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What is a General Purpose Financial Report?

The name GPFR or general purpose financial report indicates a report that highlights the information pertaining to the financial part of the business. It is needed to be adhered by every firm as directed by the government or professional accountants. The firms that meet the criteria of the reporting entity, the entity where the users depend on the report decision making process.  Hence, GPFR is a concept that is designed to meet the needs of the user so that the interpretation can be done in an effective manner. As per the annual report of Westpac Bank it is noted that the financial report is a GPFR prepared in compliance with the needs of an authorized institution that takes deposit under the Banking Act 1959 and the Standards of Australian Accounting as provided by the AASB and the Corporation Act of 2001. As per the financial report, it is seen that the corporation is an entity which is not for profit. The financial report even complies with the IFRS as directed by the IASB and other interpretations issued by the committee of IFRIC. Additional disclosures are provided by the corporation so that the users can refer to it (Westpac Bank, 2015). The GPFR comprises of the balance sheet, profit and loss account, statement of cash flow and other notes to the financial statement and these must be prepared with a total requirement of the accounting standards.  

The financial report of Westpac Bank is prepared in as per the convention of the historical cost as modification provided by the accounting of fair value to various sales for securities, financial assets, as well as liabilities. The main aim of following GPFR is to communicate the people related with the organization about the performance of the company. It helps the related parties to ascertain the position of the company and have a financial evaluation in terms of payment of current and future debts. The act of general purpose financial reporting is simply to help the users to take financial decisions that will ultimately have a bearing on the profit. It is not to adhere to the concept of AASB or conceptual framework.

As per Note 1 of the annual report of Westpac Bank the accounting policy pertains to the recognition and derecognition of assets and liabilities and the same is highlighted in notes to the financial statements (Note 10).  The purchase, as well as sale of financial assets apart from the receivables and loans are allowed on the date of trade that is the date on which the group commits to purchase or sell the asset. The settlement date is considered for recognition of loans and receivables or the time when cash is advanced. The recognition of liabilities happens when the obligation occurs. On the other hand, financial assets are derecognized when assets has reached expiry from where the cash flow generates or the time when the group transfer the right to gain cash flow from the assets or undertaken an agreement to provide payment to the received cash flow in totality.

Importance of GPFR in Decision Making

Westpac uses a Fair valuation Control Framework where the determination of the fair value is done by a party that considers the transaction. This framework has helped the organization to formalize the policies as well as procedure and helps in attainment of the compliance with the standards (Westpac Bank, 2015). The framework contains controls that are specific in nature and relates to financial instruments revaluation. The framework contains controls of specific nature, verification of the price, adjustments of the fair value and financial reporting 

The financial liabilities are ascertained through fair value and from the income statement it is viewed that the income statement declined due to lessen funding of securities. The derivative liability declined by $12,2 billion or 25% that is mainly due to translation in the currency of foreign and the impact on translation. The liabilities that accrues from

The liabilities arising from these financing activities are generally done at their fair value. Exposures that are provided on the guarantees are contained in the credit lines an 

Receivables that are due from other financial institution can be deemed as a non-derivative financial asset with payments either as fixed or determined that do not appear in the active market. These include assets of conduit nature, collateral, and lending from interbank (Westpac Bank, 2015). For Westpac the recognition is done at fair value plus various costs that are attributed in a direct manner and the measurement is done at amortized cost by utilizing the method of interest rate that is effective.

(Westpac Bank, 2015)

Westpac recognizes the purchase, as well as the sale of financial assets, excluding the loans and receivables that are recognized at the trade date. The said date is regarded as the date when the Group gets into commitment for purchase and sell off assets. The recognition of loans, as well as receivables, happens on the date of settlement whenever the advance is provided to the borrowers (Westpac Bank, 2015). The recognition of financial liabilities emerges as per the need or obligation. The classification, as well as measurement of the financial assets, is done in the following categories: the assets appear at fair value through the statement of income, derivatives, other loans, and receivables.  The concept of fair value is used to ascertain the assets and liabilities are ascertained at fair value through the income statement and recognized at fair value. Moreover, fair value is even used in ascertaining of assets and liabilities plus various other transaction costs that are attributable in a direct manner.

The remuneration of the Westpac bank executive is done in a manner so that the employees are retained and to attract the Board members who are experienced, as well as qualified. The executive directors such as CEO and CFO are remunerated in a proper manner that is based on the expertise and the time devoted for the benefit of the organization. There is a strong contrast with the remuneration of the directors because the remuneration is not in tune to the performance.

