Compliance with measurement needs of the conceptual framework

All business organisations are needed to comply with the accounting regulations when they carry out their financial reporting activities. In this way, it becomes possible to avoid issues related to accounting and financial reporting in business operations. The situation is similar for ASX listed organisations, since they require complying with the necessary guidelines of the conceptual framework. In Australia, there is presence of conceptual framework for financial reporting, which is provided on the part of IFRS and all organisations need to adhere to these standards. The objective of this report is to assess the degree of adherence with various accounting segments of the conceptual framework by Aeeris Limited, which is an ASX listed organisation.

All organisations need to consider the measurement needs in their financial reporting process in accordance with the conceptual framework and Aeeris Limited is needed to consider the same as well. This framework mandates that all organisations are needed to report their assets and liabilities by using two measurement bases, which include fair value and historical cost (Macve 2015). The conceptual framework states that assets could be considered in the form of resources, which are controlled by the business organisations and they form owing to the historical events and future economic benefits. On the contrary, liabilities could be defined in the form of current obligations for the organisations owing to historical events resulting in outflow of resources (Aasb.gov.au 2018). Equity could be taken into account in the form of residual interest in the assets of the organisation after all liabilities are deducted.

Similarly, the organisations are required to consider the recognition of the components of financial statements. The organisations need to consider two specific conditions when the elements of the financial statements are recognised. Initially, they are required to be realised, if it is likely that any future benefit related to the item would flow from the business organisation. Secondly, these items require recognition, if they have a particular cost value that could be gauged reliably (Abbott et al. 2016).

After evaluating the annual report of Aeeris Limited in 2018, the organisation has utilised historical cost as well as fair value in order to gauge its assets and liabilities.

As evident from the above figures, Aeeris Limited has used fair value as well as historical cost to gauge its assets and liabilities depending on business needs. Under the historical cost process, the organisation has gauged its assets and liabilities in a manner, which provides monetary information regarding income, expenses, assets and liabilities during the transaction events (Aasb.gov.au 2018). Conversely, in fair value, the organisation has gauged some of its assets and liabilities depending on the present value providing monetary information at the date of measurement.

However, Aeeris Limited needs to consider other aspects as well when selecting measurement bases. One such factor is relevance, which could be observed from the annual report of the organisation, as it has disclosed financial information for 2017 and 2018. Moreover, it has adhered adequately to AASB, IFRS and Corporations Act 2001, which assure faithful representation of its disclosed financial information.

Compliance with the fundamental qualitative characteristics

The conceptual framework states two fundamental qualitative characteristics, which are described briefly as follows:

Relevance:

If the provided financial information is relevant, there would be positive effect on the users in order to undertake decisions. Therefore, it is necessary both confirmatory and predictive values are present in financial information (Francis et al. 2015). When the predictive values are present, the users could estimate future outcome. From the annual report of Aeeris Limited in 2018, the users could be able to estimate its future performance by analysing its financial performance in 2017 and 218 (Aeeris.com 2018).

Moreover, there is confirmatory value in financial information when the users have the ability to provide feedback regarding the past accounting incidents. As observed from the annual report of Aeeris Limited in 2018, it is possible to obtain financial information for the users for the previous year, which is 2017.

When the financial information is faithful, the users could undertake sound decisions. For ensuring such faithful representation, the financial information needs to be neutral, error-free and complete (Garrett, Hoitash and Prawitt 2014). In accordance with the latest annual report of Aeeris Limited, adequate adherence is ensured with respect to IFRS, Corporations Act 2001 and AASB. As these aspects are complied effectively, the financial information of the organisation is represented faithfully.

As per the conceptual framework, the financial information contains four enhancing qualitative characteristics, which are discussed as follows:

Verifiability:

When this particular characteristic is present, the financial information users could use their independent observations as well as their knowledge to arrive at a consensus (Gigler et al. 2014). Such verification could be either direct or indirect. As per the latest annual report of Aeeris Limited, adequate disclosures have been made in the form of notes to the financial statements. This has assisted the users in using their knowledge directly or indirectly for verifying the accounting information of the organisation.

Comparability:

When this particular characteristic is present, it becomes easier for the users in understanding and detecting the similarities and variations related to the various financial items of the business organisations. As observed from the annual report Aeeris Limited in 2018, it has disclosed all financial information for 2017 and 2018 in table formats. This has helped the users in contrasting the financial information of Aeeris Limited with other similar companies and similar timeframes of the same organisation.

Understandability:

With the help of this characteristic, it assists the organisations in categorising and representing financial information in a concise and clear manner for better understanding of the users (Gomariz and Ballesta 2014). The annual report of Aeeris Limited states that all needed financial information is disclosed in a simple format. Moreover, it has provided the necessary clarifications and justifications of the different accounting treatments to be disclosed in the form of financial footnotes. These aspects have increased the understandability of the users.

Timeliness:

This characteristic assures the delivery of the needed financial information when useful decisions are undertaken. The previous information is less effective at the time of undertaking decisions. It could be observed that the organisation has provided required financial information for the latest years 2017 and 2018.

Compliance with the enhancing qualitative characteristics

Before using the financial statements for undertaking decisions, it is necessary that they need to conform to the significant objectives of conceptual framework. According to the first objective, all ASX listed organisations are needed to deliver the users with necessary information regarding economic resources and financial position, which could be found from the balance sheet statements.

The above table clearly indicates the disclosure of such information from Aeeris Limited in its 2018 annual report as balance sheet statement.

The next conceptual framework objective needs the organisations to disclose information regarding the changes in their financial performance and economic resources.

The above tables clearly indicate that Aeeris Limited has disclosed financial information associated with the financial performance as income statement and statement of change in equity (Aeeris.com 2018).

The final objective of the conceptual framework is to disclose necessary information associated with the cash flows of the organisations in their annual reports.

The above table makes it evident that Aeeris Limited has provided all information associated with their cash flows. This implies that all necessary financial information is disclosed adequately by the organisation by publishing different financial statements. Therefore, it could be stated that the financial statement users of Aeeris Limited could use information for undertaking decisions.

The conceptual framework needs the users to have basic accounting knowledge in order to understand the financial statements of the organisations. The latest annual report of Aeeris Limited makes it clear that all financial information is disclosed in a simple format by adhering to the essential guidelines and principles. Moreover, they have disclosed needed clarifications and explanations regarding the significant items of the financial reports as financial footnotes. As all these aspects are present in the annual report of the organisation, it is deemed to be adequate o evaluate the financial condition of the organisation (Wahlen, Baginski and Bradshaw 2014).

According to Nobes (2014), general purpose financial reporting includes the financial statements throughout a particular accounting period issued by an organisation for aiding the creditors and investors so that they could undertake sound decisions. These statements include income statement, cash flow statement, statement of change in equity and balance sheet statement. As evaluated, Aeeris Limited has disclosed all these statements in its annual report by complying with the necessary accounting standards and thus, it has complied effectively with the requirements effectively for general purpose financial reporting.  

Conclusion:

The above discussion makes it apparent that Aeeris Limited has complied with the necessary measurement needs in accordance with the conceptual framework. Moreover, it has been analysed that the organisation has adhered appropriately to the all qualitative characteristics of the framework in its financial reporting process. Finally, it has disclosed the necessary financial information by publishing different financial statements, which have assisted the users to use the same for undertaking decisions.

References:

Aasb.gov.au., 2018. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf [Accessed 5 Dec. 2018].

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 5 Dec. 2018].

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Aeeris.com., 2018. aeeris – annual reports. [online] Available at: https://www.aeeris.com/annual-reports.html [Accessed 5 Dec. 2018].

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Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.