Financial Accounting for Various Mechanism and System

Question:

Answer:

Introduction

This particular essay presents a detailed explanation of various mechanisms and systems of accounting, which generally help to monitor, direct and control the operations of the business with particular indication regarding different functions of Qantas Airways in its operations. It has been found that Qantas Airways is Australia’s largest airline with respect to its different international flights, size of fleet and destinations across the world (Qantas.com.au, 2016). The particular firm possesses the share of about 65% of the home market in Australia and it covers around 14.9% of the entire passengers who are travelling “to and from” Australia and vice-versa (Qantas.com.au, 2016). Nevertheless, fleet size of Qantas Airways is about 131, which carries out its operations over 85 destinations.

Moreover, a critical evaluation of various measurement concepts has been performed that indicates the requirement of reviewing compliance towards assessment of General Purpose Financial Reports presented and prepared for various users and various rules for measuring the financial information of the firm. This essay detects various issues that are related to measurement procedure. Additionally, it highlights the concepts of compliance and prudence to conceptual configuration for economic reporting.

Evaluation of the General Purpose Financial Reports

Various Measurement Concepts: Conceptual Framework

It has been found that the conceptual framework mainly implies the objectives and the principles of the general purpose of financial reporting (Uyar & Gungormus, 2016). Moreover, the conceptual structure is considered as the most effective tool which helps the board of the firm in the development process of financial standards. Additionally, this framework also assists in the preparation of financial reports in order to develop simultaneously effectual and reliable accounting strategies. On the other hand, the financial standard authorizes the selection of specified plan of accounting. Along with this, the framework also supports the understanding of the course by interpretation of the standards of accounting. The function and intent of the framework enhances the financial coverage structure that offers restructured, absolute and comprehensible sets of principles.

It has been analyzed that the financial statements of the particular firm complies with the AASB, the conceptual framework of the country and it manages the various intentions of diverse qualitative uniqueness and financial declarations that develops the usefulness of financial statements (Rahman, 2013). The whole financial declarations are structured by various diverse components and these include – the non-current assets and current assets, non-current liabilities and current liabilities along with the equity of shareholders (Schrand et al., 2016). The various items of financial reports illuminate the financial condition of Qantas Airways. In addition to this, the conceptual framework also assists in the evaluation procedure of the corporation’s financial health from the viewpoint of operating expenses, profit and income. Additionally, this framework explains the various criteria in detail along with the vital factors that helps in acknowledgement and recognition of the miscellaneous items in the corporation’s financial declarations.

Issues of Measurement Regarding the AASB Standard and Conceptual Framework

The establishment process of a single and principle-based structure for measuring at fair value during the time period when the Australian Accounting Standard is required is referred as the accounting standard AASB 13 Fair Value Measurement (Rahman, 2013). On the other hand, this AASB 13 generally does not convert during the time period especially when the business entity requires to make use of the fair value (Aasb.gov.au., 2016). Thus, it can be said that the AASB 13 is composed of various notions about the best exercise and assessment principle and has requirement of application of a fair value (Richard & David, 2016).

