Sunday, May 3, 2020
Financial Accounting Mechanism of Accounting Assisting
Question: Describe about the Financial Accounting for Mechanism of Accounting Assisting. Answer: Introduction This study deals with various systems as well as mechanism of accounting assisting in monitoring and controlling the business operations of Woolworths Limited. In this particular assignment, emphasis has been given to the measurement value of retail organization in Australia named as Woolworths Limited. It describes understanding of concepts of measurement with proper justification from the annual report of Woolworths Limited. It further discusses the problems based upon measurement in presenting on AASB framework standards from using annual reports on Woolworths Limited. It explains the evaluation of issue from the context of AASB or IASB standard framework on Woolworths Limited. It comments upon the relationship between employments of measurement bases rendering useful information from the annual report of Woolworths Limited. Woolworths Limited is one of the Australian listed companies operating in retail sector in and around Australia and New Zealand (Woolworthslimited.com.au., 2016). It is the second largest retail industry after Wesfarmers Limited in terms of revenue. This particular retail sector involves in supermarkets such as rendering petrol, liquor, home improvement as well as hotels and general merchandise (Kang Gray, 2013). This assignment explains the critical evaluation of measurement concepts by pointing out the compliance attributes in accordance with General Purpose Financial Reports using financial information of Woolworths Limited. It detects using solutions for the diverse issues in association with measurement process. This study renders detailed explanation on the concept of prudence and conceptual configuration especially for financial reporting in accordance with AASB or IASB Framework (Miller Power, 2013). The maintenance of prudence and integrity in the financial statements can be analysed for the financial statements. Evaluation of General Purpose Financial Reports Different Measurement bases using Conceptual Framework In this particular question, it requires explaining the concepts of measurement with justified examples based upon Woolworths Limited Company. Conceptual framework for financial reporting mainly aims at describing the objectives of general purpose of financial reporting. It helps in assisting IASB for development of Standards based upon consistent concepts. It enables preparation of developing consistent accounting policies in applying particular transaction or event in the accounting policies (Henderson et al., 2015). Addition to that, it assists others for understanding as well as interpreting Accounting Standards for future analysis purpose. Conceptual Framework helps in indicating intentions for viewing at the principles of the general purpose of financial reporting (Barth, 2013). Conceptual structure is one of the tools for assisting Board of Company for developmental process of financial standards on various notions (Aasb.gov.au., 2016). This particular framework aims in preparing the general purpose of financial reporting based upon effectual and using reliable strategies of accounting. It uses financial standards for authorizing selection of various accounting plans based upon Woolworths Limited. This particular accounting framework enables enhancing structure of financial coverage as it offers absolute as well as restructured set of principles in the most appropriate way (Edwards, 2013). Financial Statement of Woolworths Limited effectively compiles in accordance with Conceptual Framework AASB or IASB principle models. It aims at gathering facts regarding different intention of major financial declarations as well as diverse qualitative uniqueness. Addition to that, it requires usage of usefulness of financial statements for future analysis purpose (DRURY, 2013). From the annual report of Woolworths Limited, it utilizes comprising facts of current asset as well as non-current liabilities and shareholder equity at the same time. It uses items from the financial report of Woolworths Limited for illustrative facts on financial situation of a particular Business Corporation. Addition to that, corporate structure attributes enables in the evaluation process for checking the financial health of Business Corporation from financial perspective such as income, profit as well as operating expenses in an effective way (Deegan, 2013). Therefore, conceptual framework renders deta iled description on diverse factors on recognizing diverse items for making the financial declaration of the Woolworths Limited. Purpose of conceptual framework undertakes interpretation of Standards for initiating the financial reporting entities. It aims in preparing the general purpose of financial reports for developing effective on timely way. IASB proposes for the measurement principles in related information in accordance with measurement method. It depends upon the viewing at the financial position of Woolworths Limited. It is the cost for measurement bases for justification of benefits especially by existing as well as potential investors, creditors and lenders. Various measures have been undertaken for providing necessary information in contributing with future cash flows (Bonin, 2013). Concepts of measurement Problems of measurement in the context of the present AASB Framework As rightly indicated by Donelson et al., (2012), the accounting principles AASB 13 Fair Value Measurement points out towards the procedure of institution of an individual and principle based structure for the purpose of enumeration at fair value during the time there is necessity for the AASB. However, the AASB 13 usually does not change at the time when a specific business entity has the need to employ fair value. As a result, the AASB 13 involves different principles concerning the best exercises, evaluation principles (Apostolou et al., 2013). Besides this, the AASB 13 also calls for the need of implementation of the fair value. The analysis of the financial statements of the company Woolworths Limited reflects the fact that the board of the business entity adheres to the principles laid down by the charter. This is essentially accountable for the purpose of institution as well as analysis of different strategic direction and at the same time supervision of entire procedure