AGL Energy Limited: An Overview
Question:
Discuss about the Critical Analysis With Application To General Purpose Financial Reporting (GPFR) By Corporations .
The general purpose financial reporting (GPFR) is necessarily a means of communicating pertinent as well as dependable information regarding a reporting entity to various users. Essentially, the primary purpose of the general purpose financial reporting (GPFR) is to deliver the base of conceptual framework. Also, the objective is also to present pecuniary information as regards the reporting unit that is effective for subsisting as well as potential financiers, lenders along with creditors in arriving at decisions. The main purpose of the study at hand is to elucidate illustratively regarding application to general purpose financial reporting with special reference to the reporting entity AGL ENERGY LIMITED.
AGL ENERGY LIMITED is fundamentally an Australia listed public corporation engaged in the process of generation as well as retailing of electricity as well as gas particularly for the residential along with commercial usage (Agl.com.au 2018).
The report necessarily explicates in detail evaluation of various factors on different measurement bases relying upon conceptual framework of AGL ENERGY LIMITED. The financial statements of the firm are prepared as per the Corporations Act of the year 2001 and Accounting Standard of AASB 1039 Concise Financial Reports. As presented in the annual report of the corporation, the concise financial assertions are necessarily an extract from the specific financial statements and disclosures stated in the concise financial assertions (Deegan 2013). These are deduced from entire financial statements of the firm AGL Energy Limited. The concise financial assertions in their viewpoint comply with the Accounting Standards AASB 1039 Concise Financial Reports. As per AASB 1039, The Australian Accounting Standards Board prepares Accounting standards to be prepared and implemented by different units. The units include entities as required by directive of Corporations Act of the year 2001 to present financial assertions, government bodies to prepare financial assertions for government or government sector and entities operating in the private/public sector (Watts and Zuo 2016). These are reporting business entities or else the ones that prepare General purpose financial statements. It primarily emphasizes on specific governance that involves analysis of conformation with directives along with directives of general purpose financial reporting. This study also illustrates comprehension regarding measurement concepts along with proper justification from the financial report of the firm AGL ENERGY LIMITED (Agl.com.au 2018).
The main audience of this GPFR are subsisting as well as potential financiers of a business, debtors along with creditors of the business that are responsible for framing economic decisions as regards presenting resources to the business enterprise.
Chief objectives/aims of the conceptual framework:
Conceptual framework refers to intentions as well as principles of the general purpose financial report (GPFR). Fundamentally, conceptual framework can be effective mechanism that can aid the board of the firm in enhancing financial standards based on particular principles, ideas as well as themes (Watts and Zuo 2016). Furthermore, it can be hereby mentioned that individuals accountable for both preparation as well as presentation of financial assertions can formulate effective and at the same time dependable financial stratagems of accounting. Contrarily, financial standards can aid in enhancing overall procedure of adoption of particular scheme and arrangement of accounting.
Evaluation of Various Factors Based on Conceptual Framework of AGL ENERGY LIMITED
In essence, assessment of financial pronouncements of the corporation replicates adherence to the stipulations mentioned in the directives of particularly Conceptual Framework of Australian Accounting Standards Board (AASB). For itself, this essentially helps in acquiring thorough understanding and deep insight regarding purpose of financial announcements, qualitative exclusivity that consequently institutes efficacies of financial assertions. Even so, there are different elements of financial statements that can aid users to utilize the acquired information to formulate economic decisions pertaining firms’ sales, purchases as well as holdings portfolio, debt instruments as well as settlement of borrowed finances (Watts and Zuo 2016). Therefore, information regarding revenue, assets, liabilities, equity, receivables and many others can help users of this financial information regarding capabilities as well as resources of the corporation. This too can help in analysis of prospects of the enterprise in the future period.
Diverse measurement concepts (Conceptual Framework):
As rightly indicated by Whittington (2016), the conceptual framework necessarily reflects intentions along with principles of general purpose financial reporting. In actual fact, the conceptual framework is an effective tool that can aid the entire board of the firm in the procedure of development of financial standards based on diverse notions. Also, conceptual framework also assists preparers of particular financial assertions to develop effective and simultaneously reliable stratagems of accounting whilst the financial standards can validate the selection of specific plan of accounting (Christensen et al. 2016). Apart from this, the conceptual structure also upholds the entire course of understanding with analysing standards of accounting. Furthermore, specific intention as well as functions of the conceptual structure is also to augment entire structure of firm’s financial coverage by delivering an absolute, reframed as well as understandable set of principles.
The financial assertions of the firm AGL ENERGY LIMITED, conforming to the “Conceptual Framework” assists in handling different intentions of the financial statements, different quantitative exclusivity that consequently assists in establishment of usefulness of financial reports of the firm. Nevertheless, there are necessarily various components that can facilitate in the process of devising the whole economic reports (Baxter 2014). As such, the obligatory workings of financial declarations comprise of assets/ liabilities (including both current as well as non-current ones) as well as shareholders’ equity. Diverse items of financial assertions explicates overall financial state of affairs of the business enterprise (Hui 2015). In addition to this, the framework also aids in procedure of investigation of financial state of affairs of business enterprise from standpoint of income, functional expenditure as well as earnings. Above and beyond, the conceptual framework (CF) also explicates illustratively varied principle together with important features for identification and acceptance of diverse items in pecuniary assertions of enterprises.
