Process of Updating Conceptual Framework-Free-Samples for Students

Question: Does the Current accounting framework meet the needs of the users of financial reports as prescribed in the objective of the Conceptual Framework of Accounting? Answer: Introduction The present study helps in evaluating different factors that drive the culture of an organization along with mechanisms. However, in this specific report, emphasis is placed on comprehending the overall procedure of operation with special orientation to the functionalities of two Australian listed corporation named AGL and Origin Energy. AGL Energy is essentially a publicly listed Australian corporation that delivers energy products as well as services to the entire Australian economy. However, the corporation is engaged in both generation as well as retailing of electricity for both residential as well as commercial usage. On the other hand, Origin Energy is an Australian energy corporation that is headquartered in Sydney. This company is primarily involved in the process of delivering electricity, natural gas, electric vehicle charging, hot water and many others. In essence, the overall study primarily assists in assessing the entire financial declaration of the corporation AGL and the origin energy for the purpose of identification of different measures undertaken by the corporation to support diverse conceptual directives laid down by the AASB (Australian accounting Standards Board). Furthermore, the novice effectually analyses the entire remuneration report, director report along with the corporate governance report presented in the annual report of the company. Conceptual Framework of Accounting for accounting The conceptual framework reflects the aims as well as objectives of financial declarations that is essentially qualitative in nature for rendering vital information. Again, conceptual framework mainly deals with defining, detecting and at the same time enumerating different components of financial announcements as specified under statement of financial position (Rankin et al. 2012). The fundamental aim of the particular general purpose financial reporting is to present financial information to different potential sponsors, diverse creditors along with lenders in a bid to arrive at specific decision. As such, concerned decisions mainly comprise of purchasing as well as selling decisions along with the decision of holding of equity as well as debt instruments mainly in the form of loan or else in other terms of credit. Thus, company announcements sometimes fail to address all the pertinent information that can be useful for all the potential financiers, creditors along with other stake holders of the firm (Reisch et al. 2013). Analysis of the annual statements of the firm AGL Energy and Origin Energy reveals the fact that the company adheres to the particular requirements of the conceptual framework. In particular, the balance sheet projections assist in the process of comprehending the overall financial potion of the firm of the corporation and takes into account two broad factors such as the assets as well as liabilities of the specific corporation (Agl.com.au 2017). In addition to this, this factor also takes into consideration certain other aspects such as the inventory, valuation of the net inventory, and tangible as well as intangible assets, equity of the shareholders along with financial liabilities (Henderson et al. 2015). According to financial declarations presented by the corporation, it can be hereby mentioned that the board of the corporation permitted final dividend. Again, it is also imperative to take into consideration the dividend declarations that subsequently render important informati on for the potential shareholders of the corporations. In this context it can be hereby stated that the primary aim of the financial reporting of both the corporations is to acquire favourable rating (credit). Process of updating conceptual framework As such, in order to develop conceptual structure or framework it is important for the IASB to eliminate diverse references from the basic concepts of prudence. However, benefits or else advantages of financial pronouncements primarily refers to specific notions of prudence presented in a conceptual framework (Beattie 2014). Essentially, this helps in maintaining specific information together with neutrality of actions. General Purpose Financial Statements for different users in arriving at financial decisions as per AASB framework Assets: Analysis of the annual report of the firm Origin Energy reveals the fact that the net assets of the firm has increased from $14159 m during 2015 to $14530 m during 2016. The report mentions that the management system of the firm Origin Energy function to determine that the assets of the corporation are properly designed, safely functioned and at the same time appropriately maintained (Edmonds et al. 2016). Again, critical evaluation of the annual declaration of the firm AGL Energy reflects the fact that the new assets of the firm has declined to $14604 m during 2016 from $15833 m during 2015. Management of AGL is also undertaking a thorough assessment of the entire asset portfolio and targets approximately $1 billion in non-strategic as well as under-performing asset divestment by the end of the year 2017 (Agl.com.au 2017). Tangible and Intangible Assets According to the annual pronouncements of the company Origin Energy, it can be hereby mentioned that AASB 116 for specifically plant, property as well as equipment together with AASB 138 for particularly intangible assets provide the directives for analysing depreciation as well as amortisation (Di Pietr et al. 2015). The intangible assets of the firm AGL Energy is registered to be $3232 m during the year 2016 as compared to $3266 recorded during the year 