Part-1: Fundamental quantitative characteristics of financial information
Any standard financial reporting should contain the adequate information that must be ideal for the decision-making process of the financial entities. The reports must not be cumbrous and should have the exact details and information that are required in the process of the decision-making process. This study aims at providing insights into the decision-usefulness of information relating to financial matters (Appannaiah, Reddy and Putty, 2010). It also picks out some important characteristics that the financial reports must possess in order to be truly useful to the decision making process. The decision making is an extremely critical process that has important implications for the performance of the organization. Hence the financial statements must have these essential characteristics to aid in the procedures of decision making.
The approach of pronouncement usefulness while conducting financial reporting involves preparation of information on financial accounting. The report lays stress on the investor decision theory for deciding the nature and the type of the information which the investors would ask for. The approach is usually applied for satisfying the needs for information by the users of reports containing financial information of the entities. The entities, in this case, include the creditors as well as the investors (Belding, 2008). The other stakeholders to all the activities of the firm, be it financial or non-financial information, are hardly taken into consideration while addressing their needs for information. This is done through the adjustments of general purpose financial reports. Experts in the field of finance, such as view the accounting procedure as an activity of measurement. This activity makes the provision of reports on financial information to support decision-makers along with the business decisions that they take. Financial reporting deals with the communication of finance-related information applicable for investing, crediting and other related business decisions.
Initiation of the study
The communications of this type take place in the financial statements made for general purposes such as income statements, reports on equity, declarations of cash flow, balance sheets and financial statement notes. Reporting of financial information has statutory as well as common laws governing it as well as other ethical along with institutional standards. If financial information has to be functional, it requires being pertinent and must convincingly represent what is aims to represent (Britton and Waterston, 2013). There is an enhancement in the usefulness of the information provided that it is demonstrable, well-timed, comparable and comprehensible. The characteristics of the information relating to the finances of an organization are the fundamental factors for setting the standards and firms intend to use them when certain accounting decisions are made.
Orientation of Information
The orientation of the financial information is in the following ways: to the primary decision makers or the users who seek the information that the financial statements contain or to the models that are applied in such decision making. The people who use the financial reports must be capable to directly use the information in taking various decisions that are informed. In all cases, the elegance of the financial report lies in the usefulness of the decision. Hence, it is in the ethics for any entity conducting the process of reporting to try to make the information useful to the maximum extent (Critical theory, 2011). It is applicable even where a few adjustments to the financial statements are required. The aim of the process of financial reporting is the stipulation of information connected to financial matters about the entity which is reporting. This information is useful for presenting to the existing as well as the investors in equity, the lenders and creditors other than these in the decision-making process. In the capacity that they possess as providers of capital, the usefulness of the decision seeks the relevance as well as the reliability of the information (Glautier, Underdown and Morris, 2011). Seen from the perspective of the regulators of accounting procedure, the relevance concerns the economic phenomena of the decisions of the providers of capital. It is the implementation of the qualitative characteristics which would identify the phenomena of economic significance that is to be depicted in the financial reports. The reliability is also defined in respect of the other features although it also depends on the decision that is being made.
The qualitative distinctiveness of the information relating to financial matters will help to provide adequate assistance when the choices must be made among the policies of reporting. The policies can be decided either by the auditors, reporters or by those who are participating in the process of setting the standards. It can indicate qualities which can be expected by the users from the information that they are being provided. The first and most significant characteristic of the financial information is the relevance as well as the reliability (Horngren, 2013). These are the qualitative characteristics of primary importance that the financial information must possess. The information must be designed in a way that it assists users in making and estimating the decision about the process of allocating the resources that are scarce. It should also assist in the assessment of the accountability rendering by those who prepare the information. The roles that the financial information plays in prediction and confirmation are inter-connected to one another. For instance, the financial information on the current level and the structure of the holdings of assets will be of considerable value to the users at the time they try to evaluate the aptitude of the person to make use of the opportunities that exist in the marketplace. Similar information will play a major confirmatory role in terms of the previous predictions about the procedure by which the entity would be designed and about what would be the outcome of the operations that are planned. The analysis of the relation between the outcomes and predictions would assist the users in identifying the variable range that they must consider when they are making the predictions (Horngren, 2014). A significant concept that is applied in the financial reporting meant for general purpose relates to recognition. Here recognition signifies the inclusion of any item within the statements on financial matters and not just disclosing it in the notes to those statements. After the type of financial information which must be included in the financial reports for general purpose is decided, the decision must also be made as to what conditions and during what time it must be included (Kew and Watson, 2012). For instance, when the revenues must and expenses that arise as a result of a long-term contract for construction must be recognized.
