Framework for the presentation and preparation of the financial statements as per the amendments incorporated conceptual framework for the purpose of financial reporting issues by IASB (International Accounting Standards Board). Concepts under the framework are consistent with the Australian Securities and Investments Commission Act 201. It includes the concepts required for preparing and presenting the financial statement for the outside users. It assists in preparing the financial statement applying the AAS (Australian accounting standards) and interpreting the information included in the financial statements that is presented in compliance with AAS. The GPFR (general purpose financial reporting) for financial reporting deals with objectives of the financial statements, definition, measurement and recognition of elements from which the financial statements are prepared and qualitative characteristics for determining usefulness of the information reported in financial statements (Mca.gov.in 2018).
Alto Metals Limited is the listed company under ASX is mining company that is focussed in exploration of Uranium and gold tenements in the location of Western Australia. The entity is focussed on the Sandstone gold project and the activities related to gold sector. The financial report of the company is GPFR that is prepared as per the requisite of Corporation Act 2001, AAS and other pronouncements of AASB (Profile et al. 2018). Further, the financial reports of the concern are prepared on accrual basis and the basis of modified, historical cost excluding the contingent considerations and derivative financial instruments. Further, the financial reports are complied with the AAS issued by AASB and IFRS (International Financial Reporting Standards) issued by IASB (International Accounting Standards Board).
Sufficient information for making decisions
As per the GPFR requisite the financial statements shall be presented in a way to assist the users in making decisions. For instance, liabilities and assets shall be classified by the function or nature for displaying the information in the way to be useful for the users in making the economic decisions (Ball 2013).
Timing and details of amount
Items listed under the financial reports shall be presented to enable the users to assess and interpret it on timely approach. Alto metals limited provide the information in the financial reports for the period of 1 year closed on 30th June 2018. Moreover, it disclosed the details of listed items in financial reports through the notes (Mca.gov.in 2018).
Financial reports are generally prepared with the assumption that the company is going concern and will continue its operation for foreseeable future. Therefore, it is assumed that the organization does not have any intention or any requirement to curtail or liquidate the operation scale. The directors of Alto metals are responsible for analysing the ability of the company to be continued as the going concern disclosures and using it as accounting basis unless they are intended to cease the operation or liquidate the company (Schaltegger and Burritt 2017). The company prepared its report based on the principle appropriate to going concern that presumes commercial realisation of future potential of assets and discharge of obligation in normal business line.
However, the auditor of the company Grant Thornton is in the view that the net loss of the company amounted to $ 624,026 for the year closed on 30th June 2018 in addition to other matters indicates that there exists material improbability regarding the ability of the company to continue as the going concern.
Resources of the company
GPFR delivers information regarding financial position of the entity that provides the information regarding the economic resources of the entity and the existing claims against it. Financial reports prepared in accordance with GPFR shall provide information regarding the transactional impact that changes the economic claims and resources of the entity. Alto Metals Limited provides details of the economic resources and related claims that can assist the users in recognising the financial weaknesses and strengths (Wu, Ramesh and Howlett 2015).
Recognition and measurement
Recognition is the description of any item monetarily as well as with details amount in the income statement or in the balance sheet. It is the process of incorporating the item in income statement or in balance sheet that fulfils the characteristics of elements and satisfies the recognition criteria. Income statement and balance sheet shall list those items only those fulfil the recognition principles (Henderson et al. 2015).
Recognition of assets
Assets are reported in the balance sheet if it is apparent that economic benefits for the forthcoming period will be streamed to the organization and the amount of benefits can be determined reliably. As per the financial reports of the entity dated 30th June 2018 it is noticed that the company recognizes its assets as per the requirement criteria. Fixed assets of the company like equipment and plant are recorded at historical cost. Further, the cost of the fixed assets those are constructed within the entity are comprised of the material cost, borrowing cost, direct labour cost and suitable part of variable and fixed overheads. Each class of the equipment, property and plant are reported at cost reduced by the value of impairments loss and depreciation (Sterling 2014).
Recognition of liabilities
Liabilities are reported in the balance sheet if it is obvious that the economic resources will be out flown from the organization in the forthcoming period for satisfying any obligation and the amount of obligation can be determined reliably. As per the financial reports of the entity dated 30th June 2018 it is noticed that the company recognizes its liabilities as per the requirement criteria (Mca.gov.in 2018). For example, provisions are recognized by the company when it has constructive or legal obligation that owing to past events, it is likely that economic resources will be out flown from the organization in the forthcoming period for satisfying any obligation and the amount obligation can be determined reliably.
Recognition of the incomes
Revenues are reported in profit and loss statement of the organization when the enhancement in the economic resources for the forthcoming period associated with enhancement of assets and reduction of the liability has created and the value of which can be determined reliably (Mca.gov.in 2018). To be more specific, recognition of the revenues or incomes occurred along with the reporting of enhancement in assets or reduction of liability. As per the financial reports of the entity dated 30th June 2018 it is noticed that the company recognizes its incomes as per the requirement criteria.
Recognition of the expenses
Expenses shall be reported in the profit and loss reports based on direct association among costs incurred for earning the particular income item. Generally it is known as the matching of the revenues with costs and entails simultaneous reporting of enhancement in liabilities or reduction of assets. As per the financial reports of the entity dated 30th June 2018 it is noticed that the company recognizes its expenses as per the requirement criteria (Li 2013).
The qualitative characteristics of the financial reports involves 2 characteristics – (i) Fundamental qualitative characteristics that includes materiality, faithful representation and relevance (ii) enhancing the qualitative characteristics that includes comparability, verifiability, timeliness and understandability (Schulze et al. 2016).
Fundamental qualitative characteristics
- Materiality – material information are those whose misstatement or exclusion may impact the decision taken by the decision maker based on the data reported in the financial reports. Alto metals limited disclose all the information that is feels material through the notes attached in foots of financial reports.
- Faithful representation – Financial data listed in the financial reports apart from being relevant shall also be reported fairly and faithfully so that the users can use the information for making important decisions. Information those are complete, neutral and error free are considered to be presented faithfully. Directors of the organization are in the opinion that the financial reports are providing fair and true view of its financial status for the year ended at 30thJune 2018 (Zhang and Andrew 2014).
- Relevance – relevant information have impact on the decision made by the decision makers. For fulfilling this, the items shall have confirmatory value, predictive value or both. Alto Metals Limited provides its information in the financial report with proper amount and segregated under proper head.
Enhancing the qualitative characteristics
- Comparability – the financial information shall be reported in such way that the users may compare the data with previous period and make out the similarities and variances. The company present it data along with the previous year’s data that fulfils the purpose (Cheng et al. 2014).
- Verifiability – Verifiability assure the users that information listed in the financial reports are presented in true and fair manner. As the company reported the items with required details like amount and inclusion under proper head, it is verifiable.
- Timeliness – As per the requirement the company reports its financial data for 1 year the year closed on 30thJune 2018. It also provides the data on semi annual basis (Spiceland et al. 2018).
- Understandability – Data presented in the financial reports can be understood entirely as per the requirement of GPFR as each items are reported under appropriate head.
From above discussion it can be stated that generally the company is following all the objectives of GPFR and the only exception is preparing the reports as going concern. Though the company prepared the reports as going concern the auditors of the company are in the opinion that material uncertainty regarding the ability of the company to continue as the going concern exists there. All the incomes, expenses, liabilities and assets are recognised as per the requirement of GPFR. Finally all the qualitative characteristics are properly followed by the company while the financial reports are prepared.
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