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Objective of Financial Reporting

International Financial Reporting Standard (IFRS) is stated as accounting standards prepared by the non-profit and independent companies like Accounting Standards Board (Barth 2015). The report has an objective to elaborate that Wesfarmers Limited is highly effective in recognizing key objectives of financial reporting by implementing accounting framework if IFRS. This conceptual accounting framework is intended to elaborate a company’s financial statements uses and the factors that it delivers (Brüggemann, Hitzand Sellhorn 2013). Moreover, the report will take into account an ASX top 100 listed company that is Wesfarmers Limited’s disclosure of non-financial information in alignment with accounting framework. This might support the organization in enhancing the financial report and recognize certain opportunities and material risks of the company.

Wesfarmer Limited Company’s financial statements are analyzed to gather that there are numerous financial reporting objectives of establishing accounting framework of IFRS (Coca Cola 2017). The ways in which the organization is effective in dealing with these accounting framework objectives are elaborated below:

  • The company has developed its financial statements in public interest by focusing on a cluster of enforceable, superior quality and understandable accounting standards of IFRS. Wesfarmers Limited has developed financial statements that are transparent along with superior quality IFRS standard set. Highly transparent reporting of Wesfarmers Limited facilitates its participants within global capital market in efficient economic decision making (Cohen, Krishnamoorthyand Wright 2017).
  • IFRS accounting standards implementation has supported the organization in ensuring continuous application along with implementation of standards set increasing financial disclosure effectiveness.
  • Accounting standards of IFRS encouraged Wesfarmers Limited in dealing with all its disclosure requirements for its investors (Crawford and Power 2015).
  • In maintaining efficient global financial reporting convergence, international and national IFRS accounting standards are focused on providing the company with better quality solutions

Vital data developed in accordance with accounting framework of IFRS is capable in making sure that Wesfarmers Limited makes decision considering whether it has confirmatory or predictive value. Confirmatory value is offered by the organization in accordance with IFRS accounting framework that supports all its users in confirming as well as checking previous evaluations and predictions (Dumay 2016). In addition, predictive value is deemed to facilitate all Wesfarmer Company’s financial statement users in anticipating all the upcoming outcomes.  The company’s financial statements materiality factor is deemed to have an effect on information in a situation where it might be omitted or misstated while being employed by its users which develops a basis of financial information in accordance with the case of Wesfarmers Limited.

Moreover, for the reason that the organization prepares its financial statements in accordance with conceptual framework of IFRS that is anticipated to provide compatibility that facilitates users in identifying similarities and differences among the items (Li,Sougiannis and Wang 2017). Financial statement information preparation of Wesfarmers Limited based on accounting conceptual framework facilitates in making decision regarding the fact whether it has predictive and confirmatory value. Predictive value facilitates the users to turn out to be highly useful as it is compared with information associated with other companies with identical information concerning similar companies in a different date. Moreover, accounting conceptual framework that is IFRS provides verifiability which ensures certain information faithfully signifies certain economic process it efficiently considers to indicate. This also indicates that several observes can attain certain consensus that supports the company’s financial statement users in indicating faithful representation based on the accounting standards framework of IFRS (Moscariello, Skerratt and Pizzo 2014). Financial statements based on IFRS accounting framework provides understandability that signifies Wesgarmers Limited is efficient in depicting financial statements in such a way which can facilitate the users of reasonable business and financial knowledge might agree to analyze such information along with comprehending it.

Implementation of IFRS Accounting Conceptual Framework

Based on the chairman’s report mentioned within Wesfarmer Limited Company’s financial statements, the company devoted increased concentration on management as well as growth in revenue. In addition, margin recovery within the European market has empowered within conviction for continuing optimization of production, logistics as well as route-to-route market in Nigerian and Russian market. The company continued annual dividends in consideration to the fact that around 35% of unconsolidated stay adjusted after tax IFRS revenues (Picker et al.2016). Moreover, Wesfarmer Company’s financial statements can be represented through employing values from consolidated financial statements developed in accordance with accounting framework of IFRS and is provided by IASB. EBITDA of the company is explained which is adjusted as operating profit before any deductions for certain property impairment, stock option compensation, plant property and equipment deductions with intangible assets and non-cash items adjustment. Wesfarmers Limited Company efficiently follows IFRS accounting conceptual framework along with making sure of two financial reporting qualitative characteristics as elaborated under:

