IASB Conceptual Framework Objectives

Discuss about the Property Plant and Equipment System.

In today’s business world, the business entities are facing different kinds of issues due to the presence of complex business operations. One of these major issues is accounting and financial reporting issues as these are considered as contemporary accounting issues in the business organizations. These rise of these kinds of issue can be see due to the non-compliance with the principles and standard of required financial conceptual framework. In this process, International Accounting Standard Board (IASB) plays an integral part as it provides the companies with the required standards and principles that the accountants are required to be complied with for financial reporting. This report takes an honest attempt in the analysis and evaluation of the level of compliance with the standards and principles of conceptual framework by Amcor Limited. Amcor Limited is an Australian high-quality packaging company for foods, beverages, pharmaceutical products and others. Amcor Limited is in the top 100 companies of Australian Security Exchange (ASX) (amcor.com 2018). Different part of the report analyzes various factors of conceptual framework with respect of this company.         

From the above discussion, it can be observed that the business entities are required to follow the standards and principles of accounting conceptual framework. More specifically, Amcor Limited is required to meet the conceptual framework objectives. There are three major objectives of IASB conceptual framework.

First Objective: The first objective of conceptual framework states that the companies must give the users required information about the current financial position of the entity that must include the information of their economic resources (aasb.gov.au 2018). The information related o economic resources can be found in the statement of financial position. In case of Amcor Limited, the company provides the users with all required current information related to economic resources through the statement of financial situation and it can be seen as follows:

Apart from this, the recent information related to the current financial position of the entity can be found in the income statements (amcor.com 2018).

Second Objective: The second objective of accounting conceptual framework is provide the users with the information related with the major changes in economic resources and financial claims (aasb.gov.au 2018). These changes can be observed from the income statement and statement of change in equity. From the analysis of the annual reports of Amcor limited, the company provides all the information related to change in economic resources and financial claims through the income statement and statement of change in equity (amcor.com 2018). It can be found in below:

Compliance with Recognition Criteria

Third Objective: As per the third objective of conceptual framework, the financial performance of the companies must reflect from the cash flow statement of the companies (aasb.gov.au 2018). Thus, the companies are required to provide the users with all the information related to cash flow. In the annual report of Amcor Limited, the company publishes all the information of cash flow through their cash flow statement and it can be found as below:

Moreover, Amcor Limited prepares their financial reports as per the regulations of Corporation Act 2001 and Australian Accounting Standard Board (AASB). They have also complied with International Financial Reporting Standards (IFRS) and International Accounting Standards Board (aasb.gov.au 2018).

Apart from conceptual framework objectives, the requirement for the business entities is to satisfy the recognition criteria of conceptual framework for major financial elements; they are assets, liabilities, equity, revenue and expenses. Three major dimensions related to the recognition criteria are satisfying the definition, the flow of economic benefits to or from the business entities and the presence of measurable value. The following discussion shows the level of satisfaction of recognition criteria by Amcor Limited:

Amcor Limited has reported different operating assets. One of them is Property, plant and equipment (PPE) and their recognition is done in cost value after the deduction of depreciation and impairment losses. Straight-line method is used for depreciating PPE. These recognition criteria can be seen in AASB 116 Property, Plant and Equipment under section 334 of the Corporations Act 2001 (aasb.gov.au 2018).

The company has intangible assets. The recognition of goodwill is done on cost value after the deduction of impairment losses. Same as, other intangible assets are recognized at coat value after the deduction of any impairment and amortization costs. All these rules can be seen in AASB 138 Intangible Assets and IAS 38 Intangible Assets (aasb.gov.au 2018).

In case of trade and other receivables, Amcor Limited recognizes them at the invoice value and then adjusts them with the recoverable value. It can be seen in the standard of AASB 9 Financial Instruments (aasb.gov.au 2018).

Amcor Limited recognizes them inventories at the lower of costs and net realizable value. This regulation can be seen in the standards of AASB 102 Inventories (aasb.gov.au 2018).

The presence of different liabilities can also be seen in Amcor Limited. The company recognizes their interest bearing liabilities in fair value basis after considering net transaction cost. It can be seen in the standard of AASB 132 Presentation of Financial Instruments (aasb.gov.au 2018).

