Accounting Concepts And Framework Of Qube Holdings Ltd

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Question :

Analyze and present a report about an Australian company named Qube Holdings Ltd. Yoru report should depict the discussion on relevant accounting concepts and framework and some other qualitative characteristics of the company and its accounting regime. 

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Answer :


To bring the transparency in the financial records for the stakeholders in the rapidly changing economic conditions, it is required for each and every company to adopt an effective audit and assurance program. There will be no use of financial statement of an organisation for its stakeholders if the information provided under this is inconsistent and from its past records. To avoid the inconsistencies between the organisation and its stakeholders uniformity is necessary in the financial records. Some accounting frameworks are introduced at national and international level to fetch comparability and such consistencies in the financial statements. Besides these accounting frameworks various accounting concepts and accounting standards are established. The report will depict the discussion on these accounting concepts and framework and some other qualitative characteristics (Qube Holding Ltd, 2019).

The report contains the discussion about an Australian company named Qube Holdings Ltd. The company was established in year 2010 by an investment trust KFM which is diversified its infrastructure and logistic funds to acquire an old company and they introduced a new company called Qube logistics. The principal business performed by the company is to provide logistic solutions in various aspects of import-export supply and to perform the management and development activities in inland rail terminals, bulk terminals and related logistics facilities. In the end of year 2018, the NPAT of the company is $106.8 million which shows an increase in profits for the year. In the report we will further discuss about the application of accounting concepts, principals, fundamental characteristics and provisions of various accounting standards in the financial and accounting reporting of the company (Jones, and Wolnizer, 2013).

Descriptions of Accounting Concepts

The financial statements for every financial year are required to be prepared by every business entity whether it is a listed company or an unlisted company. For the listed companies the task of preparation of the financial statements is more significant and crucial due to the engagement of more stakeholders. The financial statements of listed entity are to be situated before the stakeholder. However, the result of every financial year would be different, incomparable and in understandable for the stakeholders if the company will follow a different accounting basis for every year. For bringing the uniformity and consistency while preparing the financial statements the use of accounting concepts is required. There are several accounting concepts and approaches which are used by the companies in their accounting patterns to establish uniformity in their financial statements such as Going Concern, Accounting Period, Business entity, Money Measurement, Cost Concept, Duality Aspect Concept, Accrual concept, Matching Concept and Realisation concept (Jones,  and Wolnizer, 2013). 

The Annual report of Qube Holding Ltd. is analysed for financial year 2018 which depicts the use of various accounting concepts in the accounting framework of company. The several accounting concepts used by the company in its financial statements are as follows: (Qube Holding Ltd, 2019).

  • Business entity concept: The concept of business entity says that the business entity has a separate legal entity from its owner. This is the reason that the amount of capital raised by the company from the members and shareholders is liability for the company which has to be repaid to the members. Both company and owner of business have different legal entities. In the books of accounts only the transactions made by the business entity shall be recorded not the personal transactions of shareholders and members. However all the transactions regarding the business of company are made by the directors and managerial personals and all the crucial decisions under organisations are also taken by the board of directors but eventually the company would be held liable for it due to its separate entity (Piper, 2016).
  • Money measurement concepts: As per the concept of Money measurement the transactions which have any monetary expression are the transactions which can be recorded into the financial records of the company. The transactions which cannot be expressed into the monetary terms shall be ignored while making the financial statements. For example the loyalty, perfection and expertise of the staff of company cannot be recorded in the financial statements. Also the concept allows the companies to record the transaction only in the currency operable in the home country (Qube Holding Ltd, 2019).
  • Accounting period concept: Every company need to prepare the financial statement for a specific time of period. The accounting period concept says that the accounting period has to be taken constantly for every one complete year. This concept helps in dividing the life of organisation into small accounting periods. The accounting period from 1st January to 31st December shall be followed by the Qube Holding Ltd. The company will pay the income tax for an accounting period into the next accounting period (Schaltegger, and Burritt, 2017). 
  • Going concern concept: The concept of going concern states that while incorporating a business unit the entity supposed to be continue for an indefinite period of time and the management has no intentions to stop the business in near future. It is a confidence which is drawn by the management of the company. The assumption made by the management will eventually checked by the auditors of the company. Due to such assumption the acquisition of any fixed asset has not been transferred into profit and loss account in the year of acquisition. It shall be bifurcated in the economic life of the asset and charged as depreciation in every financial year.
  • Dual aspect concept: The concept believes in the double entry system in the accounting. The system of double entry system is based upon the accounting equation i.e. Assets = Liabilities + Capital. Any transaction recorded in the accounts of the company shall affect the both sides of accounts and shall be recorded in each side i.e. debit as well as credit. The transactions entered into both sides will show their effect in the end results of the accounting where all the assets of the company shall be equivalent to the total liabilities and capital. The concept also helps to find out any mistake or error in the recording of data in the books of accounts. 
  • Realisation concept: The concept helps the company to realise that only generation of revenue in the words is not sufficient. There should be a right to receive the revenue or an actual payment received in cash to the company which is also recorded in the revenue and expenditure account of the company. Hence it is required to start the process in reference to order to book the income attached to such order. Such revenue cannot be considered to realise when the order is received (Smith,  2017).
  • Matching concept: The matching concept stands for the matching of revenue with the expenses of the company every year. The concept assists in bifurcate the items of capital nature in the books of accounts. By deducting the expenses from the revenues for a particular financial year the company can find the actual position of individual accounts of income and expenses (Strouhal,  2015).
  • Accrual concept: The concept of accrual income allows the company to book any revenue when the company receives the right to receive such income. The concept based on the advance booking of income only by the generation of such income by right. The concept avoids the wait of time till the income is received in actual in cash. As per the concept the company can book the revenue as soon as the service provided or product delivered to the customer whether the income against such service will receive in future. However as per such concept it is not allowed to reserve any expense in advance but the expenses against such revenues which are booked in advance can be charged at the time of accrual irrespective of the time of their payment (Tiron-Tudor, 2017).
  • Accounting cost concept: As per this concept of accounting the recording of assets shall be done on their acquisition price which also includes the transportation cost and installation charges. The concept also known as historical cost concept. In this concept market if value of assets have no role in the financial statements of the company. The concept says that the market value of non-current assets is not important recording in financial statements as it is recorded at their acquisition price. The concept helps the company to determine the cost engaged in business process out of the overall expenses (Winship, 2016).

