Discuss about the Agriculturae at Silviculturae Mendelianae Brunensis.
Business entities are required to carry out different kind business operations for the achievement of the goals and objectives. One of such operations is Accounting and Financial reporting related business operations. Accounting refers to the process of maintaining the financial records of the companies. It is required for the accountants of the business entities to comply with the standards, principles, rules and regulations of the accounting standards in order to carry on their accounting operations in the most proper manner. This same aspect is also applicable for the business entities of Australia having listed under the Australian Stock Exchange (ASX). It can be seen that both the Australian Accounting Standard Board (AASB) and International Accounting Standard Board (IASB) have introduced an accounting conceptual framework in order to bring accuracy and transparency in the accounting process of the Australian companies (aasb.gov.au 2018). This particular conceptual framework consists of regulations, standards and principles and standards that the Australian companies are required to follow at the time of their accounting operations. The main aim of this report is to explore the compliance with the standards and principles of accounting standard of the AASB conceptual framework by one of the top ASX 100 listed companies. Thus, for the completion of this report, Orora Limited is taken into consideration. Orora Limited is an Australia based company provides packaging solution and it is enlisted in ASX top 100 in the name of ORA (ororagroup.com 2018).
According to the earlier discussion, it is the obligation on the business entities of Australia to follow the standards, principles, rules and regulations of the AASB conceptual framework in order to bring accuracy and transparency in the financial reporting process. In the conceptual framework of AASB, there is the mention of three major objectives for the development of financial reporting. In the first objective, AASB states that the companies need to develop their financial statements in such a manner so that they can express the financial position of the business entities. For this objective, balance sheet or the statement of financial position is an useful statement (aasb.gov.au 2018). In the second objective, AASB states that the relevant financial statements of the companies must include the information for expressing the financial performance of the business entities. For this objective, income statement is a necessary financial statement (aasb.gov.au 2018). In the third objective, AASB states that the business entities have the obligation to provide all the required information so that the change in financial performance of the entities can be identified (aasb.gov.au 2018). For this purpose, the statement of change in equity and the statement of cash flows are the necessary statements. Now, it is required to analyse that whether Orora Limited satisfies these objectives or not.
The above figure represents the latest statement of financial position of Orora Limited that can be found in the 2017 Annual Report of the company. In this statement, the company has provided all the information about their economic resources like assets, liabilities, equity and others that helps in the determination of the financial position of the entity. In addition, the company has also provided the necessary notes to support the information in the above statement (ororagroup.com 2018).
The above figures are the income statement and statement of comprehensive income of Orora Limited for the latest year-end and these statements can be found in the latest annual report of the company. The above figures contain information about the revenue, expenses and profit of Orora Limited that helps in the determination of the financial performance of the entity. In addition, to support this information, the company has also provided supporting financial notes (ororagroup.com 2018).
The above figures are the statement of change in equity and the statement of cash flow of Orora Limited. From the above figures, one can obtain information on the change in the financial aspects of the company like the change in net profit, change in comprehensive income and others that helps the decision making process of the users. Moreover, Orora Limited has also provided the necessary noted related to these statements for providing greater understanding of the users (ororagroup.com 2018).
Hence, from the above analysis, it can be seen that Orora Limited has provided all the necessary information through different financial statements so that the users can get all of their required information. This aspect works well towards the satisfaction of the AASB conceptual framework objectives.
Apart from the objectives of financial statements, the AASB conceptual framework also includes some basic criteria for the recognition and measurement of major financial elements; they are asset, liability, equity, revenue and expense. While preparing the financial statements, the accountants are required to consider these recognition criteria. In the recognition process, there are other major aspects. First, all the necessary and relevant information about the above-mentioned financial elements is needed to be considered at the time of recognition. The second aspects is faithful representation as the business entities must present all the information about these elements in the most faithful manner.
The specific obligation lies on Orora Limited that the company is needed to comply with the AASB recognition criteria. It implies that the company must follow the given definition by AASB conceptual framework. These are explained below:
Asset: The major assets of Orora limited are Property, Plant and equipment (PPE), intangible assets, trade receivables and inventories. As per the standard of AASB 116 Property, Plant and Equipment under section 334 of the Corporations Act 2001, Orora Limited recognizes PPE at the cost value after deducting depreciation and impairment losses. Straight-line method is used for depreciation purpose (aasb.gov.au 2018).
Orora Limited has different intangible assets like goodwill, computer, software, licence and customer relationship. As per the standards of AASB 138 Intangible Assets and IAS 38 Intangible Assets, the company recognizes these intangible assets on fair value (aasb.gov.au 2018).
As per the principles of AASB 9 Financial Instruments, Orora Limited recognizes their trade and other receivables based on fair value and amortized costs with the help of effective interest rate (aasb.gov.au 2018).
According to the standards of AASB 102 Inventories, inventories of the company are recognized based on cost and net realizable value (aasb.gov.au 2018).
Liabilities: The major liabilities of Orora limited are trade payables, interest bearing liabilities and provisions. For the recognition of trade and other payable, the company follows the principle of AASB 9 Financial Instruments and recognizes them as financial liabilities at amortized costs (aasb.gov.au 2018).
In Orora Limited, interest-bearing liabilities include borrowings from the financial institutes and they are recognized based on fair value of the consideration received after deducting direct transaction costs (ororagroup.com 2018).
The company recognizes their business provisions when there is a present legal obligation due to the happening of any past business events. The company determines provisions by discounting the future cash flows at a pre-tax rate (ororagroup.com 2018).
