Busn7005 Contemporary Issues In Assignment Answers

Answers:

Introduction:

Conceptual framework could not measure as accounting standards or regulations. It has been set up by the supervisors to help the finals statements preparer for preparing the final financial statements and it also help the user of the report  for understanding the final financial statement of a company easily. Conceptual framework of reports and finals statements makes sure the external stakeholder of an organization about the comparability, understandability reliability and relevancy of the final statements of a corporation. Conceptual framework is a record of some rules which are prepared by the FASB and IASB to make it easier for the user as well accountant to accomplish their duty.

Conceptual frameworks provide profundity knowledge about the norms, rules and regulations of Australian accounting standard and international accounting standards so that the accountant could easily depict and accomplish his or her duty without any kind of ignorance of any rules. It is quite useful for external as well as internal stakeholders. As external stakeholder could easily analyze the financial strength and position of the business through it and internal stakeholders could also make the decisions in a better way with the help of it.

Virgin Australia Airlines Pty Ltd:

Virgin Australia Airlines Pty ltd operates in airline industry in Australia. It offer many services to its clients such as cargo, transportation, charter services and it also offer group booking, corporate booking and other services. Formerly it was known as Virgin Blue Airline Pty ltd. It has been incorporated in Australia in 1999.

Income statement:

Virgin Australia Airlines Pty ltd is a company which main goal is profit making and it has been incorporated in 1999 in Australia. This company has registered in the Australian stock exchange for share trading in the market. Annual report (2016) of Virgin Australia Airlines Pty ltd depict that all the final financial statements of the corporation has not been organized according to the IASB and FASB conceptual framework (ACCA Global, 2017). The data which have been provided in the statement of profit and loss of the company has been recorded according to the past information however some assets and liabilities have been recorded by the corporation according to the fair value.

Extract of Annual Reports:

The financial reports of Virgin Australia Airlines Pty ltd:

Has been prepared and presented according to the IASB and IFRS

The corporation act has considered while preparing and presenting this data

Has been prepared with the consideration of Australian accounting standard

Has been prepared according to historical cost concept but some assets and liabilities have been presented according to the fair value accounting (new concept).

Snap shot of annual report:

This annual report and snap shot of the corporation explains that the report and statement presented by the business for the external stakeholder as well as auditors. It has been prepared with the consideration of Australian accounting standards and Australian accounting standard board.

It has been found that the cash flow statement, statement of financial performance and statement of income of the companionship has been prepared and presented according to the concepts of accounting standards such as accrual, materiality and going concern concept. The requirement of all the Australian corporation act and UK companies act has been rewarded by the business. Because of globalization, corporation is making a focus over the international accounting standard also.

Tiger Airways Holding ltd:

Tiger airways holding pte ltd offers the air travel services to its clients in Australian and Asian market. It is among the largest air travel services in Australia. It operates many scheduled flights from Singapore to other cities and nations. Formerly it was known as Tiger Airways Pte ltd. It has been incorporated in Singapore in 2003. It is the subsidiary of Tiger Airways holding limited (annual report, 2017).

Extract of annual report:

The final financial report of Tiger Airways pte ltd has been prepared and presented according to the accounting concept such as material, accrual and going concern concept. While presenting the figures in final reports, corporation act of Australia and companies act of UK has been considered. The final financial report of Tiger Airways:

Has been prepared and presented according to the IASB and IFRS

The corporation act has considered while preparing and presenting this data (Jones, 2006)

Has been prepared with the consideration of Australian accounting standard

Has been prepared according to historical cost concept but some assets and liabilities have been presented according to the fair value accounting (new concept).

Has been presented with an observation of IASB and IFRS

This annual report and snap shot of the corporation explains that the report and statement presented by the business for the external stakeholder as well as auditors. It has been prepared with the consideration of Australian accounting standards and Australian accounting standard board.

It has been found that the cash flow statement, statement of financial performance and statement of income of the companionship has been prepared and presented according to the concepts of accounting standards such as accrual, materiality and going concern concept (Annual reports, 2016). The requirement of all the Australian corporation act and UK companies act has been rewarded by the business (IFRS, 2006). Because of globalization, corporation is making a focus over the international accounting standard also.

Concept of prudence:

Prudence is a concept of accounting that represent about the presentation of final statements of an organization. This concept explains that final statements must record all the liabilities and expenses of the organization at the time of happening or if accountant find any hope for future expenses than he should also record that transaction even before occurring the transaction. While preparing and presenting the data with consideration of prudence concept, it has been estimated from the accountants to not to under or overstate the numbers to operate the statements (IASB Framework, 2001).

Through the annual report of Virgin Australia Airlines Ltd it has been found that the business is subsequent the concept of Virgin Australia strictly. The same result has been got from the annual reports of Tiger Airways. Both the companies have tinted in their annual reports that they are following the prudence concept and they have also mentioned that any manipulation have not been done in the reports to manipulate the stakeholders.

