Accounting Standards for Financial Reporting - myassignmenthelp

Question: Discuss about theAccounting Standards for Financial Reporting Quality. Answer: Objectives and general purpose of financial reporting The chief purpose of financial reporting is to develop a framework on which the various measurements are going to be done. The financial statement is going to provide key information regarding the business of the entity depending on which the various stakeholders can decide on conducting business with the company especially regarding investing or providing credit to the company. Other functions like buying of the shares of a company selling of the shares of a company or holding the shares until the right period also depends on the information that is provided by the financial statement of the company(Barth and Landsman, 2010). It is important for potential lenders or investors in a company to have a concept regarding the business of the company and the possible gains or risks that the investor faces by investing in the company. They are generally the purpose of formation of the financial reporting. As much as it is true that the financial reports are meant for the creditors, lenders and investors in a company it can be stated that there are various other information that need to be checked before investing in a company and a financial report doesnt provide all those information. The management of a company is also interested in checking the financial information but they can gather information regarding the financial information from other sources as well. The financial reports are checked by the auditors both internal and external to check the transparency of the organisation though the auditors have access to all sorts of information apart from the financial statement. The financial is not always dependent on the exact information rather they are dependent on estimation and possible judgements (Chen et al. 2011). But still the financial report of a company has a strong impact on the image of the company in the market and in turn impacts the rate of investment. Disclosure requirement There are certain disclosure requirements for the financial statement for plant property and equipment. The disclosure requirements have been reduced according the Australian accounting system in the recent times. The method used for determining the carrying amount, methods used for the calculation of depreciation and rate of the same has to be disclosed in the financial statement, impairment losses in regards to profit and loss, the restriction on PPE that is pledged by the company, the amount of money that is promised in any sort of contract, the cost for dismantling or restoring or removing on any of the PPE are to be disclosed in the financial statement etc (Cheng et al. 2013). There are certain new relaxations on the disclosure in the PPE. The amount of money that is considered as carrying during the time of the construction of the PPE is not mandatory for the company to disclose in the financial statement. There has to be no separate mention of comprehensive income in case there is compensation form a third party for impairment or loss of a PPE. Quanta airway is one of the airline companies in Australia. The company is one of the renowned chains of airlines in Australia. The quanta airways in enlisted in the Australian stock exchange. The total valuation of the company is a$2 billion. The necessity for disclosure or the following of the disclosure requirement of PPE as per AASB 116 is a requirement of this company. The annual report of the financial year 2016 represents the scope of asset management of the company. the disclosure of the annual report of quanta airways doesnt discloses the asset that are being repaired or maintained by the company as per the new relaxation criteria. It holds the quarter of the total airline market in Australia. The annual report mentions the total amount of assets held by the company to be of 2914034 million dollar and shows the total liability to be 1357193 which gives a positive impact of the company as it has more assets than liability (www.qantas.com.au). More asset than liability means t he company has the capacity to pay back its debts quicker. Depreciation rate of the plant and machinery of the airliners are dependent on the life of the asset. Most of the assets of the airlines have a life of 10 to 12 years. The depreciation rate of the plants and machinery of the quanta airways has been mentioned as 20 per cent. The amount of total asset has been mentioned but no separate information regarding properties has been mentioned in the annual report. Qualitative characteristics of financial information There are various qualitative aspects of financial information. This qualitative characteristic gives importance to each of the products according to their value or hierarchical status. The most important part of the qualitative characteristic is the use of the data. The usefulness of the data is dependent on the ability to understand the information that is conveyed through the financial statement. This includes two chief aspects that are the reliability of the information and the relevance of the information in the financial statement. The relevance of data is dependent on certain aspects like the predictive quality of the data, the feedback value of the data and the line. The reliability on the other hand is dependent on the aspects like the ability to verify the data, the neutrality of the data, and the proper representation of the data. These are the primary qualities of the data and the secondary quality of the data involves the comparability and the consistency of the data. Th ere are basically. One of the qualitative characteristics of the financial statement is the predictive value. Predictive value is relevant information for the investors of the company. The company in its annual report mentions the total amount of asset owned by the company as well as the total amount of plant and machinery owned by the company (Lennard, 2007). The total amount of asset gives an assurance to the company regarding the financial status of the company. The prediction regarding the investment on the shares of the company or a decision regarding a purchase of a general share or a preference share can be impacted by the disclosure of the total asset. PPE and general purpose financial reporting As mentioned before one of the chief function of the financial statement disclosed in the annual report is to help the investors or creditors regarding taking decision regarding the financial status of the entity on which an investors is planning to invest. The amount of asset of the company that is disclosed in the annual report of the company suggested that there are numerous assets of the company and thus a investor can easily decide in making investment as companies with high amount of assets can be considered as a safe option to invest. The financial report states the reliability of the company. The financial report and its indication regarding its property, plants and machinery can also sends an indication regarding the financial health of the company. The total asset of the company and the total liability and its balance if in positive makes the company a sound investment option (Christensen and Nikolaev 2013). The financial conditions of the quanta airways makes it a great op tion to make investment as it has more assets than ratio and has a capacity to pay back its investors. The property plant and equipment contributes in the total asset of the company which is a deciding factor in making financial decision. Reference List Barth, M.E. and Landsman, W.R., 2010. How did financial reporting contribute to the financial crisis?.European accounting review,19(3), pp.399-423. Chen, F., Hope, O.K., Li, Q. and Wang, X., 2011. Financial reporting quality and investment efficiency of private firms in emerging markets.The accounting review,86(4), pp.1255-1288. Cheng, M., Dhaliwal, D. and Zhang, Y., 2013. Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?.Journal of Accounting and Economics,56(1), pp.1-18. Christensen, H.B. and Nikolaev, V.V., 2013. Does fair value accounting for non-financial assets pass the market test?.Review of Accounting Studies,18(3), pp.734-775. Lennard, A., 2007. Stewardship and the objectives of financial statements: a comment on IASB's preliminary views on an improved conceptual framework for financial reporting: the objective of financial reporting and qualitative characteristics of decision-useful financial reporting information.Accounting in Europe,4(1), pp.51-66. www.qantas.com.au (2017) Anon, (2017). [online] Available at: https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf [Accessed 14 Sep. 2017].