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Discuss the theory, what is appropriate in your company and the accounting problems that you have identified.

You need to look at the annual report of your company and answer these questions:

  1. Has the company complied with the measurement requirements of the conceptual framework?
  2. Have they complied with the fundamental qualitative characteristics?
  3. Have they complied with the enhancing qualitative characteristics?
  4. Are the users of financial reports (investors/potential investors/lenders/other creditors) able to use the report to make decisions.
  5. The conceptual framework says users only need a basic knowledge of accounting - do they need more than this to analyse your company.
  6. Have they met the requirements for general purpose financial reporting.
Company Overview

The accounting regulatory organisations of a nation prescribe that it is the duty of the management of the entities to prepare and present the financial reports in accordance with the framework laid down in respect of the same. Accordingly, accounting is a process in which the transactions of an entity are recorded, identified, and measured as per the standards prescribed, to measure the overall financial performance of the organisation for a financial year (Loftus et. al, 2015). The true and fair presentation of the financial statements aids the various stakeholders to arrive at meaningful business decisions. The following report is aimed at evaluating the financial statements of the entity Ahalife Holdings Limited (ASX: AHL), in the light of the guidelines issued by the Australian Accounting Standard Board (AASB) in the respect of the preparation, presentation and disclosures in the financial statements. The report will shed light on the meaning and significance of the conceptual framework as prescribed by the AASB in respect of the financial statements.

AHAlife holdings limited are an ecommerce platform that focuses on offering lifestyle goods and premium designs to customers (AHL, 2018). It is situated in New York and is listed under the list of Australia Security Exchange. The business model works in a way of direct communication between the customers and designers. AHAlife has captured great position in the digital marketplace that engages online sale by allowing users to directly purchase the items from digital platform. The artisans and designers are selected from different countries around the world. Company aims in improving the value of products and minimize the overall risk that is created due to stakeholders.

Conceptual framework is significant for an organisation as it defines the direction of the business to set objectives so that better results and thus accountability outcomes are obtained (AASB, 2016). It is a framework that is used for leading the business to a particular direction so that consistent reports can be made. The reports are used by the stakeholders to compare various parameters with the competitors so that better action plans could be designed.

In case of AHAlife holding, it can be said that company has complied successfully with the measurement requirements of the conceptual framework. The annual reports are also prepared by focusing upon the directions and set standards. To collect the information, record and identify all the financial measures accounting standards have been followed by AHAlife holding. The Financial statements are also prepared on the basis of IFRS guideline. Some of the financial and accounting scenario of the business that has been set as per the conceptual framework have been analysed below.

Financial statements have been prepared so that stakeholders understand every aspect related to financial conditions. Financial notes have also been prepared for better analyses. The company has recorded and maintained all the transactions on the basis of conceptual framework and IFRS rule so that uniformity is maintained. This helps in analysing the overall performance of the firm. For measuring the performance, risks involved and opportunities of the company the statements given by auditors and directors are studied. The conceptual framework has been studied by considering the relevancy and market place factor of the firm.

Compliance of Conceptual Framework

From the analyses it can be concluded that presentation and recording of an organisation is quite satisfying and this can be used to design new action plans in order to improve the overall performance and market value.

They have complied the fundamental qualitative characteristics by evaluating various factors and characteristics of the company. Some of the factors that were considered while analysing the situation are discussed below.

  • Reliable Representation

Reliable representation states that all the financial and non-financial statements of the company should be presented with evidence, facts and figures so that trust of stakeholders could be gained (Australian Stock Exchange, 2018). The annual report should contain the information about all the relevant activities and events that took place in the business. In case of AHAlife holding, it was seen that all new procedures, policies, operations and changes made have been made are listed in the annual report of the company.

  • Relevance

If the information and data is valid and relevant it will help at time of taking decisions as it will build a loyal relation with the stakeholders. The annual report of AHAlife holding presents the information in a better way and the facts are quiet relevant that help the stakeholders to make better decision. The annual report defines all the relevant evidence for the stakeholders so that decisions can be taken properly by the managers.

AHAlife holding have complied various qualitative characteristics in order to extent the conceptual framework.

  • Verifiability

This parameter ensures that all the data has been verified and faithfully presented by the business. Thus, in case of AHAlife holding, it was found that before representing the information in the annual report it was verified and checked thoroughly. The detail below shows about the verifiability level of the business.

  • Timeliness

It states that all the information should be delivered on time so that decisions could be taken timely. By evaluating the annual report of AHAlife holding it was observed that all the information was represented timely and in a relevant way.

  • Understand ability

All the information is described briefly in the annual report so that better understanding is gained. This builds the trust level of stakeholders and increases the chances of improvement (Garrett, Hoitash and Prawitt, 2014). Offering clear and presided information support the stakeholders to analyse the current situation and find ways for improvement.

  • Comparability

The comparable information in the annual report are every useful as it offers deep analyses of the business by understanding the change in the performance and profit margins. The example of comparability situation is snipped below.

