicts that APA group complied with the measurement requirements of the conceptual framework.
Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
The directors of APA group declares that the financial statements and notes are being prepared as per the Corporation Act 2001 consisting of accounting standards providing a fair and true view of the financial performance and position. The independent report of Deloitte also depicts that the consolidated profit or loss statement and other comprehensive income, consolidated financial position statement, consolidated cash flow statement and consolidated equity changes statements have been prepared as per the accounting rules and policies. The financial report is prepared as per the Corporations Act 2001 showing fair and true view of the financial performance and position (Greuning, Scott and Terblanche, 2011). The directors are being responsible to prepare the financial report as per the Corporations Act 2001 and Australian Accounting Standards in order to provide a true and fair view. The financial information assists the users to make significant decisions in an appropriate manner. The faithful representation has been carried out by the organization which maximizes the characteristics of neutrality, error fee and completeness. A specified structure is being followed for ensuring appropriate preparation of the financial report. The information depicted is both relevant and represented faithfully as per the needs of the users (Shim and Siegel, 2008).
The qualitative characteristics such as understandability, timeliness, verifiability and comparability enhance the quality of the information that is faithfully represented and relevant.
Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
Source: (Annual Report, 2018)
The information about the reporting organization is considered to be more useful when it can be compared with other entities with similar information. The financial statement of the APA group provides significant information which can be compared with other entities. The consolidated profit or loss statement, consolidated financial position statement, consolidated statement of equity changes and cash flow statement are being prepared by all the organizations (Iasplus, 2018). Thus, the information can be used for examining the financial position and performance of the firms. The comparability allows the users to determine and understand the differences and similarities between the organizations.
Verifiability assists the organization to ensure that the information is represented faithfully in front of the users. The users need a true and fair view of the position of the organization. APA group prepares the financial statements as per the Australian Accounting Standards and Corporations Act 2001 ensuring a fair and true view of the organization. Timeliness is referred to the availability of the information in time to the decisions enabling them to make decisions (Needles and Powers, 2012). The financial statements are prepared by the APA group at end of each accounting period which is 30 June 2018. The information assists the users to make significant decisions on the basis of the available information.
Characterising, presenting and classifying information appropriately make it understandable. The financial reports prepared by the APA group are complete and consists of appropriate information which can be easily understood. All the items are classified in order to appropriate manner. The users would be able to review the economic and business activities of the APA group from the annual report in an appropriate manner (Sharma, 2010).
The users of the financial reports are to able to use the information provided in the report to make decisions. The management team of the APA group are able to examine the financial performance of the organization which enables them to make financing and operational decisions. The investors are able to understand the profitability, cash flows and liquidity of the organization. It enables them to make a decision of making an investment on the basis of whether the organization will be able to generate returns or not (Northington and Gerard, 2011). The lenders and other creditors are able to determine and evaluate the liquidity level and profit margin of the organization. It assists them to determine whether the organization will be able to recover all its debts in future. On the basis of the information, they would decide whether lending money would be a good decision or not. Apart from this, the employees also get significant information which assists them to understand their future career prospect within the organization. The government is able to understand whether the company is paying the taxes in an appropriate manner. The customers and suppliers are also able to evaluate the financial position and performance of the organization. Thus, the APA group provides significant information to the users of the financial report.
The users of the financial reports should have more than basic knowledge of accounting for analysing an organization. It will assist them to make decisions in an appropriate manner by determining and comparing the financial information with the performance of the organization. Only gaining information about the income, expense, assets, liabilities and cash flows are not considered to be enough for the users (Roode and Leith, 2009). They should also understand the accounting rules and procedures which are being used for preparing the financial statements. The users will be able to determine and evaluate which financial items are treated in which manner within the financial statements. The users will be able to evaluate whether the organization is moving in the right direction or not. The users will be able to identify the financial items which contributed to the increase or decrease in the profit margin, liquidity, cash flows, assets and equity.
The general purpose of financial reporting is to provide significantly useful information to users that assist them to make economic and business decisions. The financial reporting of APA group consists of all the significant information that enables the lenders, investors and other creditors to make decisions about purchasing, holding or selling debt instruments, settling or providing loans or other credit forms, or exercising votes and influencing the actions of the management that imposes impact on the economic resources of the organization (Fasb, 2018). The users of the information are not able to assess the ability of the organization to generate future cash flows but also how efficiently and effectively management has carried out their responsibilities. The financial statements have provided information in respect to the financial performance and position of the APA group. The users are able to make financial and other decisions in an appropriate manner. Thus, APA group is able to meet the requirement for general purpose financial reporting.
Conclusion
APA group has appropriately met requirements of the conceptual framework. The financial statements have been prepared on the basis of the accounting rules and standards in order to ensure a fair and true view of the organization. The users are able to use the report and obtain significant information that assists them to make decisions.
References
Annual Report (2018). Annual Report. [online] Apa.com.au. Available at: https://www.apa.com.au/globalassets/documents/annual-reports/2018-annual-reports/apa_group_annual_and_sustainability_reports_2018.pdf [Accessed 13 Dec. 2018].
APA (2018). APA Group homepage – APA Group. [online] Apa.com.au. Available at: https://www.apa.com.au/ [Accessed 13 Dec. 2018].
Deegan, C. (2012). Australian financial accounting. 10th ed. North Ryde, N.S.W.: McGraw-Hill Australia.
Fasb (2018). The Conceptual Framework. [online] Fasb.org. Available at: https://www.fasb.org/jsp/FASB/Page/BridgePage&cid=1176168367774#section_1 [Accessed 13 Dec. 2018].
Greuning, H., Scott, D. and Terblanche, S. (2011). International financial reporting standards. 5th ed. Washington, D.C.: World Bank.
Holton, R. (2012). Global finance. 12th ed. Abingdon, Oxon: Routledge.
Iasplus (2018). Conceptual Framework for Financial Reporting 2018. [online] Iasplus.com. Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 13 Dec. 2018].
Needles, B. and Powers, M. (2012). Financial accounting. 6th ed. Mason, OH: South-Western Cengage Learning.
Northington, S. and Gerard, G. (2011). Finance. 7th ed. New York: Ferguson’s.
Roode, M. and Leith, K. (2009). Financial reporting. 8th ed. [Pretoria]: [Salt and Pepper].
Sharma, N. (2010). Business finance. 5th ed. Jaipur, India: ABD Publishers.
Shim, J. and Siegel, J. (2008). Financial management. 4th ed. Hauppauge, N.Y.: Barron’s Educational Series.
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