1st Objective:
1.Objectives of Conceptual Framework
It needs to be mentioned that AASB conceptual framework has some major objectives for the purpose of financial reporting of the Australian business entities. They are discussed below:
1st Objective: As per the first objective, the financial statements of the business entities must contain information about the their different economic resources so that their financial position can be determined (aasb.gov.au 2018).
From the above table, it can be observed that CSR Limited has released the statement of financial position that has all the required information about the economic resources of the company like assets, liabilities and others. It is possible for the user to ascertain the financial standing of CSR Limited from the provided information in this statement (csr.com.au 2018).
2nd Objective: Business entities must provide the financial statements containing adequate information so that the users can determine the financial performance of the them (aasb.gov.au 2018).
From the above figure, it can be seen that CSR Limited has released the statement of financial performance in the annual report of them and this statements contain information about revenue, gross margin, net profit and others. This information is necessary for the users in the determination of the financial performance of CSR Limited (csr.com.au 2018).
3rd Objective: Some of the financial statements of the business entities must contain the financial information expressing the change in the financial performance of the entities (aasb.gov.au 2018).
From the above figures, it can be observed that CSR Limited has released both the statements of change in equity and the statement of cash flows along with their latest annual report that contain major information about the change in profit, change in net debt and others. This information helps the users in determining the change in financial performance of CSR Limited (csr.com.au 2018).
2nd Objective:
Moreover, the latest financial statement of CSR Limited states the fact that the company complies with the principles and standards of Corporations Act 2001 and AASB to prepare and present the financial statements. In addition, the company also follows the standards of IASB as a guide for financial reporting (csr.com.au 2018). All these aspects prove the full compliance of CSR Limited with the objective of conceptual framework.
2.Information Need of Target Audience
The target audience of general-purpose financial reporting is the users that take the helps of different financial information for different decision-making process. These users include investors, creditors, banks, tax authorities, government and others. From the above discussion, it can be observed that CSR Limited provides all the necessary financial information with the help of different financial statement. The information about economic resources and financial position can be obtained from the statement of financial position; information about the financial performance of CSR Limited can be obtained from the statement of financial performance; and the information about the change in performance can be obtained from the statement of change in equity and cash flow statements (csr.com.au 2018). Thus, based on the above discussion, it can be said that the target audience of CSR Limited are able to get sufficient information from the financial statements of CSR Limited.
3.Conceptual Framework Recognition Criteria
It is needed for the business entities of Australia to follow the provided criteria by AASB conceptual framework for the recognition of asset, liability, equity, revenue and expense. There is not any exception of this regulation for CSR Limited as the company is required to follows these recognition criteria.
Asset: Property, plant and equipment is a major part of the assets of CSR Limited and CSR Limited follows the principles of AASB 116 Property, Plant and Equipment (aasb.gov.au 2018). They are recognized based on historical cost after the deduction of acquisition and depreciation cost.
(Source: csr.com.au 2018)
The recognition of software is done based on cost value after including all the development charges fair value measurement is used for the recognition of other intangible assets (csr.com.au 2018)
3rd Objective:
The recognition of goodwill is done based on fair value on the value of the acquired assets and liabilities. For the recognition of intangible assets, CSR Limited follows the principles of AASB 138 Intangible Assets (aasb.gov.au 2018).
Trade and other receivables are recognized at fair value on the value of the acquired assets and liabilities as per AASB 9 Financial Instruments. As per the standard of AASB 102 Inventories, inventories are recognized at net realizable value (aasb.gov.au 2018).
Liability: For the recognition of trade and other payable, CSR Limited follows the rules of AASB 9 Financial Instruments and recognizes them at their amortized costs (aasb.gov.au 2018).
As per the principles of AASB, CSR Limited recognizes the long term borrowings of the business based on fair value, net of the transaction costs (csr.com.au 2018).