According to the annual report of the firm for the year 2015, the earnings of the organization Qantas Airways is $ 15816 million and the net income for the passenger is $ 13667 million (Qantas.com.au, 2016). In addition to this, the net freight revenue is equivalent to $ 936 million (Qantas.com.au, 2016). On the other hand, the Board of Qantas Airways follows a charter and is found to be liable for the development and evaluation of administration and strategic direction of the entire execution process of the corporation’s strategies. The CEO of the firm is considered as accountable for everyday supervision of the firm’s operations. The secretary of the firm is directly liable to the Board and the Chairperson on various affairs that are related to proper functioning of the organization. The board of Qantas Airways is accurately structured and is separated into four distinct committees. These include – Remuneration Committee, Audit Committee, Safety, Environment and Security Committee and Nominations Committee (Qantas.com.au, 2016). All these committees augmented the value of the shareholders. Moreover, the board of the firm also gets complied with the “Group’s Continuous Disclosure Policy”. This policy fulfills the requirement for preparing and presenting on time and to balance the disclosures that ensures the orderly trading of issued stocks of the firm in a knowledgeable market place (Schipper, Francis & Weil, 2016). Another policy that has been identified within the firm Qantas Airways is “Shareholder Communication Policy” (Qantas.com.au, 2016). This particular policy successfully promotes two effective ways of communication, through which the firm can easily communicate with its stakeholders. The company’s board of directors presents the remuneration report that complies with the conditions of “Section 30A of the Corporation Act 2001” (Aasb.gov.au., 2016). It has been found by reviewing the remuneration report that the short-term plan of incentive is considered as the “Annual at risk incentive plan” for various workforce members of Qantas Airways. On the contrary, the “Long-term incentive plan” is followed by the firm to make incentive payments to the firm’s executives that are evaluated on the basis of the company’s “Three-year performance plan”. Therefore, this healthy financial situation of Qantas Airways supported the managers to tackle both the recession and to accomplish strong financial position for the period of Global Financial Crisis (Myers, 2016).

Evaluation of Measurement Items in Financial Reports of Qantas Airways

The financial report assessment involves the consolidated financial statement evaluation based on the general-purpose financial reports. It has been found that Qantas Airways prepares their financial reports in compliance with the standards of “Accounting Standards Board (AASB)” and “Corporation Act” (Edwards, 2013). Moreover, Qantas Airways also prepares its financial reports in line with “International Financial Reporting Standards” and “International Accounting Standards Board”.

Assets

As per the annual report of Qantas Airways for the year 2015, total assets were $17530 million (Qantas.com.au, 2016). Therefore, it can be said that the value of assets were expressed in terms of Australian Dollars, which is considered as the essential operational currency of the particular organization. The assets of the firm are classified as “as held for sale”. This indicates that assets are measured at relatively lower value compared to its fair value after deducting the costs that took place for sales (Drury, 2013). However, it has been found that the “net defined asset” of Qantas Airways is generally recorded at the fair value after the deduction of present value of the exact benefit commitment.

Liabilities

According to the annual report of Qantas Airways of the year 2015, the liabilities of the firm were $14083 million (Qantas.com.au, 2016). For this firm, the balance sheet records all non-current and current liabilities that can be utilized for financing the business. In case of Qantas Airways, its balance sheet records all the data on the basis of the historical cost and is valued at operational currency i.e. Australian Dollar (Deegan, 2013). It has also been noted that the total liability of the particular firm has been calculated at fair value of various plan liabilities after deducting the current value of the defined benefit requirements.  

Equity

On the basis of the annual report of the firm Qantas Airways of the year 2015, the shareholders’ equity was equivalent to $344 million (Qantas.com.au, 2016). As per the annual declaration of the particular organization, the values have been calculated at fair value by help of both profit and loss amount. Thus, the firm uses various models on accounting the particular derivatives, which calls for the requirement of the measurement of fair value (Crawford, 2016).        

Inventory

The evaluation of the inventory level of a firm helps to determine and analyze the degree of efficiency and the financial condition of the operations of the firm. As per the annual report of the firm Qantas Airways of the year 2015, the inventory of the particular firm increased from $317 million in the year 2014 to $322 million in the year 2015 (Qantas.com.au, 2016). The inventory amount augmented in the year 2015 as the engineering expendables increased with the passage of time along with the decrease in work in progress and shrinkage in various consumable stores (Qantas.com.au, 2016). Nevertheless, the lack in potentiality of the firm in managing the total inventory of the particular firm might weaken the aggressive position of the organization in the present competitive market.     

