Objectives of GPFR
Conceptual framework for the general purpose financial reporting (GPFR) establish the framework for preparing explicit concepts for financial statement presentation. These concepts are required to be applied while developing the IPSASs (International Public Sector Accounting Standards) and various other documents that will provide the guidance regarding information those are included in GPFRs (Iasplus.com, 2018). As per the GPFR, the accrual basis for accounting is followed where the transactions and different events are recorded in the financial statement while they actually take place.
TPG Telecom Limited offers telecommunication services to small business, residents, governments, wholesale customers all over Australia and other countries. If further offers Ethernet and fibre optic broadband access, ADSL2+, telephony services, NBN, SIM only plans for mobile, internet protocol television and other networking solutions. Further, the company owns the end-to-end infrastructure for network that includes more than 400 DSLAM enabled telephone exchanges all over Australia. It can be identified from the annual report of the company that the financial statements of the company are general purpose financial statements (Tpg.com.au, 2018). The financial statements of the company are prepared following the AASBs (Australian Accounting Standards) that is issued by AASB (Australian Accounting Standards Board) and Corporation Act 2001. Further, the statements are complied with the IFRS (International Financial Reporting Standards) issued by IASB (International Accounting Standard Board).
To recognize any item in the financial statement as per conceptual framework it must satisfy two criteria. These are –
- The value or cost of the item shall be measurable with reliability
- It shall be probable that future economic benefit linked with item will flow from or to entity (Bebbington and Larrinaga, 2014, pp.395-413).
Asset is recognized by the company in its balance sheet while it is likely that the economic benefit linked with the asset will flow to entity and the value or cost of the asset is measurable with reliability. However, the economic benefits indirectly or directly contribute in form of cash or the cash equivalent. Assets of TPG Telecom Limited that includes plant, equipment and property are recorded at cost amount which is reduced by accumulated impairment and accumulated depreciation (Chen, et al., 2013. pp.233-260). Directly attributable borrowing cost like production, construction or acquisition cost for the qualifying asset are added up with the asset cost. Subsequent costs of the asset are added up to the existing asset if it is likely that the future economic benefit linked with item will flow to entity. Further, when the part of the asset have different period of useful lives, those will be accounted as separate item for the asset. Intangible asset like goodwill that arises from acquisition of any subsidiaries are measured at cost and the amount is reduced by the amount of impairment losses.
Liability is recognized by the company in its balance sheet while it is likely that the economic benefit linked with the liability will flow from the entity and the value or cost of the liability is measurable with reliability. Liabilities of the company are segregated into current liabilities and non-current liabilities on the basis of their settlement period. The liabilities those are required to be settled within 12 months are segregated as current liabilities. On the contrary the liabilities those are required to be settled after 12 months period are segregated as non-current liabilities (Byrne, D., 2018. pp. 1-14). It can be identified from the annual report of the company that the liability associated with employee benefits shall be calculated through projected future increase with regard to salaries and wages.
Recognition criteria
Further, the company recognizes the provision under the financial statement while it has present obligation owing to past event and it is likely that the economic benefit linked with the liability will flow from the entity to settle down the obligation (Cheng, et al., 2014. pp.90-119). Provisions are determined through discounting the projected future cash flow at the pre-tax rate. However, the unwinding of discount is recorded as finance expense.
It can be recognized from the annual report of the company that the equity includes share capital, retained earnings and reserves. Ordinary share of the company is segregated as equity. Directly attributable incremental costs related to the issue of share options and ordinary shares are recoded as deduction from the amount of equity after deducting tax, if any (Frias?Aceituno, Rodriguez?Ariza and Garcia?Sanchez, 2013. pp.219-233).
Revenue is recognized in income statement while the increase in the future economic benefits linked to the reduction in liability or enhancement in asset has been created that is measurable with reliability. Revenue of the company includes rendering of the telecommunication services that further includes internet, data, network capacity, telehousing, voice and various other services to corporate customers and consumers. The revenue is recognized by the company on straight-line basis over the time during which the services are provided. Further, the usage revenue related to voice services is recorded after completion of the call (Crookes and Conway, 2018. pp. 61-83). When the service revenue is invoiced to the customer in advance, the unearned revenue at the reporting date is recorded in financial statement as deferred income and the recognition under income statement will be deferred till the time to which the amount of invoice is related.
