Contemporary Issues In Accounting Concerns-Myassignmenthelp.Com

Question: What is the Contemporary Issues In Accounting Concerns? Answer: Introduction The framework of present-day accounting lays down the procedures for preparaing and presenting the financial statements and basics of accounting presentation to give true and fair view to the external users of the financial statements. The users require information about the companys recent factual status for mainly two purposes namely if it will be profitable and viable to invest in the companys resources and they would be earning the profits and secondly, whether the enterprise has got the cash flow generating ability (Dichev, I.D., 2017) In the long run, there may be different purposes of general purpose accounting and financial regulation but its should have faithful representation i.e., free from error, neutral and complete such that it is easily understandable, comparable and verifiable. The Framework for financial reporting basically describes 5 basic elements explained below. (Cohen, J., Krishnamoorthy, G. and Wright, A., 2017) An asset is a company controlled resource due to its past efforts, which will help to earn future economic benefits. A liability is an obligation to pay the resources of the company due to its past deeds and this results in the outflow of the resources. Equity is generally the residual portion left after settling off all the liabilities from the assets. This generally includes the equity shares, reserves, etc and belongs to the owers of the company. (Mitchell, F., Nrreklit, H. and Nrreklit, L., 2017.) Income or revenue is defined as the increament in the economic benefits of the company over a period leaving apart the increase in equity portion by the owners through infusion of the funds. This is categorised between comprehensive and other comprehensive income heads. Expenses on the other hand are increase the economic losses or decrease in the economic benefits due of outflow of resources and incurring of liabilities. (Li, S., Sougiannis, T. and Wang, I., 2017.) Thre is a long dated back history for inclusion of prudence in the financial framework, there have been several rounds of debates amonst expects that whether of not it should be included in financial presentation framework as it has had impacts of under realisation of gains, booking of extra losses and provisons resulting in wrong picture to the users of financial statements. To put a full stop to all this discussion, IFRS stated for it sinclusion in 2010 (Spalding, A.D. and Lawrie, G.R., 2017) Now, the question arises what actually is Prudence and what is the limit of its application and whether or not estimation should be applied. So Prudence is the application of caution which prepration of accounts such that provionsa are made for the future decided losses and profit is not booked until it is sure to be recognised such that the robust recognition of revenue is done. Thsis has both the sides depending upon its application i.e., good and bad. (Marabel-Romo, J., Guiral, A., Crespo-Espert, J.L., Gonzalo, J.A. and Moon, D., 2017.) The whole idea behind judging of prudence limit is to record and measure the assets, liabilities, incomes and expenses on the linearity basis i.e., figures pertaining to current financial year should be recorded in the next or previous finanicial year. It is something which cannot be guided by the Standards but a relatie level of estimation is reqd. to give the financials a pure view without errors and adjustments. Example like internally generated intangibles recognition in the books are being prevented in the IFRS. Also, there is a separate piece of discussion on what items of PL should be shown in OCI what should be reinstated as a part of the PL. As per discussion paper of IASB, several items should to be recognised at historical cost as this displays an element of prudence in the values stated as well as profit recognition timing. Besides this, prudence in cash-flow-based measurement or fair value is not accommodating. This is where it becomes difficult to contradict the fights that prudence has leadto unquantified biasnessin accounting. Analytical view of the 2 companies selected QANTAS Airline (Australia) Founded in 1920, Qantas, abbreviation for Queensland and Northern Territory Aerial Services is Australias largest brand of airline, is the worldsthird oldest and has built a reputation in safety, customer experience and operational excellence.Its headquarters are in Sydney, New South Wales. The combined revenue of the business for the previous financial year was nearly $ 16.2 billion and the consolidated net profit amounted to $ 1,029 million. (Wang, W.K., Lin, F., Ting, I.W.K., Kweh, Q.L., Lu, W.M. and Chiu, T.Y., 2017.) As mentioned clearly in the financials, the company has prepared its consolidated financial statements has followed Australian Accounting Standardsand the Corporations Regulation, 2001in its accounting framework.Basic principles of accounting have been applied together with the use of reasonable judgements and the application of prudence in preparation of summary statements. The same has been mentionedin the directors declaration in the companys annual report. (Bourjade, S., Huc, R. and Muller-Vibes, C., 2017.) All the material departures, the basis of provisions and other accounting assumptions have been cleary disclosed in the Notes to Accounts and explanatory notes.The present data poinshave been delivered in a manner that all the primaryessentials like materiality, timelessness and relevance are abided with taking into account the auditors judgement. The facts in accounting statements have been reflectedin such a method that they are easily comparable, are reliable, understandable and relevant. Moreover, appropriateness of the accounting policies and the accounting estimates reasonableness has been checked. The statement of financial affairs has been prepared considering the entties to be going concern and utmost precaution has been extended such that all the sufficient necessary information is being delivered to the companys auditors so that they are capable to express their comments and opinion. The same is justified from the Independent auditors report. Some major highlights include inclusion of GST, derivative accounting, revenue recognition at fair value of the consideration received, review of the financial and non financial assets for impairment, recognition of PPE at fair value, depreciation on straight line basis, provision being taken for the onerous contracts, etc (Douglas, I. and Tan, D., 2017.) Air New Zealand (NZ) Founded in 1940, it is the largest passenger carrier in New Zealand having 21 domestic and 31 international destination