As per the principles of AASB, CSR Limited recognizes the long term borrowings of the business based on fair value, net of the transaction costs (csr.com.au 2018).
Revenue: In CSR Limited measures revenue from trading on the fair value of the consideration receivable as per the rules of AASB 118 Revenue (aasb.gov.au 2018).
4.Fundamental Qualitative Characteristics
The following discussion shows the fundamental qualitative characteristics of the financial information of CSR Limited:
Relevance: Provided financial information of the business entities must be relevant so that they can make difference in the decision-making process of different users (aasb.gov.au 2018). Thus, the information must have confirmatory and predictive values. CSR Limited provides recent financial information along with necessary notes that help the users in reaching proper decisions (csr.com.au 2018).
Information Need of Target Audience
Faithful Representation: At the same time, business entities are needed to faithfully present their financial information so that there is not any error and fraud in it. It makes financial information complete, neutral and error free (aasb.gov.au 2018). CSR Limited follows the principles of AASB conceptual framework for the preparation and presentation of financial statements and it supports the characteristic of faithful representation (csr.com.au 2018).
5.Enhancing Qualitative Characteristics
The following discussion shows the enhancing qualitative characteristics of the financial information of CSR Limited:
Comparability: This characteristic helps the uses in the selection of correct alternatives and assists indentifying similarities and differences between the correct financial aspects (aasb.gov.au 2018). CSR Limited presents their financial information in such a manner so that the users can easily compare them to the other companies (csr.com.au 2018).
Verifiability: Verifiability helps the users in reaching consensus with the application of different knowledge and independent observation (aasb.gov.au 2018). The users can verify the provided financial information of CSR Limited with the help of different methodologies. In addition, faithful representation of financial information also supports this characteristic (csr.com.au 2018).
Timeliness: Timeliness helps the users in timely acquiring the required financial information of the business entities (aasb.gov.au 2018). In case of CSR Limited, it can be seen that the company releases their financial results and information at a specific time of the years so that the users can become beneficial from it (csr.com.au 2018).
Understandability: Financial information can be classified, characterized and correctly presented with the help of greater understandability (aasb.gov.au 2018). In case of CSR Limited, the users can easily understand the financial information with the assistance of effective financial knowledge (csr.com.au 2018).
Conclusion
Based on the above discussion, it can be said that the business entities are needed to fully comply with the standards, regulations and principles of AASB conceptual framework in order to avoid major accounting and financial reporting related issues. In case of CSR Limited, there is not any significant accounting issue in the company as it fully complies with the rules and regulations of AASB Conceptual framework. Apart from this, compliance with this requirement helps the users of financial information in getting adequate and relevant information in order to reach to effective financial decisions. Thus, it is recommended to all the Australian business organizations to follow the principles of conceptual framework for smooth accounting process.
This report takes an honest attempt to analyze and evaluate different requirement and standards of accounting conceptual framework. It can be seen in the recent years that the business entities are facing major issue related to the accounting and financial reporting; and non-compliance with the required standards is the main reason behind these issues. It is the obligation on every Australian company to follow the rules of accenting conceptual framework. In Australia, Australian Accounting Standard Board (AASB) and International Accounting Standard Board (IASB) have developed a conceptual framework that includes all the required rules and regulations for financial reporting (aasb.gov.au 2018). For this report, CSR Limited is taken into consideration. CSR Limited is a major Australian business entity involves in providing building products for residential and commercial construction. The company is listed under top 100 companies in Australian Security Exchange (ASX) in the name of ‘CSR’ (csr.com.au 2018).
References:
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Contributions. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Financial Instruments. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Intangible Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf [Accessed 14 Apr. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf [Accessed 14 Apr. 2018].
Corporate. (2018). About Us | CSR . [online] Available at: https://www.csr.com.au/about-us [Accessed 14 Apr. 2018].
Corporate. (2018). Annual Meetings and Reports. [online] Available at: https://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports [Accessed 14 Apr. 2018].
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