The annual report of the entity Ahalife Holdings Limited are prepared in accordance with the accounting standards and the interpretations, that were applicable and mandatory for the reporting period ending on June 2018 and as issued by the Australian Accounting Standards Board ('AASB'). The annual report comprises of a number of information as stated in the director’s report, chairperson’s report, remuneration disclosures, significant disclosures, and notes to the accounts, sustainability report, and the relevant financial disclosures. Thus, the entity presents its financial activities and performance for the relevant financial year, in a detailed and systematic manner, as required by the mandatory guidelines of the AASB. These have been prepared and presented as per the recognition, measurement and other criteria. Thus, the various information will enable the stakeholders to gain the understanding of the activity and the agreements carried on by the enterprise in the financial year in question. In addition to the information as required by the investors and shareholders, the company has also presented the mandatory information as required by the Corporations Act 2001 (Cth), such as the agreements with the related parties, number of board meetings, and the attendance of the directors and others.

Compliance with Fundamental Qualitative Characteristic

The following images give an insight of the various disclosures made and information presented by the company Ahalife Holdings Limited in its Annual Report for the financial year 2018.

(Source: AHL, 2018)

As stated in the previous section of the report, the financial information presented is in terms of the comparatives and take into account the concepts of going concern, materiality and transparency, reasonableness and others. Thus, it can be stated that users of the financial statements are able to make the decisions based on the various financial and other information stated therein.

The conceptual framework prescribes that the users of the financial information must possess only basic knowledge of the financial and accounting practices (AASB, 2015a). This is because the duty is laid down on the management of the entity to aid and support the information presented in the financial statements with the relevant supportive explanations, disclosures, and the notes to accounts. It is significant to note that the numbers and comparisons do not provide the comprehensive picture of the financial and overall performance of an entity (Deloitte, 2018). Thus, the management must assist the users of the financial statements with the supportive data and information to provide a complete picture. Hence, it must be noted that the users need not have a detailed technical knowledge of accounting and regulatory requirements.

In context of the company Ahalife Holdings Limited has also provided the supportive tables, explanations, reports and notes as and wherever required to aid the figures presented in the income statement, statement of financial position, the statement of cash flows and others.

The chief objective of the general-purpose financial reporting practice, as stated by the Australian Accounting Standards Board is to be accountable and to communicate the relevant and reliable information to the stakeholders (AASB, 2018). There are a number of users of financial statements, each of which seek different set of information to fulfil their objectives. In addition, the AASB 101 states that the in order to make the information relevant, it must be comparable (AASB, 2015b). Thus, the management of the entity must develop a mechanism that aid in the preparation and true and fair representation of the financial statements. In addition, the same must be presented side by side the previous year figures. On application of the above objective on the company chosen, it can be stated that the company has fulfilled the basic objective of the general purpose financial reporting, by stating detailed information’s for every range of stakeholder.

Conclusion

As per the discussions held in previous parts it can be stated that the conceptual framework makes it mandatory for the preparers of the financial statements to follow certain policies and procedures to be followed to enable transparent presentation of information. On evaluation of the financial statements of the entity Ahalife Holdings Limited, it can be stated that the company has complied with the various legal and regulatory requirements to enable the users of the financial statements make relevant business and other decisions.

References

Ahalife Holdings Limited. (2018) Financial Results- 2018 Annual Report. [online] Available from: https://www.ahalifeholdings.com.au/financial-results/ [Accessed 16 December 2018].

Australian Accounting Standards Board. (2015a) Conceptual Framework for Financial Reporting [online] Available from: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 16 December 2018].

Australian Accounting Standards Board. (2015b) Accounting Standard AASB 101. [online] Available from: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 16 December 2018].

Australian Accounting Standards Board. (2016) Framework for the Preparation and Presentation of Financial Statements. [online] Available from: https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-14.pdf [Accessed 16 December 2018].

Australian Accounting Standards Board. (2018) Objective of General Purpose Financial Reporting. [online] Available from: https://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf [Accessed 16 December 2018].

Australian Stock Exchange. (2018) Review of the ASX Corporate Governance Council’s Principles and Recommendations. [online] Available from: https://www.asx.com.au/documents/regulation/Australian-Accounting-Standards-Board.pdf [Accessed 16 December 2018].

Deloitte. (2018) Australian financial reporting guide. [online] Available from: https://www2.deloitte.com/content/dam/Deloitte/au/Documents/audit/deloitte-au-audit-australian-financial-reporting-guide-june-2018-220618.pdf [Accessed 16 December 2018].

Garrett, J., Hoitash, R. and Prawitt, D. F. (2014) Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp. 1087-1125.

Loftus, J., Luke, B., Leo, K. J., Boys, N., Daniliuc, S., Hong, A., and Byrnes, K. (2015) Financial Reporting, 1st ed., Wiley, Melbourne: ProQuest Ebook Central.

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My Assignment Help (2021) Evaluation Of AHAlife Holdings Limited's Financial Statements Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/acc303-contemporary-issues-in-accounting/financial-statements-of-the-ahalife-holdings-ltd.html
[Accessed 03 March 2024].

My Assignment Help. 'Evaluation Of AHAlife Holdings Limited's Financial Statements Essay.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/acc303-contemporary-issues-in-accounting/financial-statements-of-the-ahalife-holdings-ltd.html> accessed 03 March 2024.

My Assignment Help. Evaluation Of AHAlife Holdings Limited's Financial Statements Essay. [Internet]. My Assignment Help. 2021 [cited 03 March 2024]. Available from: https://myassignmenthelp.com/free-samples/acc303-contemporary-issues-in-accounting/financial-statements-of-the-ahalife-holdings-ltd.html.

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