The company selected for this assignment is the CIMIC Group limited, the CIMIC Group limited is an Australian company which is a group of various companies which deals in construction business. The CIMIC Group limited, is a group of 7 companies. The CIMIC Group limited started its business with railway rolling stock in the year 1899 and included earth moving business incorporated in 1924, in Queensland. The CIMIC Group limited got listed in A S X in 1962. The CIMIC Group limited has a diverse business combination which includes engineering, construction, mining, service provisioning. The company has been in to existence since last 120 years.
C P B contractors got its name when Leighton contractors and Thiess Construction merged in 2016. Moreover the CIMIC Group limited acquired Sedgman and U G L in the year 2016. The CIMIC Group limited established 2 partnership firms to look after its infrastructure investments and engineering and technical service business. Both the partnerships were formed in 2014.
Pacific partnerships look in to client infrastructure investments via financing solutions, technical innovation and value of life cycle, which help in building smarter cities and stronger regions. An E I C activity helps CIMIC Group limited in engineering and risk mitigation expertise.
Accounting concepts are the assumptions, rules and principles which help in framing a framework of recording of transactions and preparation of accounts. The main aim of these accounting concepts is to maintain the uniform and consistent nature of accounting record. The accounting concepts are basis of accounting for any organization. The accounting concepts are universally accepted concepts, the accounting concepts are business entity concept, money measurement concept, going concern concept, accounting period concept, dual aspect concept, realization concept, accrual concept and matching concept.
The annual report of the CIMIC Group limited has also laid its basis up on the accounting concepts which are as follows -
Business entity concept = under this concept for the purpose of accounting it is assumed that the business and its owners are separate and distinct entities. Thus this concept treats the owner distinguishing his / her personal transactions and business transactions separately. This is the very basic accounting concept. The CIMIC Group limited’s annual report clearly states the directors’ report which state that the directors are liable to the company only in capacity of directors or the position held by them. There is a clear distinction between the director’s personal transactions and liabilities and the liability of the director in terms of his / her professional capacity of working in the CIMIC Group limited. So the CIMIC Group limited has used the business entity concept to distinguish the CIMIC Group limited’s accounting transactions and directors’ personal transactions. Moreover the profit and losses of the CIMIC Group limited are recorded and the personal expenses of the directors’ are ignored.
Going concern concept = under this concept it is assumed that the business will go on for an indefinite period. In other words we can say that the business is a never ending process which will continue forever. Moreover as per the going concern concept the business will not dissolve in near future. The CIMIC Group limited has rooted its base on the going concern concept, the company is a never ending business entity, it has survived and grown since last 120 years and it will grow in the coming years also. The company has expanded itself by merging itself with various other companies. The CIMIC Group limited has a very diverse business lines and still the company is one of the biggest companies of Australia.
The money measurement concept = this accounting concept assumes that the reporting of all the transaction will be done via usage of single currency and generally this currency is the home currency of the company. Moreover this accounting concept clearly states that the recording of transaction is to be done in monetary form and not in physical or any other form. The CIMIC Group limited follows the money measurement concept very closely while recording its transactions because all the transactions are recorded in the books of accounts of the company in its home currency that is A U D, Australian dollars. Though the CIMIC Group limited has various branches in other countries but the annual report is presented in single currency and that is the home currency. The major benefit of this accounting concept is that the transactions are recoded evenly and uniformly.
Accounting period concept = under the accounting period concept the transactions are recorded on the assumption that their profit is for a specified period. As per this concept the profit and loss account and the balance sheet is to be prepared for a specified period and at regular intervals. The aim of this accounting concept is to analyze future prospect of business. It also helps in calculation of tax payable on income earned for the period. It gives an idea of the business to its investors such as banks, creditors, investors etc. the CIMIC Group limited’s annual report accepts and follows the accounting period concept as the final accounts of the CIMIC Group limited are for a specified period which include profit and loss statement, financial positions of the company, cash flow statement of the company and so on. Moreover the CIMIC Group limited has regular distribution of dividends using the accounting period concept.
Dual aspect concept = under the dual aspect concept of accounting it is assumed that each and every transaction has 2 impacts or dual impact. In other words it can be said that every transaction affects 2 accounts which means that one transaction will be recorded at 2 different places. This dual recording of the transaction is important because each transaction has equal impact on assets and liabilities so that assets and liabilities are equal to each other. The CIMIC Group limited’s annual report has recorded every transaction twice in its correct place so that the results produced by the company’s financial accounts are equal and evenly distributed in their respective areas or accounts.
Conceptual framework is a concept of analysis which has many variations and relations. The application of the conceptual framework is varied and it can be used in many categories of analysis where the analysis is needed as an overall view and not for a specific item. The conceptual framework for accounting is developed by 3 main pillars which are as follows -
The presentation of objective of financial reporting
The presentation of qualitative elements of accounting information and the factors and functions used in financial reporting.
The presentation, measurement and recognition of concepts of accounting such as accounting assumptions, accounting principles and accounting constraints.
The measurement in accounting is related to evaluation of the economic and financial functions of a company in terms of its monetary value, time usage and so on. While measuring a transaction or function in accounting some measureable factors are put in use and these are then compared and contrasted to create and compute the value of the accounting data. The computation of the elements in accounting is not easy and it has various issues related to its measurement in accounting.