  • Relevance- For sustaining relevance, Wesfarmers Limited ensures that the financial information is reported in a timely manner. For instance, the company’s financial statements and report are published after three weeks (Thornton 2015). The accounting period is deemed to have high relevance in contrast to financial statements which will be seen months later the end of the period. Moreover, it is deemed that the company’s financial information relevance is impacted by the materiality and its nature.
  • Faithful Representation- The organization’s financial report signifies financial information along with the factors indicated by the company relied on accounting framework of IFRS. For instance, financial report of Wesfarmers Limited is associated with accounting standards of IFRS and properly indicates position of its assets and liabilities with the results that occurs after evaluating the organization’s income and expenditure position.  The organization is aligned with three aspects of faithful representation explained in IFRS accounting framework which encompass neutrality, completeness along with error free reporting (Macve2015).
  • Enhancement of quality characteristics can be divided in four parts encompassing comparability, timeliness, variability and understandability. By implementing accounting standards of IFRS, Wesfarmers Limited efficiently segments and explains its financial reporting by implementing accounting standards of IFRS concisely and in a clarified manner that makes repotting understandable and of better quality (Schaltegger and Zvezdov 2015).

Woolworth Limited Company’s financial results are prepared in accordance with IFRS (International Financial Reporting Standards) conceptual accounting framework. Relied on this standard, the organization focuses on yearly dividend declaration so that more than 35% of unconsolidated is adjusted IFRS profits is adjusted after tax. Moreover, the organization takes into account that its consolidated financial statements are represented through employing consolidated financial statement values developed in adherence to IFRS accounting standard and are issued following IASB. There is an increased effect of IFRS on Wesfarmer Limited’s financial statements development based on IFRS as this has an effect on calculations of parents basis within foreign subsidiaries along with effecting cash repartition plans. Moreover, local tax rules are centered on accounting standards which has tremendous impact on tax authorities of the company in such jurisdiction.

IFRS accounting framework use of Wesfarmers Limited has drastic impact on statutory reporting conducts. This is attained primarily and led to great implementation of consistent accounting standards set. This also indicates a chance for centralizing along with standardizing statutory reporting conducts. Implementation of IFRS conceptual accounting framework by Wesfarmers Limited needs important changes in the company’s modifications and accounts chart in order to gather IFRS based information needs. Moreover, this also has an impact on the company’s general ledger accounting which contained several ledgers. Wesfarmers limited is highly efficient in elaborating the adjusted EBITDA as operating profit before maintaining adjustments with non cash items and intangible assets. Conceptual accounting framework of IFRS has positive effect on financial statements of the company which can be observed in return on invested capital. This can serve as an indicator of organizational performance and not as replacement for measures like profit after tax considering company’s investors along with operating profit as elaborated by IFRS.

Disclosure of Non-Financial Information

In consideration to IFRS framework of accounting, Wesfarmer Limited Company is focused on representing every vital non-financial information that can facilitate in improving all the financial assets of the company (Mignolet 2017). The organization maintains such accounting framework that ensures its efficient corporate governance activities, decision makers along with the social responsibility committee belonging to the board through constantly reviewing the company priorities along with addressing issues and necessary expectations. Corporate social reporting is greatly focused on IFRS accounting standards based non-financial information disclosure which makes it necessary transparent reporting along with superior governance is needed for long term value generation. Best practices those are related with superior corporate governance has a vital role in recognizing and addressing risk and opportunities along with also sustaining trust of shareholders (Brouwer, Faramarzi and Hoogendoorn 2014). Non-financial disclosure associated with Wesfarmers Limited Company are considered accountable in order to continue merchandising branded produced beverages that is responsible for outlet execution along with consumer marketing.

Wesfarmer Limited’s non-financial disclosure are held responsible for dealing with merchandising manufactured branded beverages to the customers which is highly accountable for consumer marketing and outlet execution.

IFRS conceptual accounting framework made sure that Wesfarmers Limited focuses on risk management process management and its implementation with yearly supervision of material financial risks efficiency. Certain financial risks are identified within areas of business opportunities and risks (Li, Sougiannis and Wang 2017). These risks are also found in the areas for the organization which includes risk transfer strategy by insurance means. Implementation of IFRS accounting framework facilitate the organization in finding out key risks along with its related effects. This can also support an organization in publishing report on its progress along with approach through transparent consideration of material issues.

