Financial Concept of Southern Cross Media Group Company
In this report, fundamental accounting concepts and qualitative intents of the prepared financial statement of the company has been discussed. It is considered that in order to strengthen the transparency of the recorded items in the books of account, there is need to comply with the applicable accounting standards and legal laws. However, harmonization in the prepared financial statements on domestic and international level is based on the compliance with the domestic and international accounting standards. In this report, Southern Cross Media group Company has been selected. This report divulges the key understanding on the accounting concepts, conceptual framework and fundamental qualitative characteristic of the financial statement of the company.
1. Identify and describe the accounting concepts used
- Identify and describe the accounting concepts used
The main concept of the accounting has been formulated from the accounting authorities which can bring the consistency presentation and preparation in the field of financial data to make the organization value different all over the country. The concept of accounting if very much famous not only at national level but at international level also such as International accounting Standards Board (IASB) which is completely based on the concept of accounting. Also these globally accounting ideas go about as an umbrella structure which must be embraced by associations all across the world. The accounting ideas embraced by Southern Cross Media Group which are as per the following concepts (Eppler, and Mengis, 2014).
- Accounting Cost Concept: - This type of concept is completed based on the presentation of the financial statement which has been using the historical cost that does not based on the basis realisable value but its assets initially. The Usage of this type of concept shows the reflection of the Southern Cross Media Group in terms of acquisition price. Utilization of the bookkeeping cost idea has permitted impression of benefits in the books of Southern Cross Media Group at the procurement cost less devaluation at the estimation of $181,654,000. Also this idea was not in power each year the asset report would have reasonable esteem which is reflected properly in the balance sheet.
- Accrual concept: The Accrual concept is based on the transaction record of the organization so that when it comes to business, the business can easily transacted against the cash when it is received. Also the record of each and every transaction is been recorded in the book after every single transaction take place until it has not been settled.
Because of the implementation of the accrual notion, the income expense is registered in the economic results declaration at the moment the operations were put by the company for acquisition or any other sale-related activity. There is no relationship with the payment of these money operations (Eppler, and Mengis, 2014).
- Matching Concept: The matching concept is used to match the income which is earned by the business and it also calculated all the expenses which is paid in respect to the accounting year. The deduction of the year’s expenses is only done from the expenses which has been earned as an income from the accounting period itself. Also, the expenses of depreciation is the $14,782,000 in the year 2008 for financial and the deduction has been shown which has been generated form the income part in the year 2018 only.
- Realisation Concept: The notion of realization enables the company to recognize income in the declaration of gain and loss only when the requirements linked to the right to obtain income are achieved. If the right to obtain the income is certain, the real distribution of the company's income is not needed.
Also this type of concept is always applied on the Southern Cross Media Group which give correct direction to the business so that the revenue recorded can be increased and the probability of the economic gain benefits (Eppler, and Mengis, 2014).
- Dual aspect Concept: The implementation of this idea enables the company to pursue the billing equation in an ideal way. The implementation of this notion calls for the impact on two sides of payments, i.e. the loan side and the debit side.
Southern Cross Media Group's economic statements were ready by using the Dual Aspect Concept. By use of this concept, two parties of the accounts have influenced the company operations. Software acquisition has influenced both the money account and the property account. The assets have been increased by $70,541,000 and cash balance has declined by $70,541,000.
- Going Concern Concept: The ongoing concern notion is used in all aspects of the preparing of economic accounts by each company organization. Shareholders invest in company and need assurance about the continuing existence of the company. Management implies that this idea will be used in company and states that the company will not prevent company activities in the near future. According to this concept, the business has made various uncertain provisions. The Southern Cross Media Group has also made the provision based on the current and non-current which is worth of $15,987,000 and the $65,758,000 respectively for the uncertainties of the future (Zimmerman, and Yahya-Zadeh, 2011).
- Accounting Period Concept: The notion of the billing era needs the organization to split the work lives of the organization into the same phases. These identical periods must be implemented continuously in company. It is necessary to prepare the organization's economic statements for these identical phases and to calculate the development of the entity; revenue; profit; income, etc (Dumay, et al. 2016).
The Southern Cross Media group just follows the period of accounting which has to start from the 2nd of July and it will end on the #0th June next year.
- Money Measurement Concept: The transaction is quantified and measured by the Money measurement concept which allowed only one term of money to enter in the statement of the finance. The financial statement entirely ignore the non-monetary measures as it not been reflected in the statement. However, these interventions can contribute to the performance of the study, but can nowhere be applied quantitatively and therefore totally overlooked. Due to the implementation of this idea, the Link Group has overlooked the qualitative elements common in company, such as employee security in the workforce, production performance, etc.
- Business Entity Concept: This concept is based on the segregates of the owners of the business and where it gets from the business itself. The business owner separate the business transaction itself of both the group by just using the single set of the financial statement. Also the business book includes all the transaction other than the external one (Schaltegger, and Burritt, 2017).
It is due to the implementation of the company entity notion in the Link category that called on the community to demonstrate the cash collected from the shareholders in the form of shares under the category of liabilities and equity and not property. The cash collected from the holders must be returned to them and is not the property of the organization.
2. With reference to the conceptual framework, and the debate over measurement in accounting. Using your allocated company discuss the issue of measurement and provide examples.
