Compliance Of Webjet Limited With The Conceptual Framework Of AASB

Topic: This assignment covers the in-depth theoretical concepts with practical accounting task application based on the topics from the subject.

Students are required to prepare a comprehensive report directed to a corporation selected from a list provided by your lecturer. (company selected: Webjet Limited).

Consideration of the Conceptual Framework Objective, Recognition Criteria, Fundamental and Enhancing Guidelines is essential. The relationship between accounting research and professional practice is essential. This article needs to inform your arguments. 

Financial Reporting Objectives

The objective of this report is to take into consideration the major aspects of accounting conceptual framework for the companies operating in Australia. For the purpose of this report, Webjet Limited (Webjet) is taken into consideration. It needs to be mentioned that Webjet is a major online travel agency (OTA) having operation in the regions of both Australian and New-Zealand. The company is well-known for its online travel tools and technology (webjetlimited.com, 2018). This particulr report can be segregated into three major parts. The main area of focus of the first part is to analyze the general purpose financial reporting objectives. The aim of the second part is to analyze the adherence of Webjet with the recognition criteria of conceptual framework. The last part emphasizes on the qualitative characteristics of financial reporting.   

In Australia, the presence of the Conceptual Framework of Australian Accounting Standard Board (AASB) can be seen that provides the companies with the required rules and regulations for financial reporting and it is the responsibility of the companies to follow all these rules and regulations of AASB  conceptual framework (aasb.gov.au, 2018). This is also applicable for Webjet. AASB conceptual framework has certain objectives that Webjet is needed to take into consideration and the following discussion shows them:

First Objective: This particular aim of general purpose financial reporting states that the financial statements of the business organizations must contain the information that helps the users of the financial information in assessing the current financial position. It implies that the financial statements should have all the required information about assets, liabilities and equity (aasb.gov.au, 2018). It can be seen from the 2017 Annual Report of Webjet that the company has release their Consolidated Balance Sheet that includes all the required information for the aspects like assets, liabilities and equity. It can be seen in below:

(Source: webjetlimited.com, 2018)

Second Objective: The particular objective of general purpose financial reporting points towards the responsibility of the entities to release all the information that can help the users of the financial information to judge the company’s financial performance; and this information can be of revenue, expenses, income, income and loss (aasb.gov.au, 2018). As per the 2017 Annual Report of Webjet, it is visible that the company has released their Consolidated Statement of Profit or Loss; and this statement contains all the information about the above-mentioned aspects that assist the investors and users in gaining understanding about the financial performance of the organizations. It can be seen from the following table:

Adherence of Webjet with Recognition Criteria

(Source: webjetlimited.com, 2018)

Third Objective: This objective of the general purpose financial statements states that the business entities are responsible for providing all the information to the users for the assessment of the change in the financial performance over the previous year for projecting the  future financial performance of the entity (aasb.gov.au, 2018). According to the 2017 Annual Report of Webject, one aspect is visible that the company has released the Consolidated Statement of Change in Equity and the Consolidated Statement of Cash Flows that contain all the information related to the change in financial performance and change in cash position of the company over the year. This process helps the investors and other users in understanding the change in financial performance of Webjet. It can be seen from the following figure:

(Source: webjetlimited.com, 2018)

The conceptual framework of AASB has introduced certain criteria for the recognition of asset, liability, equity, revenue and expenses. It is needed for the companies to adhere to all the recognition criteria at the time to recognize the above-mentioned financial aspects. This aspect is also applicable for the financial reporting of Webjet and these are shown below:

Asset: There are different assets in Webjet. The conceptual framework of AASB puts the obligation on the management of Webject to adhere to the policies and guidelines of AASB 116 Property, Plant and Equipment under section 334 of the Corporations Act 2001 for recognizing their business property, plant and equipment (PPE) (aasb.gov.au, 2018). It can be observed from the 2017 Annual Report of Webjet that the company considers their PPE in the balance sheet at the historical cost value less accumulated depreciation and losses from impairment. AASB conceptual framework has also put the obligation on Webjet to comply with the regulations and principles of AASB 102 Inventories for the purpose of the recognition of inventories (aasb.gov.au, 2018). As Webjet is a service provider, the companies does not have any inventory. According to the conceptual framework of AASB, Webjet is needed to follow the principles of AASB 138 Intangible Assets for recognizing their intangible assets (aasb.gov.au, 2018). The company considers the intangible assets at cost value after subtracting accumulated amortization and accumulated impairment losses. These can be shown below:

(Source: webjetlimited.com, 2018)

Liability: As per the regulations of AASB conceptual framework, Webjet has the obligation to comply with the regulations of AASB 132 Presentation of Financial Instruments at the time of the recognition of their business borrowings. The 2017 Annual Report states that the company considers the borrowing in the balance sheet at fair value.  Another major liability is provision and the obligation on the company is to comply with the guidelines of AASB 137 Provisions, Contingent Liabilities and Contingent Assets for recognizing them (aasb.gov.au, 2018). As per the annual report, the business entity considers the creation of provision when any present obligation can be seen due to any past event. Apart from this, as per AASB, Webjet is needed to follow the guidelines of AASB 16 Leases for the recognition of leases. These can be shown below:

Qualitative Characteristics of Financial Reporting

(Source: webjetlimited.com, 2018)

Equity: The AASB conceptual framework puts the obligation on Webjet to follow the principles of AASB 132 Financial Instruments: Presentation to recognize equity (aasb.gov.au, 2018). According to the policy of the company, Webjet takes into account the fully paid ordinary shares as equity.

