The company that has been selected is AstiVita Limited which indulges in importing and distributing kitchen appliances, sanitary-ware, bathroom products etc. in and around Australia. The company indulges in a lot of capital products and the annual report of the company has been downloaded and analyzed to see whether the company is satisfying the guidelines of conceptual framework. Conceptual framework is a list of principles and guidelines that has been issued by the IASB to enhance the quality of the financial statements of the companies that are prepared by them and to increase the help to the users to study those financial statements and take necessary decisions based on the same. It has become a mandate for the companies to follow these principles as in the long run it will help in ensuring uniformity between the accounts of the companies for various companies (Abdullah & Said, 2017). The framework includes few qualitative and quantitative characteristics and the annual statements of the selected company shall be analyzed based on these features whether they are able to imbibe the same and the statements are free from all kind of errors. A brief analysis based on these parameters is given below.
Based on the annual statements of the company they have followed a single method for the valuation of the assets and liabilities of the company. The assets and liabilities have been valued based on the accounting principles and guidelines that has been issued. The IASB has stated the various guidelines that companies need to follow when they are valuing these items so that the correct picture of the financial position of the company is presented and there are no loopholes in the same. In the given case we see that the company has tried to follow these steps and has also stated the same in its notes to accounts under the section basis of presentation (Boghossian, 2017). It has clearly mentioned how the valuation has been done and what methods have been applied. An extract from the annual report of the company has been presented for reference purpose-
The fundamental qualitative characteristics of the conceptual framework involves relevance and faithful representation. This means that company should present that information that is relevant to the reporting period and in case there are some items that affects the materiality then that should be clearly highlighted (Wellmer, 2018). It has also been told that the characteristics of faithful representation should be followed which means that there should not be any error and fraud in the information that is presented. It should be clear and factual and in case any error is found then the management would be held liable for the same (Charles H, et al., 2015). One more thing that is important is that all the errors on part of the company should be highlighted in the audit report and that is also a very important feature of the conceptual framework which should be followed. In the given case the company management has stated that the books of the company are free from all kind of errors and there are no mistakes involved in the same.
The various qualitative characteristics of the conceptual framework includes-
Comparability
It is important that information that is presented should be easily comparable which means that it should be presented on global level and hence the comparison can be made with other companies easily. In case of the given company it has many competitors and the users can compare the financial statements of these companies and based on that they can decide whether they want to invest in the company or not (Coate & Mitschow, 2017).
Verifiability
The data has been analyzed on many grounds that the information the company is providing is correct and there are no loopholes in the same. In case there are assumptions made by the company the same should be mentioned in the notes to accounts by the company. There are many grounds on which the company needs to fulfil the guidelines that has been issued by the IASB and the users can verify the same by knowing about the same. So, we see that the company can present their information in the similar manner (Cundill, et al., 2017).
Timeliness
It is important that correct information should be provided to the user as and when they require it so that in case there are any changes that has any material impact that is also communicated within time. It is important that information should be current and should not be redundant else that would be no use to the users (Johan, 2018). In this case also we see that clear information related to a reporting period have been provided by the management and all the relevant notes have also been provided in support of that (Webster, 2017).
Understandability
It is important that the information should be such that it is easily understood by the users. This means that there should not be any vague words that they find difficult to understand. It should be prepared on grounds that supports the accounting operations of the company and in any case, they fail they will be held liable. The users are having only basic knowledge about accounting so financial statements should be prepared in the similar manner and in case changes are needed that should be properly highlighted. It means that the statements should be clear and less complex.
Thus, we can see that the selected company has been able to fulfil their needs and requirements of the conceptual framework and has been successful in complying with the necessary guidelines and principles as issued by the IASB. It will help in making the user experience simpler and they can take better decisions based on the same (Ruth, 2018).
The directors report of the company have been attached below and it highlights the declaration on part of the directors that they have followed all the principles that were needed and the annual reports and the financial statements have been prepared based on the Australian Accounting Standards and the Corporations Regulations 2001 and is giving a true and fair view of the company and its financial statements (Kaufmann, 2017). It indicates that the company has followed all the principles and the users can verify this section to get better clarity. An extract has been attached below:
The auditors have the responsibility to analyze the financial statements of the company and comment whether they are giving a true and fair view or not and it is free from all kind of errors or not. The users depend on the audit report to take important decisions with regards to the company. In the given case we see that the auditor has made their point clear and have given a clear report with regards to the company operations. The auditor has reviewed the financial statements and have framed an opinion based on that. They have given a qualified opinion and the users can refer to that and take decisions with regards to that (Kusolpalalert, 2018).
The auditors have made it clear that the company has done extremely well with their annual statements and have given an opinion based on that.
Conclusion
Based on the overall analysis it can be said that financial statements prepared based on the conceptual framework are better and the user can easily analyze the same and take decisions based on it. Overall the conceptual framework is very easy to follow and so all the companies should try to follow it and in case they fail they would be held liable. It aims to attain uniformity in the financial statements and thus that helps in making the comparison between the companies better. The areas in which the management can improve is to add more details to the items in the balance sheet and the income statement. Overall the company was able to follow all the guidelines.
References
Abdullah, W. & Said, R., 2017. Religious, Educational Background and Corporate Crime Tolerance by Accounting Professionals. State-of-the-Art Theories and Empirical Evidence, pp. 129-149.
Boghossian, P., 2017. The Socratic method, defeasibility, and doxastic responsibility. Educational Philosophy and Theory, 50(3), pp. 244-253.
Charles H, C., Giovanna, M., Dennis M, P. & Robin W, R., 2015. CSR disclosure: the more things change…?. Accounting, Auditing & Accountability Journal, 28(1), pp. 14-35.
Coate, C. & Mitschow, M., 2017. Luca Pacioli and the Role of Accounting and Business: Early Lessons in Social Responsibility. s.l.:s.n.
Cundill, G., Smart, P. & Wilson, H., 2017. Non?financial Shareholder Activism: A Process Model for Influencing Corporate Environmental and Social Performance. International Journal of Management Reviews, 20(2), pp. 606-626.
Johan, S., 2018. The Relationship Between Economic Value Added, Market Value Added And Return On Cost Of Capital In Measuring Corporate Performance. Jurnal Manajemen Bisnis dan Kewirausahaan, 3(1).
Kaufmann, W., 2017. The Problem of Regulatory Unreasonableness. First ed. New York: Routledge.
Kusolpalalert, A., 2018. The relationships of financial assets in financial markets during recovery period and financial crisis. AU Journal of Management, 11(1).
Ruth, W., 2018. ‘Worrying’: Companies’ reporting of climate risks goes ‘backwards’. The Sydney Morning hearld, 20 September.
Webster, T., 2017. Successful Ethical Decision-Making Practices from the Professional Accountants’ Perspective. ProQuest Dissertations Publishing.
Wellmer, A., 2018. The Persistence of Modernity: Aesthetics, Ethics and Postmodernism. fourth ed. UK: Polity Press.
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