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ACCT20074 Contemporary Accounting Theory Assignment - Practical Report, Central Queensland University, Australia

Tasks - Research and report on several aspects of corporate external reporting practices.


1. Executive Summary

It has been observed that IFRS and IAS are generally observed in a number of countries. When we look at their compliance historically especially, US, UK, Australia and South Africa, they are highly applicable but based on different reporting policies and laws. It has been also observed that social responsibility reporting differ. For South African firms, they adhere to code of corporate practices and conduct whereas Australia adheres to Corporate Act 2001 in their reporting.

2. Introduction

This research intends to investigate the conceptual frameworks financial reporting application on various entities around the world. It will focus on the historical application in USA, UK, Australia and South Africa. It will also make some comparisons on the applications on how these standards are applied in listed firms in Australia and South Africa as well. All these will be compiled in form of a report and presented to the lecturer.

Part A: Conceptual framework

(a) Undertake a review of literature regarding the history and development of the Conceptual Framework for Financial Reporting in the USA, UK, Australia, and globally under the umbrella of the International Accounting Standards Board (IASB).

Answer - Literature review of the historical framework

A conceptual framework is a declaration of rules offering universal acceptance guidelines for the advance of new reporting styles, challenging or stimulating and evaluating the current practices (Weetman, 2003a). The aim of this declaration is to;

i) Pursue to make sure that standards of bookkeeping do have reliable tactic towards solving problems and don't present a number of reactions that address this kind of problem in one piece meal basis.

ii) Helping IASB in coming up with comprehensible and dependable standards.

iii) Acting as a guideline to those who prepare fiscal statements to help them come up with bookkeeping resolutions that have not been directly addressed in the standard.

iv) It is very imperative and powerful document that supports beneficiaries to appreciate the purpose and restrictions of financial reporting.

v) The present issue is being modified as a joint project with the IASB's USA colleagues of the FASB.


Throughout the most recent couple of years, a significant number of the ASB models have been rules-based, instead of standards based. Principles based bookkeeping guidelines give very definite guideline that endeavor to consider practically every utilization of the standard. This energizes a tick the crate mindset to monetary revealing that wipes out decisions from the utilization of the detailing. Principles based models make it progressively hard for preparers and examiners to venture back and assess whether the general effect is predictable with the targets of the standard. A perfect bookkeeping standard is one that is standard based and requires monetary answering to mirror the financial substance, not the structure of the exchange. The nature of a bookkeeping standard must be identified with its target.

The two guidelines based and standard based measures expect data that is useful to clients in settling monetary choices. Seeking after a similar target, every utilization an alternative method for arriving at any rate that is the thing that protectors of the two bookkeeping sets advance as their principle contention. From one viewpoint, for example US-GAAP is absolutely governs based, setting out point by point and exact principles for quite certain bookkeeping issues. On the other hand, for example IAS is totally standard based, giving progressive brad rules.

The UK is moving from guidelines based models to standards based principles. Thusly it was important to present a calculated structure for the UK. Applied system articulations have existed since the 1980s in the USA, Canada and Australia. From 1999, the UK has its own applied system, the statement of values by the Accounting Standards Board (ASB)

It was significant for the UK to make a theoretical structure. The expanding universal needs of bookkeeping, the impact of the USA and developing worldwide monetary participation that is globalization owned the advancement of expression of principles significant for the UK. UK need to be on a similar pontoon as the significant countries for example Australia, Canada, and the USA. The system clarifies that fiscal summaries out to be valuable to a wide scope of clients (Cairn, 2001).

(b) Discuss the Australian accounting profession's concerns regarding the application of the (IASB/IFRS) Conceptual Framework for Financial Reporting.

Answer - Australia Accounting Professions Concerns

All reporting entities are allowed to utilize IFRS standards, for example the AASB's Tier 1 revealing prerequisites or the Tier 2 detailing necessities. Additionally, there is no denial on non-detailing substances utilizing the IFRS standard if the element isn't an announcing element revealed under Corporations Act.


Australia's Tier 2 detailing necessities are alluded to as Reduced Disclosure Requirements (RDR), which is accessible for universal useful money related revealing by non-freely responsible elements. A part from solidification, RDR receives a similar acknowledgement and estimation necessities that are appropriate to universal useful budgetary revealing by freely responsible substance.

The AASB is proceeding to screen the IFRS standard for potential reception in Australia

Various concerns raised are as follows.

(i) Measurement. The AASB feels that the chapter is highly modified of present practice as compared to giving a conceptual set of doctrines and guidelines. At the same time, AASB reasons that measurement will not lead to better-quality monetary reporting.