Analysis of financial statement primarily refers to review of consolidated financial declaration of the corporation AGL Energy Limited. The pronouncements of the firm are presented according to directives stated under Australian Accounting Standard Board (AASB) 1039 and Corporation Act of the year 2001. In essence, AASB 1039 cannot spell out whether a particular concise financial report formulated under the derivative 314 of the Act is a general purpose financial report (GPFR) within the connotation illustrated in “Accounting Standard AASB 101” as preparation as well as presentation of firm’s financial Statements.
Measurement Concepts of Conceptual Framework
Assets: As said in the yearly pronouncements of the enterprise AGL Energy Limited”, assets recorded for AGL Energy Limited is $14604 million (Agl.com.au 2018). The assets of the firm possessed are necessarily expressed in terms of operational currency that is essentially Australian Dollars. Nevertheless, process of analysis of assets mentioned in financial assertions replicate that the assets can be classified as held for sale (Ryan et al. 2014). The fair value of the current assets of the firm is necessarily presented at current value.
Liabilities: As mentioned in the economic pronouncements in the yearly report of the firm, liabilities of the corporation AGL Energy Limited is listed to be apprpoximately $6678 million (Agl.com.au 2018). In actual fact, balance sheet of the firm mentions about the liabilities of the firm that reflects funds that is used for financing various business operations. Evaluation of financial assertion represents that liability is presented in terms of operational currency of the firm (Newberry 2015). The liability registered for the firm is specified at specific fair value of diverse plan liabilities after appropriate subtraction of definite present worth of distinct benefit necessities.
Equity: A methodical study of balance sheet of the business enterprise reveals that equity recorded for firm’s shareholders stands at $7926 million during the year 2016 (Agl.com.au 2018). According to the annual financial pronouncements of the firm, AGL utilizes financial instruments (that is specifically derivatives), derivatives is presented at fair value in the profit as well as loss statement enumerated at fair value (Luke 2016). Thus, it can be said that company utilizes diverse models/themes on accounting the derivatives that has the need of fair value measurement.
Revenue: Revenue of the firm is recorded to be $11150 million during the year 2016 (Agl.com.au 2018). The financial statements of the firm reveal that the revenue of the firm is calculated at the fair value received. Revenue can also be calculated dependably (Dagwell et al. 2015). At the time when particular services are not delivered but the entire group is obliged to present services in the future period, recognition of revenue gets deferred.
As per the financial statement of the corporation, receivable of the firm AGL Energy Limited is recorded to be $1975 million in 2016 in comparison to $1894 million in 2015 (Agl.com.au 2018). Receivables as stated in financial assertions take in current as well as non-current receivables. Declarations replicate increase in receivables of the corporation. Essentially, this increase in the accounts receivables shows the way towards increase in debtors as well as sundry debtors (Henderson et al. 2015). In addition to this, the corporation necessarily identifies the receivables at the fair value and calculates the same at amortised cost utilizing specifically interest method after deduction of disbursements for the purpose of impairment. In itself, it can be hereby mentioned that this is an optimal framework for capital that cam aid in reducing overall debt level and enhancing firm’s liquidity. In essence, this can augment overall return (Yong et al. 2016).
Plant, property as well as equipment: According to the yearly pronouncement of the corporation, plant, property in addition to equipment (PPE) of the enterprise is registered to be approximately $47 million in the year 2016 (Agl.com.au 2018). Nonetheless, plant, property in addition to equipment (PPE) of the corporation has decreased considerably during the current year 2016 in comparison to the previous year period. The reports reflected the fact substantial decrease in PPE. Analysis of financial assertions replicated non-recurring fair value enumeration for the PPE that can be categorised as held for sale. In essence, this can be classified as the fair value platform that is founded on the use of diverse mechanisms for review (Watts and Zuo 2016).
Objectives of Conceptual Framework
Depreciation: According to the yearly monetary statement of the firm AGL Energy Limited, it can thus hereby be pointed out that depreciation as well as cost of amortization is recorded to be $99 million after reduction following from diverse non-cash impairment to the firm (Agl.com.au 2018). This figure on depreciation and amortisation is said to have increased from the level of $89 million registered during the year 2015.
Conclusion and Recommendation
Therefore, in the end it can be said that preparers of financial assertions necessarily adheres to the stipulations mentioned under Corporation Act- 2001 in conjunction with listing set of laws mentioned under particularly Australian Stock Exchange- ASX. In addition to this, management of the firm has undertaken the stratagem of delivering constant disclosures that sequentially can aid various investors in gaining a clear understanding as regards financial performance and condition of corporation. In essence, AASB 1039 cannot spell out whether a particular concise financial report formulated under the derivative 314 of the Act is a general purpose financial report (GPFR). However, as per AASB 1039, The Australian Accounting Standards Board prepares Accounting standards to be prepared and implemented by different units. The units include entities ones that prepare General purpose financial statements among others. Financial assertions of the firm AGL ENERGY LIMITED effectually adheres to the conceptual framework Australian Accounting Standards Board (AASB) or else principle models of IASB. Management of the firm can consider presentation of continuous disclosures that can help in enhancing financier’s confidence as regards integrity, dependability as well as transparency of functions of the corporation along with financial statements presented by the firm. This can require faithful representation of information and relevance (fundamental qualitative characteristics) and enhancing qualitative characteristics (comparability, verifiability, timeliness and understandability). This way user of information can frame their economic decisions more seamlessly.
References
Agl.com.au. 2018. [online] Available at: https://www.agl.com.au/-/media/DLS/About-AGL/Documents/Investor-Centre/160828_AR_1587084.pdf?la=en&hash=13EAF92E7F582B2D3C29BFF401F1C973A464F550 [Accessed 18 Apr. 2018].
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