Discuss about the Strategic Management Accounting in Enterprises.
This report is based on analysis and making conclusion of conceptual framework of accounting or financial reporting framework. This analysis is undertaken while comparing and contrasting financial statements of two companies i.e. Elders limited and Qantas limited. In this report, both companies have been analyzed on same ground of financial reporting and disclosure requirements. In this report analysis has been done by undertaken balance sheet, income statement and notes to accounts of both the companies. In this report, one more question has been taken into account which is related to revision or up gradation of current conceptual framework of accounting to include prudence into it. This report includes analysis of advantages of prudence which is provided in terms of preparation and presentation of financial statements. In last section of this report, conclusion has been made in terms of whether revision of conceptual framework of accounting shall include prudence to overcome disparity in corporate reporting.
Does the current accounting framework meet the needs of the users of financial reports as prescribed in the objective of the Conceptual Framework of Accounting?
Conceptual framework is used to define objectives and purpose of financial reporting for users of financial statements. Conceptual framework is used to define and understand nature, limit and functions of financial accounting and reporting standards established by prescribed board. Conceptual framework in terms of accounting undertakes various process and procedures that had whole together developed various accounting standards or accounting platforms that are followed by business organization. These accounting standards or prescribed procedures of accounting conceptual framework has provided base for preparing and presenting financial statements during the reporting period.
Decision making Information related to investment and credit- Main objective or purpose of financial reporting or conceptual framework of accounting is to supply information that will became base for decision making process. Decisions related to investment in any business organization and lending or obtaining credit decisions will be taken on the basis of financial reporting (Carmichael & Graham, 2012).
Information of entity- Another main objective of financial reporting or conceptual framework of accounting is provide information of business entity related to its available resources and potential resources of business organization. These information are required by investors and creditors so as to take decisions (Shying, Subramanian & CPA, 2013).
Accountability and Transparency- Another objective of conceptual framework of accounting or financial reporting is to make business entity more accountable towards its decisions and more transparent in terms of business operations and other relevant information required for decision making.
Bring uniformity- Main objective of financial reporting or conceptual framework of accounting is to bring uniformity in terms of preparation and presentation of financial statements. Objective is to make financial statements of business organizations comparable with each other and to supply decision making information for investors (Spraakman & Jackling, 2014).
In this report, analysis of conceptual framework of accounting or financial reporting of two companies has been taken i.e. Elders limited and Qantas Limited. Both the companies operate in different industry but there is same financial reporting framework that they need to follow. Both the companies has fulfilled financial reporting framework in terms of disclosing relevant information to stakeholders. Financial reporting or conceptual framework of accounting of Qantas Limited has provided relevant information i.e. financial framework (Christensen, 2010). Qantas has provided relevant financial information related to stakeholders. Following are three main information that has been provided to stakeholders:
It has been observed that Qantas limited has prepared and presented financial statements in accordance of conceptual framework of accounting or according to prescribed financial reporting standards. They has provided information related to their business operations, remuneration provided to key personnel and many other information related to different aspects.
On the other hand, framework related to disclosure and presentation of financial reporting has been demonstrated in the annual report of Elders Limited. Elders Limited has provided information related to many different aspects of business operations. They have disclosed their strategic directions & decisions, financial information in terms of financial statements and capital structure that are employed in the business operations. Annual report of Elders Limited includes auditor report that is major requirement of financial reporting (Statement on Auditing Standards, 2011). Another inclusion of reporting framework is of financial statements prepared and presented according to conceptual framework of accounting or financial reporting standards. Financial statements of Elders limited are in compliance of financial reporting framework and have prepared statement of financial statement, income statement and cash flow statement (Jhunjhunwala, 2014).
While analyzing financial statement and notes to accounts of both the companies it has been observed that notes to accounts of income tax has difference in terms of its presentation and disclosure. Elders Limited has disclosed less information of income tax of the reporting compared to Qantas Limited. Qantas limited has disclosed much more information in terms of income tax recognised in the consolidated income statement, reconciliation between income tax expense and statutory profit before income tax, recognised in the consolidated statement of comprehensive income and reconciliation of income tax expense to income tax payable (Tiffin, 2010).
On the other hand, Elders limited’s disclosure related to income tax are; —Major components of income tax expense, reconciliation of income tax expense applicable to accounting profit / (loss) and major components of deferred income tax. Therefore major difference can be observed in disclosure practices of both the business organizations.
Another important aspect of conceptual framework of accounting or financial reporting is related to notes of accounts that both business organizations has provided in financial statement. Notes to accounts include information related to detailed aspect of figures presented in financial statement. It has been analyzed that both business organizations has provided detailed information related to principle activities, dividends provided, significant changes in state of affairs, review of business operations and events subsequent to balance date. These information included in financial statements of both the business organization undertaken i.e. Elders Limited and Qantas Limited (Kalkhouran et al., 2015). There are some factors or consideration that financial reporting or conceptual framework of accounting has not been able to address successfully. There are still some loopholes in financial statements and in terms of presentation of financial results. Loop holes exist in terms of accountants and those charge with governance of the business organization. Accountants have the requisite knowledge and skills that they can manipulate financial statements or other decision making information in favor of business organizations. Therefore there is limitation in following conceptual framework of accounting or financial reporting standards.
