Conceptual Framework Objectives
The main aim of this report is to conduct an analysis and evaluation on different elements and requirement of the accounting conceptual framework. In Australia, the Australian Accounting Standard Board (AASB) has introduced a conceptual framework containing all the necessary standards and principles of financial accounting with the help of International Accounting Standard Board (IASB) (Conceptual Framework for Financial Reporting, 2018). It is the responsibility of the Australian Security Exchange (ASX) listed business entities to follow these standards and principles in their financial accounting process in order to avoid the accounting issues. For the completion of this report, Computershare Limited is taken into consideration. Founded in the year of 1978, Computershare Limited is a technological company of Melbourne. One major reason of selecting this company is its inclusion in the ASX (Our Story, 2018).
The main aim of the introduction of conceptual framework is to make the companies comply with its standards and principles. In this process, the AASB conceptual framework has three major objectives. They are stated following:
- The first objective is to provide the user with the necessary information about the economic resources of the business entities so that they can determine the financial position of those companies (Newberry, 2015).
- The second objective is to deliver the required information so that the users can determine the financial performance of the business organizations (Tello, Hazelton and Cummings, 2016).
- The third objective is to deliver the necessary information about the change in financial position of the business entities for the determination of change in financial performance and position of them (Tello, Hazelton and Cummings 2016).
These are the major objectives of conceptual framework of AASB. Now, it is required to determine whether Computershare Limited has complied with these objectives.
By referring the above figure, it can be observed that Computershare Limited releases all the required information about the aspects like current assets, non-current assets, liabilities and others so that it becomes helpful for the investors, creditors and other users in ascertaining the financial standing of the company (Annual Report 2017, 2018).
By referring the above figure, it can be said that Computershare Limited provides their users with the necessary financial information about the financial performance related aspects like revenue, expenses, profit and others. This information helps in determining the financial performance of Computershare Limited (Annual Report 2017, 2018).
By referring the above figures, it can be observed that Computershare Limited provides the information related to the change in financial position like change in profit, change in equity and others with the help of change in equity and cash flow statements. It helps the users is ascertaining the change in financial performance and position of the company (Annual Report 2017, 2018).
Moreover, the 2017 Annual Report of Computershare Limited states that the company follows Corporations Act 2001, Australian Accounting Standard and AASB for the preparation and presentation of their financial statements; and complies with IASB and International Financial Reporting Standards (IFRS) in order to bring uniformity and transparency in the whole financial reporting process (Annual Report 2017, 2018).
Target Audience
As per AASB, target audience is the users of financial information for different decision-making purposes; they are investors, creditors, banks, government, tax authority and others (Conceptual Framework for Financial Reporting, 2018). They take investment and other decision based on the financial performance of the companies. From the earlier discussion, it can be seen that Computershare Limited releases different financial statements like income statement, statement of financial position, change in equity statement and cash flow statement for providing the target audience with adequate information for the different purposes (Annual Report 2017, 2018). Thus, it can be mentioned that the target audience can gather adequate information from the financial statements of Computershare Limited.
It is an important aspect as it is necessary for the ASX listed companies to comply with the criteria of AASB conceptual framework for the recognition of major financial items like assets, liabilities, equity, revenue and expenses. While complying with these criteria, business entities need to take into consideration all the financial information related to the recognition of the above-mentioned elements. Moreover, they need to make sure that there is a faithful representation of these financial phenomena as these are required for the correct recognition of financial elements (Conceptual Framework for Financial Reporting, 2018). The following discussion shows the level of compliance with these recognition criteria by Computershare Limited.
Revenue: Fair value method is used in Computershare Limited for the recognition of revenue on the consideration received or receivable as per AASB 118 (Revenue, 2018). The amount of revenue is net of returns, volume rebates and trade discounts.
Expenses: Computershare Limited recognizes all of their expenses in the income statements at the time of their occurrence as per the principle of AASB (Conceptual Framework for Financial Reporting, 2018).
Equity: In Computershare Limited, ordinary share capital is considered as equity and they do not bear any special terms or conditions that can affect the income of the company. While recognizing equity, the company takes into consideration all the costs directly attributed towards the issue of shares as per AASB 1004 (Contribution, 2018).
Assets: Trade and other receivables are the current assets of the company and the recognition process is done based on fair value and they are measured at amortized cost after the deduction of provision and impairment as per AASB 9 (Financial Instruments, 2018).
For the recognition of property, plant and equipment, Computershare Limited follow AASB 116 and measured them at historical cost value after considering accumulate depreciation and impairment costs (Property, Plant and Equipment, 2018).
