Financial reporting helps the company to disclose all the financial information to its shareholders and the investors of the company. It help the financial users to know how the company is been performing in the market and how it can be able to increase it market in the coming years (Acharya and Ryan 2016). It should be done by both the private as well as public company in accordance with the guidelines given in the Generally Accepted Accounting Standard and also in the International Financial Reporting Standards. These guidelines suggest about how the company should record and analysis it in the company financial statement (Chen, Ding and Xu 2014).
The report consists of many reports which help the financial user to know more about the company as it include the report of the balance sheet of the company, income statement of the company, cash flow statement and statement in changes of the equity (Christensen et al., 2015). So from this report help the user to know various part of the company as from the balance sheet of the company it able to know the details of the asset and liabilities of the company so it help them to know how the company is been performing in the industry. Income statement of the company help the stakeholders to know about the expenses and income related to the company activities and how the company is earning its profit and how they are been utilize it in the business (Davidson, Dey and Smith 2015). Cash flow statement of the company shows what the inflows are and out flow of the cash in the company as it shows from where the company is able to get more amounts of cash and where the company spend the cash. Statement in changes in equity shows how the company have used their equity and whether there is any increase or decrease in the total capital of the company or not. So this all the report which help the shareholders to know how much the company is earning and what are their future goals (Flower 2018).
The essay is been based upon the company Sigma Health Care Limited. It is an Australian based company which deals with the pharmacy products. It was founded in 1912 and have it’s headquarter in Rowville, Victoria, Australia. It carries its business by wholesale and in distribution channel. Sigma Health Care Limited listed in Australian securities Exchanges.
Accounting standard are the base of the theories and practices which each types of organization have to maintain the accounting procedure in respect of each standards. It give an overview of the accounting practices and policies (Frias?Aceituno, Rodríguez?Ariza and Garcia?Sánchez 2014). These are the most reliable source of information and it’s the base of financial reporting and these are the primary source of the theory of Generally Accepted Accounting Principle. The standard on accounting are been set by the Australian Accounting Standard Board. The board maintain and regulate the standard in related to the financial reporting which should be done by the all the entity in Australia. The powers of the standard board lies with the Australian Securities and Investment Commission Act 2001. The reporting is divided into two tiers:
Australian Accounting Standards
Australian Accounting Standards – Reduced Disclosure Requirements
The first tier shows the accounting methods which should be as per International Financial Reporting Standards that has issued by the International Accounting Standard Board. This give an outline how the company should develop its reporting and how they should do accounting of each transaction (Gigler et al., 2014). The second tier involves in related to the first tier as it involves recognizing, presenting and measuring related to the information of Tier 1. As per the Corporation Act 2001 all the Australia entities must follow the accounting standard while preparing their financial statements. This report present the rules and norms which the organization must follow in related to the financial reporting and how it should applicable in related accounting standard. This help the company to make a clear picture and help them to represent a true and fair view or not. As this standard is applicable for all the entity so this helps the financial user to know more about the company and how the financial position of the company is in the market (Aasb.gov.au 2019).
This standard is related to the fair value measurement of the company asset and liabilities. It was applicable for all the entity form 1 January 2013. It states that the company should record the asset and liabilities as per the value of the same. It should record them at the real market value which the company can get by selling the asset in the market or in regards of the payment of it liabilities (Gomariz and Ballesta 2014). It also state that it can be happen that the company is not able to get the real value of the asset and liabilities than they should do some other valuation method so that it can know about the fair value of the company. It basically apply upon the asset and liability of the company as it have the maximum amount of company finance but it also take into consideration about the entity own instrument in the fair value of accounting (Hoyle, Schaefer and Doupnik 2015). As per the paragraph given in the accounting standard the company should disclose the valuation technique which the company had used to value the asset and liability and also the effect of the value which is been done by the change in the value and how it is been treated as loss, profit or other comprehensive income of the company. It should all the details in the disclosure so that the company can able to know how the valuation has done and its impact upon the financial books of the company.
