Advance Financial Accounting

Contents

Introduction.

Defining, Describing, Critical Discussion & Identification of GPFR’s.

Objectives of GPFR stated by the CF Project and Examined in Reference to Selected Company of Seek Limited

Fundamental Qualitative Characteristics.

Enhancing Qualitative Characteristics.

Conclusion.

References.

Introduction to Advance Financial Accounting

The financial reports are developed and presented by the business entities to the users for providing them significant information about their financial health and position. The financial statements depicted under the financial reports assist the users in making informed decisions by highlighting the areas of strengths and weakness of an entity. This report has been developed for the purpose of describing the objectives of general purpose financial reporting (GPFR) and also analyzing their inclusion within the present conceptual framework project of the IASB. It also includes the analysis of annual report of a selected company for examining if the objectives of GPFR re achieved by the company. The company selected is Seek Limited that is a diverse group of companies and is involved in facilitating the match between jobseekers and employment opportunities and giving assistance to the clients for finding the right type of candidates for meeting the job needs.

Defining, Describing, Critical Discussion & Identification of GPFR’s

The financial reports objective is to track, analyze and reporting the income of a business entity to its stakeholders. These reports provide an examination of the use of resources, cash flow and financial performance of the business. The Conceptual framework (CF) project undertaken by the IASB to protect the interest of the users by providing them quality financial information has regarded the general purpose financial reports (GPFRs) as highly significant for responding to the user needs. They are known to present the information that enhances supports the financial statements. The CF has identified and presented a scope within the financial reporting system that is more integrated as compared to that depicted by the financial statements (Dagwell, Wines and Lambert, 2015). The financial reports intend to satisfy the aspects of the information needs of the users and consist of multiple reports and they intend to respond directly to certain objectives of financial reporting. They mainly include the different types of financial statements that have been prepared accompanied by the notes to enrich the quality of information presented to the users.

As such, the major objectives of General Purpose Financial Reports (GPFRs) can be stated as follows:

  • A general report depicts the information of an entity that is useful to the users for accountability and decision-making purpose. The notion of accountability within the objective of the GPFR’s refers to provide significant information about the resources management of resources by an entity. The decision-making purpose of the GPFR’s refers to giving relevant and reliable information that enhances or complements the users to make better and informed economic decisions (Kolitz, 2016).
  • The different information needs of the users vary accordance to their specific requirements and as such the GPFR’s intends to meet the varying purposes of the different types of user groups of a financial report (IPSASAB, 2014).

The scope of the financial reporting tends to establish the boundary around the transaction or other events that need to be reported within the financial reports that are prepared for the general users. These are regarded to play a largely important role in providing significant information that is regarded as highly necessary for the discharge of accountability as well as is essential to be used as a significant input in the decision-making purpose. The different types of information that are provided by the GPFR’s are broadly divided into the following sections by the CF project:

  • Information about the financial position, performance and use of cash resources: The information regarding the financial position of an entity is provided through developing these reports that identifies the entity resources. The reports depicts the manner in which management conducts their responsibilities for safeguarding and managing and ensuring the availability of resources for supporting the future needs and examining the amount and timing of future cash flows necessary to support the entity’s resources.
  • Compliance Information: The information given by the GPFRs enables the users to examine the extent to which the revenue position, expenses, cash flows and the financial results provided by an entity comply with the relevant laws and regulations or to the legislation of other authorities governing the use and raising of resources. Thus, it largely helps to determine whether an entity is adequately meeting its financial objectives and enhances the credibility of its operations in the mind of the users (Conceptual Framework for Financial Reporting 2018, 2020).
  • Potential Financial and Non-Financial Information: The information regarding the future business activities and their effect on meeting the potential resource needs of an entity and their likely funding can also be examined by the use of financial reports.

The primary user groups of the information depicted within the GPFR’s are stated as follows:

  • Citizens: The general people have wide range of information needs for taking various types of decisions on the basis of information provided by a general purpose financial report.
  • Resource Providers: The donors, lenders, creditors and others providing valuable resources on voluntary or involuntary basis to the entities are regarded as primary uses of such reports (IPSASAB, 2014).
  • Legislature: The legislature, parliaments, councils and similar bodies have the authority for gaining detailed special information. They can command the information that has not been included within the GPFR’s but are specifically required by them and such reports are regarded to be special general purpose financial reports (Henderson and Pearson, 2015).

Thus, it can be said that a GPFR is prepared generally to depict the information required about an entity resources for examining its future prospect of growth and also examination of the effectiveness of management in discharging their responsibilities to use efficiently the resources. However, it has also been provided that GPFR’s cannot provide all the information that is required by the users in making economic decisions and they also need to consider other significant resources from additional resources as well (Conceptual Framework for Financial Reporting 2018, 2020).

Objectives of GPFR stated by the CF Project and Examined in Reference to Selected Company of Seek Limited

The major objective of the financial reports development as provided by the CF is to present the most useful information to the users for supporting their decisions about a reporting entity. The financial as well as non-financial information depicted within the GPFR’s should be in accordance with the qualitative characteristics provided by the CF project that need to be met by a reporting entity (IFRS Framework, 2014). The fundamental and enhancing qualitative features that the information reported within the GPFR’s need to be met as provided by the CF are discussed below by analysis of the annual report of the selected company of Seek Limited:

Fundamental Qualitative Characteristics

There are two fundamental features that a useful information need to have and they are relevance and faithful representation.