2015. However, the total assets of the firm is recorded to be $14604 m during 2016 as compared to the figure $15833 m registered during the year ago period that is 2015. Thus, it can be said that the intangible assets of the firm has declined during the year 2016 when compared to the figure of the previous year. However for the entire group operations, the depreciation and amortisation is recorded to be (280) during the year 2016 and (238) during the year 2015 (Agl.com.au 2017). On the other hand, the intangible asset of the company Origin Energy is recorded to be $5366 m during the year 2016 as compared to the year ago period of $5481 m in 2015. However, the total assets of the corporation Origin Energy is registered to be $28898 m in the year 2016 and $33367 m in the year 2015 (Originenergy.com.au 2017). Thus, it can be hereby mentioned that the total assets of the company Origin Energy has declined considerably during the period 2016 as compared to the year ago period. Again, depreciation and amortisation expense of the company Origin Energy is registered to be (624) during 216 while the same is recorded to be (807) during 2015 (Originenergy.com.au 2017). However, analysis of the report also reflects that there is a depreciation rate for both the current as well as comparative period for all the categories of assets as mentioned below: Origin Energy (Source: Originenergy.com.au 2017) Accounts Receivable According to the annual declaration of the corporation AGL, accounts receivable was recorded to be $ 1975 m in the year 2016 as compared to $1894 m in the year 2015 (Agl.com.au 2017). This refers to the fact that trade receivable is identified normally at fair value and is calculated at amortized cost by utilizing interest mechanism after making allowance for impairment. Essentially, it is important to comprehend the fact that diverse users of financial information analyse information as presented in the financial declaration along with assessment of items for presenting the financial decisions (Rankin et al. 2012). On the other hand, analysis of the financial declaration of the firm Origin Energy reveals the fact that receivable is registered to be $1945 m during 2016 as compared to $2045 m during the year 2015. In particularly, the trade receivable is presented and recognized at fair value and consequently enumerated at amortised cost after deduction of accumulated impairment losse s (Schaltegger and Burritt 2010). Plant Property and Equipment Analysis of the annual announcement of the corporation AGL Energy Limited reflects the fact that plant, property as well as equipment is registered to be $47 m during the year 2016 as compared to the figure $544 m recorded during the year 2015 (Agl.com.au 2017). Evaluation of the annual report of the firm Origin Energy reveals the fact that the plant, property as well as equipment of the firm is registered essentially at cost after deduction of accumulated depreciation, amortisation along with depletion as well as charges of impairment. In essence, the cost also includes approximated future cost of requisite closure along with rehabilitation (McLeay and Riccaboni 2012). Essentially, the plant, property as well as equipment of the firm is observed to be $5685m during 2016 as compared to the figure $6505m. Analysis of the annual declaration of the firm Origin Energy reveals the fact that the consolidated statements along with the notes are essentially presented in accordance with the Corporations Act of the year 2001. In addition to this, this segment of the report also mentions that the financial statements of the firm presents a true as well as fair view of the financial position of the entire group and complies with the Australian Accounting Standard along with the Corporations Regulation 2001. Apart from this, consolidated financial declarations also mention about the adherence with the International Financial Reporting Standards. This section of the report also shows that directors have been provided declarations obligatory by the section 295 A of the Corporations Act 2001. In addition to this, the directors report of the firm also elucidates in detail about the principal activities of the firm, assessment of diverse operations along with future developments, significant transform ations in the state of affairs, significant events consequent to balance date. In addition to this, this report also states about the dividend declaration of the firm together with the details of the directors and important information on directors as well as company secretaries (Rankin et al. 2012). Again, critical analysis of the annual pronouncement of the firm AGL reveals the fact that the directors of the corporation AGL Energy Limited as per their opinion adhere to the Accounting Standard AASB 1039 Concise Financial Reports. In addition to this, the attached financial declarations as well as notes is derived from the entire financial report of the corporation. In addition to this, this segment of the report tells about the customer focus, dividend declaration of 68 cps (full year dividend), underlying profit ($701 m), and commitment to the community as well as about the people of the organization (Agl.com.au 2017). Prudence As rightly indicated by Solomon et al. (2010), prudence cam be considered as one of the most important concepts referred to as the conservatism principle as well as accounting principle/standard required by a particular accountant for the purpose of registering liabilities along with expenses during realization. In addition to this, prudence is essentially a concept or notion that is required by accountant who are thoughtful about adoption of policies and approximations in overstatements in earning assets of particular entity expenditure during the same time (Marabel-Romo et al. 2017). The conceptual