The intention of this report is to take into account the significant conceptual framework aspects for business organisations having headquarters in Australia. In order to fit such intention, Boral Limited is selected as the firm, which is a multinational organisation involved in supplying and producing construction and building materials. Despite its base in Australia, the organisation has widespread global operations in USA and Asian nations (Boral.com 2018). The paper would be distributed into three different segments. The primary focal area would be to assess the objectives of general purpose financial reporting from the perspective of Boral Limited. In addition, the second segment of the paper would assess the compliance of the organisation with the recognition criteria related to conceptual framework. Finally, the report would shed light on emphasising the qualitative features of conceptual framework with respect to the financial information disclosed by Boral Limited.
The “Australian Accounting Standards Board (AASB)” has formulated conceptual framework, which provides the organisations with the necessary regulations and standards in relation to financial reporting. The organisations need to be responsible for conforming to such standards and regulations, as set out in the conceptual framework of AASB (Aasb.gov.au 2018). The situation could be applied for Boral Limited and the conceptual framework of AASB has three main objectives, which would be evaluated in the following decision:
This conceptual framework objective states the financial reports of the organisations need to have information, which would enable the users of the financial statements in analysing their existing financial conditions. The main users of the organisation include owners, managers and shareholders as the internal users, while the external users are suppliers, creditors, government, community, customers and public (Huber 2017). This denotes that certain necessary information regarding assets, liabilities and equity need to be included in the financial statements. From the annual report of Boral Limited in 2017, the organisation has published its balance sheet statement having the vital information of assets, liabilities and equity. This is shown as follows:
Another objective of general purpose financial reporting is to ensure that the business organisations are responsible for publishing all information to their users so that they could judge about the financial performance of the organisations. Such information includes revenue, income, expenses and loss. In accordance with the annual report of Boral Limited in 2017, it could be seen that the organisation has published its income statement and this statement possesses all information about above-mentioned aspects. This would help the investors and other users to understand the financial performance of the organisation in a better manner, which is evident from the following table:
The general purpose financial reporting has mandated the need for all business organisations to deliver important information to their users so that any change in financial condition could be identified by comparing with that of the previous year. This is because it would assist them in anticipating the likely performance of the organisations in future (Brigham et al. 2016). From the latest annual report of Boral Limited, it could be seen that the organisation has published statement of change in equity and cash flow statement, which reveal the changes in its cash position and financial performance over the years. Such procedure enables the investors as well as the other users to obtain an overview of any change in financial condition of Boral Limited. This is inherent from the following two figures:
Certain criteria are laid out in the AASB conceptual framework in order to facilitate the recognition of equity, assets, expenses, liabilities and revenue. All Australian entities have to comply with these criteria so that the financial aspects mentioned above could be recognised. The aspects are not exceptions for Boral Limited and the evidences of these aspects in the context of the organisation could be discussed as follows:
Boral Limited has different types of assets and the conceptual framework has made it mandatory for the management of the organisation to comply with the rules and policies mentioned in “AASB 116 Property, Plant and Equipment” falling under “Section 334 of the Corporations Act 2001”. In case of Boral Limited, this asset is measured at historical cost after deducting impairment losses and accumulated depreciation charges and it follows the straight line method of depreciation.
Boral Limited has to comply with “AASB 102 Inventories”, as mandated by the AASB conceptual framework in order to recognise its inventories. The organisation recognises its inventories at either net realisable value or cost, whichever is lower (Boral.com.au 2018).
Finally, it needs to adhere to the norms laid down in “AASB 138 Intangible Assets” for measuring or recognising its intangible assets (Cheng et al. 2014). The intangible assets of Boral Limited are gauged at cost after impairment losses and accumulated depreciation are deducted.
In accordance with the conceptual framework regulations, Boral Limited is responsible to adhere to “AASB 132 Presentation of Financial Instruments” in order to recognise its business borrowings. The latest annual report of the organisation states that borrowings are gauged at fair value from which transaction costs are deducted.
Another significant liability is provision and all the organisations are liable to conform to the norms mentioned under “AASB 137 Provisions, Contingent Liabilities and Contingent Assets” to recognise the same (Gomariz and Ballesta 2014). The annual report of Boral Limited in 2017 makes it evident that provisions are considered at the time of presence of any existing obligation because of past event.