Difference in disclosure:

Both the companies have presented the data according to the concept of AASB, IFRS and IASB. Both the companies are following corporation act, 2001. The Virgin Australia has  also followed the UK companies act to present the data in the annual reports so there might be some difference in discloser of the entire concept due to the different companies act and corporation act (ACCA Global, 2017). This difference could be because of the operations and nature of the company.

Segment Reporting:

Segment reporting provides the information which is related to the revenue and other important things of the company. More the operations and nature of both the companies might be separated through products and geographical area of the company (Vollmer, Mennicken and Preda, 2009). The companies are offering similar products to the clients but the geographical area of virgin is quite different form Tiger airways. So the different recording figures could be placed due to it.

Fixed assets:

Both the companies have recorded the fixed assets on the consideration of historical cost. Even the depreciation method is also same. Still it has been found that the figures are presented differently in both the companies.

Current assets:

Both the companies have recorded the current assets on the consideration of going concern concept. The inventory management technique used by the companies is also same.

Recommendations:

Through analyzing this report it could be recommended to the users that the conceptual framework is utmost important for a company to increase the understandability of annual report and the final statements. It has been found that both the companies are using a proper standard , rules and regulations and format to increase the curability and relevancy but both the companies have failed to enhance the understandability (McGregor and Street, 2007). Both the Companies have been recommended to do some changes in the standard and format and adopt the rules of conceptual framework to make final statements understandable for external stakeholders.

It is recommended to the stakeholders, board of directors, chief finance officer, managers and accountants to do some changes in the standard and format and adopt the rules of conceptual framework to make final statements understandable for external stakeholders. It could be enhanced the investment in a company as the individual investors could feel that all the statements are curable and reliable and the investment done in the company would offer more return. However, it is recommended to both the companies to make a focus over the conceptual framework rules and regulations for enhancing the investment and make the final statement more reliable.  

Conclusion:

Through analyzing this report it could be concluded that the conceptual framework concept is quite important for the users as well as accountant to understand the key concept of presentation and preparation of final financial report. This it is prepared to understand all the key concept of accounting which could be helpful for a company’s external as well as internal stakeholders. In this report Virgin Australia Pty  limited and Tiger airlines ltd’s annual report has been analyzed to understand the final financial statement of the companies.  The final financial statement of both the companies has been analyzed according to the rules f conceptual framework.

This report concludes all about the final financial statements of both the companies. It has been found through the figures of both the organizations a proper format has been followed by them with the consideration of IFSB, AASB, corporation act, companies act but the figures are not in the state of understandability for the stakeholders as both the companies have ignored the format and rules of conceptual framework. It has also been analyzed that the preparation of conceptual framework is done for the reliability, curability, relevancy, and understandability of final financial statements of a company.   

References:

ACCA Global, 2017. Conceptual framework for financing activities. Retrieved as on 5 April 2017 from https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/iasb-conceptual-framework-financial-reporting.html

Annual reports. 2016. Tiger Airways Holding Ltd. Retrieved as on 20 April 2017 from https://www.tigerair.com/news/Tiger_Airways_Holdings_Limited_Annual_Report_2015.pdf

Annual reports. 2016. Virgin Australia Pte Ltd. Retrieved as on 20 April 2017 from https://www.virginaustralia.com/cs/groups/internetcontent/@wc/documents/webcontent/~edisp/2016-annual-report.pdf

Bezemer, D. J., 2010. Understanding financial crisis through accounting models. Accounting, Organizations and Society, 35(7), 676-688.

Chorafas, D.N. 2006. IGRS, Fair Value and Corporate Governance: The Impact on Budgets, Balance Sheets and Management Accounts. Oxford: Elsevier Publishing

IASB. 2006. Summary of International Accounting Standards. International Accounting Standard Boards. Retrieved 20 January 2007 fromhttps://www.iasb.org/Home.htm

IASB. 2007. Fair Value Measurement. Part 2: SFA's 157 Fair Value Measurements: Comments to be submitted. London: IASB

IFRS. 2008. International Financial Reporting Standards. London: IASB

ISAB Framework. 2001. Framework for the preparation and presentation of Financial Statements. International Standards Accounting Board

Jones, M. 2006. Financial Accounting. Chichester: John Wiley & Sons

McGregor, W., and Street, D. L., 2007. IASB and FASB face challenges in pursuit of joint conceptual framework. Journal of International Financial Management and Accounting, 18(1), 39-51.

Vollmer, H., Mennicken, A., and Preda, A., 2009. Tracking the numbers: Across accounting and finance, organizations and markets. Accounting, Organizations and Society, 34(5), 619-637.