of exe cution of the policy of Woolworths Limited (Woolworthslimited.com.au., 2016). The preparers of the financial statements use the historical cost convention for the purpose of the entire presentation of the financial accounts of the company barring different assets as well as liabilities and at the same time certain derivative instruments (Ryan et al., 2014). Therefore, the ascertainment of the fair value as well as historical cost as the basis of the enumeration can be regarded as a problem of measurement (Weil et al., 2013). The conceptual framework can help in understanding the definition, process of recognition as well as measurement of varied components of financial statements, principles of capital as well as maintenance of capital. However, the main objective of the general purpose financial reporting is to provide essential financial information concerning the reporting entity (Brigham Ehrhardt, 2013). Again, the users of the financial information can employ the financial accounts for making decisions (Williams, 2016). Inventory: The assessment of the inventory of the company indicates that the net inventory of the corporation decreased to $ 272 million owing to diverse differences in the timing of imbursements of different creditors (Woolworthslimited.com.au., 2016). The incapability to handle the inventory in the retail business of Woolworths Limited can thereby impair the overall competitive position of the corporation (Botzem, 2012). The operating revenue of the company Woolworths Limited is usually presented at the fair value founded on diverse considerations that can be accepted depending upon different criterion for acknowledgment. Therefore, the revenue of the corporation can be recognized at the fair value, recognized net of absolute returns and at the same time discounts (Alexander, 2013). Therefore, the revenue of the firm is recognized at the fair value including certain assets as well as liabilities (Woolworthslimited.com.au., 2016). Accounts Receivables, Bad Debt as well as doubtful debt The corporation Woolworths Limited calculates the accounts receivables in the financial accounts by including different amounts of the goods and services tax Woolworthslimited.com.au., 2016). However, the trade receivables are essentially recognized at the fair value and are measured at amortised cost by the specific interest mechanism after subtraction of different allowance for impairment (Miller Power, 2013). Plant, property as well as equipment: The corporation plant, property as well as equipment are generally measured at cost after proper subtraction of accumulated depreciation as well as amortization along with the accrued loss of impairment. Again, the company also uses the straight-line method of depreciation over a specific period (Kang Gray, 2013). Evaluation of the issues of measurement in the context of AASB standards and framework As rightly put forward by Henderson et al., (2015), the process of evaluation includes different issues of measurement in the context of AASB standards as well as framework. The analysis of the annual statements point out towards important issues in different accounting strategies adopted by the management of Woolworths Limited (Woolworthslimited.com.au., 2016). The specific issues of accounting that can be recognized from the annual financial statements comprise of the discount rates, assumptions of employee benefits as well as actuarial suppositions (Edwards, 2013). The evaluation of the financial reports of the firm reveals the fact that the cash flows of the corporation are essentially discounted by utilizing a pre tax rate that can help in replicating diverse present suppositions of the entire market concerning the time value of money. Therefore, there arises risk as regards the liability in entirety (Yong et al., 2016). However, the approximations utilized for diverse future ad vantages of members of the staff consider the future salary and wages. The approximations are expected to have adequate material influence (Larcker et al., 2012). In addition to this, the management of the corporation Woolworths Limited also makes suppositions regarding the actuarial aspects. This actuarial suppositions are also said have material influence and can be regarded as a critical issue in accounting. In addition to this, different issues in accounting that are essentially identified by the audit committee of the Woolworths Limited include the process of implementation of the concept of materiality that in turn treats and evaluates the magnitude of specific misstatements in the financial declarations (Woolworthslimited.com.au., 2016). Furthermore, the issues that primarily the finance managers and the audit committee of the company Woolworths Limited faces can be associated to the accounting standards that orient around different intricacies related to adjustments of the c arrying amounts of diverse assets as well as liabilities (Woolworthslimited.com.au., 2016). However, as per the annual statements, the business corporation Woolworth Limited also faces higher degrees of risk as well as intricacies in the process of adjustment of carrying amounts of both assets and liabilities that are included within the consequent periods mentioned in particular notes (DRURY, 2013). Again, the corporation can also make use of diverse models on accounting and that have the need for assignment of the fair value. Analysis of the process of reporting revenue in the financial declarations: Association between process of enumeration and different provision of decision-making The preparers of the financial declarations of Woolworths Limited primarily conform to the stipulations under the Corporations Act 2001 and the principles conditioned under Australian Accounting Standard Board (Woolworthslimited.com.au., 2016). In addition to this, the management of the organization also presents the financial declarations as per different listing rules mentioned under the Australian Stock Exchange (Woolworthslimited.com.au., 2016). In addition to this, the company Woolworths Limited has also adopted the accounting strategy of providing the stable disclosures that can assist the financiers of the corporation in gaining a clear overview concerning the overall financial performance in addition to the financial position of the corporation (Deegan, 2013). Further this, the continuous disclosure also helps in the process of boosting the investors