One of the main features of financial accounting is corporate reporting because the way of this kind of reporting is complicated and elucidating to achieve success in business. The Conceptual Framework supplies the total instruction on the purposes behind this type of reporting done by the organizations. The immediate report provides a descriptive explanation on the review of this idea in the position of a reality-based organization, Webster of their yearly report 30 June 2018. The introduction of the study provides the common idea about the notions along with the business. Afterward, the implementation of this system and the need to follow the framework based on the organization’s corporate reporting procedure is assessed by the researcher. The study also confers about the restrictions of the conceptual framework and the importance of common purpose financial reporting. Lastly, the researcher tries to create a summary of the overview by suggesting and ends the discussion with a concluding note.
Accounting is known as the language of the business as the matter involves considering the stakes of various shareholders connected to the business. A systematic financial reporting is the solution to the corporate responsibility towards bigger shareholders and the total society. Thus, the fact that the reporting should consider an ideal and benchmark protocol for the organization is expected. A conceptual framework has been created by the ideal setters to develop a general review on the capability of the standards and the opportunity along with the purpose of financial reporting for the company.
2.0 Conceptual Framework: An Overview
The conceptual framework is provided by the International Accounting Standards Board (Later may be written as “IASB”) might be interpreted based on corporate reporting by the process of handing over the standard instructions as to the action, demonstration and announcement of different economic affairs and negotiations. Briefly, it presents the complete framework of financial reporting for a company (Bregg, 2018). As the financial data and information may be systematic, the factors that regulate have decided specific instructions as to the comparison of features based on the quality of the economic statements in accordance with applicability, sustainability, comparability and schedules that together aid management to create financial reporting more efficient to the users(Chris, 2018). The conceptual framework guarantees a comprehensive perspective such as the way of conduction such constructions and makes the reporting productive to the shareholders.
3.0 Organisational Overview
Webster annual report state that their year-end profit after calculating tax on the 12 month period is only $27.1 million which is very low compare to the 2017 net income after the tax period. But it is totally unexpected that the company earned more in the current year that means in 2018 than 2017 net profit before tax amount (Fellizzie, 2016). The director and organizational management is the most important part of an organization who reassess the current business strategy to create a new direction for the betterment of the organization and another reason is for rebalancing the portfolio of the asset. The core business strategy of Webster is continuing the entitlement of water and making the annual allocation of the water for both reasons may be for permanent or temporary for the reason of irrigated crops. Westar management and director beliefs that their conversion in horticultural and other products will increase sales because of allocating water in different parts which will be helpful for increasing the return highly from the medium fund to long term fund.
4.0 Analysis of Organisational Conceptual Framework
4.1 Compliance Requirements for Conceptual Framework
In this framework, there are some compliance requirements that the management must follow to make corporate reporting effective. This sort of requirements has a chance to be separated in a few several kinds. The first kind of requirements consists of the features based on the quality of the financial records that involve the reliability, applicability, capability to understand, trustworthy demonstration, ability to compare of the financial data as included in the financial records (Jhon, 2017). Put differently, the financial statements must be created in such a way that the utilizer can make their individual decisions according to the financial data provided. The second kind of compliance requirements works by making sure that the identification and calculation standard of the financial records are obedient with the ideals set for them and conforming with the commonly received accounting rules (GAAP) and guidelines and principles applicable for the time being(Langdon, 2018). Besides that, utilizing current value consideration in the financial information is also another significant element which the conceptual framework suggests to implicate (Langdon, 2018). Regarding the company that is mentioned, it is noteworthy that the organization creates its financial statements based on the accurate process of accounting, according to the Australian Accounting Standards (AASs) and the Corporations Act 2001. So, it can be claimed that the firm could fulfill the general compliance requirements in terms of the basis for financial record preparation.
While talking about the company, it has been perceived that the managers took up AASB-9: Financial Instruments for classifying, measuring and de-identifying financial properties and financial accountabilities. The latest impairment model, as advocated by provided AASB has also been implemented to evaluate the properties. Nevertheless, it is expected by the management that the latest announcement will not put material effect impact on the business outcome since it leaves a reduced chance for change while valuing financial credibilities. AASB-16; contracts that will be used instead of current AASB-17: contracts will oppositely put a remarkable effect on the blares of company accounts since there has been a significant quantity of contracts and agreements of the firm. Nonetheless, it has been stated that every leased property have been appropriately evaluated and identified in the booms in relation to the standards applied. In relevance to this, it can be claimed that the qualitative aspects such as materiality have been content in the provided framework since the management has already executed an effect evaluation of accepting the latest accounting standards.