Equity: As per the standard of AASB 1004 Contributions, Orora Limited classify their ordinary shares as equity and they do not have any par value (aasb.gov.au 2018).
Revenue: According to the standard of AASB 118 Revenue, the company uses fair value for the received consideration. In case of sale of goods, the company recognizes revenue from sales of goods when there is a transfer of ownership to the customers (aasb.gov.au 2018).
Expenses: In case of Orora Limited, expenses are recognized at the time of their occurrences.
From the above discussion, it can be observed that Orora Limited follows the principles and standards of AASB conceptual framework for the recognition of the above-mentioned financial elements.
According to the conceptual framework of AASB, the financial information of the business entities must contain some fundamental qualitative characteristics as these characteristics make the financial information more useful and purposeful. They are Relevance and Faithful Representation (Nobes and Stadler 2015). Financial information must have the capability to make difference in the decision-making process of the users and relevant financial information is capable enough to make difference in the decision-making process of the users. It needs to be mentioned that the relevant financial has the feature of marginality as the removal of this information can cause material misstatements in the financial statements (Gebhardt, Mora and Wagenhofer 2014). Apart from relevance, AASB also puts the obligation on the Australian business entities to represent their financial information in the most faithful manner. In order to be faithfully represented, the financial information of the business entities must have three other characteristics; they are complete, neutral and free from error (Barth 2013).
From the earlier part of the report, it can be observed that the company provides all the current and relevant financial information of their business with the help of different financial statements like income statement, statement of financial position, statement of change in equity, statement of cash flow and others (ororagroup.com 2018). In addition, Orora Limited also publishes necessary financial notes to provide justification and clarification. In addition, the auditor statements shows that the company follows the standards of AASB, IASB and IFRS for the predation and presentation of their financial statements (ororagroup.com 2018). All these aspects support the existence of fundamental qualitative characteristics in the financial information of Orora Limited.
Apart from the above characteristics, AASB has provided some other characteristics and they are called the enhancing qualitative characteristics. They are Comparability, Verifiability, Timeliness and Understandability (Kulikova, Grigoryeva and Gubaidullina 2014). Comparability is a major characterise of financial information as assists the users in the identification of the similarities and the differences in the financial performance of the company. There is a need to have some degree of comparability to support the fundamental qualitative characteristics. Verification can be direct and indirect (Barth 2013). In the presence of this characteristic, users can reach to a consensus by applying their knowledge and independent observation. The characteristic of timeliness assures the timely delivery of financial information to the users. In this context, it needs to be mentioned that the older information has less value than the new information. Proper classification, characterization and presentation of the financial information can be done with the help of understandability characteristic. It is the obligation on Orora Limited to comply with these characteristics (Bohušová 2014).
In order to fulfil the fundamental qualitative characteristics, financial information must possesses the enhancing qualitative characteristics. There is not any measured process for the application of these enhancing characteristics. In case of Orora Limited, the company uses same accounting methods for the financial valuation and computation purposes (ororagroup.com 2018). For this reason, it is possible for the users to compare the financial information of Orora Limited. The aspect of comparability is necessary to have verifiability characteristic. As per the earlier discussion, Orora limited represents their financial statements faithfully and thus, it can be easily verifiable. There is a particular time in a year when Orora Limited publishes their financial information through annual report and they are easily accessible. The simple format of the financial statements helps in bringing easy understandably for the users to easily understand the provide information (ororagroup.com 2018).
Conclusion
The above whole discussion supports the fact that Orora Limited complies with all the required principles and standards of the conceptual framework of AASB and IASB at the time of the development and preparation of their financial statements. More specifically, Orora Limited has fully achieved the objectives of AASB conceptual framework. After that, the company also complies with the recognition criteria of AASB conceptual framework for the recognition of the major financial items. Lastly, the financial information of Orora Limited possesses both the fundamental as well as qualitative characteristics of financial information.
Based on the whole discussion, some recommendations are provided below:
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 Apr. 2018].
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 Apr. 2018].
Aasb.gov.au. (2018). Contributions. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf [Accessed 13 Apr. 2018].
Aasb.gov.au. (2018). Financial Instruments. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 13 Apr. 2018].
Aasb.gov.au. (2018). Intangible Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf [Accessed 13 Apr. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 13 Apr. 2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf [Accessed 13 Apr. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf [Accessed 10 Apr. 2018].
Barth, M.E., 2013. Global comparability in financial reporting: What, why, how, and when?. China Journal of Accounting Studies, 1(1), pp.2-12.
Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.
Bohušová, H., 2014. General aaproach to the IFRS and US GAAP convergence. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 59(4), pp.27-36.
Gebhardt, G., Mora, A. and Wagenhofer, A., 2014. Revisiting the fundamental concepts of IFRS. Abacus, 50(1), pp.107-116.
Kulikova, L.I., Grigoryeva, L.L. and Gubaidullina, A.R., 2014. The interrelation between the professional judgment of the accountant and the quality of financial reporting. Mediterranean Journal of Social Sciences, 5(24), p.61.
Nobes, C.W. and Stadler, C., 2015. The qualitative characteristics of financial information, and managers’ accounting decisions: evidence from IFRS policy changes. Accounting and Business Research, 45(5), pp.572-601.
Ororagroup.com. (2018). Annual Report 2017. [online] Available at: https://www.ororagroup.com/system/downloads/files/000/000/198/original/Orora_Annual_Report_2017_interactive.pdf?1505435145 [Accessed 13 Apr. 2018].
Ororagroup.com. (2018). Orora. [online] Available at: https://www.ororagroup.com/what-we-do [Accessed 13 Apr. 2018].
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