Provision for Bad Debt, Doubtful Debt and Accounts receivable

On the basis of the annual report of Qantas Airlines for the year 2015, accounts receivables were recorded to be $959 million (Qantas.com.au, 2016). However, the current receivables of the firm decreased from $1196 million in 2014 to $959 million in 2015 (Qantas.com.au, 2016). On the other hand, the non-current receivables also reflect a decline from the $158 million in 2014 to $134 million in the previous year (Qantas.com.au, 2016). This over decline in accounts receivables imply decrease in both sundry debtors and trade debtors (Chan et al., 2016). The trade receivables of the firm are calculated at the fair value. However, the particular company’s “transformation program” helped the business to make repayments of around $1 billion of the total net debt of the particular organization (Qantas.com.au, 2016).                  

Plant, property and equipment (PPE)   

According to the annual report of Qantas Airlines of the year 2015, the total amount of PPE was equivalent to $136 million (Qantas.com.au, 2016). However, it has been found that in the year 2014, the value of PPE of the company Qantas Airlines was $134 million (Qantas.com.au, 2016). This 1.4% increase in the PPE indicates that the calculation of non-recurring fair value is considered as “held for sale” (Qantas.com.au, 2016). Therefore, it can be further classified under the ladder of fair value on the basis of the utilization of various inputs of the mechanism of appraisal.

Depreciation

Opined to the annual report of the firm Qantas Airlines for the year 2015, the depreciation as well as the amortization costs were noted to lesser with $195 million, especially, after the ensured deduction from various non-cash impairment (Qantas.com.au, 2016). It has been found that both the amortization and depreciation costs were recorded to be $1422 million in 2015 but it was $1096 million in 2014 (Qantas.com.au, 2016). As per the management, within the organization straight line method is generally implemented. Moreover, it has been noted that the assets of Qantas Airlines are usually devalued from the date of acquisition as per the internally produced assets from the duration when the definite asset can be implemented (Atrill & McLaney, 2016).    

“Treatment of leases”

It has been found that Qantas Airways leased a specific airline company under finance lease, which has the expiry dates varying from one to ten years. In addition to this, it has been found that as per the financial declaration, the total finance leases of Qantas Airways was equivalent to $1498 million in the year 2015 and the operating lease amounts was equivalent to $2782 million in the same year (Qantas.com.au, 2016). Moreover, the financial reports of the particular firm also reveal that the capitalized operating lease is calculated based on fair value measurement. On the other hand, lease measurement requires to be re-enumerated on both interest and principle that is equivalent to finance lease.    

Analysis of the Procedure of Reporting Revenue

Relationship between Provision of Decision-making and Employed Measurement

The financial statements of Qantas Airways are prepared in compliance with the particular Corporation Act of the year 2001 and the various Listing Rules that are under the Australian Stock Exchange (ASX) (Aasb.gov.au., 2016). It has been noted that the management of Qantas Airways has accepted the strategies that provide constant disclosures and thus it help the firm to get a clear understanding about the financial position of the organization. In addition to this, the constant disclosure helps to augment the investors’ confidence regarding reliability, integrity and transparency of the operations of Qantas Airways and its financial reports.

The procedure of financial statement preparation and presentation of Qantas Airways pursues the conceptual framework of AASB (Aasb.gov.au., 2016). Thus this particular framework provides a clear picture regarding the aims and definition of the financial statements and the criteria and scope for recognizing the data. Additionally, the particular conceptual framework also helps to understand the measurement process of various items in financial statements. Moreover, the investors can scrutinize the effectiveness and efficiency of the operation of the firm Qantas Airways by analyzing its financial statements that are prepared on the basis of various accounting standards of the AASB (Aasb.gov.au., 2016).

This financial system of measuring also implies the orientation of preparers in order to prudence in the conceptual framework. The conformity of the financial declarations with the relevant standards ensures the steadiness in financial information and also makes nature of neutrality of various activities. Moreover, the conformation with the measurement standards of financial statements and its adherence with the various guiding principles can help to avoid various attempts of conscious misstatements in financial reporting. Thus, by presenting the financial statements of the particular firm according to the conceptual framework, the errors in the financial statements can be minimized and the confidence of the investors can be generated (Aasb.gov.au., 2016).