Thus these qualitative characteristics of the financial information are extremely essential for making the financial information seem useful to those who make decisions based on it. The financial statements must be reliable, relevant, and recognizable, besides there being several other features of the financial statements that contribute to their decision-usefulness. For the various preparers, users and the auditors, such findings facilitate comparisons across firms including comparisons made internationally (Krivogorsky, 2012). However, there are still some unexplained aspects of the characteristics and how these characteristics enforce the decision usefulness of information relating to the financial matters. Thus these factors suggest that there is the scope and also the need for further research on the topic. There must be introspection on the matters as to how the financial information can be made even more useful in the decision-making process by different financial entities. The characteristics discussed above are the most important since they make the financial statements entirely comprehensible to the financial entities. The financial statements need to be arranged such that they comply with the appropriate laws and the Australian Accounting Standards Board (Libby, Libby and Short, 2014). For this, they must be prepared in accordance with such ideal features that are prescribed by experts in the field of finance.
Part-2: The AASB ConceptualFramework
The reporting made for the conceptual framework is being established with the appropriate objectives and also the explanation of the study can be appropriately conducted by leveraging the ideas of the financial coverage. It is simply explaining the qualitative distinctiveness which is being arranged in a sequential way for the betterment of the financial responses as it is being revised in the IASB 2010. Thus the joint sequence of the US National Standard Setter is being made4 by the help of the Financial Accounting Standard Board (Monger, 2010). Therefore the discussions are surrounding the financial reporting evaluation and also are including the conceptual framework.
The framework is showing the explanation of the work as it is being explained in form of preparing and appearance of the financial statement which is being used for supporting the AASB expansion. This is simly explaining the future Australian Accounting standards calculation which is being used for showing the explanation of the explanation of the wor and also the announcements are declared by showing the mitigation of the International Accounting Standards Board. The assisting of the issues can be easily made by showing the illustration of the work is being prepared by the preparers of the financial statements (Murthy, 2009). The structure is not an appropriate framework which is being used for describing this case as it is being described by the help of the certain dimensions. This is critically explaining the ideas and also the disclosures that are related to the issues in the financial reporting. This is simply explaining the work structure as it is being involved in the form of the Australian Accounting Standards. Therefore the limitations are also illustrated in the form of determining the objectives and also the necessities are also defined as per the criteria is being illustrated. The appropriate structure is being depicted to be showing the concepts of the resources and the conservation of the capital prevention which is being used for determining the fruitfulness of the information gathered from the financial statements. As per the study is undertaken, it is depicted to be revolving round the description of the incomes and the operating costs which are depicted to be changed during the period of the depression and also the emphasis is being made by showing the diversification of the places at the certain significant places with undertaking the appropriate decisions. This is showing the modification of the explanations which are provided in the form of the legal responsibility and also the characteristics are also measured in the terms of the legal ownership and the equity (Monger, 2011).
Concepts of Capital and Capital Maintenance
As per the modification of the financial statements are conducted, the development of the equal perceptions are very much essential for the mitigation of the issues and also the determination of the profits can be easily made by preparing the concepts. (Powers and Needles, 2012). The concept of the financial capital is revolving round the maintenance of the structure as it is being explained in this case. The concept is depicted to be surrounding the anxious characteristics as it is being explained in this case and also the capital measurements are very much essential for the identification of the profits. The considerations are undertaken for showing the appropriarte explanations as it is being considered in this case and also the capital maintenance is very much essential for the management of the work. This is simply explaining the structure of the work which is revolving round the certain issues as it is being identified during the conduct of the economic capital maintenance (Nobes and Parker, 2016). Therefore the increment in the prices are defined to be showing the appropriate explanations regarding the economic conditions as it is being explained in the terms of the power of purchasing and also the financial capital maintenance can be easily represented by showing the explanation of the investments made.