Finally, according to AASB regulations, it is necessary for the business organisations to maintain the guidelines mentioned under “AASB 16 Leases” (Henderson et al. 2015). Boral Limited has adhered to these guidelines as well evident from its annual report.
Boral Limited is liable to adhere to the guidelines depicted under “AASB 132 Financial Instruments: Presentation” for recognising equity. It recognises the entirely paid ordinary shares in the form of equity.
Boral Limited has to conform to the principles mentioned under “AASB 118 Revenues” so that it could realise revenue. The organisation recognises revenue after rendering services to its customers.
The conceptual framework of AASB requires the organisations to recognise expenses when future economic benefits are expected to flow out of them (Nobes 2014). The major expenses of Boral Limited include selling and distribution expenses along with administration expenses.
Based on the conceptual framework of AASB, the financial information of the organisations needs to possess the qualitative characteristics in order to increase the usefulness of the users, which are demonstrated briefly as follows:
These characteristics constitute of relevance and faithful representation. It could be observed from the annual report of Boral Limited in 2017 that the financial statements of the organisation include financial information for the years 2016 and 2017. This implies the efforts of the organisation in providing their users with relevant financial information so that effective decisions could be undertaken (Wahlen, Baginski and Bradshaw 2014). At the same time, Boral Limited conforms to the AASB principles, IFRS, IASB and Corporations Act 2001 for assuring accurate and faithful representation of its financial statements.
The different enhancing qualitative characteristics of conceptual framework constitute of verifiability, comparability, understandability and timeliness (Warren and Jones 2018). In this case, it is to be noted that Boral Limited has presented its financial information in a manner in order to enable the users to compare them with similar information of other business organisations and varying timeframes of Boral Limited. Due to this reason, the organisation discloses its financial information of the previous year in the financial statements of the existing year.
Apart from this, the notes to accounts mentioned in the annual report of Boral Limited assists the users by providing a scope to check the accounting assumptions made and financial statement projections. It publishes its financial statements monthly, quarterly and annually so that timeliness of financial information could be maintained. It is significant to note that the accounting treatments are supported by relevant clarifications and justifications in financial footnotes. The aim is to aid the users of the reports so that they could understand those financial and accounting treatments mentioned in the annual report (Zhang and Andrew 2014).
Conclusion and recommendations:
It is clearly inherent from the above analysis that Boral Limited has made effective compliance with the different guidelines stated in the AASB conceptual framework. This is supported by the figures extracted from the annual report of the organisation with relevant explanations. After this, it has been found that Boral Limited has not encountered any issue in recording and recognising assets, liabilities, revenue, expenses and equity. This is because it has adhered entirely to the various criteria for recognition, as mandated by the conceptual framework of AASB. Finally, it could be observed that the disclosure of financial information by Boral Limited contains the necessary fundamental and enhancing qualitative characteristics mentioned in the conceptual framework. Therefore, all the Australian entities are recommended to maintain compliance with all the features and guidelines of the conceptual framework for avoiding accounting issues.
References:
Aasb.gov.au., 2018. Conceptual Framework For Financial Reporting. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf> [Accessed 13 August 2018].
Boral.com., 2018. [online] Available at: https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-2017.pdf [Accessed 13 Aug. 2018].
Boral.com.au., 2018. Boral Australia: Build something great™. [online] Available at: https://www.boral.com.au/ [Accessed 13 Aug. 2018].
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment: Theory And Practice, Canadian Edition. Nelson Education.
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international integrated reporting framework: key issues and future research opportunities. Journal of International Financial Management & Accounting, 25(1), pp.90-119.
Gomariz, M.F.C. and Ballesta, J.P.S., 2014. Financial reporting quality, debt maturity and investment efficiency. Journal of Banking & Finance, 40, pp.494-506.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Huber, W.D., 2017. Irreconcilable differences? The FASB’s conceptual framework and the public interest. International Journal of Critical Accounting, 9(5-6), pp.514-523.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.
Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), pp.17-26.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download