Capital Markets Advisory Committee Meeting - MyAssignmenthelp.com

Question: Discuss about the Capital Markets Advisory Committee Meeting. Answer: Introduction The title of the report is Analysis of conceptual framework of accounting with prudence. The title itself describes that if any analysis is required to be made then the conceptual framework of accounting is reviewed along with prudence and is checked whether the requirements of the conceptual framework of accounting is being followed or have been followed in earlier years by the company. As per the common parlance that will come in everyones mind is that the presence of framework for pursuing any kind of work shall be solicited by each and every individual including those working in an organization. If any work of any nature is done without any structure or without any framework then the results so produced will be negative and will not serve the purpose of neither the companies nor the individuals working in an organization. Therefore, for accounting work there shall be the proper framework that shall include all the rules, regulations, acts or accounting standards and auditing stan dards. Similarly the concept of prudence says that the person who is engaged in accounting for the transaction of the company shall be true and fair enough and shall apply the degree of his knowledge as well as the caution and thus, Prudence shall be followed throughput the accounting work as it guides what are the things that are required to be considered by the individuals for preparation of the financial statements. These above explained are the two objectives of the study which has followed throughout the study. To have the deep analysis of the conceptual framework of accounting and prudence, the annual report of the company has been selected for the year ending June 2016. The company is Qantas Airlines which has been registered and incorporated in the country of Australia and also registered with the Australian Stock Exchange. The analysis of the annual report of Qantas Airlines has been made in regard to the defined parameters like valuation of the inventories, property plant and equipment, accounts receivable and others. At each of the parameters it is checked whether the conceptual framework of accounting is being followed or not and the level of prudence that has been employed while finalizing the financial statements. At the end the study has been concluded with overall findings and thereafter recommendation has been given as to whether the company so selected is in compliance of all the conceptual framework requirements. The framework is regarded as the defined and managed structure which plans out as to how the certain task is required to be performed and within what parameters the task so assigned is required to be completed. Thus, the framework is the guiding factor as well as the directing and controlling factor which ensures that if the workers engaged in an organization performs the work in the manner in which it is designed or within the framework then there will be less chances of any non compliance with the mandatory or statutory requirements. Thus, the structure and which is defined one is very necessary for the proper working and the results thereon. In case there is no defined structure then the workers engaged in the work will end up with zero outcomes and in case any outcome arises then it will be so much ifs and buts which will not in anyways serve the purpose of the organization (Anastasia, 2015 and Capital Markets Advisory Committee Meeting, 2013). In the accounting terms, the framework of accounting is known as the conceptual framework of accounting. The conceptual framework of accounting is basically consists of the two objectives. First objective gives the way as to how the assets and liabilities of the company on the particular date should be measured and how the income and expenses earned and incurred respectively has been earned and paid during the year. Second objectives are to get the financial statements so prepared by the company, satisfy the three major characteristics of the conceptual framework of accounting. These are: The first feature is represented faithfully. The financial statements prepared by the company shall be represented faithfully. There are three features included in the term faithful representation. These are neutral, free from error and free from any bias. It envisage that the financial statements shall reflect that the financial statements have not been prepared under some sort of any form of bias, that it will be neutral that is it shall be bias free. If it is present then it is clear that the conceptual framework of accounting is being applied and fully followed otherwise it depicts the non compliance of conceptual framework of accounting (Weiss, 2014). The second feature is relevant. The financial statements prepared shall be relevant to the users of the financial statements and other stakeholders. Users and stakeholders generally require the relevant information for their quick and effective decision making. If the relevant information is not made available then the purpose of the conceptual framework of accounting will decline. The last feature is reliable. It entails that the financial information provided in the financial statements shall be reliable otherwise the government department will not give any sort of benefits and also the users of the financial statements may find it difficult to make correct, effective and efficient decision (IASB, 2010). If the above features are present then the users of the financial statements and other stakeholders will find the financial statements useful and reliable otherwise the financial statements will serve no purpose and will be futile. The concept of conceptual framework is very important concept in the field of accounting and the inclusion of the concept of prudence has further enhanced the value of the financial statements so prepared. The concept of prudence is very old since the year 1989 but has been known by different names. As per the