Compliance with the Conceptual Framework

Discuss about the Methodological Issues in Accounting Research.

The report deals with the various contemporary issues that are being faced by the organisations in the modern world due to increase in the complexity of the transaction. The issues are primarily based or are concerning the financial reporting and accounting undertaken by the business entity. The conceptual framework lays down several disclosure as well as principles that are needed to be complied with by the company. The issues are related to such compliance and accounting by the company in respect of the financial statements[1]. International Accounting Standard Bporad plays a major role in guiding the companies in abiding by the principles laid down in the conceptual framework. Proper follow up done by the companies in r expect of the principles makes the job of the accountants very easy. The report focuses on the extent of the compliance maintained by the company in respect of the various conceptual framework guidelines and various other principles.

It is compulsory on the part of the companies to follow the guidelines and principles stated out in the conceptual framework. This particular section will ensure that proper emphasis is given on the extent that the company is in compliance of guidelines given out in the conceptual framework[2]. The various objectives of the conceptual framework of IASB have been listed below along with proper corresponding explanation:

• The first objective is to ensure that the companies make sure that the users get adequate and appropriate information regarding the current financial positon of the company. The information should be based upon the real and correct data regarding the economic resources available with the company. The same can be found in the statement of financial position of the company[3]. Allegiance Coal has ensured that adequate information is available to its stakeholders in respect of the current financial position of the company. The information has been clearly stated in the statement of financial position or the balance sheet and the profit and loss account of the company.
• The second objective of the guidelines is to ensure that the users are able to stay updated with any changes that have occurred in the economic resources as well as the financial claims on the company. The changes taken place in this respect can be found out by looking at the statement of changes in equity and the income statement of the company. Allegiance Coal has ensured that all the information regarding changes in the resources of the company is given out in the financial statements[4].
• The third objective makes it clear that the users of the financial statements must be in receipt of information pertaining to the cash flow generated by the company. Due to the compulsion made by the guidelines the companies require to provide the shareholders with appropriate information regarding cash flow of the company. Allegiance Coal has provided adequate information regarding its cash flow to the stakeholders.

All the entities are required to fulfil the recognition criteria as laid out in the conceptual framework. The requirements include the various elements of the financials of the company like the expenses, income, assets and liabilities. The recognition criteria’s look forward to satisfy the definition of the elements, explanation of the flow of the economic benefits and the ways in which its value can be measured[5].

From the balance sheet, it is clear that the company maintains its tangible assets like the property plant and equipment at cost less accumulated depreciation. The method of depreciation employed by the company is straight-line method. In case of the intangible assets the company, they are initially recorded at cost and subsequently adjusted or reduced by the impaired amount[6].

From the balance sheet of the company, it is clear that the company maintains and measures the trade payables, which are short term in nature at amortised cost, and the same amount is not discounted for the same reason[7].  In case of long-term liabilities like the borrowings, the company initially records it at the fair value of the consideration received less transaction cost. After the initial recognition, the borrowings are recognized at amortised cost and the difference between the cost and the redemption is recorded in the income statement of the company.

Quantitative and Qualitative Features of the Financial Statements

It is clear from the balance sheet of the company that the company recognizes its revenue only when it is probable economic benefits from the transaction are going to flow in the entity and the amount of such inflow can be measured reliably[8]. The amount of the revenue is measured at the fair value of the consideration that has been received by the company.

From the income statement of the financial statements it is clear that the expense incurred in respect of the qualifying assets are capitalised with the asset and the rest are recognised in the period in which they’re incurred.

In case of short term employee benefits expenses the company makes sure that they are settled within a period of 12 months from the time of their reporting. In case of long-term liabilities in respect of employee benefit expense is measured by calculating the present value of the future payments that are needed to be made in this respect[9].  

Along with the quantitative features of the financial statements, the qualitative features of the financial statements are also very important for the users of the same. The various qualitative features of the financial statement prepared by Allegiance Coal Ltd. are as follows:

Relevance-the company makes sure that the information given out in the financial statements for the consideration of the stakeholders are relevant. Only information, which is relevant, and can aid the process of decision making by the stakeholders[10]. The company has followed the principles of the AASB as well as the provisions of the Corporation Act 2001.

Faithful representation- the company must refrain from using or exercising any sort of bias in providing the information to the stakeholders. The information provided to the users must be in good faith and the company must exercise faithfulness in providing the information’s. The auditor of the company has made it clear via the audit report that there is no material misstatement present in the financial statements of the company. All the standards and provisions of the IASB, IFRS AASB and the Corporation Act 2001 have been duly followed by the company.

The main purpose of given detailed information and the corresponding disclosures of the various methods and policies used by the company are to increase the qualitative characteristics of the financial statements. The various qualitative features of the financial statements of the company have been listed below:

Comparability- This feature enables the users to measure the performance of the company in respect of its competitors and the industry parameters as a whole. The financial statements prepared by the company are comparable with the various other entities because it had followed the guidelines of the conceptual framework for its preparation.

Conclusion

Verifiability- This features makes sure that requisite disclosures are being given in respect of the various estimates and provisions made by the company. The users of the financial statements are able to verify the methods applied by the company in exercising its judgement very easily[11]. The company has given out adequate disclosures in order to make the information more verifiable.

Timeliness- in addition to proving the right kind of information in the right manner to the stakeholders, it is the duty of the companies to provide the same in a timely manner. The company ensures that the financial statements of the company are prepared on time and the information reaches the users one timely basis.

Understand ability- The information given out to the users will enable them to take economic decisions only if the same is understandable. The company has taken adequate steps to ensure that the company uses diagrams and tables and separate paragraphs to portray the information. This has ensured increase in the understandably of the financial statements[12].

Conclusion

After conducting the detailed analysis of the financials statements of the company, it is seen that the company has properly complied with the conceptual objectives as laid down in the conceptual framework while preparing its financial statements. The company has maintained its compliance with various standards like the AASB 9, AASB 138 and AASB 116.  The financial statements exhibit both fundamental as well as enhancing characteristics. Hence, it can be concluded that Allegiance Coal is one of those companies that have ensured full compliance with the guidelines and the various other standards lay down by the statute.

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