across the world. It has its headquartersat Auckland city, NZ. It was awarded airline of the year in 2010 and 2012 and is rated as one of the safest airline in the world. The aggregatedrevenue of the company for the previous financial year was around $ 4.48 billionand the net profit was $ 463 million. (Bourjade, S., Huc, R. and Muller-Vibes, C., 2017.) As per the Directors Statement Independent Auditors Report attached below, the financials adhere with the generally accepted accounting principles and are reflecting unbiased view of the accounts. In addition, the financials have been prepared using reasonable judgements and reliable estimates and that all the IFRS New Zealand IFRS has been followed consistently. Besides that, requirements of Financial Markets Conduct Code, 2013 has been adhered too. The company here also states that it has followed and considered internal control procedures in the financial statements in order to give its users reasonable assurance about the integrity and reliability. (Saha, A. and Bose, S., 2017.) The auditors here have also taken care of Internal Standards on Auditing (New Zealand) which means this financial statement report gives the assurance to the external users like banks financial institutions for transactions with the company. In addition, the auditors have chosen the quantitative materiality for the Group financial statements to be $30M, which gives a pristine view of what is material and what not. (Yeoman, I.S., Yeoman, I.S., McMahon-Beattie, U. and McMahon-Beattie, U., 2017.) In the notes to accounting, the significant accounting policies used with respect to IFRS 9, 15, 16 has been disclosed. The total amount of assets and liabilities that are reported, are often affected by the estimates of the management. These estimates often lead to fluctuations, because of which there is a difference in the estimated and the actual results. All the consolidation has been done using the method of equity. The concept of prudence and its application is not been mentioned by the company in its reports. However, mentioning the same is not important. The thing that matters is that the perpetrators of the financial statements apply these principles, along with ascertaining effective diligence in the accounting framework of the company. In addition, this company has given separate disclosure for partial divestment in Virgin Australia. (Weatherford, L.R., 2017.) Assessment of the annual reports of the two companies and their respective methods of preparation The two given companies operate in the same sector of the indystry.Qantas is the Australia is largest while Air NZ is a giant in NZ. For the preparation of their financial statements, both the companies are following different procedure and methods. While Qantas is following the Australian Accounting Standards and the Corporations Regulation, 2001 of conceptual framework, the Air NZ is following the principles of IFRS NZ IFRS. consolidated reports are prepared by both the companies exclusively, however, in case of Qantas any kind of discrepancies is the group companies is shown exclusively and is mentioned in the notes to account, where in case of Air NZ no such disclosure regarding materiality is given. In case of Air NZ detailed notes to accounts are given, while in case of Qantas, significant policies of accounting are presented in a detailed manner Recommendation After analysis of the given companies, it can be said that the base aim is preparation of the financial statements by the management of both the selected companies which is relevant for the stakeholders. Both the companies are following the commonly accepted IFRS principles for maintaining their books of account. The point that prudence as a concept should be included or not is a very debatable topic. It is important that proper judgement is applied while preparing the financial statements, excess of prudence is bad. But it cannot be ignored completely. Conclusion After the entire analysis, I have reached conclusion that no matter what method an organisation is applying. It is important that the analysis be such that it satisfies the needs of the users. The given companies have very well followed their chosen policies and analysis and comparison of the two has been done. It is clearly seen that the annual reports are made with utmost diligence and the makers have done applied their share of diligence in the same. All the necessary requirements are covered and the needs of the user have been satisfied. References Bourjade, S., Huc, R. and Muller-Vibes, C., 2017. Leasing and profitability: Empirical evidence from the airline industry. Transportation Research Part A: Policy and Practice, 97, pp.30-46 Cohen, J., Krishnamoorthy, G. and Wright, A., 2017. Enterprise risk management and the financial reporting process: The experiences of audit committee members, CFOs, and external auditors. Contemporary Accounting Research, 34(2), pp.1178-1209. Dichev, I.D., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, pp.1-16 Douglas, I. and Tan, D., 2017. Global airline alliances and profitability: A difference-in-difference analysis. Transportation Research Part A: Policy and Practice, 103, pp.432-443. Li, S., Sougiannis, T. and Wang, I., 2017. Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future Earnings and Cash Flows, pp.1-47 Marabel-Romo, J., Guiral, A., Crespo-Espert, J.L., Gonzalo, J.A. and Moon, D., 2017. Fair value accounting in the absence of prudence in accounting standards: an illustration with exotic derivatives. Spanish Journal of Finance and Accounting/Revista Espaola de Financiacin y Contabilidad, 46(2), pp.145-167. Mitchell, F., Nrreklit, H. and Nrreklit, L., 2017. 6VVThe Validity of Financial Statement Measurement. A Philosophy of Management Accounting: A Pragmatic Constructivist Approach,1-6. Saha, A. and Bose, S., 2017. The Value Relevance of Financial and Non-Financial Information: Evidence from Recent Academic Literature, pp.1-29 Spalding, A.D. and Lawrie, G.R., 2017. A Critical Examination of the AICPAs New Conceptual Framework Ethics Protocol. Journal of Business Ethics, pp.1-18. Wang, W.K., Lin, F., Ting, I.W.K., Kweh, Q.L., Lu, W.M. and Chiu, T.Y., 2017. Does asset-light strategy contribute to the dynamic efficiency of global airlines?. Journal of Air Transport Management, 62, pp.99-108 Weatherford, L.R., 2017. Intelligent aggressiveness: Using forecast multipliers, hybrid forecasting, fare adjustment, and unconstraining methods to increase revenue. Decision Sciences, 48(3), pp.391-419. Yeoman, I.S., Yeoman, I.S., McMahon-Beattie, U. and McMahon-Beattie, U., 2017. The turning points of revenue management: a brief history of future evolution. Journal of Tourism Futures, 3(1), pp.66-72.