Objectives of the GPFR
Conceptual framework associated with general purpose financial reporting provides IPSASB (International public sector accounting standards board) with various concepts for strengthening the development of IPSASs (International Public Sector Accounting Standards). It deals with various concepts required for presenting the general purpose financial reporting (GPFR) in accordance with the accrual accounting basis. Various concepts required to be considered includes objectivity, recognition criteria, qualitative characteristic, elements, financial statements and constraints (A Review of the IASB’s Conceptual Framework for Financial Reporting 2018).
Boral Limited, the ASX listed company is engaged in manufacturing and supplying the construction materials all over Australia, Asia and United States. It delivers blocks, asphalt, bricks, concretes, cementitious materials, retaining walls, pavers, plasterboards, roof tiles, stones, window, masonry, roofing, fly ash and material technical. Apart from that is is engaged in landfill, property and transport activities (Boral.com.au 2018).
The financial statement of the company represents consolidated results of the company. It is a for-profit company that is limited by the shares and domiciled and incorporated in Australia and company’s shares are traded in ASX. It is observed from the financial report of the company for the year ended 2018 that the GPFR is prepared as per the requirement of Corporation Act 2001 and AASs (Australian Accounting Standards) adopted by AASB (Australian Accounting Standards Board). Further, the CFS (Consolidated financial statements) of the company is complied with the IFRS (International financial reporting standards) adopted by IASB (International Accounting Standards Board).
Purpose of financial reporting by publicly held entities are to provide the useful information of the entity to the users for enabling them to make appropriate decisions based on the accounting data of the company.
Conceptual framework requires the financial statements to be presented in such a way that the amount of cash flows can be predicted from it. From the cash flow statement of the company for the year ended 2018 it can be found that the cash balance from each activities like operating, investing and financing activities are clearly mentioned (De Villiers, Rinaldi and Unerman 2014). Further, the cash balances at the beginning of the year as well as closing of the year are mentioned clearly.
As per the compliance of conceptual framework financial statement shall provide clear information as regards to the available resources of the entity, sources through which the resources are generated and the changes in the resources. It is noticed from the company’s financial report that entity’s financial statement clearly stated the changes in resource levels and its generation source (Garrett, Hoitash and Prawitt 2014).
As per the requirement of GPFRs the financial statements shall include various elements like asset, liabilities, equity, revenues and expenses to provide proper information to the users. The entity recognises any element in its financial statement when its value can be reliably measured and it is apparent that the future economic benefit will flow to the entity or economic outflow will take place for fulfilling any obligation.
When it is likely that future economic benefits related to the particular asset will be inflow for the entity it recognizes the asset it its balance sheet. It is recognised from the company’s balance sheet for the year ended 30th June 2018 that the asset of the company is segregated into current assets as well as non-current assets. While the current assets include cash, inventories, receivables and financial assets, non-current assets include PP&E, intangible assets, receivables, investors and financial assets (Kogan, Sudit and Vasarhelyi 2018).
Useful information for making decision
When it is likely that the future economic outflow related to fulfilment of an obligation will take place for the entity it recognizes obligation as liability in its balance sheet. It is recognised from the company’s balance sheet for the year ended 30th June 2018 that the liabilities of the company is segregated into current liabilities and non-current non-current. Current liabilities include trade creditors, financial liabilities, borrowing and loans, current tax liabilities and provisions whereas the non-current assets long term trade creditors, financial liabilities, borrowing and loans, liabilities for employee benefits, deferred tax liabilities and provisions (Morioka and De Carvalho 2016).
Equity section of the balance sheet for the company includes issued capital, retained earnings and reserves. Further, details regarding each item like opening balance and closing balances are disclosed through notes to the accounts.
Revenues from sales are recognised when the goods are delivered to the customers and that is the point of time when the goods are accepted by the customer and the rewards and risks related to the goods are transferred to the customer. Further, the revenue is recognised if the amount can be reliably measured and it is likely that the consideration will be recovered and no continuing management is involved with goods (Boral.com.au 2018).
Expenses are recognised by the company when economic resources are expensed by it for generating economic benefits. Further, the expenses shall be related to increase in liabilities or decrease in assets that can be reliably measured.
Recognition and measurement is another key factor to determine whether the information provided through financial statement of the company are properly recognised or measured as per the requirement of GPFRs.
