Overview of the report This report analyses the disclosures of objective of general purpose financial reporting and the qualitative characteristics of useful financial information according to The Conceptual Framework for Financial Reporting. It investigates Bega’s current accounting practice of Property, Plant and Equipment in accordance with AASB 116 Property, Plant and Equipment, and how it satisfies the objective of general purpose financial reporting and the qualitative characteristics of useful financial. This result will then recommend Bega to improve their current accounting practices. Reasons for the report Due to the use of the company’s annual report for users to make decisions, ensuring that the financial reports convince the objective of general purpose financial reporting and qualitative characteristics of useful financial information as outlined in the IASB September 2010 ‘Conceptual Framework for Financial Reporting’ (CF) have become extremely important. Such failure of disclosures can mislead information on the company’s financial statements. 1. Introduction A dramatic increase in the demand of the financial statements by external users made the reporting entities’ annual reports to meet the objective of general purpose financial reporting and qualitative characteristics of useful financial. According to the IASB Conceptual Framework, it superseded the Framework for the Preparation and Presentation of Financial Statements. As a result, this report could discuss the conceptual framework for financial statements and compare with Bega’ current accounting practice of Property, Plant and Equipment under Accounting Standard AASB116. Then, this report will suggest some actions for Bega to improve its current accountin... ... middle of paper ... ... areas of PPE, it can be concluded that Bega has not properly met with every extent of Conceptual Framework and the accounting standard. For example, when disclosing the amount of impairment losses, Bega has not disclosed accurate amounts of reversal amounts of impairment losses and the amount of impairment losses on re-valued assets. To encounter this, Bega is strongly recommended to perfectly satisfy the requirements in accordance with AASB because it can lead to overstatement or understatement of the company’s PPE. In addition, Bega has provided clear information on PPE. Also Bega has successfully disclosed the objective of General purpose financial reporting and Qualitative characteristics of Conceptual framework. Therefore, Bega is suggested to regularly review its current PPE and accounting policies in regarding Conceptual Framework to improve the usefulness.
In accounting, private companies are treated differently than governmental and non-profit companies. However governmental and non-profit companies use different reporting requirements from the private sector. The requirements for governmental companies use the Government Accounting Standards Board (GASB), whereas profit and non-profit companies use the Financial Accounting Standards Board. This paper will explain the purpose, discus the similarities, and differences between the GASB and FASB.
Financial statements are those statements which provide information about profitability and financial position of a business. It includes two statements, i.e., profit & loss a/c or income statement and bal...
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
In 2008, the Securities and Exchange Commission (SEC) issued a road map for the United States (US) to implement International Financial Reporting Standards (IFRS) that would eventually lead to the dissolution of US Generally Accepted Accounting Principles (US GAAP) (Cox 2008). US GAAP is rules based system of accounting that contains over 25,000 detailed pages of guidance, whereas IFRS is a principles based system of accounting that contains 2,500 pages of guidance. IFRS allows accountants to exercise professional judgment when making many decisions. This paper will compare and contrast US GAAP with IFRS on Intermediate Accounting Topics.
This essay will discuss the influence NZ Framework brings to financial reporting standards that included NZ GAAP based on the debate between principles-based and rule-based. In particular, it will portray: (1) the nature and orientation of financial reporting framework and GAAP; (2) the main improvement of NZ Framework and the applications framework guided in NZ GAAP.
The primary aim of this section of the report is to illustrate, interpret and evaluate the principle methods of analyzing a company’s accounts. Financial Statement Analysis is the process that involves assessing a company’s financial statements to indicate its performance, financial health and future prospects. The four financial statements used are income statement, balance sheet, statement of cash flows and statement of changes owners’ equity. Financial statement analysis is performed by both internal and external members of a firm. This report focusses on external users. The direct interest external users include investors, owners and creditors while the indirect interest external users include
Waqas A, 2013, ‘Analysis of Factors Present in Financial Reporting Standards Leading to Manipulate True & Fair View of an Entity’s Financial Statements’ Social Science Electronic Publishing 2014, KPMG p.1
The first conceptual framework for financial reporting was developed in the 1970s by the Financial Accounting Standards Board (FASB) in the US. The conceptual framework is a series of Statements of Financial Accounting Concepts (SFACs), taken as a whole, set the objectives, characteristics and other concepts that determine how financial information is measured and displayed in financial statements. In financial reporting, a conceptual framework is a theory of accounting prepared by a standard-setting body against which practical problems can be tested objectively. A conceptual framework deals with fundamental financial reporting issues. Accordingly, the International Accounting Standards Board (IASB) developed
It provides management with valuable information needed to engage in decision-making about the organization’s vision and overall strategies. Although the traditional reporting displays vital information about the financial health and activities of an organization to its potential users, it does not provide adequate record and measurement of non-financial metrics such as employee turnover and plant locations, which also contribute greatly to the overall value of the organization. The American Institute of Certified Public Accountants (2016) explains “In traditional financial reporting, the value is defined more in terms of “book value” and is historical in nature. Further, Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), and supplementary disclosures for traditional financial reporting are based on historical performance and variances in the statutory financial position according to the application of GAAP.” It is also important to differentiate financial report and financial statement. While the financial report consists of Management’s Discussion and Analysis (MD&A), financial statements, notes, Required Supplemental Information (RSI) and Other Accompanying Information (OAI), the financial statement is only a compilation of reports
Accounting gives companies, investors, regulators and others with a standardized way to explain the financial performance of an entity. Accounting standards present preparers of financial statements with a set of rules that they have to follow when preparing an entity’s accounts, making sure this standardization is across the market (Robert 2008). Many Companies are required to publish their financial statements in accordance with the relevant accounting standards. To simply International Financial Reporting Standards (IFRS) is one set of accounting standards, which have been established and maintained by the IASB with the purpose of those standards being efficient of being useful consistently. These two bodies work together to come
As annual reports are becoming more difficult to understand then the objectives of the international financial reporting standards could be seen as faulty as they are the standards by which the financial statements in the annual report need to meet. The main objective is to develop one principle of high quality, enforceable, understandable and globally accepted financial reporting standards. If these objectives are right then an alternative could be that they are not being delivered correctly which results in a long and complex annual
White, Gerald, Ashwinpaul Sondhi, and Haim Fried. The Analysis and Use of Financial Statements. June 1997. John Wiley & Sons. 2nd Edition.
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.
The Financial Accounting Standards Boards (FASB) defined conceptual framework as a consistent of underlying concepts and the ideas that describe the nature and general purpose of financial reporting which may lead to consistent standard in accounting (Deegan 2010). The role of the conceptual framework is to ensure that financial statements in accounting are free from bias and to provide useful information that is useful for user’s decision making. The standard-setting board also formulated a range of perceptions and theories related to accounting to trigger the objectives of financial reporting. The standard-setting board keeps issuing the conceptual framework over time to ensure that the conceptual framework’s objectives are improving to provide useful financial information. The innovative work on conceptual framework was embraced in the United States by the FASB in the early 1970s. The FASB accomplished disappointment in attempting to generate a standard that at the outset might not appear to present, especially testing theoretical issues. Regardless, while attempting to achieve concession on Statement of Financial Accounting Standard, tending to the theoretical issues produced critical matter for the board members. In this manner, throughout the outset the FASB understood the requirement for an obvious conceptual framework. Based on Hines’s argument, the conceptual framework is mean to provide the ability to increase self-regulate of a profession in order to neutralizing government interference from arising. Whether this argument has been accepted or not will be discussed in more detail with supported evidence to clarify the main point about Hines’s argument. Further details about this argument will discuss below.
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.