Discuss about the Revised Model for Presentation in Statement.
It is obvious that a business organisation would encounter certain kinds of issues while carrying out its business operations. In the current era, the organisations encounter accounting issues particularly due to the non-adherence of the guidelines and principles laid down in the conceptual framework. Hence, these organisations are responsible to develop and disclose their financial statements in a manner that they meet the requirements of the conceptual framework. “International Accounting Standard Board (IASB)” and “Australian Accounting Standard Board (AASB)” have issued the conceptual framework, which helps the entities to obtain an understanding of the rules and regulations needed for developing and disclosing their financial statements (Baker and Burlaud 2015). This report intends to provide a clear overview of the various aspects related to conceptual framework and thus, Coca-Cola Amatil is considered for this report. It is one of the biggest distributors and bottlers of alcoholic and non-alcoholic beverages listed in ASX 100 (Ccamatil.com 2018).
Meeting the objectives of conceptual framework and the needs of the users of the financial statements:
Based on the AASB and IASB conceptual framework, Coca-Cola Amatil is required three important objectives in order to develop and disclose its financial statements. These three objectives are demonstrated briefly as follows:
According to this objective of general purpose financial reporting, the information related to the economic resources of the corporation needs to be provided to the users so that they could understand the actual financial conditions confronting the business operations. Such information could be identified from the balance sheet statement of the business corporations (Barth 2015). After evaluating the annual report of Coca-Cola Amatil of 2017, it has disclosed all its economic resources in its balance sheet statement, which is illustrated as follows:
In accordance with this objective, it is required for the organisations to represent their financial performance by providing clear information about the revenues earned and expenses incurred. This type of information is observed from the income statement of the firm (Chaudhry et al. 2015). In case of Coca-Cola Amatil, such disclosures are made inherently in the income statement, which are further supported by the notes to the financial statement. The income statement of the organisation, according to its latest annual report of 2017, is presented as follows:
As per this objective, any change that takes place in the financial condition of the corporate entities needs to be conveyed to the users for improving their decision-making process (Dichev 2017). Such information could be found from the statement of change in owners’ equity and cash flow statement. Coca-Cola Amatil has disclosed both these statements in its annual report to provide useful information to the users about the changes in the financial condition. These two statements are illustrated as follows:
Hence, based on the above discussion, it is clearly evident that Coca-Cola Amatil prepares its financial statements in such a manner that they adhere to the norms laid out in AASB and Corporations Act 2001. In addition to this, it abides by the regulations of IASB and “International Financial Reporting Standards (IFRS)” stringently. These evidences are adequate to infer that Coca-Cola Amatil conforms to all the conceptual framework objectives to meet the needs of its various users.
Besides the objectives of conceptual framework, Coca-Cola Amatil is obliged to adhere to the recognition criteria for realising the various financial elements such as assets, liabilities, equity, revenue and expenditures. In compliance with IASB and AASB, various aspects need to be taken into consideration at the time of realising the financial elements. During realisation, Coca-Cola Amatil is required to take into account financial information pertaining to the financial elements such as liabilities, assets and others (Gerber, Gerber and Van Der Merwe 2015). Along with this, it is the duty of the accountants of the organisation the aspects associated with faithful depiction of the above-stated financial elements. Finally, Coca-Cola Amatil is required to take into account the benefits and costs of the financial elements.
In order to meet such criteria, all the guidelines laid down in the conceptual framework of IASB and AASB are required to be followed. This could be observed from the recognition criteria discussion as follows:
Since Coca-Cola Amatil functions in the Australian beverage industry, the main non-current assets of the organisation include property, plant and and leasehold improvements. These assets are recognised at cost less impairment and accumulated depreciation and it is associated with AASB 116 Property, Plant and Equipment and “Section 334 of the Corporations Act 2001”. This criterion is applicable in case of leasehold improvements as well (Gordon et al. 2015).
Fair value is used to realise trade and other receivables, which are realised at due amounts and they are reviewed considerably for collectability on ongoing basis. If it is found that some amounts could not be recovered fully or partially, allowance for doubtful receivables is realised in the statement of comprehensive income of Coca-Cola Amatil.
The realisation of trade and other payables is carried out at amount due at the time the products and services are rendered in accordance with “AASB 9 Financial Instruments”.
In case of provisions of Coca-Cola Amatil, which are current employee benefits and non-current employee benefits, these are charged to the statement of comprehensive income at the time of providing services along with the degree that the benefits remain with the employees.
For Coca-Cola Amatil, the major equity items comprise of treasury shares, share capital, reserves and non-controlling interests. However, the share capital does not have any par value in compliance with “AASB 1004”.