(ii) Using full revenue versus the profit/loss. The AASB is of the opinion that use complete income shouldn't be entrenched into a theoretical structure, just before IASB defined profit. To do so embeds practice before understanding whether there is any conceptual basis to that practice.

(ii) Liability definition. There are two issues that AASB has come up with;

IASB recommends to finalize the definition before finalizing its thought as to whether the definition is proper in categorizing businesses among obligations and capital share. The thought of AASB is that it would be better if the IASB don't change the definition of liability until the other task is thorough.

The concern of AASB is that there is no ability to avoid in the existing obligation introducing pressure of economic concept that will unintentionally increase the possibility of items apprehended as obligations.

(c) Based upon a review of journal articles, critically discuss academics' concerns about the quality (potential benefits and limitations) of the Conceptual Framework for Financial Reporting.

Answer - Benefits and limitations of Theoretical framework


Here are some of the benefits related to monetary framework in reporting include

i) The framework expedites the debate of accounting issues and guidelines relating to making of standards of accounting. The framework as far as accounting is concerned, it increases beneficiaries' self-confidence and insight around the financial reporting.

ii) The framework offers standards in contrast to which a number of main and devoted practices of which objectively can be verified in a very good way.

iii) The framework tends to offer all the fundamentals of justification and intentions.

iv) Framework offers a chance for emerging decisions that are reliable method. The decisions are concerned mainly with the right practice and several methods that are supporting the standards.

v) Application of the theoretical framework has greatly enhanced the dependability of these financial reporting in a special way.

vi) Framework has also brought to enhanced communication among the accountants and other standard-setting alliances.



Further from uncertainty, theoretical structure has established the principles for the key essential rehearses and even agreements. Though, this beneficial framework has some limitations as well.

i) It is somehow tremendously challenging to establishing this framework. The developed and rich countries have come up with their own conceptual framework whereas developing countries are finding it extremely expensive and time consuming.

ii) Secondly, the inflexibility which slinks to normal due to the challenges of putting structure into practice. Due to this impossibility in introducing new thoughts into the system.

iii) Thirdly, struggle that arises among the structure and the bookkeeping values that are now in use before the conceptual framework was introduced. The conflict arises due to change in the practices set by the earlier accounting standards and the newest framework.

iv) There last impediment is that of with following the calculated system. It is conceivable that the open door offered by the system isn't satisfactory to every one of the gatherings.

(d) Download the annual report of 2018 (or 2017, if not available 2018 annual report) of the selected company listed on the Australian Securities Exchange. Carefully read this report and explain how the conceptual framework has been applied by this company while it prepared its financial statements and notes to the accounts. Present your answer considering the (i) how many statements/reports have been prepared as per the Conceptual Framework and what are their major components, (ii) which recognition principles and measurement bases have been applied for revenue, assets and liabilities, and (iii) what qualitative characteristics of information exhibit in company's various financial reports.

Answer - Integrated Annual Reports for Elders Limited prepared as per required standard

i) Statement of comprehensive income, Statement of financial position, Statement of cash flow and Statement of change in equity.

ii) Recognition principle and measurement bases.

Money Measurement: States that it is necessary to account for the dealings a firm in a universal way. The collective unit of measurement selected in bookkeeping must be in monetary unit. Receivables are acknowledged at reasonable value and afterwards measured at amortized cost using effective interest rate less cost of damage.


The Cost Concept: It requires that firm's resources are recorded at the price exchanged during purchase or past cost. The firm recognizes its inventory at cost and at net achievable value. Suppliers also recognized at cost of inventory. Trade payables are amortized at cost due to their short-range in nature they are not discounted.

Accrual Concept: This method reveals that the revenues are recognized when they are earned in the income statement. The firm's revenue is recognized when a sale has been transfer and reward given to customer. This applies to interest income is being recognized as it accrues with effective interest rate method.

Full Disclosure Concept: The complete honesty idea necessitates that a business endeavor ought to give all significant data to outer clients with the end goal of sound monetary choices. Non-current assets are recorded on historical cost less accumulated depreciation together with impairment losses

iii) Qualitative characteristics - Chapter three of the theoretical structure converses the qualitative features of valuable monetary material of Elders Ltd. For it to be beneficial to its current and potential stockholders, creditors and other moneylenders for making judgments about the reporting firm on the grounds of their fiscal report material, it has to be appropriate and represented authentically what it significances to. Therefore, data is said to relevant only if: i) it is able to create a difference in the provider's decision as the potential users of monetary information; ii) It has to be predictive value, positive value or both. Predictive value arises where the evidence is beneficial as a contribution into the users' judgment representations and upsets their hopes about the future. Positive value arises where the data delivers reaction that present expectations based on previous evaluations; iii) It is able to make a difference whether the users make use it or not. It is not essential that the data has in point of fact made a transformation in the past or will create a transformation in future.

