Conformance to measurement requirements
The conceptual framework for financial reporting provides the organisations with the necessary guidelines, principles and standards so that the financial statements could be presented and prepared accurately. The reason is to assist the users in extracting the necessary information about the organisations in order to undertake decisions (Beattie 2014). For this report, the conformance of an ASX listed organisation with the different needs of the conceptual framework is taken into consideration. More specifically, Anchor Resources Limited is considered for this report, which is a leading mineral explorer having expanded portfolio of highly prospective projects across Queensland and New South Wales (NSW) in Australia (Anchorresources.com 2018). Various aspects are taken into account in this paper and they include the requirements for general purpose financial reporting, measurement needs associated with the conceptual framework, knowledge needs for analysing the financial statements and qualitative features related to financial reporting.
In accordance with IASB, measurement could be deemed as the method of ascertaining the amounts, which are needed to be incorporated in the financial statements of the organisations. Therefore, the measurement of liabilities and assets has direct effect on the realisation of expenses and income as well as profit. Based on the IASB conceptual framework, the business organisations need not adopt a single mechanism of measurement in order to gauge their liabilities and assets. This is because the implementation of a single approach in relation to assets and liabilities does not provide pertinent information for undertaking decisions (Aasb.gov.au 2018). Moreover, according to the framework, assets and liabilities could be gauged by using four available measurement bases. They constitute of realisable value method, current cost method, fair value method and historical cost method. The below discussion reflects the extent of conformance of Anchor Resources Limited with the measurement needs of IASB.
By using the above statement, it is apparent that Anchor Resources Limited has not followed only one measurement approach for various aspects of the financial statements. This is because the organisation has utilised fair value approach as well as historical cost method for measuring its assets and liabilities. Evidences in relation to this conformance could be found from the below discussion:
The above extracts from the annual report of Anchor Resources Limited provide evidences that the organisation has conformed to the basic requirements of the conceptual framework mentioned in IASB, which is avoiding the adoption of only one measurement approach for business assets and liabilities. It could be witnessed that Anchor Resources Limited has implement historical cost method as well as fair value approach for gauging various assets and liabilities so that the users could be provided with relevant financial information regarding its asset and liability position (Hotcopper.com.au 2018).
Anchor Resources Limited has to conform to two fundamental qualitative characteristics mentioned in the conceptual framework for financial reporting and they are demonstrated briefly as follows:
Relevance:
When the decisions of the users are impacted with regards to distribution of scarce resources, financial information is adjudged to be relevant. Along with this, the pertinent information has the capability of bringing favourable variations in the decision-making process. Due to this, there must be presence of confirmatory value and predictive value in financial information. When predictive value is present, it becomes easy for the users to make estimates. On the other hand, when confirmatory value is present, the users could seek the feedback of the past analyses (Cheng et al. 2014).
Conformance to fundamental qualitative characteristics
With reference to the above extract, Anchor Resources Limited has disclosed necessary information regarding revenue for the existing period and this could be utilised by the users as a base for estimation of revenue in the upcoming years. In addition, it becomes possible for the users to contrast such information with revenue estimation in the existing year based on the previous outcomes. The users could enhance accurately the processes by using the comparison results.
Faithful representation:
The financial information of the organisations need not contain errors and it needs ro complete and neutral for assuring faithful representation (Díaz et al. 2015).
From the above extract, it is evident that property, plant and equipment have been taken into account as an instance. It could be observed that Anchor Resources Limited has given derailed overview of the selected asset and its supporting assumptions as well as the overall numerical explanation of the asset.
As per the above extract, BDJ Partners, the auditor of Anchor Resources Limited, has affirmed that the financial reports do not contain material misstatements. By taking into consideration all the above-mentioned aspects, the financial statements of Anchor Resources Limited are said to be faithfully represented.
There are four enhancing qualitative characteristics that need to be considered by the ASX listed organisations and they include comparability, verifiability, timeliness and understandability.
Comparability:
The financial information of the organisations tends to be more beneficial at the time they could be contrasted with identical information about the other organisations and with same information of the organisation for other accounting periods (Henderson et al. 2015).
The above extracts help in providing evidences that the financial statements of Anchor Resources Limited could be contrasted with similar sets of financial information of another organisation operating in the same sector. Along with this, the organisation is involved in providing financial information of the past year in the existing annual report so that the financial information of the organisation could be compared with another financial year.
Verifiability:
Verifiability implies the capability, which ensures that the depicted information is provided in accordance with the selected measurement technique so that the errors or bias could be eliminated (Karadag 2015). From the annual report of Anchor Resources Limited in 2018, the organisation has provided the needed judgements as well as assumptions so that the financial statements could be developed and represented.