Conceptual framework and debate over measurement
It is considered that the conceptual framework followed in the books of account helps in measuring the liabilities, assets and income and expenditure recorded. However, in order to measure these accounts, proper measurement method, amortisation method and other costing method are followed (Bovens, 2007). However, impairment testing is also one of the method followed to strengthen the measurement concepts in the recorded items. However, conceptual framework followed by the all the listed companies in the Australia needs to be aligned with the frameworks and guidelines set by the IASB accounting standard (Schaltegger, and Burritt, 2017).
It is considered that there are several costing method to determine the true value of the recorded items in the books of account. The historical costing method allows company to identify the true value of the recorded items. However, the historical costing method is used with the impairment testing method to identify the present value of the assets. It helps company to identify the impairment loss occurred on the assets historical value. The historical value determine the value of the assets at its cost. This method is preferred method which is used by company to make the less complexities in the recorded assets. It helps in determining the realised value and current proposition of the assets held by company in its financial statement (Zimmerman, and Yahya-Zadeh, 2011).
. Another valuation method is fair value method which is used to identify the market value of the recorded items in the financial statement. This helps in determining the organization value and based on the earning management concept of the organization. This method is ideally not followed due to the discrepancies created by the management department in the manipulation of the financial statements (Meyer, and Land, 2015).
Measurement applied in Southern Cross Media group Company
It is analysed that financial statement of the company has been prepared by using the historical cost method. All the assets have been recorded at the historical cost and considering the depreciation effect. The measurement of the provision recorded in the books of account at the cost and future cost redundancies. For instance, property and plants are recorded at their purchase price and value is deducted with the depreciation rate. The goodwill is also recorded at the historical value irrespective of its market value. The impairment test also helped in determining the true value of the recorded items by deducing the impairment loss from the historical cost. The amortization cost is also used to assess the value of the assets (Ouchi, 2019).
3. Fundamental qualitative characteristics and understanding of relevance and representational faithfulness in relation to the useful information of the financial statements and if one are more important than the other, in accounting for assets and liabilities.
It is analysed that the conceptual framework of the company is used to prepare the financial statement of Southern Cross Media group Company. However, fundamental qualitative characteristics are followed by the company to maintain the uniformity in the recorded items with the other accounting standards (Barth, et al. 2011). It is required to follow the set qualitative characteristic by the Southern Cross Media group Company to maintain the transparency and fair and true view of the recorded items in the books of account. It is mandatory for the listed companies to comply with these fundamental qualitative characteristic (Eppler, and Mengis, 2014).
Nonetheless, below are the given two fundamental qualitative characteristic which needs to be followed by the Southern Cross Media group Company in its prepared financial statements and recorded books of account (Adams, 2015).
Relevance: - All the recorded items in the financial statement needs to be recorded to the extent it is imperative or material to its stakeholders. The unnecessary information should be avoided while recording the financial and no-financial transaction in the financial statement. The financial statement of Southern Cross Media group Company must reveal the material qualitative items and should not take into account those information which are imperative or material to its stakeholders (Barad, 2018).
In case of Southern Cross Media group Company, it is found that company has avoided those information which are imperative or material to its stakeholders. In addition to this, qualitative concept of the followed relevancy concept has revealed that company reflected all the financial figures recorded in the books of account by rounding off them to the closed thousand. It has also given the supporting notes in the notes to account of the annual report for the same. The uncertainty, audit risk model has also been disclosed by the company in its annual report to make the shareholders and other stakeholders more informed (Bosse and Phillips, 2016).
- Faithful representation: It is analysed that the qualitative intents developed in the followed conceptual framework of the books of account reveals that company has maintain the transparency in the recorded items and also given the economic phenomenon of the business operating in the particular year (Cardona, Chica, and Barragán, 2018). It is considered that adoption of the faithful representation qualitative concepts has allowed company to make authentic and true and fair disclosure of the recorded business values to its stakeholder. It shows that all the recorded assets and liabilities in the financial statement needs to be valued at its true value. The financial statements should reveals the true value of the recorded items which eventually helps in taking the investment decisions (Dinnie, 2015).
Which kind of qualitative characteristic is more important for valuation of assets and liabilities
There are several qualitative intents adopted in the conceptual framework of the organization for the valuation of the assets and liabilities recorded in the financial statement. However, these qualitative characteristic is used to strengthen the comparability, uniformity, interpretation of the recorded items and maintain the transparency in its books of accounts.
It is analysed that in order to identify the true value of the recorded assets in the books of account, computation of the value should be done on the basis of proper assumptions (Dumay, et al. 2016). IAS 137 should be periodically followed to identify the impairment loss of the assets recorded.
Valuation of the assets could be done by considering the materiality of the information faithfulness. In case of Southern Cross Media group Company, it is found that company has avoided those information which are imperative or material to its stakeholders. Therefore, it could be inferred that there is no single qualitative characteristic which should be considered only as compared to others. These qualitative characteristic helps organization to strengthen the reporting framework and also align its domestic reporting compliance with the international accounting and reporting framework (Evans, et al. 2016).
After analysing the annual report of Southern Cross Media group Company, it has been found that company has kept higher transparency in the recorded financial items by complying with the IFRS rules and accounting standards. However, the international accounting conceptual frameworks has been adopted by the Southern Cross Media group Company to align or set up harmonization in the domestic and international accounting framework. This has allowed company to disclose all the imperative information to its stakeholder with the true and fair view aspects. IAS 137, AASB 138 has been followed by company to identify the true value of the recorded intangible assets covering high value in the books of account.