In the given case of the company Sigma Health Care Limited use the accounting policy more properly and carry all its asset and liabilities in fair value concept as it can be seen from the annual report of the company that it uses AASB 13 in the accounting policies of the company (Investorcentre.sigmahealthcare.com.au 2019). As from notes on account of the company it is been seen that the company have used to value all its asset in historical cost but it had valued its Investment at fair market value so this show that the company follow the accounting standard properly in the business.
This standard state that when the company have to record a transaction as revenue and when they do not have to record the transaction as revenue. Revenue are the income which is been generated by the company by carrying its ordinary business activities in the company (Kieso, Weygandt and Warfield 2017). It can be of any name as sale of a product, fees received, dividend and interest received so it is the inflow of the cash in any form to the company. Company can only able to recognize the revenue when they see some economic benefits from the same so this standard help the company to understand in which circumstances it can record the same transaction as an revenue in the company financial accounts (Leuz and Wysocki 2016). It apply to all the events which are related to a sale of the product, earning from rendering services and also from the income earned by the interest and dividend. There are some section of the revenue which this standard does not follow as revenue arising from the lease agreements, insurance contracts and changes in the fair value of biological assets. The standard state the company should recognize the revenue at the market value of consideration which is going to receive by the company. It contains all the details about when the company should record the income as revenue (Nobes 2014).
It states that the company should record the sale when it had satisfy all the conditions as the risk and ownership is been transfer to the buyer, the company is able to recognize the amount of revenue, the cost of the sale can be measured easily by the company so if all the conditions are satisfied than only it can able to record it as sale.
As per the company Sigma Health Care Ltd it can be seen from the balance sheet that the company have follow all the point mention in the standard and as a result it able to recognize the same in the balance sheet so it can be say that it had follow all the rules and regulation which are there in the accounting standard and also it show how the company is able to implement it in the business of the company.
This standard state that the valuation method of intangible asset so if any company want to the valuation of their intangible asset than they have to follow these standard for then they do as per these standard. It state that the intangible asset should be treated as a non-monetary asset and it does not have any physical existence. It state that the company can only able to record its intangible asset in the company financial statement only when the company is able to get some sort of benefit in future from the asset and it can able to measure the cost of the asset of the company.
As per the given case of the company it can be seen that they have recorded all the intangible asset like Goodwill, Brand name, Software etc., as per the standard of AASB 138 and it has also given proper disclosure of in the financial statement of the company as it can be seen from the notes of the company financial statement. So the company have follow all the rules and regulation in regards of the intangible asset of the company.
The standard is related to the provision, contingent asset and contingent liabilities. It state that the contingent asset is the asset which the company get from any past event and the confirmation of the asset will only be happen when one or more uncertain event will occur in the company and this event are not able to control by the entity.
The standard state the definition of the contingent liabilities is that the liability will be occurring from the past event of the company and the existence of this is based upon one or more uncertain event which will occur in the future of the company and the company is not able to control the same. It also takes into consideration of the event which happen in the present business but not able to recognise by the company. Provision is one type of uncertainty which the company create for the same in the financial statement of the company.
As per the company is been is concern it can be seen from the annual report of the company that the company does not have any contingent asset and liabilities. It only had the provision in regards of the trade receivable which is been maintained by the company properly and the company have follow this standard while making the provision in the financial statement of the company.
Conclusion
The report concludes about the financial reporting of the company. Financial reporting is the processes which help the company to share the financial information to the stakeholder of the company. It includes many reports such as balance sheet, income statement, cash flow and statement in the changes of the equity. It consists of the Company name Sigma Health Care Ltd and contains details about the company and also contain accounting standard and how the company have followed it in the company accounts and how they have given disclosure in the notes of the accounts. Accounting standard help the company to record the asset and liability properly so that it will able to know how the company had done proper transaction or not. Company maintaining the standard help them to do proper accounting treatment as it have given them all the details from the recognize of the amount in which it should be recorded and also what are the disclosure which should be given by the company in the notes of the account. The analysis many accounting standard is been given and how the company manages in the accounting of the business in related to the accounting standard.
Reference
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