Western Areas headquartered in Perth, Western Australia, is recognized as a leading producer of nickel in Australia led by several types of base metals exploration and developmental projects in the country. The company is further depicted to be listed in ASX under the symbol of “WSA”. The growth and expansion of the company is associated to a multi-stream strategy which involves continuous exploration programs, disciplined approach towards potential acquisitions and redevelopment projects (Westernareas.com.au, 2018). The main discourse of the report aims to evaluate its financial statement published in 2017. The important discourse of the report will include the objectives of conceptual framework, recognition criteria of the assets along with various types of fundamental enhancing guidelines. The last section of the study will enumerate the relationship among accounting research and professional practice.
As per the notes of significant accounting policies and basis of preparation of financial statements it can be found that the company follows standards and interpretation prescribed by Australian accounting. It further includes authoritative pronouncements related to “Corporations Act 2001” and “Australian Accounting Standards Board (‘AASB’)” (Westernareas.com.au, 2018).
The AASB standards have been able to set the appropriate accounting policy which will consist of the reliable and relevant information pertaining to the transactions, conditions and events. The conceptual framework is further depicted to be following “Australian accounting Standards” which have particularly ensured that the financial statements and the associated notes are able to adhere to the IFRS. In addition to this, the adoption of the material accounting policies is aimed to be reported in a consistent manner throughout the financial year. As per the basic framework the preparation of financial statements is based on an accrual basis which includes measurement at fair value for the selected non-current assets, financial liabilities and financial assets. This criterion is applicable to all the overheads except information pertaining to cash flows (Luke, 2016). The company has further adopted to the revised accounting standard and interpretation which are mandatory to be stated in the current period of reporting. The exploration and evaluation of expenditure by the company is reviewed by the interest to assess the appropriateness of continuing the costs of business in the area of interest. As stated under AASB 6 Western Areas suggests the carrying amount of an asset which has exceeded its recoverable amount. This is done to consider the impairment loss which is to be recognized. The company have also adopted to the new accounting standards such as “AASB 15 Revenue from Contracts with Customers” effective from 1 January 2018 (Westernareas.com.au, 2018).
The company has declared the recognition criteria for various types of information such as principles of consolidation, joint arrangements, investments in associates, segment and reporting, foreign currency transactions and revenue recognition. The revenue recognition depends on the probabilistic nature of economic benefits associated to a consolidated entity and the revenue which can be measured reliably. Moreover, the revenue is measured at a fair value as per the different types of considerations of received or receivable. The recognition of sale of goods is inferred from the revenue generated as per sale of nickel which has risks and rewards associated to a product that passes along to the buyers. It has been further discerned that the company recognizes the revenue as per the estimated sales. The estimated sales value is assessed by referring to estimated metal price metal content, metal recovery and metal exchange rate. The overall adjustment made in the final sale of good is reflected when the actual metal content and metal recovery price is computed (Aasb.gov.au, 2018).
The company recognizes the interest revenue on a proportional basis by considering the interest rates over financial assets. Other sources of revenue are recognized at the time of receiving the payment. The finance costs are considered as attributable to the qualifying assets which may be capitalized under asset. The inventory is are measured at a lesser cost than the value which is net realizable. Costs incurred in portion of fixed and variable overhead are duly assigned to the inventories with the appropriateness of particular class on average cost basis. The net realizable value is estimated with the selling price less the forecasted cost of marketing, selling, distribution and completion of the project (Jin, Shan and Taylor, 2015).
Recognition pertaining to PPE is carried at a cost less where applicable along with impairment losses and related depreciation. Property such as land and building are carried at cost less accumulated depreciation pertaining to buildings. The measurement for plant and equipment is performed on cost basis which is carried at cost less accumulated depreciation and accumulated impairment. In case the carrying amount of plant and equipment is seen to be greater in compared to estimated recoverable amount, the carrying amount will be written down on an immediate basis as per the estimated recoverable amount and impairment losses (Komninos and Cameron, 2017).
The fundamental and qualitative enhancing characteristics from the financial statement can be discerned with understandability, verifiability, timeliness and comparability. The information presented in the financial statement of Western Areas complies to the guidelines under AASB. This has allowed the company to compare similar information among other entities for the same reporting period. The comparability aspect has allowed the users to understand and identify the differences in recognition of various financial and materiality aspects of reporting. The verifiability component has ensured that the users are able to depict the full representation of the economic phenomena (Mazhambe, 2014). This is confirmed by using different perspective of knowledgeable and independent opinion of auditors who are able to reach consensus in completing an argument and faithful representation of information (Nobes and Zeff, 2016). The publishing of financial information as per quarterly reports, half yearly reports and annual reports shows the timeliness characteristics maintained by company. In addition to this, it also shows that the information is available to the decision makers at the right time. The understandability component of reporting is understood by presenting and classifying each aspect of report in a presentable and concise manner. The preparation of financial reports is also seen to be done with simplicity which will allow even a person from non-financial background to have a significant overview of business performance. Western Area has adopted several qualitative enhancing characteristics by rendering appropriate information in its financial statement (Camfferman and Zeff, 2015).