common parlance, the term prudence means the act of being cautious. The same word has been used in the definition in the year 1989 when the concept of prudence was first introduced in the regulatory framework of accounting. It is said at that time that the personnel involved in accounts department of the company should exercise not only the due care but also some level of the caution which will help them to correctly estimate the accounting part of any transaction or events that has happened in the uncertain event which shall in case lead to overstatement of assets and revenue. The above introduction has been very categorically criticized saying that the approach of the concept of prudence was very conservative as it has send the signal for ensuring that there shall be no overstatement of assets and revenue and thus has not taken into consideration the liabilities and the expenditure which also forms part of the financial statements. With this criticism, the concept of prudence has been excluded in the year of 2005. But after 2005 many persons started arguing that the financial statements if it is without prudence will mean thereby imprudent (Cooper, 2015). Thus, this argument somewhere states that the concept of prudence is deeply connected with the Neutrality as the being prudent mean being cautious which in turn means that is shall be from any error or bias. Due to this argument, the concept of prudence is again included in the conceptual framework of accounting and its presence is duly solicited from the year 2015. After having the understanding of the conceptual framework of accounting and that too with the re inclusion of concept of prudence and the importance that both the concepts have gained over the years, now it is to analyze through the annual report of the company as to know whether the company has followed the conceptual framework of accounting and have considered the concept of prudence as basis in preparing and presenting the financial statements to the users along with the stakeholders of the company. The company Qantas Airlines has been selected. The company has been incorporated in the year 1920 in Australia. The full form of an abbreviation Qantas is Queensland and Northern Territorial Aerial Services Limited. In current scenario, it is regarded as the leading airline company in Australia in Domestic and International sector and is also regarded as the second largest airline across the world. To understand whether the conceptual framework of accounting is complied with, the annual report of the company has been analyzed with regard to the following factors (Annual Report, 2016): Remuneration to Key Managerial Personnel: The Company in their annual report has described under the section of Remuneration report that there exists the remuneration framework which strives for motivating and retaining the best possible talent by having the defined opportunities for pay and that is on appropriate level. It aims at linking the remuneration of the directors directly to the results of the company. The company has bifurcated the remuneration under three factors Basic pay, short term incentives and long term incentives. By having the remuneration framework the work and the results under this will be very fruitful. But on the other hand there may be chances of having high chances of manipulation. Trade Receivables Total receivables of the company for the year ending June 2016 is amounting to $929 million as compared to the year of 2015 amounting to $1093 million.. The company is measuring and valuing the receivables as per the sale invoice and is valued after making the provision for impairment losses in receivable. It exhibits that there exists the framework and the accountant provide for the impairment within that structure only. Property, Plant and Equipment: This is measured by deducting the depreciation and the impairment loss from the item of the asset. A note has been given about the Capital Expenditure Commitments. It states that the group capital expenditure commitments are expressed in the functional currency as US dollar. The same is converted into Australia dollar and are reported as on 30-06-2016 amounting to $11670 millions. It also exhibits that the company follows the conceptual framework. Revenue : Revenue received in advance has been shown as Current Liability amounting to $5046 million for the year ending 30-06-2016. It depicts that the company is following the conceptual framework along with prudence. Conclusion The concept of conceptual framework along with the concept or prudence plays very vital role in the accounting field. It lays down how the company is required to perform its functions keeping in view the boundaries of statutory and managerial compliance that is required to be crossed. The importance of the concept of conceptual framework has been detailed and reasons have been given for including the prudent in it. Thereafter, the annual report of the Qantas has been analyzed and established that conceptual framework is being followed by the company and that too with caution. References Anastasia, (2015), Financial Statement Analysis : An Introduction available on https://www.cleverism.com/financial-statement-analysis-introduction/ accessed on 04-05-2017 Capital Markets Advisory Committee Meeting, (2013), Conceptual Framework available on https://www.ifrs.org/Meetings/MeetingDocs/Other%20Meeting/2013/March/AP%203%20conceptual%20framework.pdf accessed on 04-05-2017 Cooper S, (2015), A Tale of Prudence, available on https://www.ifrs.org/Investor-resources/Investor-perspectives-2/Documents/Prudence_Investor-Perspective_Conceptual-FW.PDF accessed on 04-05-2017. International Accounting Standards Board, (2010), Conceptual Framework for Financial Reporting 2010 , pages 16-21 Qantas Airlines Official Website, Annual Report 2016 available on https://www.qantas.com.au/ accessed on 04-05-2017 Weiss D, (2014), Faithful Representation available on https://bschool.huji.ac.il/.upload/Seminars/Faithful%20Representation%20October%202014.pdf accessed on 04-05-2017.