ACC303 Contemporary Issues in Accounting T318
Topic: A current Contemporary Issue in Accounting as advised by your lecturer
Task Details: Groups are to research the current state of a contemporary issue in accounting. As a result of their research groups need to develop a video presentation detailing the current contemporary issue, practices, etc using higher order analysis and explaining the implications for various stakeholders in relation to financial decision making. The video presentation should conclude with supported specific recommendations as to how organisations and their accounting advisors should proceed in light of the analysis.
Adacel Technologies Limited is an Australian business organization with the primary business of developing simulation and training systems for business organization and military. It also provides services for developing air traffic control simulators for training and research purposes. It is one of the most successful business organization in this industry and has won different kind of industry awards over the period of time for providing quality services and products business organizations and military.
Following the conceptual framework established by the government and other regulatory authorities is very important for a business organization. Main objectives of these conceptual frameworks are to make sure that the financial position of the company is correctly depicted in financial statements. One of the main purposes of preparing financial statements is that so financial statements are able to understand the financial position of the company with the help of these statements.
There is five major component of conceptual framework elements i.e. assets, liabilities, equity, expenses, and income. Combination of these five elements helps in maintaining and preparing financial statements and books of account for any business organization (Higgins, Milne and Van Gramberg, 2015). General purpose financial reporting framework is developed by each country in order to make sure that financial statements prepared by business organizations operating in a particular industry are similar to each other and shareholders can easily compare the financial statements to make their investment decisions.
Critical Analysis/ Discussion
Complied with the measurement requirements
After analyzing financial statements prepared for the year ending 30 June 2018 it can be said that the management of the company has followed all the requirements in relation to the conceptual framework. During the year under consideration date of the company has been conducted by PWC which is one of the most significant and efficient audit consultancy firms in the world. According to the report issued by Jason Perry i.e. auditor of the company, a financial statement prepared by the company are in compliance with all the rules and regulations applicable to the business organization.
Auditor of the company has also stated that financial statements of the company are presenting a true and fair view of the company's financial position. All the accounting standards issued by the accounting standard board of Australia are followed by the organization while preparing the financial statements (Spiceland et.al, 2018). Rules and regulations given in Corporations Regulation 2001 are also complied with efficiency and effectiveness by the management of the company. In addition to that structure of the annual report and financial statements prepared by the company are in accordance with the general purpose accounting framework.
According to IASB conceptual framework, there are two fundamental qualitative factors that should be followed in the preparation of every financial statement i.e. relevance and faithful representation. According to the quality factor of relevance, all the data represented in the financial statement should be relevant to the stakeholders. Any material misstatement should not be misrepresented or omitted and in the statements. On the other hand, faithful representation means that all the data present in the statement should be accurate. Therefore it can be said that fundamental qualitative factors want that data provided in the financial statement should be relevant and accurate for the user (Zhang and Andrew, 2014).
Financial statements prepared by management of Adacel Technologies have followed both of these correlated qualitative fundamental characteristics. Financial statements are present in each and every transaction entered into by management of the company during the financial year. In addition to that unqualified audit opinion provided by the auditor of the company also shows that financial statements are representing faithful representation of a financial position of the company.
There are four factors that could be considered by the management of the company while enhancing qualitative characteristics in financial statements. These four factors are comparatively, verifiability, timeliness, and understand ability (Barker, 2015). If financial statements prepared by the company are showing all the above 4 factors that it can be said that financial statements are enhancing qualitative characteristics.
Financial statements are prepared in the customer not that it is representing financial data for the year 2017 and 2018 both. Users of financial statements can easily compare the financial position after reading the financial statements. External Audit has been conducted by the management of the company with the help of expert i.e. statutory auditor (Bauer, O'Brien and Saeed, 2014). Auditors have provided that there are no material misstatements in financial statements of the company that shows that financial data is properly verified.
Financial data presented in the statements are representing business transactions for a limited period of time. Financial data relates to the conducted by the company in the year 2017 and 2018 that shows that the factor of timeliness has been followed by the company. At last management of the company has followed all the rules and regulations maintained by AASB. The main purpose of these rules and regulations can make sure that these financial statements are understandable from the perspective of a user with limited knowledge of economics and business. According to this analysis, it can be said that all the factors of enhancing qualitative characteristics have been followed by the company.
Purpose of financial statements is to provide important information to users of financial statements so that they can make their decisions in relation to their investment in the business. Financial statements prepared by Adacel Technologies prepared by following every rule, Regulation and other requirements of financial reporting framework. On the basis of this analysis, it can be said that users of financial statement can easily make the decision in relation to their investment. Existing stakeholders in the business can compare the current financial position of the company with previous financial year performance to make their investment decision.
For example, if the supplier wants to evaluate whether it will be profitable who enter into business with the company in then such a supplier can evaluate short-term liquidity position of the company by analyzing current assets and current liabilities in the balance sheet (Wahlen, Baginski and Bradshaw, 2014). All Assets and liabilities are categorized between current and long-term which would be very helpful for suppliers to make their decision.
It is recommended by the conceptual framework of accounting that financial statement should be prepared in such a manner that it is understandable by a person with limited knowledge of business and economics. After analyzing audit report, financial statements and notes to accounts it can be said that financial statements will be easily understandable by a person with Limited knowledge of accounts and business (Weygandt, Kimmel and Kieso, 2015). Financial statements are structured in such a manner that person with some knowledge of accounts can easily understand the basic overview of the organization. In addition to that detailed notes to accounts provided at the end of the report also helps significantly for getting detailed knowledge of every element mentioned in profit and loss account and balance sheet.
This report has identified that all the rules and regulations of the financial reporting framework are properly followed by the organization. In addition to that, all the fundamental qualitative factors are also followed by the organization. Therefore it can be said that the requirements of general purpose financial reporting are followed by the organization. The main purpose of any financial statement is to make sure that users of financial statements are able to make their decisions (Nobes, 2014). Users of financial statements prepared by Adacel Technologies Limited will be able to make their decision so as relevant accurate and structured data is provided in the financial statements.
Financial statements are providing a true and accurate review of financial position but there are some recommendations that can help in improving the quality of financial statements prepared by Adacel Technologies Limited-
This report has effectively evaluated financial statements prepared by the management of Adacel Technologies Limited parenting 30th June 2018. This report has successfully evaluated the qualitative characteristics used by the organization in order to enhance the quality of financial reporting. Auditors of the company have also declared in their audit report that the financial position of the companies representing its true and fair value and all the rules and regulations in relation to Australian accounting standards are followed by the company. It is also concluded that different stakeholders of the company would be able to make their investment decisions with the help of information provided in the financial statements. On the basis of all these information, it can be said that the company has complied with conceptual Framework requirements.