Discuss about the Financial Reporting Disclosures for Property Plant.
Every company whether it is newly incorporated company or the older company, the financial results of the operations of the company is required to be presented. These results are presented in the financial statements of the company comprising of the statement of the comprehensive income and the statement of the balance sheet and the statement showing the cash inflows and the cash outflows. Through this report, the importance of the financial statements has been sighted majorly on one component only which is the Property plant and equipment. The company that has been selected for conducting of the business research is the Wesfarmers Limited. The report has been started describing the requirements and the importance of the general purpose financial reporting and the features that the conceptual framework of accounting possesses. Secondly, the requirements of the disclosure as made by the accounting standard on the property plant and equipment has been discussed and whether the company has complied with the same have been reported. Thirdly, the features of the useful information has been discussed in connection with the conceptual framework of accounting and lastly the analysis has been made in the critical manner and the report has been closed with the appropriate suggestion if any for improvement.
The concept of the general purpose financial reporting has been explained and described in the statement of concepts. Firstly, the general purpose financial reporting has been discussed. The statement of concepts number two has defined the general purpose financial report as the reports which has been made and made available for the users of the financial report in the situation where the user does not have control over the presentation and the preparation of the financial reports (AASB, 2001). The users of the financial reports includes the accounts receivable and the accounts payable, to whom the goods have been sold and from whom the goods have been purchased and etc.
Secondly the term of the conceptual framework of accounting is dealt with the structure or the layout within which the financial reports of any company is developed and presented. This framework is consists of the layout as prepared in accordance with the Australian accounting standards, international financial reporting standards and the corporations act, 2001. The conceptual framework of accounting has been explained in the statement of concepts number eight. The main objective of having the conceptual framework of accounting is that the financial statements shall be prepared in such manner so that the uniformity shall be available across the globe in the preparation and the presentation of the financial statements. As per OB 1 of the statement of concept number eight the general purpose financial reports acts as the platform or the base on which the conceptual framework of accounting has been constructed and developed. The aims for having the general purpose financial reports in the system has been detailed under the paragraph number beginning from the OB 1 and ending to OB 21.
The main objective of having the general purpose financial reports is to provide the understanding to the users of the financial statements about the result of the company both in the meaning of the financial position and as well as in the meaning of the financial performance. The users then will be able to take the decision on an effective basis after analyzing the financial results of the company. The users decision will be in total based on the type of interest like customers will like to have the information as to whether goods shall be purchased from the particular vendor or not and the supplier will to have the information like whether it will be useful to sell the goods to the particular vendor and also even in case of the requirements of funding from the banks, the first step that the banks usually takes as to whether the company has the required creditworthiness and so on.
The second main objective of the preparation of the general purpose financial reports is that to ascertain or estimate the cash inflows of the company that will be generated in the future. This is because only on the basis of the estimation and judgments applied by the management of the company in respect of the cash flows that will be generated in future, many investors’ wants to invest in the company and thus becomes the potential investor of the company as the same will help them in knowing whether the company will increase the wealth of their investment so made in the company or likely to be made in the company.
Along with the objectives of the general purpose financial reports, there exists the features of the conceptual framework of accounting that has been listed and mentioned in the paragraph number beginning from QC 1 and ending with QC 39. It contains two basic features of the conceptual framework and these are the relevancy and second one is the faithful representation (AASB, 2010). Apart from these features, in order to enhance or increase the usefulness of the financial information, three more features have been prescribed and these are comparability, understandability and verifiability. These have been mentioned in QC 4 of the statement of concepts number eight.
The disclosure of the property plant and equipment shall be made in accordance with the Australian accounting standard number 116. For continuing the discussion, the company has been selected from the Australian stock exchange list which is Wesfarmers Limited. The company is into the business of having super market chains all over the Australia and New Zealand. In accordance with the seventy fourth paragraph of the relevant standard the company shall disclose the following in their financial statements (AASB, 2010):
After analyzing the note number seven of the annual report of the company, it has disclosed all the matters in the annual report of the company and have given the slab for the useful life of an asset like twenty to forty years for the different kinds of the plant and equipment and the proper statement reconciling the two years balances and thus showing the net carrying amount of ten thousand million dollars approximately (Company official Website, 2017).
In this way the company is complying with the requirements of the accounting standards.
The conceptual framework of accounting as per statement of concept number eight has prescribed that there is one fundamental feature which is known as the faithful representation. It includes within itself three concepts which are – complete, free from error and neutral. All the three concepts have the role in establishing the faithful representation of the financial statements.
In the given case, the company has mentioned all the things in the note number seven of the financial statements which indicates and establish that all the features are present therein as the information provided is totally complete and the auditor’s report has further clarified that the financial statements are error free and is not prepared on the basis of the personal bias or similar interest.
The feature that further increased the usefulness of the financial information is that the financial statements has made the results easily understandable by any one and due to the application of the uniform accounting policies and the accounting standards that are globally acceptable, the company has facilitated the two other features which are comparability and the understandability.
The extent of the disclosures so made by the company in its annual report for the year ending 2017 is as per the requirements of the accounting standards and the accounting concepts. The information so provided by the company is not only meaningful but also very useful for the users of the financial statements to take the decision accordingly. As the general purpose financial reports targets the potential community of the customers, suppliers or investors, etc, the large benefit have been enjoyed by them. It is because the company in current situation is the competitor for the largest company – Woolworths Limited and operates across the country of Australia and New Zealand. Thus, then objectives of the general purpose financial reports have been achieved in great manner.
Conclusion
The conceptual framework of accounting carries the fundamental features of the financial information and also the features that will enhance the usefulness of the information. On the other hand general purpose financial reports acts as the base on which the conceptual framework is developed. These two are the pillars which ensure the compliance with the provisions of the accounting standards, accounting concepts and the law of the governing state. The company Wesfarmers Limited has provided all the disclosures in accordance with the accounting standards and other related statutes.
Apart from all the compliances, the company shall strive for improving the financial information quality so as to ensure the comparability across the globe.
References
AASB, (2001), “Objectives of General Purpose Financial Reporting”, available at https://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf accessed on 25/09/2017.
AASB, (2010), “Conceptual Framework”, available at https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176157498129&acceptedDisclaimer=true accessed on 25/09/2017.
AASB, (2010), “Property Plant and Equipment” available at and https://www.aasb.gov.au/admin/file/content102/c3/AASB116_07-04_ERDRjun10_07-09.pdf accessed on 25/09/2017.
Company official Website, (2017), “Annual Report 2017” , available at www.wesfarmers.com.au/
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