Conceptual framework, and the Issue of Measurement

The Australian Accounting Standard Board (AASB) established a framework for all the public listed companies for the preparation of financial statements. Afterwards it is amended by the International Accounting Standards Board (IASB) which is released as framework for all the listed entities. The financial statement of entities should be complied with the framework issued by the AASB (Bragg, 2016). The entities are free to adopt any of the measurement criterion provided by this framework which includes fair value measurement, current cost measurement, present value measurement, historical cost measurement, and realizable value measurement. This framework used by the companies to make their accounting framework more transparent and effective. It also helps to set a convergence between domestic and international reporting framework (Halpin, and Senior, 2009).

An argument exists relating of use of these approaches and their fairness in the accounting conditions from a long time but due to the wide use at world level and extreme popularity of historic cost method, it is considered as more favourable and reliable. Such method is popular since nineteenth century. The company adopted the method for preparing its financial statements. The method applies in the business with the historic cost of certain assets, liabilities. The company also follows the Corporation Act and the provisions mentioned under Australian Accounting Standards/International Accounting Standards Board (IASB) to prepare the financial statements (Parrino, Kidwell,  and Bates, 2011).

All the financial statement of the company has been recorded by using the fair value measurement method which strengthen its transiency view and strengthen the business position of company. Nonetheless, it is analysed that all the purchased items and assets have been recorded by using the AASB 138 which helps company use the costing model to strengthen the transparency of the recorded items.  Company also follows the IAS 136 to identify the impairment loss by undertaking the impairment testing in the recorded items of the books of accounts (Hirschey, 2008).

However, this argument regarding the method is being initiated due to its reporting pattern which allows the reporting of anticipated losses but not profits. Such reporting decreases the value of company and show the lower value of items of income and elements of balance sheet. For attaining the real position of balance sheet of company and its income, the fair value accounting method is considered as more favourable. However, debates have also been made against such method that this method violates the financial results which can become hurdles for the business. The argument regarding the choice of methods is unending. The reason behind this is that the organisations initially chose the historical cost method for recording the inputs in accounts and then they switched to the fair value method while declaring the results. The organisations have the liberty to choose several method of accounting by providing the proper disclosure (Brealey et al. 2007).

Fundamental Qualitative Characteristics - Understanding of Relevance and Representational Faithfulness

For every organisation which is preparing its financial statements, it is mandatory to apply the fundamental qualitative characteristics. These are the only sources of the information providing to its users. Relevance and Faithful representation are two characteristics of fundamental qualitative. These characteristics suggest that all the interest which cannot be controlled and held by other companies shall be aligned with the reporting framework. The organisation uses two methods for valuation of assets for effective reporting framework (Halpin, and Senior, 2009).

  • Relevance: The relevancy of information is considered with the fact that if the information is capable to differentiate the decision and opinion of its users. The decision made by a user without information is different to the decision made with the availability of information. The relevancy can be judged for any organisation on the basis of the materiality of the information available. The method of relevancy is used by the company to strengthen the transparency in its books of accounts which attracts the huge number of investors towards the company and increase the sustainability value of the company (Subrahmanyam, 2008). 
  • Faithful representation: The financial information provided by an organisation should be equally faithfully represented along with its relevancy. Not only legal form but the substance of information is also important in the representation of financial statements.  An error free report which is neutral and complete in nature can be found with the help of faithful representation. For execution of such qualitative characteristics, it is required to develop the understandability, comparability and verifiability of provided information. Both the characteristics relevancy and faithful representation is significant in the valuation of assets and liabilities (Tiron-Tudor, A., 2017).

The company Qube Holding Ltd. Use both the fundamental qualitative characteristics in the preparation of its financial statements. The company is focused about the relevancy of the information along with its faithful representation. The financial information represented by the company is understandable for the users which enable them to take more appropriate decisions. The characteristics help in increasing the understandability of users at international level. Also the information can also be easily comparable with the help of these accounting characteristics. The financial elements of Qube Holding Ltd. are valued with the proper implement of accounting concepts and reporting frameworks. The company has used proper and relevant methods in measurement of inventories and other assets and liability elements. Also the company is using a proper auditing method to make its reporting framework more effective and reliable for its users (Whittington, 2016).


To survive in the global corporate world, it is needed for every company to follow proper accounting concepts and frameworks according to the nature of their business. The financial information provided by the companies should be the result of application of proper methods of financing otherwise the users will not be able to believe the facts provided by the company and to compare the information. With the help of adequate representation of financial statements and by using proper financial instrument in the transactions of business, the company can gain the confidence of its stakeholders and can also lead among its competitors. The financial analysis made by the company should be fairly represented among the users and should also be relevant to the business of the company. The use of such accounting frameworks and provisions helps the company to make its financial records more transparent. Also these accounting concepts and frameworks have a significant role in establishing a convergence between domestic and international frameworks. Company performing internationally is obligated to follow the international framework of accounting and recording so that it can establish more transparency in its books of accounts.  However, the companies have the liberty to choose any of the measurement method as per its nature of business but it is required to choose any one of them for proper execution of business and fair accounting reporting.