Accounting Disclosure And Other Requirements †MyAssignmenthelp.com

Question: Disscuss about the Accounting Disclosure And Other Requirements. Answer: Introduction Accountingis the integral part of the finance function. Theaccounting helps in recording the transactions that are entered into by the company during the period and presents the results of theaccounting in the form of the financial statements of the company consisting of the statement of profit and loss and the statement of the balance sheet. The former is known as the process of financial accounting and the latter is known as the process of financial reporting. This financial reporting will help the users of the financial statements to make an effective decision and an informed decision. In the report, thefinancial accounting has been given the main importance. The company that has been selected for the purpose of the report is the Boral Limited. The report has been at first started with the identification of the major accounting policies that are duly mentioned in the annual report and laying down in the report. In the second section, the instances have been given as to how the man agers are in the way of exercising the flexibility in making choices of accounting practices and concepts and how are they getting motivated for selection. In the third section, the strategies of the company have been evaluated majorly in relation to the flexibility enjoyed by the managers in selection of the different accounting policies and the accounting procedures. After that in the next section, the degree of the quality of the financial information and other information has been disclosed. After assessing the quality of disclosure made by the company, the areas have been identified and detailed where there is the high potentiality of having the frauds, mistakes and the related flaws and discrepancies. In the last, the importance of the framework of accounting which is known as the conceptual framework has been given and ascertained whether the company has complied with the same. The report has then ended up with the defined and appropriate result. Important Accounting Policies The accounting policies are very important for the success of any company. It is because if the there were no accounting policies present then the accounting for every transaction will be in haphazard manner and will be done at the will of the managers rather than in the form of compliance with the laws of the governing country . In order to discuss the key accounting policies of the company, it is required to investigate into the understanding of the business of the company as well as the understanding of the areas in which the company is dealing and period of working. The company Boral Limited has been incorporated in the year of nineteen hundred and forty six in the country of Australia only. It was then named as Bitumen and Oil Refineries (Australia) Limited. In the year of two thousand and sixteen, the company has covered successful completion of the seventy years of its incorporation. The company has been established by David Craig. The company is engaged in the business of refining the oil, supply of the gas across the counties of operation and the manufacturing and the trading of the material used in the production and the manufacturing work. Currently the company is now operating in the sixteen countries in Australia, Middle East, The United States of America and Asia (Company Official Website, 2017). The financial year of the company has been ended up on the thirty of June two thousand and seventeen only. For the purpose of identifying the key accounting policies the annual report of the company has been considered for the two years including the year immediately preceeding to the year of two thousand and seventeen. On verification of the annual report of the company, the following are the key policies of the company including the notes: In the section 1 of the notes to the financial statements, the accounting policies have been started with the statement of compliance. This statement consists of the declaration that the financial statements of the company has been prepared in the consolidated format and has complied with the provisions of the relevant accounting standards of the Australia which in turn was issued by the Australian accounting standard board. It also states that the company has complied with requirements of the Corporations Ac, 2001 and the financial statements so prepared complies with the globally accepted International Financial Reporting Standards which was adopted by the standard setter body of the International accounting standards. It has further mentioned that the company, while preparing the financial statements of the company, through its management makes the accounting estimates, accounting judgments and the material assumptions about the future events. It has further mentioned that areas where the estimates and the judgments have been made. These are revenue, accounts receivables, property plant and equipment, valuation of the intangible assets, Income tax and deferred tax expense, Impairment, business combinations and lastly share based payments. These estimates and the judgments so made help the company to adopt the best practices in accounting and will made efforts to avoid any type of flaw and inconsistency. In note number 2.2 of the financial statements of the company, under the heading profit for the period, it has been stated the accounting policy in relation to the revenue earned by the company. It states that the company is recognizing the revenue from the sale of goods only when the risks and rewards pertaining to the goods are transferred to the buyer of the goods. It requires that the recovery of the consideration involved in the transaction of business shall be probable and the related costs associated with the goods shall be measured in the reliable terms. The same note number 2.2 also prescribes that revenue from the business of the contracting shall be recorded and recognized on the basis of the completion of the different levels or stages as finalized at the time of entering into the contract. The loss thereon if any come to know is directly charged to statement of profit and loss and is treated as an