Fundamental Qualitative Characteristics Compliance

The company recognizes provisions in the presence of any legal or constructive obligation and they are measured on present value basis (aasb.gov.au 2018).

In Amcor Limited, the classification of ordinary shares is done as equity and they are fully paid with no par value. In case of treasury shares, their recognition is done at cost value after the deduction of equity. For this aspect, the company follows the standard of AASB 1004 Contributions (aasb.gov.au 2018).

Amcor Limited does the recognition of revenue from sales of goods at the time of the transfer of risk and reward of ownership to the customers. No revenue is recognized in the presence of significant uncertainty regarding considerations. It can be seen in the standards of AASB 118 Revenue (aasb.gov.au 2018).

Two types of expenses are there; they are Finance expenses and Lease payments. The company recognizes financial expenses in the income statement at the time of their occurrence. Payment of lease is also recognized in the income statement on straight-line basis.

Fundamental qualitative characteristics of financial information make them more acceptable to their users. The following discussion shows the level of compliance with these characteristic by Amcor Limited:

Relevance: Provided financial information must be relevant to become helpful in the decision-making process of the users (Barth 2013). They must possess predictive and confirmatory value. Amcor Limited develop their financial statements as per the standards of AASB and Corporations Act 2001 and these information helps in getting future outcome in the presence of previous evaluation information (amcor.com 2018).

Faithful Representation: Companies must represent financial information faithfully in the absence of any influence and biasness (Gebhardt, Mora and Wagenhofer 2014). The auditors of Amcor Limited has provided the opinion that there is not material misstatement in the financial statements of Amcor Limited as they have been prepared as per the standards of IFRS, IASB, AASB and Corporations Act 2001 (amcor.com 2018).  

Financial information become more useful in the presence of enhancing qualitative characteristics. The following discussion shows the level of compliance with these characteristic by Amcor Limited:

Comparability: The users of financial information can understand and identify differences and similarities in different financial elements in the presence of comparability (Edmonds et al. 2016). In the presence of faithful representation of the financial statements, the users become able to compare the financial information of Amcor Limited with other entitles and different timeline from the same entities.    

Verifiability: Verifiability characteristics are required for making financial information more useful. In case of Amcor Limited, the provided justification and classification of different financial items make financial information verifiable for the users (Henderson et al. 2015).

Timeliness: This characteristic helps in delivering timely financial information to the users. Amcor Limited always publishes their annual report and financial statements on certain time of the year so that the users can access them when required (Edmonds et al. 2016).

Understandably: Users can better use financial information if they are easy understandable. Amcor Limited provided financial information in simple form and tabular formats for the easy understanding for the users (Henderson et al. 2015).

Conclusion

The above analysis shows the fact that Amcor Limited has well complied with the conceptual framework objectives of AASB while developing financial statements. At the time of the recognition of necessary financial items, Amcor Limited complies with the standards of AASB like AASB 9, AASB 116, AASB 138 and various others. Moreover, the financial information of Amcor Limited posses both the fundamental and enhancing characteristics. Thus, it can be concluded that Amcor Limited has fully complied with the standards and principles of conceptual framework.

References

Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Contributions. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Financial Instruments. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Intangible Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Inventories. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf [Accessed 8 Apr. 2018].

Aasb.gov.au. (2018). Revenue. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf [Accessed 5 Apr. 2018].

Amcor.com. (2018). Amcor – Investor Relations – financial information and ASX announcements . [online] Available at: https://www.amcor.com/investor-relations/about-us [Accessed 8 Apr. 2018].

Amcor.com. (2018). Annual Report 2017. [online] Available at: https://www.amcor.com/CorporateSite/media/Annual-reports/Amcor_Annual_Report_2017.pdf [Accessed 8 Apr. 2018].

Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.

Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial accounting concepts. McGraw-Hill Education.

Gebhardt, G., Mora, A. and Wagenhofer, A., 2014. Revisiting the fundamental concepts of IFRS. Abacus, 50(1), pp.107-116.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.