Accounting Policies and Methods Adopted by Westpac Bank

Interest income, as well as interest expense that bear assets, as well as liabilities,  is recognized through the method of effective interest rate. The interest that relates to impaired loans is recognized by utilization of the original interest rate that is based on the loan and is done on the carrying value that is net of the impaired loan. Hence, Westpac uses this rate to discount the cash flow of the future by measurement of the charges of impairment. However, this rate is even used by the company so that the cash flow of the future can be discounted and impairment charges can be determined (Sanders et. al, 2007).

The tax expenses of the period deal with current, as well as deferred tax.  The recognition of the tax is done in the statement of income and to the level that the elements should be recognized in a direct manner in other income that is comprehensive (Westpac Bank, 2015). Current tax can be defined as the tax that is payable expected on the income that is taxable in the statement of income that is comprehensive in nature.

There are many principles appearing under the policy that is directed to uplift the superior’s performance and enhance the value of the shareholder in total. Such principles contains the pay as per performance and the rewards are in tune to the executives target, merge with the reward for the interest of the shareholder where employees of higher rank are requested to hold shares of an amount that is nominal and appraisal are targeted for influencing the shareholder value that pertains to the long-term (Jensen & Murphy, 2010). It even contains a market that is competitive in nature and sets the targeted level of rewards considering the practices of the competitor and provides the outcome of the reward projecting the Westpac Bank success in contrast with the companies that are competing against it.

The CEO remuneration and another executive of senior rank contains fixed remuneration keeping into consideration the complexity, as well as the role that is played by them, experiences and skills of the individual. The major role is being played by the short-term, as well as long-term incentive (Lapsley, 2012). The payment of CEO and other executives of the group are done in an overall reward structure 

The above explains the composition of target reward that is present for the CEO and average for the senior group executives. The target mix is assessed for different level and comprises of rewards that are affected by the performance which enhances with the role of the employee.

This part is composed of salary in cash, superannuation fund of the employee and contribution and items of salary sacrifice. It is evaluated on an annual basis considering the role of the executives, a well as the level of motivation, retention and attracting the executives.  A superannuation of 9% is allotted to the CEO and different employees  that is in tune to the package that is fixed in nature and even contains a salary sacrifice opportunity salary for higher superannuation contribution, benefits for the employee, and other benefits that accrue under the salary cycle of  Westpac.

Recognition of Financial Assets and Liabilities

The employees involved under STI can have a realization of cash and equity can be deferred comprising under equity where the specific results are derived. The members of the group such as CFO and CEO are ascertained with the help of a balanced scorecard that joins the league of the annual financial, as well as non-financial that provides immense support to the vision and mission of the company (Westpac Bank, 2015).

The target for 2015 was fixed at $2686000. The target is set by the remuneration committee in collaboration with the CEO of the company (Brian Hartzer’s). The target is set by the committee and the approval is needed to be obtained by the board at the initial point of time. The results of the STI are driven by evaluation based on quantitative and qualitative rules and the opportunity of the STI stands at 150% of the target (Westpac Bank, 2015).

When the part of STI in the form of equity is deferred, the incentives payments are associated in a better fashion with the shareholder interest as the portion that is deferred and complete is attached to the share price fluctuations over a particular period (Westpac Bank, 2015).  In this scenario, if resignation is done by a CEO or CFO before the securities are vested then the Board have the right to have their discretion in the securities and when another organization is joined, the securities are renounced. 

The awards in connection to STI are projected below that is linked to CEO and other officials. 

Long-term incentives

It is needed to uplift and creates shareholder value pertaining to the long-term. The awards are provided by Westpac to the CEO, employee and other senior executives who play a vital part in enhancing the scenario of the company. The CEO receives the award for LTI under the performance plan of CEO but other senior officials receive LTI awards under the reward plan of Westpac. 

(Westpac Bank, 2015)

CEO and executives 

(Westpac Bank, 2015) 

There are various arrangements entered into with the customers that are recognized in the balance sheet. The arrangements contain commitments to enhance credit, endorsement of the bill, financial guarantee, letters of credit on a standby note and facilities of underwriting.

Financial lease for Westpac is where the group takes the role of a lessor and even include loans. The company include leases where the risk, as well as reward is transferred to the lessee. The financial income is derived on a basis that projects a constant rate of return on the net investment in the finance lease.  Discounting is done by utilizing the implicit of the interest rate to ascertain the present value.