The improvement and the modification of the conceptual framework imply the procedure of elimination of the IASB with specified point of reference to the various ideas of prudence (Barth, 2013). The updating process and developing notion of prudence requires exclusion of remarkable factors regarding faithful representation. The modification of the standards also imply that the financial system updates the diverse references points to the conceptual configuration that refers to the expected amendments to the various standards, such as - “AASB 2, AASB 3, AASB 4, AASB 6, AASB 101, AASB 108 and AASB 134” (Aasb.gov.au., 2016).

The financial performance of an organization can be analyzed by the investors by studying the level of inventory and the effectiveness and efficiency of the firm in transformation of the particular inventory into sales before concluding any decision. The relevant standards of accounting help the investors to measure the PPE and also to understand its value (Bonin, 2013). Thus, it helps the financiers to become more responsive to various opinions of investment of the organization regarding the PPE. The decision of investing of Qantas Airways on its PPE generally imply cash outflow, which helps in generating revenue for the firm in future (Qantas.com.au, 2016). Therefore, all the items in the financial statements help the shareholders of the firm to understand the financial condition of the organization and also to boost up their sentiments.

Conclusion

Therefore, it can be concluded that financiers are able to evaluate the various items of financial reports of the firm Qantas Airways. It also represents various concepts regarding financial measurements. Moreover, the issues associated with the measurement in present days regarding conceptual framework and AASB standards have also been understood that helps in operating Qantas Airways. Additionally, the issues associated with the various items of measurement of the financial reports have also been highlighted that are in context of AASB. The relationship between the provision of various decisions and the measurement implemented in Qantas Airways has also been analyzed in detail. 

References                     

Aasb.gov.au. (2016). Australian Accounting Standards Board (AASB) - Home. [online] Available at: http://www.aasb.gov.au [Accessed 23 Aug. 2016].

Atrill, P., & McLaney, E. (2016). Financial Accounting for Decision Makers 8th edn. Pearson Higher Ed.

Barth, M.E., (2013). Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.

Bonin, H., (2013). Generational accounting: theory and application. Springer Science & Business Media.

Chan, S. H., Song, Q., Rivera, L. H., & Trongmateerut, P. (2016). Using an educational computer program to enhance student performance in financial accounting. Journal of Accounting Education.

Crawford, C. W. (2016). ACTG 201.05: Principles of Financial Accounting.

Deegan, C., (2013). Financial accounting theory. McGraw-Hill Education Australia.

Drury, C.M., (2013). Management and cost accounting. Springer.

Edwards, J.R., (2013). A History of Financial Accounting (RLE Accounting)(Vol. 29). Routledge.

Myers, L. P. (2016). Knowledge structures and their relevance for teaching and learning in introductory financial accounting. South African Journal of Accounting Research, 30(1), 79-95.

Qantas.com.au, (2016) Retrieved 29 August 2016, from http:///www.qantas.com.au

Rahman, A.R., (2013). The Australian Accounting Standards Review Board (RLE Accounting): The Establishment of Its Participative Review Process. Routledge.

Richard, L., & David, P. (2016). Advanced financial accounting.

Schipper, K., Francis, J., & Weil, R. (2016). Financial Accounting: Introduction to Concepts, Methods and Uses. Cengage Learning.

Schrand, C. M., Armstrong, C. S., Taylor, D. J., Verrecchia, R. E., Wagenhofer, A., Casey, R. J., ... & Hribar, P. (2016). Journal of Financial Reporting A Publication of the Financial Accounting and Reporting Section of the American Accounting Association.

Uyar, A., & Gungormus, A. H. (2016). Factors associated with student performance in financial accounting course. European Journal of Economic and Political Studies, 4(2), 141-156

MyAssignmenthelp.co.uk provides homework help from K-12 and beyond. Our homework writing services cover a vast range of subjects and can help students with their essays, projects, book reports and more. We have more than 3000 highly qualified homework writing helpers on our team to make sure students get only the best.