The impact of accounting research and professional practice needs to be understood with scope and objectives of the financial statements. The important objective of financial statement is seen with providing information about entities assets, liabilities, income, expenses and equity. Similarly, Western Areas has clearly stated about its disclosures on assets with total current asset of $ 119,913 in 2016 and 181,176 in 2017. The total liability was recognized as $ 59,588 in 2017 and $ 55,167 in 2016. The prospectus of reporting the future net cash inflows of an entity is also an important criterion for fulfilling accounting research into professional practice. Western Areas has disclosed the consolidated cash flow from cash from operating activities, cash from investing activities, cash from financing activities and net cash outflow in 2016 and 2017. As per the accounting research, the entities need to prepare their financial statements for a specified time period under a specific circumstance. Referring to the financial information published by Western Areas in form of quarterly report, half yearly report and annual report the criteria of reporting period has been duly met. The important perspective of going concern is also stated by the company (Hao and Liu, 2017).
This information can be seen under the disclosure of directors’ responsibilities. It is clearly stated that during the preparation of the financial report, the directors are responsible for assessment of groups ability towards going concern unless the directors are intended to liquidate the group or cease the operations. The appropriateness of going concern basis of accounting can be evidenced from relevant disclosures about material uncertainty existing and significant ability of the company to continue as a going concern. Lastly, the general theory of accounting state that the consolidated financial statements are more likely to provide appropriate information about financial statements. Referring to the aforementioned statement it can be noted that Western Areas has used consolidated income statement, statement of financial position, statement of changes in equity and cash flows during all the reporting periods. This shows the relevancy and usefulness of the information published by the company (Iasplus.com. 2018).
Conclusion
The discourse of the study has stated that Western Areas has set its conceptual framework object is as per “Corporations Act 2001” and “Australian Accounting Standards Board (‘AASB’)”. The recognition criteria for items such as revenue is measured at a fair value as per the different types of considerations of received or receivable revenue. PPE is carried at a cost less where applicable along with impairment losses and related depreciation. In addition to this, property such as land and building are carried at cost less accumulated depreciation pertaining to buildings. The different types of fundamental and enhancing qualitative guidelines can be discerned by presentation of information as per AASB which has allowed the company to compare similar information among other entities for the same reporting period.
References
Aasb.gov.au. 2018. Definition and Recognition of the Elements of Financial Statements [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/SAC4_3-95.pdf [Accessed 10 Sep. 2018].
Camfferman, K. and Zeff, S.A., 2015. Aiming for global accounting standards: the International Accounting Standards Board, 2001-2011. Oxford University Press, USA.
Hao, J. and Liu, Q., 2017. The Impact of Australian Accounting Education on Repatriates’ Career Development. Australian Accounting Review, 27(1), pp.52-60.
Iasplus.com. 2018. Conceptual Framework for Financial Reporting 2018. [online] Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 10 Sep. 2018].
Jin, K., Shan, Y. and Taylor, S., 2015. Matching between revenues and expenses and the adoption of International Financial Reporting Standards. Pacific-Basin Finance Journal, 35, pp.90-107.
Komninos, J. and Cameron, R.B., 2017. IMPACTS OF REVENUE RECOGNITION CHANGES IN THE CONSTRUCTION INDUSTRY.
Luke, B., 2016. Measuring and reporting on social performance: from numbers and narratives to a useful reporting framework for social enterprises. Social and Environmental Accountability Journal, 36(2), pp.103-123.
Mazhambe, Z., 2014. Review of International Accounting Standards Board (IASB) Proposed New Conceptual Framework: Discussion Paper (DP/2013/1). Journal of Modern Accounting and Auditing, 10(8).
Nobes, C.W. and Zeff, S.A., 2016. Have Canada, Japan and Switzerland Adopted IFRS?. Australian Accounting Review, 26(3), pp.284-290.
Westernareas.com.au. 2018. ANNUAL REPORT 2017 [online] Available at: https://www.westernareas.com.au/images/files/Annual-reports/WSA_Annual_Report_-_Final_for_ASX__website.pdf [Accessed 10 Sep. 2018].
Westernareas.com.au. 2018. About Us – Western Areas. [online] Available at: https://www.westernareas.com.au/about-us.html [Accessed 10 Sep. 2018].
Westernareas.com.au. 2018. Corporate Governance – Western Areas. [online] Available at: https://www.westernareas.com.au/about-us/corporate-governance.html [Accessed 10 Sep. 2018].
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