Economic resources and claims
The information surrounding the issues and also the payments must be covered for the betterment of the study and also the future cash flows can be easily dispersed by showing the declarations which are made for the coverage person. This simply is explaining the structural framework as it is being focused with relating the needs and also the additional financing is being made by showing the flourishing of the attaining criteria’s which is being explained in this case (Previts, 2010). Th accrual accounting process is depicted to be revolving round the determination of the effects of the transactions which is being explained in this case. it is also illustrating the future performances and also the past performances of the entity win the for gathering the payments of the cash proceedings made. Therefore the relation between the financial transactions with showing the shareholder’s importance can be easily measured by illustrating the positions of the shareholders and the creditors appropriately. This shows the appropriate establishment of the relation in the form of the additional possession (Schroeder, Clark and Cathey, 2011). As per the coverage is made by the entity which is depicting the information related to the claims, are shown in form of the financial performance which are the issuing of the additional ownership shares. Therefore the entity’s information regarding the flow of the currency is enabling the entity to understand the reporting as it is being evaluated in the form of the financial reporting and also the explanation is being made which is being made by showing the explanation of the investment activities in the form of the changes in the conditions. Thus it is also explaining the understandings of the resources and the claims which are showing the explanation of the work.
Therefore the accepting is being made by showing the appropriate formation of the options which is being superior for the gaining weight as it is being made by showing the explanation of the factors. Therefore the custom design is being made by showing the explanation of the general purpose and also the explanation is being made by showing the general purpose which is showing the custom designing which is showing the explanation of the financial purpose as it is being explained in this case. This is simply explaining the investments and also the information is showing the needs on the various. The various constructions is being made by justifying the characteristics of the work which is based on the reporting as the reflections are made for the purpose of connecting the users to the management or the firm (Scott, 2015).
Part-3: Intangible assets
Through this article, it majorly focused on the introduction, definition, management, and the measurement of the intangible assets. It also shows the differentiation between the tangible and the intangible assets. It also shows the categories of the intangible assets described under the International Accounting Standard Board (IASB). The importance of the intangible assets in the global economic market is discussed in this analysis. The several levels of valuation methods are also described in this case study. This study is also able to show the objectives and the scopes of the intangible assets. The control of the intangible assets and the future economic benefits provided by the intangible assets are also illustrating in this case study. The financial statements of both the retail companies exhibits the appropriate value of the organizations.
The non-monetary assets which are not visible are known as the intangible assets. During the current business process, these intangible assets are valuable. The intangible assets include the skills, knowledge, progresses, brands, current market value and the strategies also. The Australian accounting standard board made the AASB 138 intangible assets under the section of 334 of the corporation act 2001 on 14 August 2015. The accounting treatment for the intangible assets is prescribed by the standard board. With the help of few specific criteria, the intangible assets are recognized (Stolowy, Lebas and Ding, 2013). To produce the value added products and services the companies should invest capital in the intangible aspects of their business. The emerging importance of the intangible assets, corporate value and the growth of the assets should understand by the investors. These criteria are briefly described in this case study. During the transformation of the industry from the manufacturing base to the service the company should be driven by the knowledge of the workers. The skills or the knowledge of the workers help the company to make a flow towards the global market. In fact, according to the government the intangible assets of the enterprise can be the reason for the economic growth and provides the encouragement to the organization for achieving more attention toward their intangible assets (Stolowy, Lebas and Ding, 2012). During the globalization of the business, the capital market also takes a movement for the global standards by the intangible assets. The financial statement of Woolworths and Wesfarmers has been carefully analyzed in order to verify the disclosures of the non-financial items. Woolworths is one of the leading retail organization that provides the information about the intangible assets like quality products and services in its financial statements. The company has many stores located at different regions of the country and the company provides great emphasis in preparing its consolidated financial statements. The financial statements of the company clearly disclose the current assets and current liabilities in the balance sheet. The financial statement shows accurate value of the intangible assets. Wesfarmers is a reputed retail organization and has established its brand name in the market. The financial statements of the company clearly show the values of the assets and labilities in the financial position statement. The income statement, balance sheet and cash flow statement shows the actual value of all the financial items.
Disclosures in the financial statements of the companies
The non-monetary assets which are not visible are known as the intangible assets. These assets are not able to be touched physically, or it cannot be measured. These intangible assets include the skills, knowledge, progresses, brands, current market value and the strategies also. The distribution of the agreement, the leases, the employment contracts, groups or categories are related to this rights. It also covers few intellectual properties like patents, copyrights, trademarks, new technologies, etc. The financial statements of business entities mainly demonstrate the value of the financial items.
