This report reflects about the IASB, AASB, accounting standards, IFSR and conceptual framework which should be followed by organizations while reporting its financial statement. This conceptual framework provides easy and determined approach which helps stakeholders to read and understand the financial statement of organizations.
Tesco and Wesfarmers are the two selected company which have been used to analysis annual report in effective manner. There is several analytical process have been used in light of reporting requirement imposed on accountants and those charged with governance of corporations. There are several points which have been measured in this report such as whether company has followed proper conceptual frameworks in its reporting frameworks, complete disclosure of notes to account in its financial statement. In the end, comparison would be made on the annual report of both companies to identify the possible drawbacks in annual reports of companies. This annual report is prepared by these two companies by following two conceptual frameworks which are given under the rules of IFRS and AASB standards.
Conceptual frameworks followed in annual report provides depth knowledge about the rule and regulation of international accounting standard so that accountant and auditors could use these rules to accomplish set of targets and without ignoring any accounting standards and rules.
It is one of the supermarket leading companies in Australia which has been providing goods and services to its customers through its retail stores. This company has been operating its business around all over the world. In order to reduce the problem of harmonization in reporting frameworks it is prudent for company to follow conceptual framework in its reporting standard. This company prepare Conceptual frameworks to deal with financial reporting issues such as objectives, users of financial statements and all other intents that convert all the accounting and financial information useful for stakeholders in its prepared annual report.
Tesco is largest business organization running its business in supermarket industry. It is a profit making company and it has been incorporated in Australia. This company has prepared its accounting and conceptual frameworks as per IASB and FASB (ACCA Global, 2017). All the data provided in the financial statement have been recorded as per its different set of rule and regulations shown in IASB and FASB e.g. income statement consists of all the values based on their cost whereas, balance sheet of Tesco is consisted
This extract of annual report of Tesco has been prepared on the basis of IFRS and IASB standards and rules.
Company has followed complete transparency rules and regulation as per the norms and regulation of Australian accounting standard.
All the items shown in balance sheet is recorded at historical cost however, Company has shown some of its assets and liabilities at faire value.
The annual report is prepared on the basis of IASB rules and regulations
All the amount shown in the financial statement of Tesco is in AUD$.
This extract of annual report is consisted with all the information’s and details which would be used by stakeholder for their investment decisions. As per the conceptual frameworks followed with IFRS and AASB, Extract of annual report disclose all the notes to financial statement, directors reporting and independent Auditors report. In addition to this, company has followed all the international accounting standards to establish harmonization in its reporting frameworks and avoid reporting conflict. Extract of annual report of both companies consist all the required information which could be used by stakeholders to measure financial performance of company for their investment decision.
It is largest supermarket company which has been running its business in Australia. It is observed that company has diversified its business in several countries which has forced company to follow all the international financial reporting standards and AASB rules in its financial reporting framework (annual report, 2017).
Conceptual frameworks in reporting of financial statement of Tesco corporation Ltd deal with financial reporting issues such as objectives, users of financial statements and all other intents that convert all the accounting and financial information useful for stakeholders. The basic elements of financial statement of company would be consisted with assets, liabilities, income and expenses. In financial reporting of company’s financial and non- financial data, conceptual framework is a theory of accounting prepared by a standard setting body which will be used to gauge practical problems for a particular object
This extract of annual report of Wesfarmers Ltd has been made on the basis of rules and regulation given in IFRS and GAAP rule.
Australian accounting standard rules has been followed while preparing annual report of Wesfarmers Ltd.
All the details of financial transactions have been recorded either on historical cost of market value.
All amount shown in the financial statement of Wesfarmers in AUD$.
This annual report of the corporations reflects that all the financial information has been disclosed by companies as per the rules and regulations of AASB and IFRS.
Both companies have disclosed income statement, balance sheet, shareholders equity statement and other notes to account in its annual report with a view to dispense (Annual report, 2016). In addition to this, corporations act 2001 and GAAP rules have been followed in reporting frameworks of both companies (IFRS, 2006). .
This concept reflects that all the liabilities and expenses in organization should be recorded in financial statement at the time of its occurrence. In addition to this, profit of company would also be noted down at the time when it incurred (IASB Framework, 2001).
Both companies have followed concept of prudence in preparation of annual report. Tesco and Wesfarmers have followed materiality and going concern concept in recording all the financial transactions in financial statement of company. The Conceptual frameworks in reporting of financial statement of Tesco corporation Ltd and Wesfarmers deal with financial reporting issues such as objectives, users of financial statements which is helpful for filling annual report with the reporting report. This concept of prudence provides that company would prepare its financial statement by accountant prudence and auditors instructions which will be result into development of standard financial statement. It helps stakeholders to understand financial reporting standard and information depicted in annual report in determined approach.
