Overview of the report
This report analyses the disclosures of objective of general purpose financial reporting and the qualitative characteristics of useful financial information according to The Conceptual Framework for Financial Reporting. It investigates Bega’s current accounting practice of Property, Plant and Equipment in accordance with AASB 116 Property, Plant and Equipment, and how it satisfies the objective of general purpose financial reporting and the qualitative characteristics of useful financial. This result will then recommend Bega to improve their current accounting practices.
Reasons for the report
Due to the use of the company’s annual report for users to make decisions, ...view middle of the document...
According to OB1 to OB21 of IASB Conceptual Framework, the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to users (existing and potential investors, lenders and other creditors) for decision-making about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit. In addition, the users cannot require reporting entities to provide information directly to them and must rely on general purpose financial reports for the financial information they need. General purpose financial reports are not designed to show all information users need, but they provide information to help users to estimate the value of the reporting entity. Also, the Conceptual Framework establishes the concepts for financial reports that based on estimates, judgments and models rather than exact depictions or value of a reporting entity.
2.2 Disclosure of qualitative characteristics of useful financial information
According to QC1 to QC39 of IASB Conceptual Framework, the qualitative characteristics of useful financial information identify the most useful information to the users for decision-making about the reporting entity on the basis of its financial report. If financial information is useful, it must be relevant and faithfully represented. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable.
2.2.1 The Fundamental qualitative characteristics
Relevant financial information helps making different decisions by users if it has predictive value, confirmatory value or both. Financial information with predictive value is engaged by users in making their own predictions. Financial information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations. The predictive value and confirmatory value of financial information are interrelated, since the values can be presented at the same time. The information of the current year is used as the basis for predicting values in future years and also is compared with the predictions for the current year that was made in past years. The results of those comparisons help a user to correct and improve the processes that were used to make those previous predictions.
188.8.131.52 Faithful representation
To be useful, financial information must not only represent relevant phenomena, but it must also faithfully represent the phenomena that it purports to represent. To be a perfectly faithful representation, a depiction would be complete, neutral and free from error. When the information is completed, it has all necessary descriptions and explanations for users to understand the phenomenon. A neutral information is without bias in the selection or presentation of financial information, and should not biased, weighted, emphasised, de-emphasised or...