ACC303 Communication Research Practices | Accounting Standard Board

The main aim this report is the analysis of different aspects of conceptual framework related to a newly established Australian company, Domain Holdings Australia Limited. Initial section shows the main objectives of AASB conceptual framework.

The next section involves in the discussion of the recognition criteria of assets, liability, equity, revenue and expenses as per AASB conceptual framework. The third section shows the analysis of the qualitative characteristics of financial information of the companies.  

Answer:

Introduction

Conceptual Framework Objectives

Third Objective: As per AASB, the third objective of conceptual framework is to show the change in the financial position of the companies with the help of required financial statements. For this reason, the business organizations are needed to release the statement of change in equity along with the statement of cash flows for showing the change in the financial position of the companies. As Domain Holdings is a newly established companies, at the time to the preparation of the annual report, the management of the company must develop these two statements so that the investors and other uses can understand the extent to the change in the financial position of their business (Palmer, 2013).

Recognition Criteria

It is needed for the Australian companies to pursue the provided recognition criteria of AASB conceptual framework at the time to recognize five major financial aspects; they are Assets, Liabilities, Revenues, Expenses and Equity. There is not any exception of this aspect in case of Domain Holdings and the company is also needed to follow the same guidelines (Perera and Chand, 2015). The following discussion shows the recognition criteria as per AASB conceptual framework:

Expenses: As per AASB conceptual framework, it is needed to Domain Holdings to recognize their expenses in the income statement at the time when there is a probability of the loss or consumptions of the future economic benefits for the company resulted to the decrease in asset or increase in liability. However, Domain Holdings must be able in the reliable measurement of the loss or consumption of economic benefits (Budding, Grossi and Tagesson, 2014).  

Qualitative Characteristics of Financial Reporting

The qualitative characteristics of financial statements are considered as crucial aspect in the process of financial statements. The presence of both the fundamental and enhancing qualitative characteristics make the financial information more useful for the users of the financial statements. The management of Domain Holdings is also needed to ensure the presence of these charatecrstcs in the financial information. They are discussed below:   

Fundamental Qualitative Characteristics

Enhancing Qualitative Characteristics

Understandability: As per AASB, the companies are needed to provide all the clarification and justification of their accounting treatment so that the users can easily understand them. In order to comply with this, Domain Holdings is needed to provide all the clarification and justification of their accounting treatment with the help of notes to the financial statements (Yao, Percy and Hu, 2015).

Timeliness: In order to make the financial information available to the users at the time of their investment decision-making, Domain Holdings must ensure the quarterly, half yearly and annual publication of their financial statements (aasb.gov.au 2018).  

Conclusion

• It is recommended that Domain Holdings should take into account the objectives of AASB conceptual framework in order to increase the efficiency of their financial reporting.
• It is recommended that Domain Holdings is needed to follow all the provided recognition criteria of AASB conceal framework for recognizing major financial aspects

References

Budding, T., Grossi, G. and Tagesson, T. eds., 2014. Public sector accounting. Routledge.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Perera, D. and Chand, P., 2015. Issues in the adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMES). Advances in accounting, 31(1), pp.165-178.

Potter, B., Ravlic, T. and Wright, S., 2013. Developing Accounting Regulations that Reflect Public Viewpoints: The Australian Solution to Differential Reporting. Australian Accounting Review, 23(1), pp.18-28.