After IFRS accounting conceptual framework implementation, the company is increasingly capable of gaining yearly review of material concerns which supports Wesfarmers Limited to make sure that this offers new viewpoint from stakeholders and business (Mardini, Crawford and Power 2015). The organization is highly capable to recognize material opportunities that are present in social and environmental impact of an organization’s actions regarding its customers. This offers high opportunities for the company can identify its relevance that can increase consumer interest along with increasing environmental regulation and consumer interest. Some material risks those are revealed to be increased encompass demand for the company’s reputation from compliance with marketing standards and ethics that increases transparency related with marketing activities. This is due to the fact that Wesfarmers Limited was not that able to stay associated with the marketing standards that can gradually impact reputation of the organization as well as consumer relationship (Markelevich, Riley and Shaw 2015).

Impact of IFRS on Financial Statements and Statutory Reporting Conducts

8. Conclusion and Recommendations

The report has an objective to elaborate that Wesfarmers Limited is highly effective in recognizing key objectives of financial reporting by implementing accounting framework if IFRS. The company has developed its financial statements in public interest by focusing on a cluster of enforceable, superior quality and understandable accounting standards of IFRS. Wesfarmers Limited has developed financial statements that are transparent along with superior quality IFRS standard set. Highly transparent reporting of Wesfarmers Limited facilitates its participants within global capital market in efficient economic decision making. The organization maintains such accounting framework that ensures its efficient corporate governance activities, decision makers along with the social responsibility committee belonging to the board through constantly reviewing the company priorities along with addressing issues and necessary expectations. IFRS accounting framework use of Wesfarmers Limited has drastic impact on statutory reporting conducts. This is attained primarily and led to great implementation of consistent accounting standards set. This also indicates a chance for centralizing along with standardizing statutory reporting conducts.

Westfarmers Limited is recommended greatly focus on IFRS accounting standards based non-financial information disclosure which can make it necessary transparent reporting along with superior governance is needed for long term value generation. Best practices those are related with superior corporate governance can have a vital role in recognizing and addressing risk and opportunities along with also sustaining trust of shareholders.

References

Barth, M. E. 2015. Commentary on Prospects for Global Financial Reporting. Accounting Perspectives, 14(3), pp. 154-167.

Brouwer, A., Faramarzi, A. and Hoogendoorn, M., 2014. Does the new conceptual framework provide adequate concepts for reporting relevant information about performance?. Accounting in Europe, 11(2), pp.235-257.

Brüggemann, U., Hitz, J. M. and Sellhorn, T. 2013. Intended and unintended consequences of mandatory IFRS adoption: A review of extant evidence and suggestions for future research. European Accounting Review, 22(1), pp. 1-37.

Coca Cola, 2017. Coca Cola Annual Report. [online] Coca-colacompany.com. Available at:

<https://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/investors/2016-AR-10-K.pdf> [Accessed 1 Dec. 2017].

Cohen, J., Krishnamoorthy, G. and Wright, A. 2017. Enterprise risk management and the financial reporting process: The experiences of audit committee members, CFOs, and external auditors. Contemporary Accounting Research, 34(2), pp. 1178-1209.

Crawford, L. and Power, D. M. 2015. Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8. Journal of Applied Accounting Research, 16(1), pp.2-27.

Dumay, J. 2016. A critical reflection on the future of intellectual capital: from reporting to disclosure. Journal of Intellectual capital, 17(1), pp.168-184.

Li, S., Sougiannis, T. and Wang, I. 2017. Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future Earnings and Cash Flows.

Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.

Mardini, G. H., Crawford, L. and Power, D. M. 2015. Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8: Evidence from Jordan. Journal of Applied Accounting Research, 16(1), pp.2-27.

Markelevich, A., Riley, T. and Shaw, L. 2015. Towards Harmonizing Reporting Standards and Communication of International Financial Information: The Status and the Role of IFRS and XBRL. Journal of Knowledge Globalization, pp.8(2).

Mignolet, F. 2017. A study on the expected impact of IFRS 17 on the transparency of financial statements of insurance companies.

Moscariello, N., Skerratt, L. and Pizzo, M. 2014. Mandatory IFRS adoption and the cost of debt in Italy and UK. Accounting and Business Research, 44(1), pp.63-82.

Picker, R., Clark, K., Dunn, J., Kolitz, D., Livne, G., Loftus, J. and Van der Tas, L. 2016. Applying international financial reporting standards. John Wiley & Sons.

Schaltegger, S. and Zvezdov, D., 2015. Expanding material flow cost accounting. Framework, review and potentials. Journal of Cleaner Production, 108, pp.1333-1341.

Thornton, D.B., 2015. Different Conceptual Accounting Frameworks for Public and Private Enterprises: Commentary on Canada's IFRS Transition and Suggestions for International Empirical Work. Accounting Perspectives, 14(3), pp.168-189.

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[Accessed 27 February 2024].

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