Accounting homework

By Saphal Shrestha

Student Id: 11601027

The accounting standards ought to set the guidelines which are stated as "Conceptual Framework". For making the statements easy to understand and compare, there is the international standard in the preparation of the statement. The motto of following the conceptual framework of financial accounting in report preparation is to provide the relevant, understandable, comparable and timeliness information to users so that they will be able to make the investment related decisions. The study of the annual report of FY2017 finds that states the information of assets, liabilities, revenues, risks, declarations and so one that is helping in making the decision to users. Also, the company is found to be following international standards in report preparation. The paper describes the illustrations of financial statements considering the conceptual framework. The study concludes that CAR follows the requirements of accounting framework. The paper also suggests the changes on the existing framework of CAR based on the obligations of the conceptual framework.

Table of Contents Abstract 2 Introduction 4 Compliance with the Objective of Conceptual Framework of Accounting 4 Use of Report for Gathering the Needed Information 6 The inclusion of Elements of Financial Statements 6 Fundamental qualitative characteristics 6 Enhancing qualitative characteristics 8 Conclusion and Recommendation 9 References 10 Appendices 11 Appendix1 11 Appendix2 12 Appendix3 13

Carsales.Com Ltd (CAR) is the ASX listed company that is engaged in the online automotive, motorcycle and marine to the sectors in Australia. There are more than 5 classified websites under Carsales.Com Ltd that utilizes the internet to deliver best solutions in automotive business (carsales.com Ltd , n.d.). The financial report is prepared by the company every year and follows the Australian Accounting Standards (AASBs), Corporations Act 2001and authorization is done by the board of directors (Carsales.Com, 2017). The purpose of report preparation is to know whether their reporting style complies with the conceptual framework of general accounting. The annual report describes that during the financial report preparation they follow the International Financial Reporting Standards (IFRSs) compliances.

The Conceptual Framework of Accounting describes that the objectives of financial statement preparation are to make the information assessable to the users so that they will feel easy in making a decision regarding investment, lending, buying entities and so one (Abdullahi & Abubakar, 2017). The financial statement of the CAR includes the information board of directors, review from the chairman, declaration of lead auditors, consolidated statement of financial position, cash flows, financial position and so one. The report of the independent audit is also included in the report with other information. The details provided makes easy to set mind that it is following the objectives of the conceptual framework of the audition. The financial statement provides the information of the financial position, changes in the financial positions from previous years and performance. The profit and loss statement depicts the financial performance and statements of cash flow shows the changes in the financial position. The comparison of revenue is clearly stated as:

Table 1Highlights CAR

The above table is the example that makes easier for the users of the statement for making the comparison. The increment percentage in the revenue collection can be easily understood from FY2011 to FY2017. It is considered that the information provided in the structure act as the influencing factor for making an investment decision (Jagongo & Mutswenje, 2014). Hence, the information provided such as assets, revenue, stocks, dividends and so one by the statement is useful for making an investment decision. The consolidated statement of cash flow provided by the CAR is provided in the appendix1. Also, the financial result of the company includes that it has delivered 4% EBITDA with net profit after tax of 6% increment and so one. The information needed for making investment decision is provided. The "operational financial review" provides the area of the business operation. The users also need the business outlooks, environment, opportunities, challenges and so one. The report of FY2017 offers the growth opportunities in "outlook" section. The expansion opportunities in FY2019 are mentioned. The company is found to be at risk of credit risk, market risk, operational risk, and liquidity. Those sorts of information are included in the report. The way to mitigate the risk is also mentioned. The detail report on the financial instruments, data and more is enabling the users to collect the data needed in making the decision.

The users are the present investors, potential investors, buyers of shares and entities and lenders. The annual report prepared at the end of the fiscal year provides the details of the financial information. The consolidated data provides the all types and nature of information. The detail portfolio of the leaders is also included in the statement. The targeted audiences can easily access the report on its website. So, the statement is able to provide the information on time and it is useful to the target users.

Recognition criteria included by the conceptual framework means the enclosure of the necessary elements in the balance sheet and income statement. The financial statement should include the monetary value and items in words also (ASIC, 2014). The consolidated income statement makes clear that it has included the elements; profit and losses as provided in Appendix2. Similarly, the balance sheet also provides the information of liabilities, assets and other entities. The plenty of expressions of income and expenses and assets, liabilities, and equity in the financial statement proves that the statement meets the criteria of the conceptual framework.

