Financial Assets And Financial Liabilities: A Study Of AGL Energy Ltd Essay.

Financial Reporting in Australia

Question:

Discuss About The Financial Assets And Financial Liabilities?

AGL Energy Ltd is considered as the most prominent Australian listed public company involved in the telling and generation of gas and electricity for commercial uses. The energy generated by AGL are mainly from sourced from power stations, natural gas, hydroelectricity, thermal power, posting gas and solar energy. The company claimed to be having a customer base of more than 3.6 million both residential and business across “New South Wales, Victoria, South Australia and Queensland”. It has been further discerned that AGL decided to enter the commercial gas market and residential market in July 2017 situated in Western Australia (Agl.com.au. 2018).

The important facets of the study will be able to identify whether the company is able to meet the objectives of conceptual framework of reporting. The report will be further able to recognise the main criteria followed for recognition of expenses, equity, liabilities, assets and revenues. The third section of the study will be able to evaluate the quality has the characteristics which has been shown with the events of the report and faithfulness representation. The latter part of the study has been able to state the comparability of the information provided in the report

It has been discerned that “Australian Accounting Standards Board (AASB)” is responsible as the main government agency for developing of the financial report which is mainly seen to be applicable to both public and private sectors of the economy across Australia. The main contributing role of AASB is further seen to be based with the financial reporting stated as per the “Australian securities and investment commission at 2001” (Legislation.gov.au. 2018). In December 2013 several amendments were brought to the existing reporting framework which aimed at better measurement, presentation, de-recognition and reporting entity. The important objective was also seen with bringing out management stewardship with several entities (Financial Accounting Standards Board (FASB) 2013).

Based on the information on audits, “AGL financial report 2017” has been depicted to be prepared with standards prescribed by “AASB” and various types of other standards which are acceptable by ASX. The concise financial statements have been further seen to be prepared in accordance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports”. The report of the financial statements further seen to be audited and audited report is unmodified and is attached to “AGL financial report 2017”. The main business of AGL has been seen to be managed under the operating segments namely group operations, investments and markets. The operating segments has been prepared as per “Australian Accounting Standard AASB 8” (Agl2017.reportonline.com.au). The company reports segmental information on similar basis as its internal management structure. This is evident with the fact that the company the face energy markets operating segments in majority of the area is associated to revenue and margin from AGL’s activities while group operations has been taken to operating segments reported from a variety of the expenses group. It has been further depicted that the company has implemented the conceptual framework of AASB in recognition and measurement of financial instruments (Aasb.gov.au. 2018).

AGL Energy Ltd: Financial Assets and Liabilities

The different types of changes in fair value of financial instruments has been taken into consideration with “Australian Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement”. This particular standard is seen to be requiring certain assets, derivatives and liabilities reported at fair value and the financial statements. “Australian Accounting Standard AASB 139 Financial Instruments” has been also seen to be conducive in recognising equity as an adjustment to the hedging reserve it is considered with the derivative to be effective for the hedges and any variation in the fair value of the item being hedged and fair value of the derivative which is substantially offset against each other (Legislation.gov.au. 2018).  The consideration of all other hedges are seen to be unsuccessful hedges. The several types of deviations in the fair value of derivatives has been further depicted to be effective for hedges is recognised in equity as an adjustment to the hedge reserve. The several types of changes in the value of derivatives between the reported period is carried at fair value and recognised in the P/L statement of the company. The company restated the adoption of accounting standards for employee benefits as per AASB 119 Employee Benefits in the financial year 2013 (Legislation.gov.au. 2018). 

As per the recent energy system and the various financial consideration for the cost of the same, it can be discerned that AGL is following a powerful blueprint to an affordable, reliable and orderly depiction of the financial data. The significant consideration of the changes in fair value of the financial instrument has been regarded as an added security measure for financial performance depiction from the annual report of the company. It has been further seen to be considered the fluctuations in the fair value of the derivatives with the reporting periods and the periods which are based on ineffective hedges other than the assets and liabilities carried at fair value and the recognition of the same which is needed to assess the statement of profit or loss. Based on the point of view of AGL as per the AASB 139 definition, the effective hedge results have been seen with the suitable outcome for the interest rate and foreign exchange rates which are currently favoured by many experts. The changes in fair value of the financial instrument is reported with profit and loss for the year ended 30 June 2017. The reliability of the day ties further evident with the total change in the fair value (Agl2016.annual-report.com.au. 2018). 

Adherence to Conceptual Framework of Financial Reporting

The immersion outcomes have been further able to consider the statutory profit aspect. The board is seen to adjust the statutory profit for the “non-cash fair value movements” in the financial instruments. It has been further discerned that board uses to determine the immersion outcomes under company’s LTI and STI which has been ensured with the management for not taking any unfair advantage or disadvantage by matters which are outside their control (Agl2016.annual-report.com.au. 2018). 

