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Understanding Financial Information and Qualitative Characteristics


If it accepted that financial information should be useful for economic decision making in terms of deciding whether to make resources available to a reporting entity, as the IASB conceptual framework indicates, a subsequent element to consider is the qualitative characteristics that financial information should have if it is to be useful for such decisions.

1. Describe what you understand by the above statement and explain briefly the qualitative characteristics.

2. Discuss and describe two IASB / AASB accounting standards and the utilisation of the qualitative characteristics to promote decision useful information.

3. Select a company from the Australian Securities Exchange website and download the most recent annual report.  With regard to your chosen standards, and in the context of your company annual report, comment on the effect the qualitative characteristics have had on the financial statements. 

The Conceptual Framework for Financial Reporting lays forward the ideas that bring about financial bookkeeping and reporting. The structure is a lucid arrangement of interconnected goals and essentials that recommends the character, capacity, and confinements of financial reporting (Bradshaw, M., et al 2010).

Financial reporting ought to incorporate clarifications and translations and other data expected to help stakeholders/users comprehend the financial data gave. The helpfulness of financial data to financial specialists, leasers, and others in framing desires around a company possibly will be improved by administration's clarifications of the data. Administration recognizes more regarding the business and its undertakings than financial specialists, leasers, or other outsiders and can regularly build the handiness of financial data by recognizing a few exchanges, different occasions, and situations that influence the undertaking and clarifying their financial effect on it.

Financial data exhibited in financial articulations needs to encompass a few significant qualities which turn it valuable for the clients. By GAAPS regularly frame such gauges in their systems. IASB Conceptual Framework arranges these into crucial subjective qualities and upgrading subjective attributes. These incorporate

  • Relevance- It needs financial data to be important to the choice making requirements of the clients.
  • Materiality- It obliges bookkeepers and examiners to spotlight on financial data which is required to influence the choices of the clients.
  • Faithful demonstration- It needs the financial data to be genuine and reasonable and without any error.
  • Comparability- It needs the financial data to be equivalent crosswise over periods and crosswise over organizations.
  • Verifiability- It needs the data to impart the fundamental financial aspects of the organization's trade.
  • Timeliness- It obliges revelation of financial data not to be exorbitantly deferred.
  • Understandability- It needs the financial data to be justifiable by clients with sensible information of business and monetary functions.

Handiness is an abnormal state reflection. To provide like an important measure or principle alongside which to review the consequences of financial accounting, handiness has to be prepared additional solid and particular by investigating it into its segments at lower levels of reflection. The two essential segments of handiness are pertinence and dependability.

At the same time as those ideas are further solid than handiness, they are still truly dynamic. That is the reason Concepts Statement 2 centers at a pretty further solid level, where the ideas of prescient quality and reaction worth, auspiciousness, figurative loyalty, evidence, nonpartisanship, and likeness mutually hand out as criteria for deciding data's value.

Financial reporting data may have shifting degrees of value to distinctive capital suppliers. Upgrading subjective attributes recognize more helpful data from less valuable data. They improve the choice helpfulness of financial reporting data that is pertinent and dependably spoken to. Improving subjective qualities (similarity, undeniable nature, opportunity and understandability) ought to be boosted to the degree conceivable. In any case, the improving subjective qualities, either exclusively or working together with one another, can't settle on data helpful for choices if that data is unessential or not dependably spoken to.

IASB/AASB Accounting Standards and Utilization of Qualitative Characteristics

Similar data empowers clients to distinguish likenesses in and contrasts between two sets of financial phenomena. Irrefutable data loans validity to the statement that financial reporting data speaks to the financial phenomena that it implies to speak to. Opportuneness gives data to chiefs when it has the ability to impact choices. Understandability is the nature of data that empowers clients to understand its importance.

Giving valuable financial reporting data is restricted by two pervasive stipulations, materiality and expense. Data is material in the event that its exclusion or misquote could impact the choices that clients make on the premise of a substance's financial data. The profits of giving financial reporting data ought to advocate the expenses of giving that data.