The theoretical structure intricate on the important qualitative features of faithful representation. Data is represented faithfully only if:

i) It is complete where it comprises data for user to comprehend the singularity of being represented including necessary explanations.

ii) It is natural where the description is short of bias in the choice or representation of economic data.

iii) It is free from error meaning that there are no errors in the clarification of the singularity and procedure used to yield the conveyed facts has been designated and applied with error free in the process.

Therefore, the helpfulness of economic data is improved by comparability, verifiability, correctness and understandability.


Part B: Integrated/sustainability reporting

(a) Compare and contrast the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI) and the International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC) for explaining a holistic view (broader view) of corporate social responsibility reporting in addition to reporting of corporate financial performance.

Answer - International Integrated Reporting Council (IIRC)

IIRC point is to produce a universally recognized system for the procedure that impacts in correspondences by a business around esteem creation after some time. It distributed the main rendition of it in December 2013 first time.

Global Reporting Initiative (GRI)

The point of GRI is to mark manageability reporting standard into training. It enables all firms to report their fiscal conventional, social and administrative execution it creates.

The point of GRI is to mark manageability announcing standard into training. It enables all organizations to report their fiscal, conservational, societal and administration execution, GRI creates free.

(b) Explain the rigour (strengths and limitations) of the conventional accounting, based upon the Conceptual Framework for Financial Reporting, to explain the contents of sustainability as well as integrated reports.

Answer - Benefits and limitations of the conceptual framework

The advantages of the structure include:

i) The extension of thoughts in a precise groups that brand announcing solid and sensible and expanding similarity of models internationally engaged through such uniformity;

ii) Financial improvement of bookkeeping and generally speaking upgraded correspondences (Sterling 1982).

iii) Creating models with sponsorship of a reasonable structure is made simpler and increasingly prudent (as far as expense is concern) as the establishing essential standards are now discussed and set up (FASB, 1980). The principles can be supportive if connected in situations where no significant bookkeeping actions exist, and where there might be irreconcilable circumstances on which approaches to be utilize specifically examples. iii) Without reasonable edifice, the normal setters often agreed to external heaviness from conspiracy gatherings encouragement aimless and uncertain doctrines and rules. Explanation of thoughtful behind obvious measures, setters of benchmarks are made progressively accountable to customers of fiscal reports and revealing with these customers made simply watchful and ready to observe takeoff from the standard set (ASB, 1999). Therefore, theoretical system contributes altogether to the believability and open certainty of monetary announcing with consistency.


On the drawbacks,

i) The applied structure can, nonetheless be excessively brad in nature and its standards with its colossal dependence on the different suppositions;

ii) It might, thusly be of little assistance when really delivering fiscal reports and can prompt the enhancement of bookkeeping gauges which are educational, theoretical and inclined to pressure (Sterling, 1982);

iii) Ideas may be unchanged and refined however with the impulsiveness and trouble in understanding, the handiness of fiscal reports can be watered down;

iv) the truthful edifices will in general spotlight on the helpfulness of data contained in budget reviews which is huge yet eagerness on data allowing the assessment of stewardship of executives isn't provided (Solomon, 2000);

v) Client prerequisites are different and there might be requirements for an variety of norms and functional structure anyway can't, without continuing complex nature, spread these various predictabilities. In the scan for shared agreement and naturalness and for it gain the ideal wide acknowledgement, the system desires to cover a few assumptions enduring deficiencies (FASB, 1980)

Different Limitations

Money related bookkeeping does not seem to give an establishment to social and natural divulgences.

Conceptual system centers on giving data to parties monetary enthusiasm for the element, it will in general dismissal data rights and needs of clients who don't have a direct budgetary enthusiasm for the association.

If any exchange does not cause any immediate effort on the element, the exchange will be overlooked and bookkeeping reasons. This implies any occasions identified with externalities will be overlooked except if there is a fine from government forced on the substance.


(c) Discuss the applicability (usefulness or limitations) of the theories you learned to explain the contents of sustainability as well as integrated reports.

Answer - Benefits of sustainability reporting

Maintains trust: Transparency among firms and partners, as for non-money related execution, causes an association to look for proposal from clients and speculators while decreasing reputational dangers. Maintainability revealing, in this way keeps up brand picture and friends' notoriety.

Helps in progress of the procedure and the entire framework. By examining the issues like material utilized, squander created, vitality of utilization and so forth and observing interior administration and basic leadership forms, cost of firm can be decreased. Supportability reporting further causes a firm to exhibit that how it can present changes with the assistance of manageable improvement.

