Corporate Regulation, Accounting Standard Setting, And Owner Equity: An Analysis

Corporate Regulations

The aim of the report is to identify standard and regulations that has been imposed an organization for preparing the annual report. The report directly evaluates the different concepts such as accounting standard settings, owners’ equity, and corporate regulations. The further evaluation is conducted on the relationship between the regulation and the financial reports, which needs to be provided by the organizations on annual basis. Adequate discussion is relatively conducted on the presentation of the annual report, whether it needs to be regulated or dependent on the manager’s discretion. The discussion on the IASB is directly conductance and the contributions of AASB are depicted. Relevant companies have been chosen whose overall debt and equity conditions are evaluated for the previous four fiscal years.

i) Indicating whether financial reporting can be handed over to the manager for voluntary disclosure or regulated:

Regulations have been a major backbone of the financial reports that has been prepared by organizations during the past fiscal years. Therefore, due to the presence of regulation organizations are forced to prepare and present their actual financial position conducted during the fiscal year. There have been many where the financial reports of your organization were manipulated by the managers for manipulating the financial strength of an organization. In this context, Balakrishnan, Watts and Zuo (2016) mentioned that even with the increase in regulations organizations have manipulated the financial reporting system to alter the financial position and increase their profits. The regulation imposed by the regulators has helped in improving the level of financial reports that an organization needs to portray on yearly basis. The regulations has a relatively helped in forming a conceptual framework, which allows the organization to follow all the relevant steps for preparing the financial report. Furthermore, the presence of Regulation and conceptual Framework has allowed the current organizations to value their assets in fair value and depict their accurate financial position.

Before strengthening the financial reporting system the organizations were able to manipulate their annual report for inflating the financial position. There were many accounting scandals, which were conducted by different organizations that had negatively influence on the capital market and hampered the economic growth. Therefore, it could be understood that even with the presence of accounting standards organization tend to miss-utilize the information and represent a wrong financial report to their investor. The decision of the financial reports is relatively conducted by the managers of the organization, which depicts the question whether the reporting structure should be in the discretion of the managers. The scandals such as HIH insurance, ABC, and Enron directly indicates the misrepresentation of financial report that can be conducted by the manager of the organization. On the contrary, Warren and Jones (2018) argued that managers should not be given adequate authority for preparing the annual report, as they might manipulate the financial progress to suit their needs and requirements.

Hence, adequate regulations need to be improved in the financial report preparation system for presenting the accurate financial report of an organization and reducing the chances of unethical practices. The preparation of the annual report in accordance with the conceptual framework and the valuation system that is imposed by regulators would eventually allow the stakeholders to understand the current financial progress of an organization. Therefore, the presence of standards can help in evaluating both the tangible and intangible assets of the organization.

Accounting Standard Setting

ii) Detecting why IFRS is not compulsory for member countries, while detecting the contribution of the AASB:

Figure 1: AASB Contributions

(Source: Aasb.gov.au 2018)

The above figure directly indicates the level of contributions that has been made by Australian accounting standard board for the accounting settings of IASB. The above figuratively indicates the level of regulations that has been proposed by the AASB for creating the relevant strategic directives and oversight for the organization. The standard setting process for the organization was relatively conducted for reducing the unreliability of the organization financial report that has been prepared for the fiscal year. The AASB standard has eventually helped in depicting the level of financial performance, which can depict the accurate financial view of an organization. The measures used by the Australian accounting standard board has a relatively indicated the awareness for the financial report, with an outreach and educational condition for the organization.

The current IASB accounting standards are not compulsory for the member countries, as they can choose alternative accounting standards that can be used by the companies. The IFRS system is relatively complex and needs adequate expenses to complete the financial report in according to the standard. However, companies that are multinational needs to comply IFRS settings, as the operations are international, which would eventually help investors to understand the accurate financial position that is derived by the organization (Lins, Servaes and Tamayo 2017). IFRS system is only mandatory for organizations that are listed in oversea market, as International investors needs to evaluate the financial progress of the organization in an accurate stand, which can only be provided by the IFRS system. Hence, the member countries of the IASB are not restricted to use IFRS, while the multinational companies needs to comply with the IASB ruling.

iii) Detecting and discussing the items listed in equity:

The total equity of Amcor Limited has relatively declined over the period of four fiscal years, which was the relatively conducted due to the declining equity, reserves, and non-controlling interest. Retained earnings of the organization are increased, while other contributor coffee has declined during the fiscal years, which has the relatively forced the organization to reduce their equity value (Assets.ctfassets.net 2018).

The above organization’s overall equity value has relatively increased during the past fiscal years, which indicate its rising financial position. The improvement in equity was a relatively boosted by the rising issued capital and retained earnings of the organization. However, the slide decline in reserves of the company has been witnessed during the past fiscal years. This improvements in the equity section has the relatively allowed the organization to improve its total equity value in the past four fiscal years (Boral.com 2018).