Expenses is recognized in income statement while the decrease in the future economic benefits linked to the enhancement in liability or reduction in asset has been created that is measurable with reliability (Francis, Hasan and Wu, 2013. pp.319-346). It is identified from the annual report of the company that the expenses like income tax are recorded under the income statement except to extent that is linked with the business combination.
Financial information included in the financial statements is capable of creating difference to decision made by the users. For making the difference the financial information has confirmatory value or predictive value or both. As per the revised conceptual framework 2 types of the qualitative characteristics shall be complied with to provide the useful information regarding finance. These are –
- Fundamental qualitative characteristics are faithful and relevance representation
- Enhancing qualitative characteristicsare comparability, verifiability, timeliness and understand ability (Li, 2013. 1082-1098)
Faithful representation – as per the conceptual framework the financial statement shall be presented in true and fair manner. It is identified that the financial statement of TPG Telecom Limited has been presented in true and fair manner (Griffith, Hammersley and Kadous, 2015. pp.833-863). Further, the auditors did not find any material misstatement in the presentation of financial report.
Relevant presentation – financial information recorded in the financial statement shall be relevant to make it reasonable for the users for taking any decision. It can be identified from the company’s annual report that the financial information has been presented in relevant way. Further, the items have been differentiated under proper head and the same is disclosed through notes (Miller and Power, 2013. pp.557-605).
Recognition of asset
Comparability – the information to be useful must be able to be compared with the data of other companies or the data of the same company for any previous year. It can be identified from the annual report of the company that the company presented the current year data along with the previous year’s data to make it comparable. Further, the financial and operating performances of the company have been presented through graphs to make it more presentable (Tpg.com.au, 2018).
Verifiability – it is identified that the financial information presented through financial statement of the company can be verified through supporting disclosures and notes. Further, the items under various head have been properly segregated.
Timeliness – financial data shall be presented in timely manner to make it useful for decision making. For instance, information shall be presented company publishes its financial results in timely manner. Each year it publishes the data through half-yearly annual report and annual report (Tpg.com.au, 2018).
Understandability – data presented in the financial statement is understandable as details regarding the items and its calculation are clearly presented trough notes.
Conclusion
It can be concluded though analysis of the financial statement of TPG Telecom Limited complies with all the requirement of conceptual framework to present the financial statement as per GPRSs. Further, it follows all the qualitative characteristics of conceptual framework in preparing the financial statements.
Company is recommended to present last 5 years financial and operating performance related data in table format. Further, the changes shall be presented in percentage form. It will enable the potential investors to analyse the past performance of the company.
Reference
Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39(6), pp.395-413.
Byrne, D., 2018. Introduction. In Contemporary Issues in Accounting (pp. 1-14). Palgrave Macmillan, Cham.
Chen, L.H., Folsom, D.M., Paek, W. and Sami, H., 2013. Accounting conservatism, earnings persistence, and pricing multiples on earnings. Accounting Horizons, 28(2), pp.233-260.
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international integrated reporting framework: key issues and future research opportunities. Journal of International Financial Management & Accounting, 25(1), pp.90-119.
Crookes, L. and Conway, E., 2018. Technology Challenges in Accounting and finance. In Contemporary Issues in Accounting (pp. 61-83). Palgrave Macmillan, Cham.
Francis, B., Hasan, I. and Wu, Q., 2013. The benefits of conservative accounting to shareholders: Evidence from the financial crisis. Accounting Horizons, 27(2), pp.319-346.
Frias?Aceituno, J.V., Rodriguez?Ariza, L. and Garcia?Sanchez, I.M., 2013. The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), pp.219-233.
Griffith, E.E., Hammersley, J.S. and Kadous, K., 2015. Audits of complex estimates as verification of management numbers: How institutional pressures shape practice. Contemporary Accounting Research, 32(3), pp.833-863.
Iasplus.com., 2018. Conceptual Framework for Financial Reporting 2018. [online] Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 17 Aug. 2018].
Li, J., 2013. Accounting conservatism and debt contracts: Efficient liquidation and covenant renegotiation. Contemporary Accounting Research, 30(3), pp.1082-1098.
Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting accounting research and organization theory. Academy of Management Annals, 7(1), pp.557-605.
Tpg.com.au., 2018. About TPG – Company Profile. [online] Available at: https://www.tpg.com.au/about/profile.php [Accessed 16 Aug. 2018].
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