The basic comparability aspect has been duly presented with the resultant value in the present year and comparing the same with the prior year. This has been implemented in several areas of financial report including “earnings before interest and tax, underlying profits every, net finance cost and income tax benefit. In a similar fashion the company has reviewed the operations on the basis of comparing financial data of present year with previous year. The clearer segregation of generation mix has been discerned with extreme relation, short-term incentive and long-term incentive (Agl2016.annual-report.com.au. 2018). The same has been depicted with a donut chart. In addition to this, the performance and executive immigration outcomes has been presented with a clear depiction of the results as per previous five years of financial data. This has included elements such as statutory profit or loss, underlying profit, statutory EPS, underlying EPS, closing price of shares etc. Along with this the companies and of actual growth in the last five years of AGL has been clearly presented with the bar diagram. The line chart has been able to depict a more qualitative enhancing characteristic thereby showing the total shareholder return for AGL vs. ASX 100 index from a time period of July 2012 to July 2017 (Agl2016.annual-report.com.au. 2018). 

Conclusion

The given study has been conducive in addressing the main adherence of AGL with Australian conceptual framework. “AGL financial report 2017” has been depicted to be prepared in accordance with standards prescribed by “AASB” and various types of other standards which are acceptable by ASX. The concise financial statements have been further seen to be prepared in accordance with “Corporations Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports”. The significant agreement with the recognition criteria for reporting Assets, Liabilities, Equity, Revenue and Expenses has been discerned in form of “Australian Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement”. This particular standard is seen to be requiring certain assets, derivatives and liabilities reported at fair value and the financial statements. The company restated the adoption of accounting standards for employee benefits as per AASB 119 Employee Benefits in the financial year 2013. Adherence with the qualitative enhancing characteristics of financial reporting has been discerned with significant consideration of the changes in fair value of the financial instrument has been regarded as an added security measure for financial performance depiction from the annual report of the company. It has been further discerned that board uses to determine the immersion consequences under company’s LTI and STI which has been ensured with the management for not taking any unfair advantage or disadvantage by matters which are outside their control. The several factors responsible for enhancing characteristics of financial reporting is evident from comparability aspect. The basic comparability aspect has been duly presented with the resultant value in the present year and comparing the same with the prior year.  This has included elements such as statutory profit or loss, underlying profit, statutory EPS, underlying EPS, closing price of shares etc.

References

Aasb.gov.au. (2018). [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 24 Jan. 2018].

Agl.com.au. (2018). Our Company | AGL. [online] Available at: https://www.agl.com.au/about-agl/who-we-are/our-company [Accessed 29 Nov. 2017].

Agl2016.annual-report.com.au. (2018). Business Highlights | AGL 2016 Annual Report. [online] Available at: https://agl2016.annual-report.com.au/business-performance/business-highlights [Accessed 29 Nov. 2017].

Agl2016.annual-report.com.au. (2018). Financial Highlights | AGL 2016 Annual Report. [online] Available at: https://agl2016.annual-report.com.au/business-performance/financial-highlights [Accessed 29 Nov. 2017].

Agl2016.annual-report.com.au. (2018). Independent Auditor’s Report | AGL 2016 Annual Report. [online] Available at: https://agl2016.annual-report.com.au/financials/independent-auditors-report [Accessed 29 Nov. 2017].

Agl2016.annual-report.com.au. (2018). Remuneration Report | AGL 2016 Annual Report. [online] Available at: https://agl2016.annual-report.com.au/financials/directors-report/remuneration-report [Accessed 29 Nov. 2017].

Agl2017.reportonline.com.au. (2018). [online] Available at: https://agl2017.reportonline.com.au/sites/agl2017.reportonline.com.au/files/sustainability_report_full_report_0.pdf [Accessed 29 Nov. 2017].

Financial Accounting Standards Board (FASB) (2013) ‘Recognition and Measurement of Financial Assets and Financial Liabilities, Exposure Draft: Proposed Accounting Standards Update’, Financial Accounting Standards Board, Norwalk. doi: 10.1002/jcaf. Available at: https://fasb.org/cs/ContentServer?c=FASBContent_C&cid=1176156902600&d=&pagename=FASB%2FFASBContent_C%2FNewsPage [Accessed 29 Nov. 2017].

Legislation.gov.au. (2018). AASB 119 - Employee Benefits -September 2011 . [online] Available at: https://www.legislation.gov.au/Details/F2015C00428 [Accessed 24 Jan. 2018].

Legislation.gov.au. (2018). AASB 139 - Financial Instruments: Recognition and Measurement - July 2004 . [online] Available at: https://www.legislation.gov.au/Details/F2015C00113 [Accessed 29 Nov. 2017].

Legislation.gov.au. (2018). Australian Securities and Investments Commission Act 2001 . [online] Available at: https://www.legislation.gov.au/Details/C2017C00326 [Accessed 29 Nov. 2017].