The tax expense for the year is composed of current and deferred tax. Tax is ascertained in the income statement except to the level that it is linked to the elements that are recognized directly in other income that is comprehensive in nature in the case it is accepted in the income statement. Current tax is the tax that is payable for the year utilizing certain tax rates and law for every jurisdiction. Current tax even contains adjustments to tax payable for previous years. Deferred tax is ascertained by using the act or laws

Remuneration Policy

Operating expenses enhanced by $157 million or 5% that accrues from the investment that is high and related to enhanced depreciation and amortization of software. The spending in the investment has been directed to depreciation, as well as amortization of software.  Investment spending is directed to mould the experience of the customer. 

Apart from the structural change in the operations, the Group adjusted its methodology of expense allocation and transfer pricing of cost of funds. When it comes to divisional result, the adjustments of transfer pricing are provided in the division of the performance and this projects the structure of the management apart from the legal entity. The internal transfer pricing framework leads to transfer of risk, measurement of probability, allocation of capital and alignment of the business unit, etc. 

The International Accounting Standards Board recently revised the concept of prudence in the year 2015. It is a characteristic of a conceptual framework that requires the management to be cautious in adopting plans and policies in a way that prevents expenses and liabilities to be understated, and assets and income to be exaggerated (Northington, 2011). In relation to corporate reporting, this concept allows the management to get rid of errors and biases from financial statements, and it does not intertwine with other characteristics like reliability and reliability of the conceptual framework (Meeks & Swann, 2009). The key rationale behind the revision of conceptual framework in 2015 was that companies should not identify an asset at a price that is greater than the value, that  is anticipated to be procured from its use or sale. In the same manner, liabilities of an organization must not be presented below the amount that is more likely to be expanded in the future (Choi & Meek, 2011).

There is an inherent risk of exaggeration of income and assets, and understatement of liabilities and expenses, by the management. Such risk generates from the fact that companies procure advantage from effectively reported profitability, and lesser gearing the form of high price of shares and cheaper source of finance (Merchant, 2012). In addition, there is also a risk that the advantage provided by the choice of estimates and accounting policies can lead towards biases in the preparation of financial statements that are in reality, aimed at enhancing financial position and profitability by the utilization of creative methodologies of accounting (Horngren, 2013). These are the main reasons why IASB recently revised the concept of prudence. Besides, in the history of prudence, the ambiguities caused due to the concept forced the IASB to exclude it from corporate reporting in the year 2010. According to the IASB, even though prudence is a desirable thing during the preparation of financial statements, yet establishment the characteristics of effective financial reporting have long been proved controversial and difficult (Melville, 2013). In simple words, the concept was included in the 1989 conceptual framework of accounting but had to be removed because there was no explicit reference to the concept, but later revised again in 2015 after an explicit reference was proposed.

Net Interest Income

The concept has its own benefits and criticisms. In relation to its importance, it can result in contributing towards other characteristics like reliability and relevance of financial reporting, by limiting the identification of unrealized profits (Horngren, 2013). In addition, prudence is most beneficial when matters of estimates and judgments are required. For instance, if the credit policy of a business requires a consumer to expend for the products sold to him in fifty days, and he has not paid after hundred days, it can be reasonable to make a provision for the entire figure as bad and doubtful debt (Zeff, 2007). In simple words, the concept of prudence does not require companies to leave their figures of income or leave a chunk of their physical assets, and instead, it facilitates the implementation of due care when it comes to uncertainties (Blowfield & Murray, 2011). Further, it also assists the investors in sorting out financial performance such as future complications and business costs prior to identification of signs of profit. This can change the way companies report now, as these consistencies prevailed before the inclusion of prudence. However, the concept fails to write foreseeable losses or identifies unrealized income, thereby producing a misguiding outcome that can eventually result in losses to shareholders and creditors (Needles & Power, 2013). Moreover, the concept can also work the opposite as it can overstate liabilities and understate assets, thereby resulting in an impression that is false for the company being in a worse financial condition than it actually is (Douma & Hein, 2013). Hence, this also gives rise to the fact that financial statements are no longer neutral in nature.

The reasons behind developing the conceptual framework are that it assisted in offering the fundamental principles that can, in turn, enhance the accounting standards setting. In addition, accounting standards can be easily developed with the assistance of a conceptual framework, and this is the reason why accountants adhere to it (WFE, 2011). Besides, the concepts incorporated in the conceptual framework can make the financial reporting more consistent, efficient, and logical in nature. Further, in the case of absence of relevant accounting standards, the FASB principles can assist in being implemented to every such situation. However, there are some issues in the present conceptual framework that makes it less reliable for preparers and users of financial statements (Davies & Crawford, 2012). In addition, the accounting principle in conceptual frameworks primarily focuses on monetary figures, and users cannot operate with such a standard. For example, management’s accountability for its performance involves, but is by no means restricted to the relationship betwixt executive remuneration and creation of value by reporting entities (WFE, 2011).