In measuring accountancy there are 3 major elements which affect the measurement. These 3 elements are accounting assumptions, accounting principles and accounting constraints. The accounting assumptions are the assumptions which have been derived over 100 of years and provide the very basis and existence of accounting. The accounting principles are the principles up on which the accounting and its existence has been laid down. The accounting principles are the norms and standards which need to be followed by the company while preparing and presenting their accounts and financial statements. Every country has a board that looks after the needs of accounting of that country but also keeps in mind the norms and standards which are followed all over the world. Keeping all these objectives in mind the Board develops the accounting standards for a country which are in relation to the world accounting standards but customized as per the needs of a given country. The accounting principles include the historical cost accounting principles, matching concept, full disclosure, objectivity, revenue recognitions, and so on.
There are various constraints also in measuring the accounting. In other words we can say that there are various issues in measuring accounting. The issues of accounting are important from various point of view. The user need to trust the financial report of the company only then he / she will be able to make the right decision of his / her investment. If the financial statement or the annual report of the company is window dressed or the financial statement or the annual report does not gives a true and fair view of accounts to the intended user then it is useless and the trust of the user will be hampered and the very basis of accounting will fail.
The following are the issues in measuring the accounting of any company and the same issues have been faced by the CIMIC Group limited while measuring its accounting.
Materiality - under the materiality concept, it is considered that some transactions will be of high value than others and these transactions need to be watched carefully. In the similar manner there will be areas where chances of fraud, error and omission will be high so the areas where fraud, error and omission is high need to be watched very carefully. In other words we can say that the transactions which are material need to given high level of attention and these items or transactions should not be mixed with other items or transactions.
The term materiality in context of accounting means an impact by an item on the overall financial health and functioning of the company and influences the decisions of an investor or creditor. The CIMIC Group limited has clearly distinguished all the material items and materiality areas in its annual report. The company and its auditors have provided a careful watch over the material transactions and the impact of these transactions have been noted in the annual report and provided to the users, investors and creditors etc. the company and its auditors have honestly followed the accounting principles and evaluated a clear and fair view of accounts of the CIMIC Group limited in its annual report.
Conservatism - conservatism also known as prudence should be used wisely while evaluation of estimates and opinions of the accounting statements. The procedures selected should be with due diligence and fair practices. The CIMIC Group limited shows conservatism in its accounting, the company disclosures any change in its accounting methods or accounting policies in its annual report in the section notes to accounts which creates a clear picture of the accounting and gives a better measures of practices followed by the company to its potential investors.
Consistency - this means that the accounting policies or methods which are once adopted will remain intact without being changed every now and then. This is an important convention because it helps in making accurate comparisons. The CIMIC Group limited has followed its accounting policies, principles and methods without any change. If in certain circumstance the CIMIC Group limited has changed its accounting methods, policies or procedure then the CIMIC Group limited has stated the necessary changes made in its note to accounts in the annual report of the CIMIC Group limited.
Cost and benefit - the CIMIC Group limited measures all its accounting data as per the cost incurred and the benefit the CIMIC Group limited will derive in future for these costs. For example the cost incurred in acquisition of a company is measures and its goodwill is shown as an asset to the company which will be amortized at gradual intervals which will help in reducing profits for tax purposes and will save tax for the company.
Fundamental qualitative characteristics - Understanding of Relevance and Representational faithfulness -
The fundamental qualitative characteristics of financial statement provide useful information to its readers about the business. The fundamental qualitative characteristics are as follows -
Relevance - the information provided in the financial statement will be considered useful only if the information provided has the ability to influence the decision of its intended user.
Faithful representation - the faithful representation of annual report or financial statement means that the financial information is complete in all respects, the information provided is neutral and unbiased, and most important the information provided is free from any error.
The fundamental qualitative characteristics used in the preparation of the financial statement of the CIMIC Group limited gives a faithful representation of the assets and liabilities of the CIMIC Group limited. The CIMIC Group limited has clearly disclosed all its assets and liabilities; the CIMIC Group limited has given the manner of measuring the depreciation and amortization expense in its annual report. The CIMIC Group limited has also motioned the manner in which the CIMIC Group limited is amortizing the goodwill, the company has clearly defined the impairment and the assets which the CIMIC Group limited has impaired providing the reason why the company has impaired these assets, what was the carrying value of the assets and the reason why the CIMIC Group limited had to impair these assets.
Under the liabilities section of the balance sheet the CIMIC Group limited has clearly defined the heads under which the company has put various liabilities, the CIMIC Group limited has defined all the necessary changes which it has developed while labeling the liabilities. The CIMIC Group limited has provided the details of loans, both secured and unsecured mentioned in the balance sheet. So we can say that the information provided by the CIMIC Group limited in its annual report is relevant and pertains to current period, the CIMIC Group limited has provide the information of last year as per the specified needs and demands of the accounting standards and this provisioning of 2 to 3 years data helps the users of annual report to get a comparative view of the financial health of the company over the past years and they are able to make a better and accurate decision in terms of making the investment or not.
The CIMIC Group limited has represented its financial statement with faithfulness and honesty the auditors have provided their independent report and the CIMIC Group limited has complied with all the compliance and norms set by the accounting board of Australia.
It can be concluded that the CIMIC Group limited has presented its annual report as pre the described accounting concept, keeping in mind the materiality of the transactions and issues related to measurement in accounting. Moreover the CIMIC Group limited has presented its annual report in true and fair manner, where the company has adhered to the fundamental qualitative characteristics of accounting.
Annual report of the CIMIC Group limited https://cimicdigital-cdn.azureedge.net/-/media/projects/cimic/group/publications/annual-reports/2018-cimic-group-annual-report---5-february-2019.pdf?modified=20190218055542 retrieved on 25th May 2019
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