Financial statements preparation requires the management to make estimates, assumptions and judgements regarding future events. Assumptions made by the company regarding revenues, receivables, intangible assets, PPE, provisions and tax expenses are properly disclosed through the notes. Further, it is recognised from the financial statement that the Director’s of the company regularly review the dividend policy and capital structure of the company and do so for assessing the company’s going concern status (Boral.com.au 2018). Further, the company in compliance with the requirement of GPFRs publish their financial statements on annual basis and 6 months basis.
Financial statements of the company are prepared on the foundation of historical cost except for the revaluation of few financial instruments. Cost is depended on the fair values of consideration that is given for exchanging the assets. Amounts are reported in Australian dollars, unless it is note otherwise. Further, the financial statements are prepared taking into consideration the matching principle (Zhang and Andrew 2014). For instance, income is reported on systematic basis over periods required for matching with related costs under which it required to be compensated. Further, details regarding all the items are properly disclosed through notes to the accounts.
Qualitative characteristics for the information provided through financial statements of the company recognizes the types of information those seems to be most important for the users of the financial statements while making decisions on the basis of the information provided.
Primary requirement of financial statement’s preparation as per GPFRs is the information shall be relevant and reliable so that the users can make their valuable decisions.
- Relevance – Financial information presented in the financial statement of the company shall be presented in such manner that the information will be relevant to the users while making any decisions. From the financial report of Boral Limited for the year closed on 30thJune 2018 it is noticed that financial data are presented and segregated in proper manner so that the users find it relevant (Zhang and Andrew 2014). Further, the information is presented within the time frame to which it relates. It enables the users to make comparative assessment with the previous period’s performance. Further, the reports of the company are published annually as well as semi-annually.
- Reliability – Financial information presented in the financial statement of the company shall be reliable to the users while making any decisions otherwise they will end up with wrong decisions. The information presented by Boral Limited in their annual report are seems to be reliable as the amount for each item can be verified through the notes disclosed with the financial statements (Simnett and Huggins 2015). Further, as per the CEO and CFO of the company the financial records are maintained properly and are complied with proper accounting standards and provides true and fair view of the entity’s financial performance and position.
- Materiality – information are material if the omission or misstatement have impact on the user’s decision making process. It is recognised from the finnacial report of the company for the year ended 30thJune 2018 that material items are properly disclosed under the notes to financial statements (Cheng et al. 2014). Further, as per the review of auditors no material misstatement were found in the financial statements presented by the company.
Secondary requirement of financial statement’s preparation as per GPFRs is the information shall be comparable and consistent so that the users can make their valuable decisions.
- Comparability – It the qualitative character that enables the users of financial statement to identify and understand the differences and similarities among the items provided in financial statements (com.au 2018). It is recognised from the annual report of the entity for the year closed on 30thJune 2018 that the company presented the data through tables and graphs that will enable the users to make proper comparisons.
- Consistency – As per the requirement of GPFRs the accounting approach and accounting standards used by the company shall be used consistently to provide the information more transparently (Cajaiba-Santana 2014). It is recognised from the financial report of the entity for the year ended 30thJune 2018 that the accounting standards and recognition approaches used by the company are used on consistent basis.
Conclusion
From above discussion it is found that Boral Limited is complying with all the requirement of the objectives under GPFRs. Users of the financial reports of the company can use the information reliably to make proper decisions. Further, all the recognition criteria for liabilities, assets, equities, revenues and expenses are met and followed consistently by the company.
Reference
A Review of the IASB’s Conceptual Framework for Financial Reporting., 2018. [ebook] Australian Accounting Standard Board. Available at: https://www.aasb.gov.au/admin/file/content105/c9/ITC29_07-13.pdf [Accessed 12 December. 2018].
Boral.com.au. 2018. Boral Australia: Build something great™. [online] Available at: https://www.boral.com.au/ [Accessed 6 Dec. 2018].
Cajaiba-Santana, G., 2014. Social innovation: Moving the field forward. A conceptual framework. Technological Forecasting and Social Change, 82, pp.42-51.
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
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), pp.1042-1067.
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp.1087-1125.
Kogan, A., Sudit, E.F. and Vasarhelyi, M.A., 2018. Continuous online auditing: A program of research. In Continuous Auditing: Theory and Application (pp. 125-148). Emerald Publishing Limited.
Morioka, S.N. and De Carvalho, M.M., 2016. A systematic literature review towards a conceptual framework for integrating sustainability performance into business. Journal of Cleaner Production, 136, pp.134-146.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), pp.17-26.
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