expense. Further the same note number describes that the revenue from supply of services shall be recognized when the services are delivered to the customer in the manner specified and when there are no requirements pending in fulfillment of the conditions of the provision of the services (Anastasia, 2015). As per note number 3.3 of the annual report of the company, it has been mentioned that the property plant and equipment shall be valued at the cost of acquisition less the amount of the depreciation so accumulated till date and the amount of the impairment if any. Depreciation as mentioned under the note of the Property plant and equipment is calculated on the straight line method and is depreciated over the useful life of the asset. At the end of every financial year, the useful life of the assets is reviewed and the changes are made accordingly if required. The effect of changes are then recorded in that financial year only and the effect will be made in the current year and the future years only and not in the earlier years. It means the change in the useful life of an asset will affect the depreciation part on prospective basis rather than the retrospective basis. The note number 3.4 of the financial statements of the company deals with the Intangible assets. Intangible assets include the goodwill and the other intangible assets. Goodwill is acquired during the business combination and is the excess of the purchase consideration paid over the fair value of the assets of the target company. The business combinations have been accounted for by using the equity method. Goodwill is recognized at cost less the amount if the impairment loss if any occurred at the end of the year. Other Intangible assets including the brands, trademarks and others are valued at the cost less the impairment loss and less the amount of accumulated amortization and the amortization are calculated on straight line basis in consonance with the estimated useful life of the asset. The above are the key accounting policy that has been identified from the annual report of the company. There is other accounting policy also like inventories, accounts receivable, etc. Financial Information Flexibility The financial information is provided through the annual report of the company. These are sometimes to some extent enjoys the flexibility in terms of the distortion or manipulating the actual results of the company. These are generally in the hands of the managers of the company involved in the executing and the planning function of the company. Following instances has been observed where is clear that flexibility has been enjoyed by the managers: Useful lives- In the note number 3.3 of the annual report of the company, the managers of the company determines the useful life of an asset depending upon the historical experience that the company has faced and the management uses their judgments for assessing the condition of the assets on an annual basis and determines the useful life of an asset accordingly (Bryer, 2013). It is because of this fact, the company has not specified the fixed percentage of depreciation or the amortization rates and rather they have mentioned the depreciation rates as per the slab like the depreciation rate of the building has been specified between the gap of 1% to 10% and mineral reserves and licenses are depreciated between the gap of 1% to 5%. These are so tailored so as to increase the net worth of the company and it moreover will benefit to the shareholders of the company and also the stakeholders. The shareholders and the stakeholders are interested in the knowing the return on assets immediat ely after having the earnings per share. More the return more the investor will move forward to invest in the company (Cooper, 2015). Shareholders Interest - In the remuneration report of the company, it is mentioned that the remuneration of the key managerial personnel of the company will to some extent depends on the feedback of the shareholders of the company. If the feedback of the shareholders will be good regarding the performance of the company then the variable portion of the remuneration will be increased (Weygandt, 2012). There are much more incentives like increase in the sales revenue of the company, increase in the debtors and such other figures ensures that the managers have enjoyed the flexibility in accounting. Strategy In Accounting Every company has their own strategy in operating the business. Some develops their own strategy and some develops on the basis of the conditions in the market. In this case the company has developed its own strategy and that too in accordance with the market conditions. The two strategies have been adopted by the company which has led the managers to enjoy the flexibility in the financial accounting as well as in the financial reporting. In the first case, the company has adopted the strategy to ensure that the interest of the shareholders of the company are considered at the highest peak and due to this the useful lives of an asset and the depreciation rates have been mentioned in the longer gap depending upon the checking on an yearly basis as to the condition of the asset. Secondly the company has adopted the strategy of including the shareholders feedback as the part of determining the increment level in the remuneration of the company (Ingram, 2008). The company has included th e same keeping in consideration the collapses that have taken place across the globe on the continuous basis. It is because all the companies including the Lehman Brothers, HIH Insurance and others have been collapsed as the company was not looking after the fall down of the value of the shareholders of the company in the eyes of the operations of the company (Kothari and Ball, 2014).. In this way by increasing the shareholders wealth and confidence, the managers pay will increase and which in turn will increase make the managers to provide the financial information in the distorted manner so as to serve the purpose. Disclosure Quality In the beginning of the notes to the financial statements of the company, it has been stated that the company has complied with all the requirements of the Corporations act 2001 and the provisions of the accounting standards