Conceptual Framework For Financial Reporting - AGL Plc Vs Drax Group Plc

Discuss about the Conceptual Framework for Financial Report.

An organization is always required to deal with various complex activities in which numerous operations and the functions are performed by the companies to achieve the objectives and the goals of the organization. It has been found that the financial analysis and evaluation of an organization always assist the company to analyze the company’s performance at a particular time. For preparing this report and analyzing the framework concept and conceptual framework’s concept, AGL has been taken into concern.

AGL Plc is an organization which is operating its business into the international market. This company is providing services to the domestic and international clients to enhance the revenues of the company. The main functions and operations are handled by the main office in Australia. The current rate of the stock of the company (ASX) is A$ 25.73 (Morningstar, 2017). AGL Plc has managed to enhance the revenue and total turnover through diversifying the market. The company operates its business into the electricity, gas, solar PV etc. (Home, 2017)

For this report, AGL Plc has been compared with another Australia company to analyze that whether the conceptual framework are used by the company or not. Drax group plc has been chosen to analyze the performance of AGL Plc. This company is also operating its operations into supermarket segmentation. Head office of the company is in Bradford, England (Home, 2017). 

It has been analyzed that the main objectives and goals of the financial reporting’s analysis and conceptual framework is to reveal all the activities related to finance of the business such as assets, liabilities etc. according to the evaluation over financial statement of AGL plc, it has been found that the company has recorded all the financial figures such as assets, liabilities, revenues, expenses etc according to the proper level of harmonization and  its GAAP rules and standards of  IFRS (international financial reporting standards).

There are numerous objectives of conceptual framework with the organizational reporting that mainly focuses over the simplicity of company and replicate its views about the liabilities, assets and financial performance of the company (Abeysekera, 2013). This company takes the concern of the IFRS (international financial reporting standards) while preparing the company’s financial report and recognize the statements of the company. It adds the understanding of financial statement in a better way.

Further, the analysis depicts that the GAAP rules have been followed by the AGL Plc Company to record all its financial transaction into the books of the company. This company is also following the IFRS (international financial reporting rules) to manage and enhance the understanding of the company’s financial statement. This company is maintaining proper harmonization of GAAP rules (Chand, Patel and White, 2015). Another comparative company is Drax group Plc. This company has also reported and managed the inventory through following the IAS-2 AS (Accounting standards). Further, the assets and liabilities have been recorded by the company through following the rules of IAS-136.

Conceptual framework objectives

Further, it has been found that the impairment test has been followed by the company to showcase the reality and disclose all the relevant factors in the financial statement of the company.  Further, the difference among both the companies has been evaluated and it has been analyzed that both the companies are maintaining the international rules to maintaining the financial standards and the statements (Elad, 2016). Further, the AGL Plc is following IFRS rules and GAAP rules whereas the Drax Group Plc is using the IFRS rules to manage the performance of the company.

Further, it has been considered that the AGL Plc’s CFS (cash flow statement) has been prepared and presented according to IAS-7.  This comapny has followed the indirect method to present and prepare the CFS (cash flow statement) of the company. Further, the other accounting standards and IAS has also been followed by the business to sustain other activities of the company, such as IAs-2 has been used to maintain the inventory level of the company (Zeff, van der Wel and Camfferman, 2016). 

Further, through the analysis, it has been found that the company has reported all its financial activities into the financial statement and the financial books according to the double entry accounting system. This company has reported all the activities according to the IFRS rules and accounting standards have also been followed by the company while preparing the report.  This company has followed and managed the proper standards and regulations to maintain the performance of the company. Further, it has been found that the impairment test has been followed by the company to showcase the reality and disclose all the relevant factors in the financial statement of the company.  This company has also reported and managed the inventory through following the IAS-2 AS (Accounting standards). Further, the assets and liabilities have been recorded by the company through following the rules of IAS-136 (Garrett, Hoitash and Prawitt, 2014).

Through further analyzing the annual report of the company, it has been found that this company uses the FIFO method to manage the performance and the position of the inventory of the organization. IAS-2 rules have been followed by the company to manage the inventory performance. Further, the annual report of the company describe that all of these financial activities have been set in such a manner that entire stakeholder could easily analyze the financial statement and make a better decision about the performance of the company. It also assists the company to make better approach about the internal and external aspect of the company.