Enhancing basic leadership quality. Supportability go about as methods for presenting development for firms and accomplish upper hand in the market. It causes the firms to take care of the dangers and defeat them. It makes a way to get various open doors making firms start new exercises, upgrading the points of confinement to enter in new markets and pull in ventures. Along these lines, it encourages firms to move towards becoming pioneers.

Building systems for development. Analysis of qualities and shortcomings with the assistance of manageability report gives a more prominent vision and makes firms to take a shot at shortcomings and control techniques for generally improvement. Besides commitment with partners can make the firm to have wide-going dreams. Accordingly manageability can be made a fundamental piece of the association for expressing solid and focused name in the market. It empowers the clients or different partners to comprehend the inborn estimates of the association as unmistakable and impalpable. It also empowers the firm to chip away at long haul worthwhile arrangements, marketable strategies and methodologies.

Reduce compliance cost. Analyzing and estimating manageability report help the firm to chip away at the gathering of important information that is financially savvy, control prerequisites and maintain a strategic distance from breaks and while making a firm to handle issues in successful and proficient way.

Issues with sustainability Reporting

Despite that fact that there are number of advantages of rehearsing manageability report and applying it in development, still a concern is required for institutionalization (Moon, 2012). There are three segments that control the intensity of a standard. The main segment is connected with the structure which is further a set-up of normal practices. The authenticity that is subject to numerous partners.

The distribution in authorization for manageability detailing. In the event that keeping up feasible revealing is discretionary, at that point there is no expert for punishing an association for rebelliousness. Once more, an association can build up its own casing work for supportability reporting, however, if there should arise an occurrence of any misquote, no punishing is there for such associations

Sustainability revealing is willful or discretionary for an association so such associations don't require any methodology for authentication by any outsider. What's more specific exposures by them rehearsing manageability can make potential predisposition. This further, ought to be forestalled to uncover negative and awful news. Revelations guaranteed by outer expert bookkeepers can possibly expand the unwavering quality of such exposure in the future.

There are sure confinements in regards to the estimation of social obligations related with supportability that is further most testing to gauge and evaluate. Moreover, inspiration and prerequisite of a firm for consistence isn't clear. For instance, US firms are firmly examined and assessed by natural gatherings that are further US based, however, this inspiration make US firms to create household maintainability instead of worldwide one.


(d) Prepare an index (a table or checklist) of various components (criteria) of an integrated report, and then discuss whether and how the selected South African company has disclosed information against each of those components (criteria).

Answer - SPAR Group Limited 2018 Integrated Annual report - South Africa

Organizational overview under which it operates

It is a warehousing and distribution firm head quartered in South Africa. It has branch network/subsidiaries across south Africa, Ireland, Namibia, Mozambique and Switzerland.

Governance structure and how this supports its ability to create value

The firm is adhere to King IV principle report and the directors certified that no issue raised  during the financial year 2018

Business Model

It is a warehousing and distribution firm which deals with food and drug retailing that is listed in JSE. It owns several licenses and retail brands.

Risks and opportunities and how they are dealing with them, and affect firm's ability to create value

The firm is associated with financial risks such as credit risks, interest rate risks, currency risks, market risks and liquidity risks. It sets up some policies and they are adhering to them.

Strategy and resource allocation

The firm maintains a strong capital base so as to attract and maintain investor and market confidence. The shares are issued at fair value.

Performance and achievement of strategic objectives

Profits earned are allocated to shareholders on the basis they earn it. Some of the profits are reserved to Cather for future eventurities.

Challenges firm is facing

Firm faces market, credit and political challenges.

Basis of presentation.

Report is presented on a historical basis which is measured at fair value. Accounting policies are applied consistently for all periods and are based on going concern basis.

(e) Discuss whether the selected Australian company prepare an integrated report. If not, then what alternative report/s this company prepares for reporting corporate social responsibility in addition to reporting of its financial performance. Compare the contents of Austrian company's corporate social responsibility reporting in addition to reporting of financial performance with the index and contents of the integrated report of the South African company presented in Part B (d) above.

Answer - Corporate Social Responsibility reporting comparison

In South Africa, reporting is quite different from that of Australia. They have what we call Code of corporate practices and conduct that is applicable for all listed firm in JSE, and requires them to issue every year sustainability reports.

In Australia, it is a legal obligation to social responsibility reporting. This requires that firms to include details of social responsibility and ethical considerations on their reports as per Corporate Act 2001.

Therefore the reporting style is different and each country adheres to their policies and at the end of the day is that reporting is aligned to IASB standards.

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