framework also takes into account different uncertainties along with facts as regards events as well as circumstances namely collection of doubtful receivables together with the economic lives of different fixed assets such as the plant, property as well as equipment. In addition to this, there also exists certain uncertainties that can be detected through specific corporate disclosures after properly working out prudence (Maynard 2017). Thus, prudence refers to the notion that is inclusive of certain degree of cautiousness in a manner for proper judgement on level of uncertainty. Shareholder Analysis Overview of overall operations, financial position along with strategies of undertaking business together with management outlook assists in management outlook assists shareholders in acquiring clear understanding as regards financial position of the corporation. However, the review also assists in interpreting financial statements issued by the corporation presented as per directives (Wahlen et al. 2014). Analysis of the report reflects the fact that the board has issued a fully franked final dividend that is equal to 36 cents per share. This shows that the board persistently stresses on improvement of return on equity of shareholders along with the earnings per share by means of heightened concentration on productivity, efficiency along with efficient allocation of capital. Financial overview of the entire firm AGL Energy Limited reflects that the operating earnings of the company has increased from $1126 m in 2015 as compared to $1211 registered in the year 2016. In addition to this, profit has increased from $630 m during the year 2015 as compared to the figure $701 m during the year 2016. Furthermore, dividends per share also increased to 36 cents per share while the full year dividend was registered to be 68 cents per share (Agl.com.au 2017). Again, the return on shareholders was recorded to be 22.3% in the year 2016, while the same was registered to be 14.8% during 2015. Thus, it can be mentioned that return on shareholders has increased during the year 2016. Furthermore, return on equity also escalated to 8.3% during 2016 as against 7.2% recorded during 2015. Thus, it can be hereby inferred that investment on the corporation AGL Energy Limited can be considered to be profitable (Agl.com.au 2017). AGL Energy Limited (Source: Agl.com.au 2017). In addition to this, financial overview of the firm Origin Energy divulges the fact that the underlying profit of the firm is registered to be $635 m during the year 2016 while the same is recorded to be $904 m during the year 2015. This shows that the operating profit of the firm has declined considerably during the year 2016. In addition to this, the dividend per cent is recorded to be 25 cents per share during the year 2015 while the same is recorded to be 10 cents per share during the year 2016. As per the financial report of the firm Origin Energy, it can be hereby concluded that investment in this company can prove to be effective for the shareholders of the corporation. Origin Energy (Source: Originenergy.com.au 2017) Conclusion Founded on the annual statement of the corporation AGL, it can be hereby mentioned that financial results of the corporation was encouraging, while some significant units of the business have failed to improve substantially. On the other hand, the financial outcomes of the firm Origin Energy was quite unsatisfactory. Analysis of the annual report helps in understanding the conceptual structure and the performance of the firm that helps in analysing financial position and their decision from viewpoint of shareholders. References Agl.com.au. 2017. AGL | Electricity Providers | Gas Suppliers | Solar Energy | AGL. [online] Available at: https://www.agl.com.au [Accessed 12 Aug. 2017]. 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. Di Pietr, A., Art, S. and Ronen, J., 2015.Accounting and regulation. Springer,. Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016.Fundamental managerial accounting concepts. McGraw-Hill Education. Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015.Issues in financial accounting. Pearson Higher Education AU. Marabel-Romo, J., Guiral, A., Crespo-Espert, J.L., Gonzalo, J.A. and Moon, D., 2017. Fair value accounting in the absence of prudence in accounting standards: an illustration with exotic derivatives. Spanish Journal of Finance and Accounting/Revista Espaola de Financiacin y Contabilidad, 46(2), pp.145-167. Maynard, J., 2017. Financial accounting, reporting, and analysis. Oxford University Press. McLeay, S. and Riccaboni, A. eds., 2012.Contemporary issues in accounting regulation. Springer Science Business Media. Originenergy.com.au. 2017. Electricity Providers Gas Suppliers - Origin Energy. [online] Available at: https://www.originenergy.com.au [Accessed 12 Aug. 2017]. Rankin, M., Stanton, P.A., McGowan, S.C., Ferlauto, K. and Tilling, M., 2012.Contemporary issues in accounting. Milton, Australia: Wiley. Rankin, M., Stanton, P.A., McGowan, S.C., Ferlauto, K. and Tilling, M., 2012.Contemporary issues in accounting. Milton, Australia: Wiley. Rankin, M., Stanton, P.A., McGowan, S.C., Ferlauto, K. and Tilling, M., 2012.Contemporary issues in accounting. Milton, Australia: Wiley. Reisch, L., Eberle, U. and Lorek, S., 2013. Sustainable food consumption: an overview of contemporary issues and policies.Sustainability: Science, Practice, Policy,9(2). Schaltegger, S. and Burritt, R., 2010.Contemporary environmental accounting: issues, concepts and practice. Greenleaf Publishing. Solomon, J.F., Solomon, A., Norton, S.D. and Joseph, N.L., 2010. A conceptual framework for corporate risk disclosure emerging from the agenda for corporate governance reform.The British Accounting Review,32(4), pp.447-478. Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.