Relevance

The financial or non-financial information is regarded as relevant in making a difference in achieving the objectives of financial reporting or it is able to give either a predictive or confirmatory value or both. This means that the information has relevance for being accountable and decision-making if it confirms to the expectations about these matters and thus has confirmatory value. On the other hand, if the GPFR’s information is able to analyze the anticipated business activities and the amount and sources of information that will be available in the future then it can be stated to have predictive value (Dagwell, Wines and Lambert, 2015).

As such, it can be stated from examining the annual report of Seek Limited for the year 2019 that it has included the financial as well as non-financial information about the amount of revenue realized within the two consecutive years in its GPFR’s. The revenue information confirms to the past expectations and provides feedback about the previous year evaluations. On the other hand, the revenue information can also be used to estimate the revenue for future years and thus such information has the ability to make a difference in the decision-making of the users (Seek Limited: Annual Report, 2019). The information presented within the annual report of the company is illustrated as below:

Faithful Representation

The information should be faithfully represented to support the objectives of GPFR’s and therefore it is required that it has been depicted in a complete, neutral and free from any type of error form to the users. The completeness of the information refers to ensuring that there is no mis-presentation of essential facts and figures, neutrality means it should be free from any type of biasness and free from error signifies that it should be accurate in all type of aspects (Seek Limited: Annual Report, 2019).

The annual report of the company for the financial year 2019 has included auditor declaration to enhance the faithfulness of the information stated within the GPFR’s that is depicted as follows:

Enhancing Qualitative Characteristics

There are four enhancing qualitative features that the information needs to have for meeting the objective of GPFR’s as stated below:

Understandability

The information need to be given in a manner so that it enhances the knowledge base of the users in an appropriate manner. This required the needs for providing detailed and explanatory information within the GPFR’s that is adequately classified, characterized and presented in a clear and consistent manner for making it easily understandable (Kolitz, 2016).

The annual report of Seek Limited in regards to this need of the financial reporting has provide detailed non-financial information explaining the type of accounting methods and policies used for conducting financial transactions in the notes section. The notes section of the annual report has presented the information in a classified and consistent manner as depicted below:

Comparable

The comparability is the quality of the information that provides assistance to the users for identifying similarities and differences across different reporting period. It is largely essential that the information providers in the GPFR’s need to be consistent that refers to the use of same accounting principles or policies for preparation of these reports so that information can be easily compared.

It has been analyzed form the notes to financial statement section of the annual report of Seek Limited for the year 2019 that it prepares its GPPFR’s as per the Corporations Act 2001 and AASB standards that are in compliance with the IASB framework. Also, the different financial statements has been presented in a comparable format depicting the financial results of two consecutive years so that users can easily evaluate the difference in the past and present financial performance of an entity (Seek Limited: Annual Report, 2019). The same has been depicted from the GPFRs of the company selected as follows:

Verifiability

This qualitative feature of the GPFR’s information infers that it should be directly or indirectly verifiable. The direct verifiability of the information means that it can be checked through direct observation and indirect means refers to examining the different explanatory information presented within the reports (Deegan, 2016). In this regard, the GPFR’s of the company Seek Limited has presented the financial information in a numerical format so that its accuracy can be checked with the use of application of relevant accounting policies and rules that has been described in the notes section.

Timeliness

It is also required for making the information stated within the financial reports highly useful that it must be updated and latest to enhance the quality of decisions taken by the different primary user groups. In this regard, the selected company Seek Limited discloses its GPFR’s on an annual basis so that users can get latest information which enhances its credibility to support the various decisions of the users (Seek Limited: Annual Report, 2019).

Conclusion on Advance Financial Accounting

The discussion conducted infers that the major purpose of a reporting entity to prepare and disclose the GPFR’s it to provide assistance to the users in the decision-making. The reports encompass both financial as well as non-financial information to ensure that the information is both accountable and useful to make decisions. The information provided by a financial report also needs to be in accordance with the fundamental as well as enhancing qualitative characteristics for meeting the objectives of GPFR’s.

References for Advance Financial Accounting

Conceptual Framework for Financial Reporting 2018. 2020. [Online]. Available at: https://www.iasplus.com/en/standards/other/framework [Accessed on: 1st June 2020].

Dagwell, R., Wines, G. and Lambert, C. 2015. Corporate Accounting in Australia. Pearson Higher Education AU.

Deegan, C. 2016. Financial Accounting, 8th Edition. McGraw-Hill Education Australia.

Henderson, S., Pearson, G. 2015. Issues in Financial Accounting. UK: Pearson Higher Education AU.

IFRS Framework. 2014. Conceptual Framework for Financial Reporting. [Online]. Available at: https://www.ifrs.org/-/media/project/conceptual-framework/fact-sheet-project-summary-and-feedback-statement/conceptual-framework-project-summary.pdf [Accessed on: 1st June 2020].

IPSASAB. 2014. The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. [Online]. Available at: https://www.ipsasb.org/publications/conceptual-framework-general-purpose-financial-reporting-public-sector-entities-presentation-general-0 [Accessed on: 1st June 2020].

Kolitz, D. 2016. Financial Accounting: A Concepts-Based Introduction. UK: Routledge.

Seek Limited: Annual Report. 2019. [Online]. Available at: http://www.annualreports.com/Company/SEEK-Limited [Accessed on: 1st June 2020].

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