Enhancing qualitative characteristics includes of relevancy and faithfulness in the presentation of information (Mbobo & Ekpo, 2016). CAR is considered to be delivering relevant information if it is able to influence the decision of the users. The comparative expression of information of growth rate from FY2013 to FY2017 is an example of relevancy.

Faithful representation means the neutral, error-free and complete information included in the statement.

The users can predict the future trend through the revenue collected as provided in above data. The information is seen that the company is able to increase the revenue collection. The users can easily trust the company through the information provided. Financial statements are prepared with the judgments and estimates in some cases such as the management team estimates the likelihood of the amount receivables, lives of assets and so one. There is a little chance error in estimation. However, the information provided follows neutral and completeness for example under the assets categories, complete information of types and nature of information as provided in appendix3. The complete description of the types of assets, liabilities, cash flow and other information are provided in the financial statement. So, EPL is found to be applying the fundamental qualitative characteristics.

The framework of accounting describes the enhancing qualitative characteristics as verifiability, understandability, and comparability (Weil et al., 2013). The user can feel the statement comparable if the similar accounting principle is adopted by the CAR. The report of FY2017 includes that it is prepared by following the Australian Accounting Standards (AASBs), Corporations Act 2001with IFRS standard. Having adopted the international code in the accounting like general purpose of accounting it has fulfilled the comparable characteristics (Lin, 2015). The boards of directors have approved the statement. The verifiability characteristics assure the faithful representation fundamental characteristics (International Public Sector Accounting Standards Board, 2012). There are independent auditors and the declaration from the independent auditor is the example to assure the verifiability. The fair value is also assured by following the international standard in report preparation. The website https://www.carsales.com.au/ provides the announcements 2017 (Carsales.Com, n.d.). The users can easily get the necessary information through the report by accessing through the "contents". So, the information can be gathered in time. Some terminology in words in report is however difficult to understand and useless to some users such as pension system, amortization and so one. The expression in numerical form, chart, figures, and table are however understandable. The separate title is provided for separate states. So, the report has adopted the understandability.

The Carsales.Com (CAR) is found to be preparing the statement following the international standards. From the study, it is found that the company meets the obligations of a framework for the accounting report preparation. The CAR is able to deliver the organized and clear information. The study reveals that financial statements are prepared with the judgments and estimates in some cases such as the management team estimates the likelihood of the amount receivables, lives of assets and so one. The company should prepare the information based on classification and aggregation of such amounts. The statements reflect the past information and the user should predict the performance in future (CPA Australia, 2012). However, the company has provided the business outlook but the information is limited. The financial information does not discuss the uncertainties, risk and so one in details. Such information is also needed. Also, the state should focus on using understandable terms as much as possible.

Abdullahi, A., & Abubakar, M. Y. (2017). Adoption of International Financial Reporting Standards (IFRS) and Measurement of Reporting Quality: A Review of Methodologies. International Business and Accounting Research Journal , 1 (2), 103-108.

ASIC. (2014). Users of financial reports. Retrieved April 13, 2018, from http://asic.gov.au/regulatory-resources/financial-reporting-and-audit/users-of-financial-reports/#2

Carsales.Com. (2017). Annual Report 2017. Carsales.Com.

Carsales.Com. (n.d.). Carsales.Com. Retrieved from https://www.carsales.com.au/

carsales.com Ltd . (n.d.). carsales.com Ltd . Retrieved from http://shareholder.carsales.com.au/Investor-Centre/

CPA Australia. (2012). Accounting Concepts and Principles. CPA Australia. BPP Learning Media Ltd .

International Public Sector Accounting Standards Board. (2012). Conceptual Framework forGeneral Purpose Financial General Purpose Financial Entities Presentation in GeneralPurpose Financial Reports. Toronto: International Public Sector Accounting Standards Board.

Jagongo, A., & Mutswenje, V. S. (2014). A Survey of the Factors Influencing Investment Decisions: The Case of Individual Investors at the NSE. International Journal of Humanities and Social Science , 4 (4), 94-102.

Lin, H. (2015). Discussion about Conceptual Framework. International Business Research , 8 (6), 191-195.

Mbobo, M. E., & Ekpo, N. B. (2016). Operationalising the Qualitative Characteristics of Financial Reporting. International Journal of Finance and Accounting , 5 (4), 184-192.

Weil, R. L., Schipper, K., & Francis, J. (2013). In Financial Accounting: An Introduction to Concepts, Methods and Uses (14 ed., p. 864). Cengage Learning.

Revenue in Millions FY2013 FY2014 FY2015 FY2016 FY2017 215.1 235.6 311.8 344 372.1

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