of the company. As per the listing rules of the recognized stock exchange of Australia, Company is required to follow the full and continuous disclosure scheme and accordingly the company has disclosed all the relevant facts and figures in the annual report of the company and as per the details on the website of the company, the company has been disclosing the facts and figures on the timely basis. For instance as per the Australian accounting standard number 116 on the tangible assets, the company is required to provide the full disclosure relating to the carrying amount of the asset, the amount of depreciation charged, impairment loss if any and the net carrying amount. Along with above figures the company is required to provide the accounting policy adopted by the company in connection with the valuation and measurement of the tangible assets and it has been observed by looking after the note number 3 of the annual report that the company has disclosed the required information effectively and efficiently (Sinha, 2012). Further as per the accounting standard on the segment reporting, the company is required to identify the reportable segment and is required to disclose the segment revenue and expenses and the loss thereon shall be mentioned. The company has done the reporting in the same manner (Company Official Website, 2017). Thus, the company has the high quality of the disclosure. Potential Flaws In Accounting Although identifying the flaws or the discrepancies in accounting from the annual report of the company without having the scrutiny of the ledgers and the books of accounts of the company is little bit difficult but as per the deep analysis of the annual report of the company, following potential flaws have been identified which required the urgent attention of the management of the company: The account receivable of the company has been considerably increased by 200 million dollar approximately where as the revenue of the company has been increased by 290 million dollar approximately. It indicates that there might be the situation where the revenue figure has been increased on bogus basis and also the debtors (Weiss, 2014). It might be done because of the two major reasons. One reasons is of the covenant imposed by the banks or the financial institutions of the company to have the high amount of the accounts and receivable and the second reason is of the having the higher remuneration from the company by the managers of the company. Second reason is that the financial income has been considerably increased from 7.6 million dollars in the year 2016 to 24.4 million dollars in the year of 2017 (Phillips and Heiser., 2011).. The increase exhibits that there might be the possibility of having the losses which has been converted into profits. Conceptual Framework Every operation has the structure in which the way of performing that function is described. The function may be small or big but the way of doing that function will remain the same. Similarly, in case of accounting the structure has been named as the conceptual framework of accounting. As per the conceptual framework of accounting, the information so provided shall be error free, neutral and shall b relevant for the users of the financial statements. In order to further enhance the information usefulness, the information shall be understandable and comparable. In the given case, the company has complied with all the accounting standards and the accounting concepts in the complete manner and have also complied with the requirements of the corporations act 2001 and have also considered the interest of the shareholders of the company and thus it depicts that the company has complied with the conceptual framework of accounting in the true spirit (Capital Markets Advisory Committee Meeting, 2013). Conclusion The success of any company whether it is big or small depends upon the efficiency of the finance function of the company. All the functions stops at the finance function and in case the latter functions ineffectively then the working of the company will come to the closure. Managers in planning and executing the function play the very important role. Managers generally have the flexibility in selection of the accounting procedures and the accounting concepts and sometimes they take the way which will benefit the managers in some manner. The report has laid down all the policies and the disclosure framework adopted by the company Boral Limited and has provided as to where be the discrepancies in the financial statements of the company which will be the potential risk matters. The report has laid down the importance of the conceptual framework of accounting. The report has answered all the questions of the investigation and has been able to achieve all the objectives of the study and thus it is concluded that the study has been able to describe that the company has been following the sound accounting policies and practices. References Anastasia, (2015), Financial Statement Analysis : An Introduction available on https://www.cleverism.com/financial-statement-analysis-introduction/ accessed on 28-09-2017 Bryer, R.A., 2013. Double-entry bookkeeping and the birth of capitalism: accounting for the commercial revolution in medieval northern Italy.Critical perspectives on Accounting,4(2), pp.113-140. Capital Markets Advisory Committee Meeting, (2013), Conceptual Framework available on https://www.ifrs.org/Meetings/MeetingDocs/Other%20Meeting/2013/March/AP%203%20conceptual%20framework.pdf accessed on 28-09-2017 Company Official Website, (2017), Annual Reports available at https://www.boral.com.au/accessed on 28-09-2017 Cooper S, (2015), A Tale of Prudence, available on https://www.ifrs.org/Investor-resources/Investor-perspectives-2/Documents/Prudence_Investor-Perspective_Conceptual-FW.PDF accessed on 28-09-2017 Ingram, R.W., 2008. A note on teaching debits and credits in elementary accounting.Issues in Accounting Education,13(2), p.411. International Accounting Standards Board, (2010), Conceptual Framework for Financial Reporting 2010 , pages 16-21 Kothari, S.P. and Ball, R., 2014.Financial statement analysis. Mcgrew-Hill Companies. Phillips, F. and Heiser, L., 2011. 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