It can be concluded that financial statements although provides relevant and decision making information to its users (like investors, creditors and other stakeholders). But on the other hand, reporting framework or conceptual framework of accounting has provided some loop holes also that accountants and those charge with governance has (Macve, 2010). Therefore powers provided to accountants and those charges with governance have not been utilized in common good manner.
How the conceptual framework revision to include Prudence is likely to address the disparity in Corporate Reporting is a requirement in your analysis.
Earlier it can be observed that business organizations were free to prepare and present their financial statements according to their wish. Most importantly it affected presentation of financial statement aspect. Therefore earlier there was no framework that governs or manages presentation aspect of financial statements of business organizations. But as the passage of time many changes has been made and many developments has been seen in presentation of financial statements aspects (Sanders & Seifert, 2013). According to earlier accounting framework accountants and those charges with governance can modify or can include & exclude some aspects or financial information. Therefore there is need to include prudence in the preparation and presentation of financial statements. This has been inherent point where officials of accounting standards or reporting framework shall be review and update (Robbins & Taylor, 2014). Conceptual framework of accounting needs to be update or revise so that prudent framework can be incorporated or included in the conceptual framework.
Prudence can be defined as the process or framework that governs and discipline of the business organization for the better management. Prudence improves governance power or governance ability in terms of corporate reporting requirements or conceptual framework. This revision shall be implemented in order to curb disparity or difference in corporate governance requirement in terms of preparation and presentation of financial statements. There shall be imposed limitation on preparation and presentation aspects of financial statements of business organization so that uniformity can be achieved in terms of financial statements or financial reporting. Uniformity in financial statements provides better basis of decision making process and will be to better investments of investors (Sana’a, 2016). This change has not only improves preparation and presentation of financial statements of business organization but it also sets decision making platform for stakeholders of the business organization.
Conclusion
It can be concluded that there are various types of disclosure requirements on business organizations that is managed and controlled by conceptual framework of accounting or financial reporting framework. It is concluded that after analysis of financial statements or annual report of two companies it has been analyzed that there is gap in terms of preparation and presentation of financial statements. Income tax expenses have been differently disclosed in financial statements of both the companies. Therefore this has been the result of loopholes of conceptual framework of accounting or financial reporting framework. In order to overcome from this situation, prudence shall be incorporated in corporate reporting. Prudence is the form of ability and discipline that governs accountants and those charge with governance of the business organization.
References
Carmichael, D., & Graham, L. (2012). Accountants’ Handbook, Financial Accounting and General Topics Financial Accounting and General Topics (12th ed.). New York: Wiley.
Christensen, J. (2010). Conceptual frameworks of accounting from an information perspective. Accounting and Business Research, 40(3), 287-299.
Jhunjhunwala, S. (2014). Beyond Financial Reporting-International Integrated Reporting Framework. Indian Journal of Corporate Governance, 7(1), 73-80.
Kalkhouran, A., Rasid, S., Sofian, S., & Nedaei, B. (2015). A Conceptual Framework for Assessing the Use of Strategic Management Accounting in Small and Medium Enterprises. Global Business and Organizational Excellence, 35(1), 45-54.
Macve, R. (2010). Conceptual frameworks of accounting: Some brief reflections on theory and practice. Accounting and Business Research, 40(3), 303-308.
Robbins, W., & Taylor, G. (2014). What CPAs Need to Know about the FRF for SMEs. The CPA Journal, 84(10), 22-27.
Sana’a, N. (2016). Recognition and Measurement Obstacles of the Conceptual Framework of Financial Accounting Underlying E-commerce Business. Journal of Internet Banking and Commerce, 21(1), 1-20.
Sanders, Lindberg, & Seifert. (2013). The AICPA’s Financial Reporting Framework for Small and Medium-Sized Entities: Examining Its Key Features. The CPA Journal, 83(10), 36-39.
Shying, M., Subramanian, R., & CPA Australia. (2013). Accounting handbook. French’s Forest, N.S.W.: Pearson Australia for CPA.
Spraakman, G., & Jackling, B. (2014). A Conceptual Framework for Learning Management Accounting. Accounting Perspectives, 13(1), 61-81.
Statement on Auditing Standards – reports on application of requirements of an applicable financial reporting framework. (2011). Journal of Accountancy, 211(2), 76.
Tiffin, R. (2010). The Complete Guide to International Financial Reporting Standards (3rd ed.). London: Thorogood Publishing.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download