Accounting Guidelines And Compliance - Appen Limited Essay.

Appen Limited possesses certain groups of assets. According to the AASB conceptual framework, the organisation is liable to conform to certain policies of the framework and one of them is “AASB 116 Property, Plant and Equipment” in line with “Section 334 of the Corporations Act 2001”. The policy is designed for recognising property, plant and equipment. Appen Limited uses the historical cost for recognising this asset after subtraction of accumulated.

depreciation and impairment losses.For conforming to the AASB conceptual framework, it is necessary for the organisations to act as per the regulations of “AASB 132 Presentation of Financial Instruments” before realising business borrowings (Henderson et al. 2015). In case of Appen Limited, fair value is taken into account in order to recognise borrowings and amortised cost is used for gauging the same through the method of effective interest. 

need to provide introduction objectives financial structure of the year etc.

Objectives of conceptual framework for financial reporting

The purpose of this report is to consider the significant aspects related to conceptual framework of accounting for the organisations functioning in Australia. Hence, Appen Limited has been taken into consideration for fulfilling the stated purpose. The organisation provides data solutions as well as services in relation to machine learning and artificial intelligence applications for auto manufacturers, technology organisations as well as government agencies operating in Australia and USA (Appen 2018). The report is formulated in three different segments. The first segment focuses on evaluating the conceptual framework objectives. The second segment concentrates on the compliance of Appen with criteria for recognition stated in the framework. Finally, the reliable measurement in terms of qualitative characteristics of accounting is discussed in this report.

2. Objectives of conceptual framework for financial reporting:

There is widespread evidence of the AASB conceptual framework in Australia, which guides the organisations to comply with the needed guidelines and norms related to financial reporting as a part of their responsibilities (Aasb.gov.au 2018). Appen Limited could not be exempted from such responsibility as well. Certain objectives are laid out in this framework, which are discussed below:

First objective:

It is inherent from this particular objective that a business organisation needs to have information that is beneficial for its users to ascertain the existing financial position of the organisation. More precisely, such information should include details regarding assets, liabilities and equity (Apostolou et al. 2015). From the 2017 annual report of Appen Limited, meaningful information could be obtained about the above-mentioned items in its consolidated balance sheet statement, which is illustrated as follows

Second objective:

According to this particular objective, focus is kept on checking whether the entities are responsible to disclose vital information for assisting their users to make adequate judgements regarding their financial performance. Such information constitutes of expense, income, revenue and loss (Cheng et al. 2014). From the assessment of the last published annual report of Appen Limited, it is evident that the necessary information related to the above-stated items are published in its income statement so that their financial statement users could judge the financial performance.

Third objective:

In accordance with this objective, if any organisation experiences a downfall or an upsurge in its financial performance corresponding to the past year, it is necessary to reveal the same by providing meaningful information so that the future performance could be anticipated. In case of Appen Limited, it is evident from its annual report that it has disclosed such changes in financial performance and cash position through disclosure of the cash flow statement and statement of changes in equity (Cdn.appenresources.com 2018).

Recognition criteria (reliable measurement)

3. Recognition criteria (reliable measurement):

Certain criteria are formulated under the AASB conceptual framework with the intent of recognising equity, assets, liabilities, revenue and expenses. These criteria are to be met by the organisations in order to recognise the above-stated items. Such criteria are applicable in case of Appen Limited, which are demonstrated as follows:

Assets:

Appen Limited possesses certain groups of assets. According to the AASB conceptual framework, the organisation is liable to conform to certain policies of the framework and one of them is “AASB 116 Property, Plant and Equipment” in line with “Section 334 of the Corporations Act 2001”. The policy is designed for recognising property, plant and equipment. Appen Limited uses the historical cost for recognising this asset after subtraction of accumulated depreciation and impairment losses.

In addition, the conceptual framework has made it necessary for all the organisations to be liable to report under “AASB 102 Inventories” guidelines. However, since Appen Limited is mainly a service provider, it does not maintain any inventory. Finally, for measuring intangible assets, the Australian entities are required to comply with “AASB 138 Intangible Assets” principles for making effective recognition of the same. Appen Limited measures intangible assets at the fair consideration value except goodwill and they are mainly obtained during business combination.

Liabilities:

For conforming to the AASB conceptual framework, it is necessary for the organisations to act as per the regulations of “AASB 132 Presentation of Financial Instruments” before realising business borrowings (Henderson et al. 2015). In case of Appen Limited, fair value is taken into account in order to recognise borrowings and amortised cost is used for gauging the same through the method of effective interest.

