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Topic: Students are required to prepare a comprehensive report directed to an Australian ASX Top
100 listed corporation detailing a critical analysis of the effectiveness of the corporation to meet the
obligations of the conceptual framework of accounting. From 100ASX list I have chosen REA GROUP
TOPIC FOR MY ASSIGNMENT.
#Specific questions to be answered like;
1. Has the company met the objectives of general purpose financial reporting?
2. Are the target audience of general purpose financial reports able to adequately use this report to
gather information for their needs?
3. Has the company satisfied the recognition criteria for the elements of financial statements?
4. Has the company exhibited the fundamental qualitative characteristics of financial reporting?
5. Has the company exhibited the enhancing qualitative characteristics of financial reporting?
Research Requirements: Consideration of the Conceptual Framework Objective, Recognition
Criteria, Fundamental and Enhancing Guidelines is essential. The relationship between accounting
research and professional practice is essential. This article needs to inform your arguments. The
analysis and supported recommendations need to be formatted into a professional report as would
be expected in a modern organisation by management and clients. It should include an abstract,
introduction, body, conclusion and bibliography. Maximum word count is 1300 -1500 words not
including the abstract or bibliography.
100 listed corporation detailing a critical analysis of the effectiveness of the corporation to meet the
obligations of the conceptual framework of accounting. From 100ASX list I have chosen REA GROUP
TOPIC FOR MY ASSIGNMENT.
#Specific questions to be answered like;
1. Has the company met the objectives of general purpose financial reporting?
2. Are the target audience of general purpose financial reports able to adequately use this report to
gather information for their needs?
3. Has the company satisfied the recognition criteria for the elements of financial statements?
4. Has the company exhibited the fundamental qualitative characteristics of financial reporting?
5. Has the company exhibited the enhancing qualitative characteristics of financial reporting?
Research Requirements: Consideration of the Conceptual Framework Objective, Recognition
Criteria, Fundamental and Enhancing Guidelines is essential. The relationship between accounting
research and professional practice is essential. This article needs to inform your arguments. The
analysis and supported recommendations need to be formatted into a professional report as would
be expected in a modern organisation by management and clients. It should include an abstract,
introduction, body, conclusion and bibliography. Maximum word count is 1300 -1500 words not
including the abstract or bibliography.
Executive Summary
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Place Your OrderThis particular study focuses upon the Australian corporate entity, REA Group Limited. The annual report of this particular entity for the accounting year of 2017 has been evaluated in order to find out the fact that whether accounting statements satisfy the required objectives of accounting report, whether the company has satisfied the recognition criteria for the elements of the accounting statements and other associated factors.
It has been found out that the management of the company has prepared the accounting statements of the companies in regards to the issued standards of the regulatory bodies like the Australian Accounting Standards Board.
Introduction
The issue that has been presented in the question is that the annual report of a listed organization has been analyzed in order to examine the objectivity the regulatory standards that have been applied for the objective behind the preparation of the accounting statements. It must be noted here that the Australian Accounting Standards Board has essentially established the particular accounting standards that are applied for the preparation of the accounting statements of an organization in Australia.
This particular study focuses upon the Australian corporate entity, REA Group Limited. The annual report of this particular entity for the accounting year of 2017 has been evaluated in order to find out the fact that whether accounting statements satisfy the required objectives of accounting report, whether the company has satisfied the criteria of recognition for the elements of the accounting statements and other associated factors.
Objectives of the accounting report
The objectives of the accounting report have been as follows:
• The objective of the general purpose accounting report is primarily regulated around the providence of accounting information in regards to the accounting entity that can be useful to the third party investors, lenders and creditors for making the investment decisions.
• Decisions in regards to the potential and existing potential investors for dealing in the debt instruments are also facilitated by analyzing the accounting statements.