For the purpose of setting accounting standards, handiness can't be deciphered to denote whatever a specific entity deciphers it to denote. A decision that a bit of data is valuable have to be the aftereffect of a cautious examination that affirms initially that the data has the characteristics at the mainly solid level of the chain of command:

  • Whether it is opportune and does it encompass prescient or criticism worth or both?
  • Whether it is representationally dedicated, obvious, and nonpartisan?

In case it has those qualities, it is pertinent and dependable. At exactly that point, if data has endured that sort of assessment, would it be able to be considered valuable (Ball, 2006).

AASB 119 Employee Benefits is almost same as IAS 19 of the similar term as copied by the International Accounting Standards Board. The goal of AASB 119 is to endorse the accounting and divulgence for worker benefits. It is pertinent for yearly reporting episodes starting on or following 1 January 2005.

Data about impacts of exchanges and different occasions and circumstances that change a employee benefits and the cases on them helps a client of the substance's financial reports to survey the sum, timing and instability of its future money streams. Such data moreover helps a client to survey the viability with which administration has released its stewardship obligations to the capital suppliers of the element. That data incorporates quantitative measures and other data about changes in financial sets and claims that are a consequence of the employee benefits' financial execution, which are reflected by accumulation bookkeeping and money streams amid a period, and changes that are not a consequence of the element's financial execution, (for example, financing exchanges between the firm and its employees).

AASB 119 has been implemented by Billabong to record for all employee benefits, aside from those to which AASB 2 Share-based Payments relates. These staff benefits of Billabong encompass:

1. short-term profits, for example, compensation, pay rates, compensated yearly leave, rewards and non-fiscal benefits, for example, therapeutic consideration, lodging, autos and free/sponsored products or facilities

2. Post-working benefits, for example, post-job therapeutic consideration, and pension fund

3. Other long haul advantages, for example, long-administration leave, vacation leave and conceded remuneration

4. Departing benefits

5. Benefits gave to the companion, kids or dependants of recruits

Meanings of employee benefits for Billabong incorporate worker benefits, reasonable quality, other long haul employee reimbursement, fleeting employee payback and end payback.

Impact of Qualitative Characteristics on Company's Financial Statements

1. In case an employee has performed job with Billabong amid the reporting phase, perceive the undiscounted sum anticipated that will be paid in return for those administrations as a cost

2. the anticipated expense of short-tem repaid nonattendances is perceived as a cost:

3. In case the administration is served expanding the employee's qualification to benefits for gathering repaid nonattendances; and

4. In case the nonappearances happen for non-gathering repaid nonattendances

  • Billabong has a present lawful or valuable commitment as a consequence of past occasions; and
  • a solid assessment can be formed due to the commitment
  • a risk is perceived for any not paid transient benefits

Accounting for characterized benefit arrangements includes the accompanying steps:

1. utilizing actuarial strategies to gauge the benefit workers have been paid as an exchange for their job in the present and earlier times

2. discounting that payback utilizing the anticipated entity credit strategy to focus the present estimation of the characterized benefit commitment and the existing administration expenditure

3. Assessing the fair value (FV) of any arrangement resources

4. Assessing the aggregate sum of actuarial profits and misfortunes, and the sum needed to be perceived

5. At place an arrangement has been presented or changed, deciding the precedent administration cost

6. At point an arrangement has been abridged or settled, deciding the ensuing increase or misfortune

For Billabong, the sum perceived as a characterized benefit risk, is the net aggregate of the accompanying:

1. The PV (present value) of the characterized benefit commitments at the day of reporting, as per actuarial suppositions (IASB, 2007)

2. Less the reasonable estimation of any arrangement resources (from which the commitment will be settled) at the day of reporting (Amendment to International Accounting Standard IAS19 Employee Benefits, 2004)

3. Adding actuarial profits (less actuarial misfortunes) not perceived

4. Less any previous administration cost not perceived till now

The disposable of the accompanying sums for Billabong is to be perceived in gain or misfortune:

  • Present administration expenditure
  • Interest expense
  • The projected profit for any arrangement resources and any repayment privileges
  • Actuarial additions and misfortunes
  • Precedent administration expenditure
  • The impact of any decreases or payments