CSR Limited	2018	2017	2016	2015
Issued Capital	1,036.2	1,036.8	1,041.1	1,042.2
Reserves	(53.2)	(73.4)	15.8	17.1
Retained earnings	244.4	191.6	127.0	86.4
Non-controlling interest	46.7	51.5	133.3	60.3
Total Equity	1,274.1	1,206.5	1,317.2	1,206.0

The equity value of CSR Limited has increased minutely over the period of four fiscal years, which was due to the improvements in the retained earnings section of the organisation. The other part of the equity contribution was mainly declining such as issued capital, reserves and non-controlling interests. The increment in the retained earnings has only pushed the total equity value of CSR to positive (Csr.com.au 2018).

Fortescue Metals Group Limited	2018	2017	2016	2015
Contributed equity	1,287.0	1,289.0	1,301.0	1,294.0
Reserves	46.0	39.0	33.0	46.0
Retained earnings	8,386.0	8,392.0	7,058.0	6,184.0
Non-controlling interest	12.0	14.0	14.0	13.0
Total Equity	9,731.0	9,734.0	8,406.0	7,537.0

Owners’ Equity

The above table indicates the level changes that have been witnessed in equity section of Fortescue Metals. The drastic increment in the total equity was mainly due to the rising retained earnings of the organisation during the past fiscal years. On the other hand, the contributed equity, reserves and non-controlling interest of the organisation mainly declined during the fiscal years, while the retained earnings of the organisation increased (Fmgl.com.au 2018).

Boral Limited	2018	2017	2016	2015
Equity	5,730.8	5,440.5	3,506.3	3,524.1
Debt	2,453.0	2,333.0	893.0	817.0

The contribution condition of Boral Limited in relevantly depicted in the above table, where the increment in debt has been greater than equity. Both the equity section and debt sector of the organisation has growth adequately, which has helped in boosting the level of income and supporting operations of the organisation. The immense increment in growth is relevantly seen in 2017, which raised the level of debt accumulation conducted by the organisation to support its operations (Boral.com 2018).

CSR Limited	2018	2017	2016	2015
Equity	1,274.1	1,206.5	1,317.2	1,206.0
Debt	28.0	30.5	3.3	10.4

The increment in the debt and equity section of CSR has been witnessed in the above table, where the combination of equity values is relevantly high. The company has relevantly focused on continuing its operations with the help of equity and low debt is acquired to be support its operations. However, during the past four fiscal years the values of debt and equity has mainly inclined slowly indicating the organisations growth over the fiscal years (Csr.com.au 2018).

Fortescue Metals Group Limited	2018	2017	2016	2015
Equity	9,731.0	9,734.0	8,406.0	7,537.0
Debt	3,112.0	2,633.0	5,188.0	7,188.0

The operations of the organisation have relevantly improved over the past fiscal years, where the company has increased its exposure in equity, while reduced the debt accumulation. This has mainly strengthened the organisations overall solvency condition and reduced the leave of financial cost, which was being incurred each year. The increment in equity indicts the trust of investors, which has been growing over the period, while the decline in debt indicates the high performance, which is being conducted by the management to reduce its overall debt (Fmgl.com.au 2018).

Amcor	2018	2017	2016	2015
Equity	1,090.5	869.7	845.5	1,587.0
Debt	3,872.2	4,049.5	3,829.4	2,880.4

The financial position of the above company has mainly declined over the period of four fiscal years, where reduction on equity is witnessed, while debt is increased. This rise in the debt value has mainly allowed the organisation to increase its finance cost and raise the chances of becoming insolvent. The current condition of the organisation is mainly vital, where the total equity is lower than the current debt that has been accumulated by the organisation (Assets.ctfassets.net 2018).

After evaluating the debt and equity condition of the above four companies it could be understood that some of the organisation’s overall financial position is at vital conditions. The debt and equity position of Fortescue Metal and CSR Limited has relevant improved, where the equity values have increased, while the debt composition has declined. This directly indicates the high financial condition of the organisation. The performance of Boral Limited has improved, while the debt accumulation has also increased, where there is no alarming condition currently prevailing within the organisation. However, the current financial position of Amcor Limited is mainly at alarming levels, where high debt has been accumulated by the organisations, where equity values are low.

Conclusion:

The different segments of the financial report are relatively evaluated in the above assessment, which helps in detecting significance of financial report. The overall financial reports needs to be formulated with the help of regulations, is it reduces the level of an ethical approach that is conducted by the organization to inflate their financial report. in addition, AASB has contributed immensely to  create an adequate accounting system, which might allow organization to present their actual financial condition. The financial report of Fortescue Metal, Boral Limited, Amcor Limited and CSR Limited is evaluated to understand their current financial performance.

References

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