• It must be noted here that the general purpose accounting reports cannot provide all the accounting information that is required by the investors in order to make the required accounting decisions (Ali, Akbar & Ormrod, 2016)
The accounting statements of REA Group Limited reflect the fact that the accounting reports have been prepared in accordance to the financial accounting standards as prescribed by AASB. This means that the accounting statements satisfy the requirements of the accounting report sufficiently. This can be further evidenced from the fact that the Australian Accounting Standards Board (AASB 101) reports that the basis for the preparation of the accounting statements have been that the degree of comparability of the accounting statements of the corporate entity for the previous periods and the accounting statements of other entities is high (Ali, Akbar & Ormrod, 2016). It must be mentioned here that a sufficiently qualified accounting statements will consist of the elements like:
• Assets
• Liabilities
• Equity statement
• Income and expenses
• Cash flows
Moreover, it must be mentioned here that a complete set of accounting statements essentially consist of the essential elements as follows:
• accounting position statement that has been prepared at the end of the period
• Comprehensive income statement in regards to the stipulated period
• Equity statement for the stipulated period
• Statement of cash flow for the stipulated period
• Accounting disclosures
The accounting report of the company has adhered to all these standards. This means that the financial report of the business entity has included all the above mentioned accounting statements. These statements are the consolidated income statement, consolidated statement of comprehensive income, consolidated of accounting position, consolidated statement of changes in equity and consolidated statement of cash flows. The company has also provided the required accounting disclosures. Furthermore, the general features of the annual reports of REA Group Limited have been in accordance to the accounting report standards (Ali, Akbar & Ormrod, 2016). This can be evidenced from the fact that are as follows:
• The accounting statements have been prepared on the basis of the International Accounting report Standards
• The management of the firm has properly asserted the fact that the corporate entity is a going concern and has resulted in the execution of the preparation of the accounting statements accordingly
• Furthermore, the management of the firm has prepared the accounting statements in such a way that the similar classes of items have been reported separately if material
• The accounting disclosures that have been provided by the companies have been reported separately and the accounting information revealed by the particular disclosures have been clear and meaningful
• It must be noted here that the accounting statements of the company has been prepared on the basis of accrual accounting
• The administration of the firm has been such that it has facilitated in the providence of the required information in regards to the offset of the assets and the liabilities of the firm
• Each of the statements that have been included in the financial report of the company has facilitated the providence of the required information that has been featured by a high degree of comparability
Therefore, it can be deduced that the company has met the objectives of the general purpose accounting report (Balsmeier & Vanhaverbeke, 2018).
Have the target audience adequately used the report?
The target audience that are the shareholders, stakeholders, creditors, debtors and the other third party investors of the firm have been able to utilize the accounting report for the purpose of taking the accounting decisions effectively. This can be evidenced from the fact that the accounting report prepared by the management of REA Group Limited has been providing enough information into the accounting condition of the company. The accounting disclosures provide enough overview in to the past performance of the company. The investors of the company and the other potential stakeholders get enough overview into the operations of the company on the basis of the information that has been provided in the accounting statements of the companies. Moreover, it has been provided in the accounting report of the company that the shareholders have received enough remuneration thus ensuring welfare of the shareholders of the firm (Balsmeier & Vanhaverbeke, 2018).
Recognition criteria for the elements of the accounting statements
The criteria of recognition in regards to the elements of the accounting statements that has been provided in the annual report of the corporate entity. The revenue recognition in the accounting statements of the companies have been carried out by the particular method of fair value measurement. This means that the different types of revenues that have been included in the accounting statements of the companies. Moreover, the other income and the income tax have also been valued by the utilization of the accounting statements. The different accounting Australian standards that have been applied in case of the measurement of the different accounting components have also been mentioned in the accounting report of the company. A particular disclosure that has been provided in the annual report of the company has been as follows:
Figure: revenue recognition criteria
Fundamental qualitative characteristics in regards to accounting report
The fundamental qualitative characteristics in regards to accounting report can be defined as follows:
• Relevance – the relevance of the accounting statements have sufficiently satisfied the fundamental quality standards of the company
• Faithful representation – it can be certainly deduced that the conveyed accounting information reflect a true and fair image of the accounting position of the company.
It can be evidently stated that the accounting statements of the REA Group has been prepared on the basis of the fundamental qualitative features of accounting report. This means that the accounting report provides enough information in regards to the different accounting components. This can be further evidenced by the auditor’s report that has stated the fact that the accounting statements of REA Group has adhered to the qualitative features satisfactorily. Moreover, the information that has been conveyed by the accounting statements reflect the fact that the accounting statement represent a true and fair image of the corporate entity.
Enhancing qualitative characteristic of the firm
The enhancing characteristic of accounting report can be defined as follows:
• Comparability – the degree of the comparability of the accounting statement of the company have been high.
• Clarity – the clarity of the information that has been obtained from the accounting statements of the companies has been of a high degree
• Conciseness – the provided information in the accounting report of the company has been concise which has facilitated the economic decision making by the stakeholders and the shareholders of the firm
• Verifiability – the verifiability of the information that has been disclosed in the accounting report of the company has been of a high degree. This has increased the trust between the management and the stakeholders of the firm (Balsmeier & Vanhaverbeke, 2018).