Billabong perceives an obligation for other long haul reimbursement equivalent to:

  • The PV of the characterized benefit commitment at day of reporting
  • Less the FV of any arrangement resources at the day of reporting

It perceives as cost or earnings the net aggregate of defined sums together with:

  • Present administration expenditure
  • Interest expense
  • Actuarial increases and misfortunes
  • Precedent administration overheads

Billabong perceives an obligation and an overhead for end benefits when it is certifiably dedicated to either:

  • come to an end of the vocation of employee(s) prior to the typical day of retirement; or
  • offer end benefits as a consequence of an proposal furnished to energize deliberate excess
  • billabong is evidently dedicated to an end at the time and just at the time it has an itemized official arrangement for the end and is devoid of practical plausibility of pulling out
  • At point wherein end benefits fall due more than12 months after the day of reporting, they have got to be cut-rate using the discount rate as explained above.

AASB 101 Presentation of Financial Statements (reissued in September 2007) is proportional to IAS 1 of the identical term like given by the IASB. The destination of AASB 101 is to endorse the premise for arrangement of broadly useful fiscal reports. It is material for yearly reporting times starting on or following 1 January 2009, with right on time selection from 1 January 2005 allowed. The primary necessities of the modified AASB 101 (amended) are:

The wording utilized as a part of the standard is suitable revenue driven businesses, together with public segment business firms. Notwithstanding benefit firms as of the private or public segments apply this principle, revisions might be expected to the depictions of a few things as well as financial statements

Billabong’s description for presentation of financial statements incorporate universally useful financial statements, IFRS, inventory, notes, other comprehensive earnings, Directors report, P&L,  complete exhaustive income and exceptional reason financial statements.

A set of financial statements for Billabong comprises:

1. Period ending statement for financial position

2. The statement of comprehensive income for the stated time phase

3. A report of changes in equity for the stated time phase

4. A statement of cash flows for the stated time phase (MaÅ„ko, 2011)  

5. Notes, involving an outline of noteworthy accounting approaches and other data for Billabong

6. A statement of financial position as toward the beginning of the most primitive relative period, at the time Billabong implemented an accounting approach reflectively or had a review change. In spite of the fact that Billabong utilizes different headings for these reports/ statements.

Financial statements should genuinely introduce the financial position, financial execution and money streams of a business. The Corporations Act obliges a firm's (Billabong's) monetary report to agree to Australian Accounting Standards. Billabong unveils in the notes a declaration that the financial statements have been arranged as per Australian Accounting Standards. Billabong likewise uncovers in the notes if the report is a universally useful or exceptional reason financial report. Given that Billabong's financial statements follow IFRS, it must put forth an unequivocal and open statement of such agreeability in the notes. Financial statements of Billabong are arranged on a going concern premise. In the event that administration is mindful of monetary vulnerabilities, it must reveal those instabilities.

A substance's financial presentation gives data about the return it has delivered on its financial assets. Over the long haul, an element must deliver a positive profit for its financial assets in the event that it is to produce net money inflows and in this way give a come back to its capital suppliers. The variability of that return is likewise critical, particularly in evaluating the instability of future money streams, as is data about the segments of that return. Capital suppliers typically discover data about a substance's past financial execution accommodating in foreseeing the substance's future profits for its assets furthermore in evaluating administration's capacity to release its stewardship obligations to its capital suppliers.

According to the standard, the financial statements for Billabong are as per the accrual basis, with the exception of the CFS (Cash flows statement). Every monetary division of comparable things is introduced independently. Accrual bookkeeping delineates the financial impacts of exchanges and other occasions and circumstances that have money or different outcomes for an substance's assets and the cases on them in the periods in which those exchanges, occasions or circumstances happen. The purchasing, creating, offering and different operations of an element amid a period, and in addition changes in fair esteem and different occasions that influence its monetary assets what's more the cases on them, frequently don't harmonize with the money receipts and installments of the period. Data in financial reports about an substance's assets and claims and changes in assets and cases for the most part gives a superior premise to surveying past execution and future prospects than data exclusively about the element's present money receipts and installments. Without accrual bookkeeping, critical financial assets and claims on assets would be barred from financial proclamations.