In accordance with the above image, impairment could be taken into account as an instance, in which the organisation has disclosed the needed estimates and assumptions for impairment.
Timeliness:
The organisations are accountable in delivering financial information in a way so that the users could accumulate the same for undertaking decisions. This is owing to the fact that the past information does not carry the same significance to the users like the current information (Simnett and Huggins 2015). For Anchor Resources Limited, all latest financial information is disclosed in its annual report.
Understandability:
The financial information needs to be depicted in concise and clear manner for better understanding of the users. When financial notes are present in the annual report of Anchor Resources Limited, they constitute of the needed clarifications and explanations so that the users could gain an overview of the various line items mentioned in the annual report of the organisation.
Conformance to enhancing qualitative characteristics
All financial statement users require obtaining the needed financial information of the organisations in order to undertake decisions. Various financial reports are present in the annual report of Anchor Resources Limited having the necessary financial information regarding the organisation. The organisation has published different types of financial statements from which the users could gain an insight of its financial performance, financial position, cash position and change in equity position. Moreover, the disclosure of financial footnotes provide additional information like explanations and clarifications of accounts.
In accordance with the conformance of Anchor Resources Limited with the characteristic of understandability, the financial statement users could gain an overview of the financial information by applying primary accounting knowledge as well as independent observations. Besides, the regulations of IFRS and IASB assist the organisation to reveal the financial information in a user-friendly technique. However, when certain items are present in the annual report, the opinions of the experts are necessary in understanding transactions related to foreign currency as well as others (Wahlen, Baginski and Bradshaw 2014).
These factors need professional financial knowledge for better understanding. However, majority of the aspects could be understood by applying primary accounting knowledge.
The general purpose financial reporting is intended to provide financial information regarding the reporting organisation, which is beneficial for the potential and the current investors, creditors and lenders (Aasb.gov.au 2018). The objective is to aid them in undertaking suitable decisions regarding the resources of the organisation. By presenting the balance sheet statement, Anchor Resources Limited has provided necessary information to the users regarding assets, liabilities and equity. Moreover, with the help of the cash flow statement, the users of Anchor Resources Limited could be able to determine the outflows and inflows of the organisation. Finally, the financial statement users could evaluate the change in the financial performance of the organisation by analysing the consolidated income statement or consolidated statement of profit or loss (Zhang and Andrew 2014).
Conclusion:
By adhering to the measurement needs of the conceptual framework of AASB, Anchor Resources Limited has not followed only one requirement approach for gauging its assets and liabilities. Instead, the organisation has used a mix of historical cost method and fair value approach for conducting the same. After this, the organisation has assured conformance to the various qualitative characteristics of the conceptual framework, which include fundamental qualitative characteristics and enhancing qualitative characteristics. The objective is to make the financial information of the organisation highly acceptable to the users so that better decisions could be undertaken. The general purpose financial reporting is intended to provide financial information regarding the reporting organisation, which is beneficial for the potential and the current investors, creditors and lenders. Moreover, by adhering to the needs of the general purpose financial reporting, Anchor Resources Limited has disclosed all needed financial statements like the income statement, cash flow statement, statement of change in equity and cash flow statement.
References:
Aasb.gov.au., 2018. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf [Accessed 12 Dec. 2018].
Aasb.gov.au., 2018. [online] Conceptual Framework for Financial Reporting. Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 12 Dec. 2018].
Anchorresources.com., 2018. Anchor Resources – Anchor Resources. [online] Available at: https://www.anchorresources.com/ [Accessed 12 Dec. 2018].
Beattie, V., 2014. Accounting narratives and the narrative turn in accounting research: Issues, theory, methodology, methods and a research framework. The British Accounting Review, 46(2), pp.111-134.
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.
Díaz, S., Demissew, S., Carabias, J., Joly, C., Lonsdale, M., Ash, N., Larigauderie, A., Adhikari, J.R., Arico, S., Báldi, A. and Bartuska, A., 2015. The IPBES Conceptual Framework—connecting nature and people. Current Opinion in Environmental Sustainability, 14, pp.1-16.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Hotcopper.com.au., 2018. [online] Available at: https://hotcopper.com.au/documentdownload?id=uOMxKKzFkiWRTLKhOROKAxjvSDYL4g66zhX3v%2FZx7bFiGug%3D [Accessed 12 Dec. 2018].
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), pp.26-40.
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.
Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), pp.17-26.
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