Recognition Criteria
The company recognizes their goodwill in fair value and it is subject to impairment. Fair value is used for the recognition of other intangible assets as per AASB 138 (Intangible Assets, 2018).
The recognition and valuation of inventory is done based on lower cost and net realizable value as per AASB 102 (Inventories, 2018).
Liability: Interest bearing liabilities are the major non-current liabilities of Computershare Limited and the company recognizes them based on fair value and measured them on amortized costs as per AASB (Conceptual Framework for Financial Reporting, 2018).
The amount of trade and other payable is unsecured and they are paid within 30 days f recognition as per AASB 9 (Financial Instruments, 2018).
The company recognizes the amount of provision in case there is any present obligation due to any past event as per AASB (Conceptual Framework for Financial Reporting, 2018).
Hence, the above discussion shows that Computershare Limited fully complies with all the recognition criteria of AASB conceptual framework (Conceptual Framework for Financial Reporting, 2018).
The presence of fundamental qualitative characteristics of financial reporting makes the financial information more useful as well as purposeful. As per AASB, there are two fundamental qualitative characteristics; they are Relevance and Faithful Representation:
Relevant financial information can create positive impact on the decision-making process of the users and the absence of relevant information can create material effect on the financial statements of the business entities (Conceptual Framework for Financial Reporting, 2018). Computershare Limited provides all the relevant financial information to the users with the help of relevant financial statements like income statement, statement of financial position and others (Annual Report 2017, 2018).
Faithful representation of financial information ensures the correct and fair presentation of the financial information of the companies in order to help the users (Conceptual Framework for Financial Reporting, 2018).
The above audit report of Computershare Limited shows that the company has prepared and presented their financial statements by complying with all the required standards so that true and fair value can be provided and this aspect supports the argument of faithful representation of financial statements by Computershare Limited (Annual Report 2017, 2018).
As per AASB, there are four enhancing qualitative characteristics of financial reporting; they are Comparability, Verifiability, Timeliness and Understandability.
The presence of comparability makes the users understand the basic difference and similarities in the financial information of more than one entity (Conceptual Framework for Financial Reporting, 2018). In case of Computershare Limited, the users can compare the financial information of Computershare Limited with the other companies by applying adequate knowledge (Annual Report 2017, 2018).
The presence of verifiability helps the users in verifying the financial numbers provided by the business entities (Conceptual Framework for Financial Reporting, 2018). The release of various notes of financial statements by Computershare Limited helps the users in verifying the accounts balances (Annual Report 2017, 2018).
In the presence of timeliness characteristic, the users can get their required financial information when they are required (Conceptual Framework for Financial Reporting, 2018). In order to provide financial information at time to the users, Computershare Limited releases their financial results at a specific time of the financial years (Annual Report 2017, 2018).
In the presence of understandability characteristic, the users can understand the accounting process of the companies with adequate financial knowledge (Conceptual Framework for Financial Reporting, 2018). The financial reports of Computershare Limited are developed as per the simple rules of AASB that ensures the necessary understadability of the users (Annual Report 2017, 2018).
Conclusion
The above discussion shows the compliance of Computershare Limited with all the required standards and principles of AASB conceptual framework like the conceptual framework objectives, the recognition criteria and both the fundamental as well as enhancing qualitative characteristics. Due to the compliance of all these standards, Computershare Limited does not have to face any accounting issue while conducting their financial operations.
References
Aasb.gov.au. 2018. Conceptual Framework For Financial Reporting. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Contributions. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Financial Instruments. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Intangible Assets. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Inventories. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Property, Plant And Equipment. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf> [Accessed 20 April 2018].
Aasb.gov.au. 2018. Revenue. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf> [Accessed 20 April 2018].
Computershare.com. 2018. ANNUAL REPORT 2017. [online] Available at: <https://www.computershare.com/News/CPU_Annual_Report_FY2017.pdf> [Accessed 20 April 2018].
Computershare.com. 2018. Our Story. [online] Available at: <https://www.computershare.com/corporate/about-us/who-we-are/our-story> [Accessed 20 April 2018].
Kober, R., Lee, J. and Ng, J., 2013. GAAP, GFS and AASB 1049: perceptions of public sector stakeholders. Accounting & Finance, 53(2), pp.471-496.
Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public Money & Management, 35(5), pp.371-376.
Tello, E., Hazelton, J. and Cummings, L., 2016. Potential users’ perceptions of general purpose water accounting reports. Accounting, Auditing & Accountability Journal, 29(1), pp.80-110.
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