There is no offset among the liabilities and assets of Billabong, given that these are not particularly allowed by an alternate Australian Accounting Standard. A comprehensive set of financial statements, with near data, has been introduced half yearly. Relatives for the former phase are accommodated for all sums and account/enlightening data. At the point when a business alters the presentation or arrangement of things in the financial accounts, similar sums is additionally being renamed by Billabong, in spite of the fact that this had not been the situation in the year 2013-14. In case this kind of arrangements for reclassification would have happened, it must be important for Billabong reveal the attribute, sum and purpose behind reclassifying it. In the event that impracticable, it needed to reveal the reason and nature.

Data about an element's financial execution amid a period reflected by changes in its assets and the cases on those assets, other than changes coming about because of financing exchanges, is additionally valuable in surveying the element's past and future capacity to produce net money inflows. That data demonstrates the degree to which the element has expanded its accessible financial assets, and accordingly its ability for creating net money inflows, through its operations instead of by getting extra capital from capital suppliers. Data about an element's financial execution amid a period portrayed by changes in its assets and the cases on those assets may likewise demonstrate the degree to which occasions, for example, changes in business costs or investment rates, have expanded or diminished the substance's financial assets and the cases on those assets, along these lines influencing the element's capacity to produce net money inflows.

The latest or amended accounting principles which got to be successful for the reporting phase beginning on 1 July 2013 are AASB 10 Consolidated Financial Statements, AASB 13 Fair Value Measurement and modified AASB 119 Employee Benefits. There has been no effect to the interim financial accounts like an aftereffect of the latest or amended accounting principles.

There are no different principles that have gotten to be compelling from the earliest starting point of the reporting period that are required to boast a monetary effect on the consolidated firm in the present or upcoming reporting periods and on predictable upcoming deals.

Other disclosures comprise:

1. total of dividends anticipated or confirmed prior to the financial statement was approved in favor of issue however not identified, along with the linked sum for each share

2. the domestic and authoritative document of the element, its nation of consolidation and location of enlisted office

3. family name of parent and decisive close relative of the business

4. a variety of auditor linked data

5. definite information regarding forth writing credits

As stated by the PRESENTATION OF FINANCIAL STATEMENTS 101, the Audit Committee of Billabong had to gather 3 times per annum. Details of these Directors' attendance at Committee meetings are set out in the Directors' Report on page 19.The main functions of the Committee are to:

1. ensure the integrity and reliability of the Company's financial statements and all other financial information published by the Company or released to the market;

2. assess the degree and consequences of outside and consistence audits;

3. ensure the trustworthiness and unwavering quality of the Company's financial statements and all other financial data distributed by the Company or discharged to the business;

4. assess the effectiveness of the systems of internal control and risk management;

5. assess agreeability with appropriate legitimate and administrative necessities.

6. assess the adequacy of the frameworks of interior control and danger administration;

7. review the arrangement, compensation, capabilities, autonomy and execution of the outside auditors and the respectability of the audit handle overall; and

8. Monitor and survey the way of non-audit administrations of outside auditors and related expenses and guarantee it doesn't antagonistically affect on auditor autonomy.

9. The Audit Committee has power, inside the extent of its obligations, to look for any data it requires as of any worker or outside party.


Amendment to International Accounting Standard IAS19 Employee Benefits. Actuarial Gains and Losses, Group Plans and Disclosures (December 2004, IASB).

Ball R. (2006). 

Bradshaw, M., et al (2010). Response to the SEC's Proposed Rule- Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by U.S. Issuers. Accounting Horizons(24)1

Director’s committee at Billabong retreived from  on 24th Jan’2015.

Financial Accounting Standards Board, Statement of Financial Accounting Concepts No. 2, par. 32.

International Accounting Standards Board (2007): International Financial Reporting Standards 2007 (including International Accounting Standards (IAS(tm)) and Interpretations as at 1 January 2007),

Library Briefing. Library of the European Parliament. Retrieved 24th Jan’2015.

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