The degree of comparability of the accounting statements have been high. This is because the accounting statements of REA Group have been prepared on the basis of the Australian Accounting Standards Board. The clarity of the information conveyed by the accounting report has also been high resulting in the reflection of the accounting statements of the particular corporate entity with an optimum degree of verifiability. This fact has also been confirmed by the auditor of the company.
Fundamental qualitative characteristics in regards to accounting report
The fundamental qualitative characteristics in regards to accounting report can be defined as follows:
• Relevance – the relevance of the accounting statements have sufficiently satisfied the fundamental quality standards of the company
• Faithful representation – it can be certainly deduced that the conveyed accounting information reflect a true and fair image of the accounting position of the company.
It can be evidently stated that the accounting statements of the REA Group has been prepared on the basis of the fundamental qualitative features of accounting report. This means that the accounting report provides enough information in regards to the different accounting components. This can be further evidenced by the auditor’s report that has stated the fact that the accounting statements of REA Group has adhered to the qualitative features satisfactorily. Moreover, the information that has been conveyed by the accounting statements reflect the fact that the accounting statement represent a true and fair image of the corporate entity.
Enhancing qualitative characteristic of the firm
The enhancing characteristic of accounting report can be defined as follows:
• Comparability – the degree of the comparability of the accounting statement of the company have been high.
• Clarity – the clarity of the information that has been obtained from the accounting statements of the companies has been of a high degree
• Conciseness – the provided information in the accounting report of the company has been concise which has facilitated the economic decision making by the stakeholders and the shareholders of the firm
• Verifiability – the verifiability of the information that has been disclosed in the accounting report of the company has been of a high degree. This has increased the trust between the management and the stakeholders of the firm (Balsmeier & Vanhaverbeke, 2018).
The degree of comparability of the accounting statements have been high. This is because the accounting statements of REA Group have been prepared on the basis of the Australian Accounting Standards Board. The clarity of the information conveyed by the accounting report has also been high resulting in the reflection of the accounting statements of the particular corporate entity with an optimum degree of verifiability. This fact has also been confirmed by the auditor of the company.
Conclusion
The particular conclusion that can be arrived at is that the accounting statements of REA Group Limited for the accounting year of 2017 have been prepared in accordance to the regulatory standards as conveyed by the Australian Accounting Standards Board. Therefore, no such recommendation is required for the management of the corporate entity. However, a particular fact that should be noted is that the adoption of the new accounting policies should be properly revealed in the financial report in a proper way.
References and Bibliography
Ali, A., Akbar, S., & Ormrod, P. (2016, March). Impact of international accounting report standards on the profit and equity of AIM listed companies in the UK. In Accounting Forum (Vol. 40, No. 1, pp. 45-62). Elsevier.
Balsmeier, B., & Vanhaverbeke, S. (2018). International accounting report standards and private firms’ access to bank loans. European Accounting Review, 27(1), 75-104.
Dye, R., Glover, J., & Sunder, S. (2014). How Can Accounting report Standards Resist Accounting-Motivated Accounting Engineering?.
Graham, A., Nandialath, A. M., Skaradzinski, D., & Rustambekov, E. (2017). Macroeconomic Determinants of International Accounting report Standards (IFRS) Adoption: Evidence from the Middle East North Africa (MENA) Region.
Jibril, M. A., & Abubakar, M. (2016, October). Effect Of International Accounting report Standards (Ifrs) On Corporate Financing In Nigerian Banking Industry. In Proceedings of Economics and Finance Conferences (No. 4206880). International Institute of Social and Economic Sciences.
Kim, J. B., Shi, H., & Zhou, J. (2014). International Accounting report Standards, institutional infrastructures, and implied cost of equity capital around the world. Review of Quantitative Finance and Accounting, 42(3), 469-507.
Lestari, D. (2015). The Effect OF Implementation OF Convergence International Accounting report Standards (ifrs), Good Corporate Governance, And Disclosure OF Corporate Social Responsibility (csr) ON Investor Reactions (in Manufacturing Companies Listed ON Indonesia Stock Exchange Period 2011-2013).
Perkins, J. D. (2016). Discussion of “Security Returns and Volume Responses around International Accounting report Standards (IFRS) Earnings Announcements”. The International Journal of Accounting, 51(2), 266-270.
Sunder, S. (2016). Rethinking accounting report: standards, norms and institutions. Foundations and Trends® in Accounting, 11(1–2), 1-118.
Tsunogaya, N. (2016). Issues affecting decisions on mandatory adoption of International Accounting report Standards (IFRS) in Japan. Accounting, Auditing & Accountability Journal, 29(5), 828-860.
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