Both companies have followed rules and regulations of AASB, IFRS and IASB concepts in preparation of annual report. It is observed that both companies have followed corporation act 2001 for reporting its financial statement. However, the main difference in disclosure is aroused due to different conceptual frameworks followed by Tesco and Wesfarmers (ACCA Global, 2017). The main problem which is faced by company in disclosure requirement is related with management representation letter. It is evaluated that Wesfarmers and Tesco both have failed to use management representation letter in its annual report.
Both companies have been disclosing all its financial information as per the developed Australian conceptual frameworks. However, both companies are Australian company which is why Tesco and Wesfarmers are following same segmenting reporting. (Vollmer, Mennicken and Preda, 2009).
All the fixed cost in both companies has been recorded on the basis of historical cost computed by following written down value. These reporting frameworks provide that company has recorded all assets either at book value or historical value. In addition to this, it is observed that both companies has followed written down value method to determine the true value of its assets in financial statement
All the current assets shown in this report has been prepared by following materiality concept and going concern concept. All the current assets have been shown under separate heading as per the IFRS rules and AASB standards.
Through this report it could be recommended that the conceptual framework is important for an organization to enhance the understandability of the final statements. Both the companies have used a proper standard and format to enhance the relevancy and curability but the understandability could not be enhanced by both the companies (McGregor and Street, 2007). Company has been recommended to make some changes in the format and adopt the conceptual framework so that the external stakeholders could understand the final statement of the company easily.
Therefore, both companies should focus on following conceptual frameworks while reporting its annual report with reporting authorities. However, company could follow IFRS and GAAP to minimize the possible conflicts in its reporting frameworks. Tesco and Wesfarmers have been following IFRS accounting standard for preparing and reporting of its financial statements.
Conclusion:
This report contains all the conceptual frameworks in preparation of annual report. This report has been done to understand the concept of conceptual framework. This conceptual framework followed by these two companies is developed and prepared differently by different countries. In addition to this both companies namely Tesco and Wesfarmers Ltd has not used management representation letter in its annual report. This MRL is used to prepare basis for the organization so that they could justify the entire amount shown it’s their financial statement and annual report.
Both companies Tesco and Wesfarmers have been following conceptual frameworks in preparation of annual report. It is evaluated that annual report prepared by companies contains all the financial and non financial information which helps stakeholders to analysis the situation of company in effective manner. This conceptual framework is developed and prepared differently by different countries. Accordingly, international financial reporting standard board developed its own Conceptual frameworks that provide basic instructions to prepare financial statement of organization.
References:
ACCA Global, 2017. Conceptual framework for financing activities. Retrieved as on 5 April 2017 from https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/iasb-conceptual-framework-financial-reporting.html
Annual reports. 2016. Telstra corporation limited. Retrieved as on 5 April 2017 from https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/2016-Annual-Report.pdf
Annual reports. 2016. TPG Telecom Ltd. Retrieved as on 5 April 2017 from https://www.asx.com.au/asxpdf/20161020/pdf/43c4ntvj1x9f81.pdf
Bezemer, D. J., 2010. Understanding financial crisis through accounting models. Accounting, Organizations and Society, 35(7), 676-688.
Chorafas, D.N. 2006. IGRS, Fair Value and Corporate Governance: The Impact on Budgets, Balance Sheets and Management Accounts. Oxford: Elsevier Publishing
IASB. 2006. Summary of International Accounting Standards. International Accounting Standard Boards. Retrieved 20 January 2007 fromhttps://www.iasb.org/Home.htm
IASB. 2007. Fair Value Measurement. Part 2: SFA’s 157 Fair Value Measurements: Comments to be submitted. London: IASB
IFRS. 2008. International Financial Reporting Standards. London: IASB
ISAB Framework. 2001. Framework for the preparation and presentation of Financial Statements. International Standards Accounting Board
Jones, M. 2006. Financial Accounting. Chichester: John Wiley & Sons
McGregor, W., and Street, D. L., 2007. IASB and FASB face challenges in pursuit of joint conceptual framework. Journal of International Financial Management and Accounting, 18(1), 39-51.
Vollmer, H., Mennicken, A., and Preda, A., 2009. Tracking the numbers: Across accounting and finance, organizations and markets. Accounting, Organizations and Society, 34(5), 619-637.
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