The recognition and measurement of revenue is carried out at the fair value associated with consideration obtained or receivable net of discounts, applicable amounts and allowances of value added taxes like the goods and services tax of Australia. This complies with the standard of “AASB 118 Revenue”.
Therefore, it is inherent from the above analysis that Coca-Cola Amatil has adhered totally to all the AASB norms and guidelines in order to realise the various aspects of the financial statements.
There are certain fundamental qualitative characteristics laid out in the conceptual framework and they are discussed as follows in the context of Coca-Cola Amatil:
With the help of pertinent financial information, it is beneficial for the users of the financial statements to make suitable decisions (Hales, Rees and Wilks 2016). Coca-Cola Amatil supplies relevant financial information to its users regarding financial resources, which is evaluated from the statement of financial position.
All the business organisations are obliged highly in representing their financial information faithfully. This would enable in enhancing the value of financial information. In accordance with the audit report of Coca-Cola Amatil, all the financial statements are prepared to meet the requirements of IASB and AASB.
There are certain enhancing qualitative characteristics laid out in the conceptual framework and they are discussed as follows in the context of Coca-Cola Amatil:
This aspect enables the users to understand the variations and resemblances in the economic resources of the business entities (Linsmeier 2016). As Coca-Cola Amatil prepares its financial statements by following all the prevailing norms and regulations, the users could contrast its financial information with the other organisations having distinct timelines.
A strong linkage is observed in case of faithful representation and verifiability. This is because with the help of faithful representation, the users would be able to verify the financial information of the organisations (Macve 2015). As all the standards are followed on the part of Coca-Cola Amatil, verification could be made easily and simply.
Timely disclosure of financial information is crucial in order to benefit the users (Mala and Chand 2015). In case of Coca-Cola Amatil, both annual and quarterly reports are published for providing beneficial information to the users.
If the understandability of financial information is widened, the users could use them purposefully. Coca-Cola Amatil presents its financial information in a format, which is simple having all the essential categorisations and footnotes to ensure that they are user-friendly (Miller and Oldroyd 2017).
Conclusion:
It is inherent from the above discussion that Coca-Cola Amatil adheres to the essential guidelines and norms laid down in the conceptual framework of AASB and IASB when it develops and reveals its financial information. In addition, it has conformed to all the conceptual framework objectives. Furthermore, the recognition criteria are followed as well on the part of the organisation. Finally, it possesses both fundamental and enhancing qualitative characteristics of the conceptual framework while presenting its financial statements.
References:
Baker, C.R. and Burlaud, A., 2015. The historical evolution from accounting theory to conceptual framework in financial standards setting. The CPA Journal, 85(8), p.54.
Barth, M.E., 2015. Commentary on Prospects for Global Financial Reporting. Accounting Perspectives, 14(3), pp.154-167.
Ccamatil.com., 2018. [online] Available at: https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-Report-2017.ashx [Accessed 14 Apr. 2018].
Chaudhry, A., Coetsee, D., Bakker, E., Varughese, S., McIlwaine, S., Fuller, C., Rands, E., De Vos, N., Longmore, S. and Balasubramanian, T.V., 2015. Conceptual Framework. 2015 Interpretation and Application of International Financial Reporting Standards, pp.29-37.
Dichev, I.D., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), pp.617-632.
Gerber, M.C., Gerber, A.J. and Van Der Merwe, A., 2015. The conceptual framework for financial reporting as a domain ontology. In Twenty-first Americas Conference on Information Systems, Puerto Rico (pp. 1-18).
Gordon, E.A., Bischof, J., Daske, H., Munter, P., Saka, C., Smith, K.J. and Venter, E.R., 2015. The IASB’s discussion paper on the Conceptual framework for financial reporting: a commentary and research review. Journal of International Financial Management & Accounting, 26(1), pp.72-110.
Hales, J., Rees, L. and Wilks, T.J., 2016. A Synthesis of Three Commentaries on Measurement and Performance Reporting. Accounting Horizons, 30(4), pp.473-483.
Linsmeier, T.J., 2016. Revised model for presentation in statement (s) of financial performance: Potential implications for measurement in the conceptual framework. Accounting Horizons, 30(4), pp.485-498.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.
Mala, R. and Chand, P., 2015. Commentary on phase A of the revised conceptual framework: Implications for global financial reporting. Advances in Accounting, 31(2), pp.209-218.
Miller, A.D. and Oldroyd, D., 2017. An Economics Perspective on Financial Reporting Objectives. Australian Accounting Review.
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