Criteria to recognize the assets, expenses, liabilities and income

Further, the company’s top level management has considered the international rules and regulations to state the financial activities of the company to maintain the international business activities (Nobes.Routledge, 2014). At the same time, Drax group has followed only IFRs standards and rules to record the financial activities of the company. Such as, this company has used the IAS 36 to administer the impairment loss. The impairment loss of the business has been raised by revaluating assets and the amount of impairment loss has been charged from goodwill amount and the balance amount has been charged from various cash generating units. The main differences among both the annual report of the company are the above international rules only. Thus, it has been found the AGL plc has used the rules and regulations more efficiently and used the financial information in better way to manage the performance of the company.

The essential qualitative characteristics of financial reporting which has been sued by AGL Plc are revealing entire imperative financial information for the stakeholder and the managers of the company. Further, it has been found that due to these rules and regulations, the transparency has been enhanced and the entire information has been disclosed by the company. According to the IFRS rules, the company has maintained all the policies to perform the better study (Dinnie, 2015). These frameworks have helped the company understand and analyze the company’s financial performance in better way. Further, it has also been evaluated that the annual report’s narration as well as the notes of the financial activities have enhanced the faithfulness of the annual report of the company in concern of the company’s stakeholders. 

Through the evaluation over the annual report of the company, it has been found that this company is following all the accounting standards rules and regulations to maintain the performance of the company in an effective way. Following are some of fundamental qualities of the company:

It has been evaluated that the financial information of the company is quite enough to make better decision. It has been found that the annual report has been prepared by the company through analyzing the various standards, rules and regulations (Draft, 2015).

Further, it has been considered by the annual report of the company that the perpetual entity concept has been followed by the company to analyze the performance of a particular period. Inventors are using this information to manage and make better decisions.

Relevancy and faithful representation

The annual report of the company has been compared with the annual report of Drax Group to analyze that whether the performance and the reporting systems of the company is better or not. The competitiveness of the annual report has been analyzed to make a better decision and through the analysis, it has been found that the position and the reporting systems of the company are way better (Abeysekera, 2013).

The annual report of AGL Plc and Drax group has been analyzed and found that the AGL Plc is using the standards and IFRS rules in a proper way and thus the verifiability of the annual report of the company enhances and further, the accounting notes and narration has also helped to check the verification of entre financial activities of the company. 

Through the evaluation over the annual report of the company, it has been found that this company is following all the accounting standards rules and regulations to maintain the performance of the company in an effective way and thus the annual report of the company is quite faithful (Cayanan, 2016).

Conclusion:

Thus through the above study over the annual report and the conceptual framework of the company, it has been found that the position of the company is way better. Through the evaluation over the annual report of the company, it has been found that this company is following all the accounting standards rules and regulations to maintain the performance of the company in an effective way.

Further, through the analysis, it has been found the AGL plc has used the rules and regulations more efficiently in comparison of Drax Group and used the financial information in better way to manage the performance of the company. 

References:

Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital, 14(2), pp.227-245.

Annual report. 2017. AGL PLC. Available from https://agl2017.reportonline.com.au/sites/ag]l2017.reportonline.com.au/files/full_financial_annual_report.pdf  [accessed on 11^th Dec 2017].

Annual report. Drax Group. Available from https://www.drax.com/wp-content/uploads/2017/03/Drax-Group-plc-annual-report-and-accounts-2016-Smart-Energy-Solutions.pdf [accessed on 11^th Dec 2017].

Cayanan, A.S., 2016. An assessment of the financial reporting practices of listed Philippine banks in 2003. Philippine Management Review, 11(1).

Chand, P., Patel, A. and White, M., 2015.Adopting international financial reporting standards for small and medium?sized enterprises. Australian Accounting Review, 25(2), pp.139-154.

Dinnie, K., 2015. Nation branding: Concepts, issues, practice. Routledge.

Draft, I.E., 2015.Conceptual Framework for Financial Reporting. 2015-05-01)[2015-07-20]. https://kjs. mof. gov.cn/zhengwuxinxi/gongzuotongzhi/201506 P.

Elad, C., 2016. International Classification of Financial Reporting, Christopher W. Nobes.Routledge, Abington, UK (2014),(160 pages,£ 95), ISBN: 0415736935.

Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp.1087-1125.

Home. 2017. AGL PLC. Available from https://www.agl.com.au/about-agl/who-we-are/our-company [accessed on 11^th Dec 2017].

Home. 2017. Drax Group. Available from https://www.drax.com/ [accessed on 11^th Dec 2017].

Morningstar. 2017. AGL PLC. Available from https://financials.morningstar.com/competitors/industry- Morningstar. 2017. AGL PLC. Available from peer.action?t=AGL&region=gbr&culture=en-US [accessed on 11^th Dec 2017].

Zeff, S.A., van der Wel, F. and Camfferman, C., 2016. Company financial reporting: A historical and comparative study of the Dutch regulatory process. Routledge.