4.2 Compliance and Enhancement of Qualitative Characteristics of Conceptual Framework
The aspects based on the quality which has been stated before, are significant parts of the process of preparing financial statements. Concerning aptness and reliability, it can be seen that the audit report is unchartered with an exceptional remark about the main audit issues. To put in other words, the financial record was stated to be dependable by the individualistic patrons. In addition to that, the same was in accordance with the International Financial Reporting Standards (IFRSs) and thus, the same is known to have comparability. Another major point is faithful demonstrations that can be confirmed by the fact of reliability of the books by the manner of pointing out unlicensed audit opinion given by the auditor. In addition, the records of the accounts show that the fixed properties like plant and instruments have been measured according to the historical cost process, less devaluation that is in a queue with the particularly applicable standards. In case of complicated accounting presumptions like the evaluation and identification of properties profits the employees, the company has followed AASB 137: Provisions, Contingent Properties and Contingent Assets which verifies the issue that the business has been in accordance to the relevant accounting criteria and thus thereby implementing the provided framework.
4.3 Usefulness of Financial Statements to the Users
According to AASB framework in 2004, the way to define the key components of financial records like properties, credibilities, earnings, expenditure, and equities are given based on their economic profit afterward (Megan, 2015). To say it in other words, the way business may find profit in future by utilizing these components or take up them into the activities determines the measurement for them to be picked under certain terminology (Megan, 2015). To talk about the current case study, the yearly report claims that the records of the financial statements include a descriptive discussion and abiding by connected announcements regarding AASB declaration on different issues like financial components and earning from agreements and bond with those ordinances.
4.4 Limitations of Conceptual Framework: Stakeholders’ Perspective
Primarily, the researchers ask how applicable the conceptual framework is in the given situation, specifically when the definitions of the key components of financial records depend on unstated principles and standards (Pilot, 2017). Along with that, some concerns related to the clearance on the descriptions given for issues like deferred tax credits or existing value accounting (Pret, 2018). From the perspective of Webster, no mention of existing value accounting can be found as long as the investment valuation in certainty according to equity process is related.
4.5 Compliance of General Purpose Financial Reporting
According to the Annual Report 2018, the preparation of business for its notes of accounts based on the AASs and Corporations Act 2001 and whereas executes compliance in the line with the rules and regulations (Tandau, 2017). It is claimed by the yearly report perusal that the Board has always controlled the situation to ensure larger returns to the shareholders as a dividend. The given situation represents how adequate the regulation over resource and powerful economic position the company is in. Along with that, the statement of money flow demonstrates various operations for sponsoring and investing descriptively, which is helpful for the shareholders to assess the financial situation in the business based on a holistic approach in accordance with cash flow from executing different operations. Apart from that, the managerial point of view about future business enhancement plan on the basis of effective use of financial resource and the situation of the company can also be seen from the report. Thus, it can be stated that the accountability to the common stockholders not holding the power to regulate the preparation of the financial records is on the management. They have been adopted to their separate requirements regarding compliance and clear reporting (Webster, 2017).
The current trend in market and evaluation of equity value controlled by the existing value accounting process should be considered by the management. Besides, it is necessary to display the social side of the business in corporate reporting to make it comprehensive. Last but not least, the announcement on non-accounting regulatory compliance in the report should also be appraised by the managers so that the shareholders can inspect this kind of overview with legality and rules during the assessment.
A holistic approach is provided by the conceptual framework as to the complete process of financial statements preparation. Every kind of attempt must be made by the management of the firm to make financial records of the organization in such a manner so that it is effective and useful to the users. Lastly, the conclusion will say that a systematic approach for preparing financial statements with the consideration of the conceptual framework and related guidelines and directives as demonstrated by regulated and standard setters will remarkably help to enhance the functionality of the financial statements. Ultimately, it will aid the business to achieve its purposes and target by obtaining sustainability (Rihanna and Dr.B.Mahadevappa, 2011)
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Tandau. (2017). Toshiba Investor Relations : IR News. Retrieved from http://www.toshiba.co.jp/about/ir/en/news/2017.htm
Webster. (2017). What is financial reporting? | AccountingCoach. Retrieved from https://www.accountingcoach.com/blog/what-is-financial-reporting