Another item in this section includes provision and the companies have to adhere to the principles of “AASB 137 Provisions, Contingent Assets and Contingent Liabilities” for effective realisation of the same. Appen Limited realises provisions due to the occurrence of any obligation because of historic events.

Besides, compliance is necessary for the organisation in relation to “AASB 16 Leases”. Appen Limited capitalises its finance leases and the charge of operating lease payments are made to profit or loss with the help of the straight-line method for the lease period.

Equity:

“AASB 132 Financial Instruments: Presentation” is another standard containing certain principles for the entities for realising equity. Appen Limited is involved in categorising ordinary shares in the form of equity.

Revenue:

The conceptual framework has formulated “AASB 118 Revenues” containing certain guidelines for revenue realisation (Horngren and Harrison 2015). It is identified from the 2017 annual report of Appen Limited that revenue is realised based on fair value of consideration receivable or received.

Expenses:

In accordance with the conceptual framework of AASB, expenses are realised only when the company is likely to experience an outflow of future economic advantages (Kumar and Rao 2015). For Appen Limited, the significant expenses comprise of depreciation and amortisation, impairment expenses, finance costs and employee benefits expense.

Based on the above analysis, there are wider evidences of the various financial aspects for Appen Limited. It has conformed to all the regulations and doctrines laid down in AASB in relation to different financial items. Moreover, adequate disclosures have been made for supporting the recognitions and measurements for assuring that the reliability aspect is provided utmost priority within the organisation.

4. Qualitative characteristics:

The users of the financial statements often search for information that would assist them in undertaking decisions and for ensuring the disclosure of such information, the AASB conceptual framework has designed qualitative characteristics of financial reporting to meet the purpose (Macve 2015). The explanations of these characteristics and their relation with Appen Limited are discussed briefly as follows:

Fundamental qualitative characteristics:

The two aspects associated with these characteristics mainly constitute of relevance and faithful representation. The critical analysis of the 2017 annual report of the organisation makes it evident that it has published the financial statements of the past year as well. This is provided with the intent so that the financial statement users, mainly the investors, could undertake investment decisions.

This ensures the aspect of relevancy in the published financial statements of the organisation (Nobes and Stadler 2015). Moreover, as evaluated from the recognition criteria of the conceptual framework, Appen Limited has strictly conformed to the various guidelines mentioned under the standards IFRS, AASB, Corporations Act 2001 and IASB. This has further helped in assuring true and faithful depiction of the financial reports disclosed in the annual report of the organisation.

Enhancing qualitative characteristics:

These characteristics take into consideration four aspects, which include timeliness, comparability, verifiability and understandability. In this context, it is noteworthy to mention that financial information needs to be provided in such a manner that comparisons could be made with competitors and different timelines (Smith 2017). By keeping this point into consideration, Appen Limited has included its financial statements of 2016 in its 2017 annual report to assist the users in making comparison. This has enabled in assuring the comparability aspect for the organisation. Besides, the supporting notes related to accounting estimates as well as assumptions are disclosed for treatment of the various financial items in the annual report. The intention is to comply with the verifiability aspect along with assisting the users in their decision-making process.

In addition, Appen Limited publishes its financial statements on every quarter, half year and after the year end (31^st December 2017), which is evident from the above evaluation. Thus, timeliness is maintained completely in terms of publication of financial information (Zhang and Andrew 2014). Finally, the relevant justifications and disclosures of the accounting statements made in the form of financial footnotes have assisted the users to obtain full knowledge regarding the same from its annual report. Therefore, the understandability is complied effectively as well by Appen Limited.

5. Conclusion:

It could be observed from the above discussion that no guidelines and principles are left on the part of Appen Limited to be complied with the conceptual framework of AASB. Initially, all the objectives mentioned under the framework are adhered appropriately through disclosures of the different types of financial statements. After this, it has not encountered any issue to measure and recognise the various financial items such as revenue, expenses, assets, liabilities and equity in its annual report for meeting the criteria of the conceptual framework. Finally, adequate evidences are gathered to support the fact that Appen Limited has conformed to all the qualitative characteristics of the framework so that the users could take decisions accordingly.

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 16 August 2018].

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Appen., 2018. Appen | High-Quality Training Data for Machine Learning. [online] Available at: https://appen.com/ [Accessed 16 Aug. 2018].

Cdn.appenresources.com., 2018. [online] Available at: https://cdn.appenresources.com/wp-content/uploads/2018/04/Appen-Annual-Report-2017.pdf [Accessed 16 Aug. 2018].

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Horngren, C. and Harrison, W., 2015. ACCOUNTING: BSB110. Pearson Higher Education AU.

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Smith, M., 2017. Research methods in accounting. Sage.

Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical perspectives on accounting, 25(1), pp.17-26.