Financial Accounting Assignment Help

Introduction

Accounting standards refers to the practices that are utilized by the firms in preparing financial statements which in the long run actually helps the investors and creditors in taking prompt decisions about whether to invest in the business depending upon the profitability, efficiency, productivity, liquidity and solvency position of the business. This report is going to be formulated with correspondence to the AASB/IASB standards providing conceptual frameworks by selecting the annual reports of a listed company under ASX. The report would be prepared by selecting TPG Telecom’s annual reports and financial statements of FY 2015 which would help to evaluate the essence of cognitive capacities of the accountants and financial decision makers at TPG Telecom, Australia. In this particular report, a detailed analysis of the needs for simplification of the financial terms would be provided. A broad elaboration of the term “accounting” and its role in financial decision making perspectives at TPG Telecom shall be illustrated with evidence to the annual reports of TPG Telecom during 2015.

Question 1: Brief overview and description of accounting concepts according to AASB standards

This section of the report addresses a clear description of the accounting concepts with evidences from the annual reports of TPG Telecom, 2015. The fundamental concepts of accounting can be expressed as the Business Entity concept, Going Concern concepts, Cost concept, Dual Aspect Concept and Money Measurement concept (Armstrong, et al., 2003). One of the major accounting standards setting body, AASB, has however improvised reporting frameworks that produces a clear synopsis of the accounting concepts and principles. The accounting principles are as follows:

·         Relevance, matching concept, faithful representation, neutrality, prudence, completeness, materiality, accruals, business entities duality concepts, understandibality, substance over form, realization concepts, consistency, timeliness and reliability.

The principles that are followed in the given statement can be categorized under the principles of Comparability and Prudence according to the AASB standards.

Comparability/Consistency principle of accounting

While preparing the financial statements, it is required that the financial accounts during a particular period shall be compared so as to simplify the needs of accounting practices over a particular period of time (Bean & Bernardi, 2005). Changes in the accounting policies of the business firm are often required to make progress upon the reliability and the relevance of the financial statement for making the accountants to take effective decisions. For example, TPG Telecom, Australia being one of the largest telecommunication giants in Australia maintains the principle of comparability while preparing the financial statements. If the Income statement of TPG Telecom during 2015 is examined, it can be seen that the consolidated income statement has been restated with the figures of 2014 and 2015. More precisely, for instance, TPG Telecom earned revenue of $ 971 million during 2014 which comparatively increased to $ 1270 million. This shows that the total revenues earned by the company increased in FY 2015 as compared to FY 2014. A comparison over two years is provided in the annual report of TPG Telecom 2015.

Financials

 

 

 

 Fiscal year ends in June. AUD in millions except per share data

 

2014-07 ($ millions)

2015-07( $ millions)

Revenue AUD Mil

 

971

1,270

 

Prudence concept of accounting

While preparing financial statements, it is fundamental that the accountants actually use up professional judgements for improvising the accurate accounting policies and estimates. This particular principle/concept delineates that all accountants in business firms shall be able to exercise a minimum level of caution while adopting policies and anticipation of the assets and the income of the given entity which actually helps in taking effective financial decisions (Elias, 2002). The above statement implies that accountants belonging to any firm must be aware of this principle while recognition of the options so that the financial statements are not overvalued. For example, the annual reports of TPG Telecom in 2015 depicts that the firm could easily provide an estimation of the expected revenue during 2015 about the following years. They estimated that in 2016, the firm would earn revenue above $ 2200 million as compared to the previous financial years 2015 and 2014.

Fiscal year ends in June. AUD in millions except per share data.

 

 

2014-06

2015-06

2016-06

Revenue

 

 

971

1270

2388

 

Question 2: Problems of financial illiteracy as per the AASB standards and conceptual frameworks

In this section of the report, a detailed description of the issues/dilemmas that the listed firms under ASX like as TPG Telecom, Australia, usually face due to absence prompt literacy about the financial terms and statements as per the AASB/IASB standards. Financial illiteracy is moreover has become the recent dilemma in Australia. The term refers to unsoundness of the financial managers and the accountant who usually lack expertise and knowledge and they usually tend to face issues and problems while managing money and capital. Adequate knowledge about the concept of financial management can orient with several challenges that are addressed by the Australian telecom hubs below as per the IASB standards.

1.    A study undertaken by David Lufkin found that in the telecommunication industry of Australia, the investors are unable to understand the elementary financial concepts like as diversification, portfolio management, compound interests and inflation (Gaa & Thorne, 2004).

2.    Most of the Australian telecom firms are addressing issues in undergoing effective financial money management procedures since the accountants and financial managers are illiterate about the investments and the impacts of the investment returns. They are also significantly unaware of the existing investment frauds.

3.    Significant telecom hubs are also continuously facing challenges as the financial accountants are unable to abide by the standards for changing depreciation methods and the financial statements are directly affected.  

4.    Mostly common in the Australian telecom sector, the telecom investors are moreover unaware of investing basics according to the IASB standards and this can even lead to challenges for the financial managers and the accountants to abide by the standards of AASB or IASB.

5.    Lack of financial literacy can however lead to issues encountering problems in managing the capital or the wealth of the business that moreover leads to take improper financial decisions.