confidence by maintenance of transparency, integrity as well as dependability of the business operations of the entity along wi th the different declarations made by the business concern (Uyar Gungormus, 2016). As rightly put forward by Bonin (2013), the procedure involved in the preparation as well as presentation of financial declarations of the corporation also needs to adhere to different stipulations conditioned under the conceptual framework (CF) under AASB. Again, the conceptual framework also helps in gaining a clear understanding concerning the definition, aims of the financial declarations together with the scope as well as criteria for the acknowledgment of the data (Hall, 2012). Besides this, the structure of the conceptual framework also helps in comprehending different mechanisms involved in the process of measurement of diverse items in the financial declarations of the business concerns (Barth, 2013). Consequently, wide range of investors of the company Woolworths Limited can scrutinize the overall effectiveness as well as efficacy of the operations of the business by way of utilizing the financial declarations of the company Woolworths Limited (Woolworthslimited.com.au., 20 16). Again, the process of enumeration points out towards orientation of financial declarations of the firm towards prudence in the conceptual constitution. The compliance of the financial statements of the corporation to different pertinent standards can help in making it certain the reliability as well as overall steadiness of the financial declarations (Hall, 2012). In addition to this, the compliance with the pertinent standards can help in the process of analysis of particular financial declarations. However, the conformation with different rules as well as regulations conditioned under the accounting standards can therefore help in the process of averting diverse intentional attempts towards material misstatements in the financial statements (Larcker et al., 2012). This in turn can help in making it certain that the financial announcements presented in accordance with the conceptual configuration can aid in minimizing the committed errors owing to the fraudulent actions and unconsci ous mistakes. The minimization of the errors can help in maintenance of the prudence that refers towards the notion of maintenance of caution with the intention as well as purpose of providing judgements for different intensities of uncertainty (Deegan, 2012). The financial declarations of Woolworths maintaining prudence can benefit from the consistency as well as stability of information and at the same time neutrality of different activities. Therefore, the adherence to the conceptual framework and the maintenance of the prudence can assist in avoiding biasness that can affect the financial performance in the upcoming period (Uyar Gungormus, 2016). This reflects the fact that the maintenance of prudence can help the financiers in maintenance of the reliance on different financial declarations and turn up at functional decisions (Yong et al., 2016). However, the investors can help in evaluation of the overall financial condition of the corporation Woolworths Limited by studying di fferent levels of inventory and the efficacy of the corporation in process of conversion of inventory to sales prior to framing important decisions (Woolworthslimited.com.au., 2016). The dimensions used in the process of enumeration of the plant, property as well as equipment can also assist the investors in comprehending the overall value (Ryan et al., 2014). This in turn can help the financiers to become reactive to diverse alternatives of investment of the corporation on plant, property as well as equipment. Again, the investments decisions by the management of the business concern especially might point out towards the overall the negative cash flow that assists the process of creation of revenue during the future period (Williams, 2016). As a result, different items declared in financial declarations according to the requisite principles can thereby assist the shareholders of the firm as well as several other communities of financiers in gaining vivid idea regarding the financi al condition of the corporation (Uyar Gungormus, 2016). Conclusion and Recommendations At the end of the study, it is concluded that the financiers are required to evaluate the various items from financial reports of Woolworths Limited. This enables presenting the various concepts of measurement bases in aligning with the conceptual framework. The above study renders detailed explanation on the AASB Standards Conceptual Framework discussing on the issues faced by Woolworth Limited Company. It requires understanding of the problems in relation with measurement of AASB Standards of Woolworths Limited Company. Addition to that, present study explains relationship between measured employments in Woolworths Limited for making decision-making process. Potential investors analyzes on various items for presentation of financial reports of Woolworths Limited. It explains the disclosure policies of the Australian listed retail firm in compilation with Corporation Act in the year 2001 as well as Australian listed rules. It involves continuous disclosure policies for promotion of confidence of potential investors in alignment with integrity and securities. Inventory of Woolworths Limited increases because of increased establishment of new stores in and around Australia. Potential investors analyzes with the efficiency of Woolworths Limited into sales for final decision-making process. It is important to understand the fact that investors should be aware regarding the investments by Woolworths Limited especially for fixed assets such as Plant, Property and Equipment. There are various investments made in the PPE intangibles for initial cash outflows for generation of profits in the upcoming financial years. This particular attributes boosts extreme level of sentiments for the potential investors ob positive terms. The financiers can utilize the financial statements and make use of the statements for analysing the financial position of the company. The analysis of the statement can help them in framing the decision regarding investments. References Aasb.gov.au. (2016).Australian Accounting Standards Board (AASB) - Home. [online] Available at: https://www.aasb.gov.au [Accessed 23 Aug. 2016]. 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