Revenue: As per the conceptual framework of AASB, Webjet is needed to comply with the guidelines of AASB 118 Revenues to recognize their revenues (aasb.gov.au, 2018). It can be seen from 2017 Annual Report that Webjet measures their revenues on fair value basis and it can be shown in below:

(Source: webjetlimited.com, 2018)

Expenses: AASB conceptual framework states that it is needed for the companies for the recognition of expenses at the time of the outflow of future economic benefit from the company (aasb.gov.au, 2018). Some of the major expenses head for Webjet are lease expenses, taxation expenses, employee benefit expenses and others.   

According to AASB conceptual framework, financial information of the business entities should have the qualitative characteristics of financial reporting so that they can become more useful for the users. They are discussed below:

Fundamental Qualitative Characteristics: Relevance and Faithful Representation are two fundamental qualitative characteristics of financial information (Lawrence 2013). It can be seen from 2017 Annual Report of Webjet that the financial statements of the company contain the financial information for the year of 2017 and 2016; and it indicates towards the attempt of the company to provide their users with the most relevant financial information for the purpose of their investment decision-making process. It can be observed at the same time that Webjet adheres to the principles of AASB, Corporations Act 2001, IFRS and IASB that ensures the true and faithful representation of the financial statements of the company (Barth, 2013).   

Enhancing Qualitative Characteristics: Comparability, Verifiability, Timeliness and Understandability are for enhancing qualitative characteristics of financial reporting (Tayeh, Al-Jarrah and Tarhini 2015). It needs to be mentioned that Webjet has provided their financial information in the way so that the users can compare them with other corporations and the different timeline of Webjet. For this reason, Webjet provides the financial information of the previous year in present financial statements (Zeff, 2013). After that, the noted to the financial statements of Webjet provide the users with the scope to verify the used accounting assumptions and estimates of the financial statements. Moreover, Webjet releases the financial statements on quarterly, half-yearly and annual basis that maintains timeliness of their financial information. Most importantly, Webjet provides all the needed justification and clarification of the accounting treatments in the notes to the financial statements that help the users in gaining understanding about various accounting and financial treatments in the annual reports (Henderson, et al. 2015).      

Conclusion and Recommendations

It can be observed from the above discussion that Webjet has fully complied with all the requirements of the conceptual framework of AASB. The presence of the compliance of Webjet with the objective of conceptual framework is evident in the financial statements of the company. After that, Webjet does not have any issue in the recognition and recoding of asset, liability, equity, revenue and expense as the company has fully followed all the recognition criteria provided by AASB Conceptual Framework. Lastly, it can also be seen that the financial information provided by Webjet has presence of both the fundamental and enhancing characteristics in them. Thus, the recommendation for all the companies is to keep complying with all the requirement and characteristics of conceptual framework so that accounting issues can be avoided 

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 11 August 2018].

Aasb.gov.au. 2018. Financial Instruments: Presentation. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB132_07-04_COMPoct09_02-10.pdf> [Accessed 11 August 2018].

Aasb.gov.au. 2018. Inventories. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-04_COMPjun09_01-09.pdf> [Accessed 11 August 2018].

Aasb.gov.au. 2018. Leases. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB16_AmendStd_02-16.pdf> [Accessed 11 August 2018].

Aasb.gov.au. 2018. Property, Plant And Equipment. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf> [Accessed 11 August 2018].

Aasb.gov.au. 2018. Provisions, Contingent Liabilities And Contingent Assets. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-14.pdf> [Accessed 11 August 2018].

Aasb.gov.au. 2018. Revenue. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf> [Accessed 11 August 2018].

Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.        

Lawrence, A., 2013. Individual investors and financial disclosure. Journal of Accounting and Economics, 56(1), pp.130-147.

Tayeh, M., Al-Jarrah, I.M. and Tarhini, A., 2015. Accounting vs. market-based measures of firm performance related to information technology investments. International Review of Social Sciences and Humanities, 9(1), pp.129-145.

Webjet Limited. (2018). Our Story - Webjet Limited. [online] Available at: https://www.webjetlimited.com/our-story/ [Accessed 11 Aug. 2018].

Webjetlimited.com. 2018. Annual Report For The Year Ended 30 June 2017. [online] Available at: <https://www.webjetlimited.com/wp-content/uploads/2017/10/FY17-Full.pdf> [Accessed 11 August 2018].

Zeff, S.A., 2013. The objectives of financial reporting: a historical survey and analysis. Accounting and Business Research, 43(4), pp.262-327.