6.    According to the IFRS 9 and IASB 39, the telecommunication hubs often face crisis as to comply with the terms and conditions of recognition and measurement of the assets and the revenues of the firms (Rossouw, et al., 2010).

7.    Lack of expertise and knowledge in cash flow management, credit management and investment behaviour of the investors and the managers can directly link up to the credit crunch and financial inefficiencies of the businesses.

8.    According to the standards of AASB, it is imperative that lack of effective knowledge and financial literacy in the management of cash, can lead to issues in managing the emergency funds and that could even prompt out to result in financial susceptibilities.

9.    There remain absolute chances of the financial managers and accountants to either overstate or understate the assets and the earnings of the firms such that directly affect the income statement of the firm.

10. Inadequate knowhow of the accountants and financial managers can result in incorrect budgetary control procedures that can however result in fraudulent practices and deficits in the available cash in hand of the business.

There exist a positive relationship between financial literacy and beneficial financial behaviours. However it is defined that, large entities like as TPG Telecom in Australian telecom industry are moreover finding it advantageous to acquire risky assets and accordingly invest in the same and this positively affects the decision making aspects in the portfolio management. Therefore, financial literacy serves to be an imperative factor that can result in simplification of the accounting concepts and the financial statements.

Question 3: Need to place trust in professional accountants with conformity to the accounting standards

An experienced professional accountant is often considered as the potential asset for any business or an entity. Professional accountants usually deploy themselves in showing inquisitiveness towards the work they are usually assigned with. The decision making perspectives of firms are vested on accountants for not only addressing the financial statements but also to simplify the financial statements. The illustrations of the financial statements however help the stakeholders (managers, staffs, employees, investors and creditors) to take prompt decisions about whether they shall invest in the business to attain good and effective returns in the long run. It is noteworthy that businesses must have trust on the professional accountants as per the conformity of the accounting standards because of the following reasons:

1.    With evidence to the financial reporting standards, businesses shall have trust upon the professional accountants, since they are the experts who actually help in making the financial reporting methods more strategic in nature. Financial reporting is considered as the advantage for any firm like as TPG Telecom to provide relevant answers to three questions of the stakeholders – the need of financial reporting in developing goodwill of the company; to attain trust factor from the respective stakeholders and whether to attract and appeal new investors (Smith & Hume, 2005).

2.    Maintaining trust upon the professional accountants about conformity with the AASB standards and the regulatory norms of accounting, would in the long run, provide a chance for the management to enforce and strengthen their attention and focus upon the materiality and disclosure of the accounting standards. The stakeholders who actually use financial statements for decision making usually are able to put focus upon the materiality of the accounting concepts and the standards.

3.    Having faith and trust upon the professional accountants helps the management of large MNCs like as TPG Telecom to organize the financial management practices and simultaneously helps in formatting and presentation. A professional accountant is only able to use more headings, sub headings and tables. The accountants are only able to build up a link between the readers of financial statements and the management for actually influencing their decisions in investing in the business.

4.    Only professional accountants are able to come up with the interim reporting practices. The concept of interim reporting under AASB standard will however provide an option to the financial statement users and readers to obtain adequate knowledge about the profitability, productivity, solvency and liquidity of the entity. Keeping trust upon the professional accountants with conformity with the accounting standards of AASB/IASB however helps in preparing restated financial statements and condensed reports that sums up the recognition of the assets and liabilities of any business entity listed under ASX (Ward, et al., 1993).

5.    Lastly, having trust upon the professional accountants actually helps the regulators, standard setters  and the auditors of the firm to address the stakeholders’ wants and expected returns from the business by the preparation of effective financial statements.

Conclusion

Adjoining to the above discussion, it can be made evident that ethics is an important aspect or rather a responsibility for an accountant and is yet a technique that can help the financial managers and accountants in tackling the isolation of the accounting standards and helps in undergoing relevant and evitable accounting works (Armstrong, et al., 2003). Nonetheless, this has moreover gave rise to the concept of public accounting since the former was actually demanded by the investors which helped them in taking prompt and effective financial decisions.


 

References

Armstrong, M. B., Ketz, J. E., & Owsen, D. (2003). Ethics education in accounting: Moving toward ethical motivation and ethical behavior. Journal of Accounting Education, 21(1), 1-16.

Bean, D. F., & Bernardi, R. A. (2005). Accounting ethics courses: A professional necessity. The CPA Journal, 75(12), 64.

Elias, R. Z. (2002). Determinants of earnings management ethics among accountants. Journal of Business Ethics, 40(1), 33-45.

Gaa, J. C., & Thorne, L. (2004). An introduction to the special issue on professionalism and ethics in accounting education. Issues in Accounting Education, 19(1), 1-7.

Rossouw, D., Prozesky, M., du Plessis, C., & Prinsloo, F. (2010). Ethics for Accountants & Auditors. OUP Catalogue.

Smith, A., & Hume, E. C. (2005). Linking culture and ethics: A comparison of accountants’ ethical belief systems in the individualism/collectivism and power distance contexts. Journal of Business Ethics, 62(3), 209-220.

Ward, S. P., Ward, D. R., & Deck, A. B. (1993). Certified public accountants: Ethical perception skills and attitudes on ethics education. Journal of Business Ethics, 12(8), 601-610.

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