The definition of the intangible assets is necessary to distinguish the intangible from the goodwill. The identifiability of the intangible can be the reason for the future economic growth and benefits between the identifiable assets. This cannot be quality for the reorganization I the financial statement (Ve?ron, 2007). The assets can be recognized as the identifiable assets if it is capable of separating from the entity and sold or transferred. The other process to identify the assets is on contractual basis. The financial statements of the business organizations illustrate the value of the items in the statements.
Intangible assets provide the scope to another standard. The financial assets which are related to the intangible assets are represented as the AASB 132 Financial instrument. The ordinary course of the business and their selling are indirectly related to the intangible assets. The income tax assets of the AASB 112 deferred the intangible assets. The good will which is necessary for the business combination is related to the intangible assets (Weil, 2017). The defect rate, return rate, and the customer record rate can be identified by the intangible assets by the opinion of the customers.
The sale of the product or the service of the intangible assets can be the reason for the future economic growth of the company or the firm. The cost saving or use of the intellectual property also can be beneficial for the future economy.
It can influence the customer to make the correct decision. The brand is also an intangible asset. A strong brand can be a warranty of the quality and the luxury of the product and the consumer’s choice also depends on the brands of the product. The financial, tax and the accounting part of any firm also depend on the intangible assets of the organization. In accounting process, the government also requires the intangible assets. To improve the intellectual or the intangible asset management of any firm it is necessary to enhance the competition for the resources. The communication between the company, customers, and the shareholders are maintained by the application of the intangible assets (Monger, 2010). The improvement of the overall system also depends on the intangible assets. The high profits of the company also partially depend on the intangible assets. As an example- the current research of the PricewaterhouseCoopers notified the significant market value which is potentially over 60% which is related to the strong brand, goodwill, customer relation, performance of the employees and the overall intangible assets.
The valuation and the reporting of the intangible assets are affected by the accounting rules which also have an effect on the financial statement of the companies. According to the financial reporting standard rules, the intangible assets report is necessary to represent the market value of the company in the global market. The cause and condition for the betterment of the valuation of the company are given by the intangible assets on the basis of the prediction of the current market (Krivogorsky, 2012). The uses of the intangible assets can be more profitable than using the technologies. The intangible assets can be used in a multipurpose way. Many strategies for the improvement of the firm is totally base do the intangible assets of the company. The management, customer relation, and the employee relation also based on the measurement of the intangible assets. The financial statements of both the retailers demonstrates the cost of the financial items.
There are well known three modes of approaches which are related to the valuation of the intangible assets.
- Cost approaches: the cost of the creation and recreation of the assets are possible on the basis of the valuation of the intangible assets. This creation is done under the commercial utilization and the equivalent consumer appeal. The development and the implementation cost of the information technology are including in the cost of the services. The cost approach is not too much beneficial for the economic condition.
- Market approach: the sales comparison approach includes the market approach of the intangible assets. The market approach helps to differentiate between the actual sales from the similar sales and help the customer and the firm to make a decision for improvement. Like other business assets, the intangible assets cannot be separable or cannot be sold (Libby, Libby and Short, 2014). The intangible assets are unique under specific condition, and any specific comparison between the intangible assets and the actual assets of the business can be helpful for the valuation of the intangible assets of the firm.
- Income approach: The Net Present Value (NPV) of any company is responsible for calculating the value of the intangible assets of the firm under the future benefit stream. This helps to estimate the future profit of the assets owner. The highest NPV is produced by the principle income stream which can also face the risks related to the intangible assets.
In the era of the knowledge economy and the growth of the intangible business assets are very important. The valuation of the intangible assets is very difficult still the company think about the investors, rewards and the owning portfolio of the company. The good assessment of the investors about the innovation and the technology are very much profitable for the company (Britton and Waterston, 2013). This case study and the discussion about the topic of intangible assets of the companies can provide the fixed income facility, information security, advantages and the sustainability of the growth rate of the company. This analysis is able to show the definition, types, the differences between the tangible and the intangible assets, importance of the tangible assets in the modern business, measurement, variations and the all other aspects are discussed in this case study.
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