In the absence of a proper definition in the conceptual framework, variations in net assets that does not represent business outcomes in cash flows can be reported as a part of performance. Hence, in the present conceptual framework, there must be a stronger alignment betwixt the business model and reporting to allow shareholders to hold management liable for execution of business model and the creation of value as a whole. Perhaps, addressing such remuneration issues together with other complications can assist in modifying the efficiency of conceptual frameworks (Bushman & Piotroski, 2006). This is the reason why on August 2016, the FASB introduced an exposure draft that comprises of issues being addressed in the conceptual framework. Nonetheless, the current conceptual frameworks that have been introduced by the FASB assist by offering several benefits to users and preparers of financial statements (Brigham & Daves, 2012). Projects like Fair Value Project to consider applicability of other characteristics in selecting an effective measurement output, Liability and Equity Project in reconsidering variances betwixt liabilities and equities, and Revenue Recognition Project in addressing inconsistencies in the learning processes, have been recommended to attain better outcomes out of the conceptual framework (Hegarty et. al, 2004).

Tax Expenses

Despite several issues, accountants strongly recommend adhering to the conceptual framework, as it allows them to enhance accounting practices including setting up several standards to develop consistency and comparability so that the principles governing corporate reporting can easily surpass the issues prevalent (Horngren, 2013).


As per the report, it is clearly demonstrated that the remuneration of the company is in direct tune to the policies that is implemented by the company. The selected of Westpac bank was done to elaborate the study. The accounting policy of the organization guides the recognition of assets and liabilities and the notes to financial statements provides clarity in terms of methods selected and the manner in which the company operates (Whittington, 2008). Further, the remuneration committee is responsible for designing the remuneration and is done considering the internal policies of the company. The presence of remuneration committee has enabled in smooth comparison of different companies. However, the CEO and CFO draw a huge salary that does not adhere to the conceptual goals.


Blowfield, M., & Murray, A 2011, Corporate Responsibility, New York: Oxford University Press.

Brigham, E. & Daves, P 2012,  Intermediate Financial Management , USA: Cengage

Bushman, R & Piotroski, R 2006, ‘Financial reporting incentives for conservative accounting: The influence of legal and political institutions’, Journal of Accounting and Economics, vol. 42, pp. 107-148.

Choi, R.D. & Meek, G.K 2011, International accounting,  Pearson .

Davies, T & Crawford, I 2012, Financial accounting, Harlow, England: Pearson.

Douma, S & Hein, S 2013, Economic Approaches to Organizations. London

Hegarty, J,  Gielen, F, & Barros, A 2004,  The implementation of international accounting and auditing standards: Lessons learned from the World Bank's Accounting and Auditing ROSC Program: The World Bank.

Horngren, C 2013, Financial accounting,  Frenchs Forest, N.S.W: Pearson Australia Group.

Jensen, M C & Murphy, K J 2010, ‘CEO Incentives: It’s Not How Much You Pay, But How’, Harvard Business Review, vol. 3, pp. 146-192

Lapsley, I. 2012, Commentary: Financial Accountability & Management, Qualitative Research in Accounting & Management, vol. 9, no. 3, pp. 291-292.

Meeks, G & Swann, G.M.P 2009, ‘Accounting standards and the economics of standards, Accounting and Business Research’, International Accounting Policy Forum, vol.  39, no. 3, pp. 23-44

Melville, A 2013, International Financial Reporting – A Practical Guide, Pearson, Education Limited, UK

Merchant, K. A. 2012, ‘Making Management Accounting Research More Useful’, Pacific Accounting  Review, vol. 24, no. 3, pp. 1-34.

Needles, B.E. & Powers, M 2013, Principles of Financial Accounting, Francisco: Mc Graw-Hill Brook co.

Northington, S 2011, Finance, New York, NY: Ferguson's.

Sanders, Wm. G & Donald C. H 2007,  ‘Swinging for the fences: The effects of CEO stock options on company risk-taking and performance’,  Academy of Management Journal, 2007, Vol. 50, No.5, pp. 1055-1078

Westpac Bank 2015, Westpac bank annual report 2015, viewed 24 April 2017,

WFE 2011, World Federation of Exchanges, viewed 24 April 2017,

Whittington, W J 2008, ‘Harmonization or Discord? The critical role of the IASB conceptual framework review’, Account. Public Policy, vol.  27, pp. 495–502

Zeff, S.A. 2007, ‘Some obstacles to global financial reporting comparability and convergence at a high level of quality’, The British Accounting Review, vol. 39, pp. 290–302

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