Contemporary Issues in Accounting Professional Knowledge

Question: Discuss about the Contemporary Issues in Accounting for Professional Knowledge. Answer: Introduction The financial analysis of a firm involves arduous work that needs professional knowledge. It has been found that the compliance to the AASB standards provides sturdiness to the firms and this enhances the standards which are expressed by different strategies of the firm. The users generally interpret the information from the firm as they are consistent and clear. The strategies of a firm are studied based on the compliance of the annual report to the conceptual framework and the AASB standard (DaÃÅ' vila, Epstein and Manzoni 2014). The particular report has been prepared on the basis of a pilot study of an organization which is listed in the Australian Stock Exchange (ASX). Here, the company Woolworths Limited has been selected. The non-compliance to the AASB standards of Woolworths Limited has been focused that have lead to demolition of its reputation in the current competitive world. On the other hand, the non-compliance to the AASB standards of Woolworths Limited has been com pared with its competing firm Wesfarmers Limited, which follows the conceptual frameworks and the AASB accounting standards throughout its business. It can also be said that this comparative study helps in highlighting the effects of the non-compliance to the guidelines of AASB standards with the aim to analyze the value of the specified firm. As per the norms of the social responsibility, like the salary of the employees and its influence on the shareholders of the firm have been analyzed. This study also puts focus on the prudence implementation into the revised conceptual framework as it is a primary factor for appropriate reporting by the firms. Moreover, the screenshots of the noteworthy portions have been provided to validate and strengthen the results of the report. This particular report implies that this study will help to represent the companies compliance with the conceptual framework and its guidelines would help the users in preparing an analyzed annual report before making any decision regarding investment. Literature Review It has been found that the conceptual framework helps a firm to develop different concepts and also to highlight various purposes about the financial reporting (Ifrs.org 2016). The standards bring consistency and also promote the understanding level of financial statements of a firm by help of its users. Generally, the annual report of a firm is counted as a comprehensive report for all the activities of the firm of the earlier year. This helps to give information to the shareholders of the company and the other users about the financial performance and other activities of the specific organization. It has been found that the annual reports of a company help to express whether a company is compliance to the conceptual framework or not (Ifrs.org 2016). Prudence is an implementation of caution under the conditions of uncertainty, whereas, the judgment is prepared for ensuring the asset or income of the organization which is not overly stated and the expenses or liability of the organization is not understand (Ifrs.org 2016). Research Methodology by Analyzing the Strategies of an Organization Opined to DaÃÅ' vila, Epstein and Manzoni (2014), the organizational strategies imply the benchmarks of a specific company and the actions are counted with the aim to ensure the probability of obtaining its long-term goals. This needs a process which will highlight on every corporate operation. Moreover, this also helps to grasp the chief audiences of a specific organization. In addition to this, it has been noted that the managers of a well-performing firm tend to develop the precedence about the strategies of a firm and also in improving the organizational performance with the aim to achieve the aims and objectives of the performance. It has been found that this has resulted into relatively better outcome of the specified organization. This also helps in assisting the establishment of the activities of the performance of a firm. According to Watson (2013), the organizational performance can be made relatively better by the implementation of the policies and programs of the orga nization accurately. In addition to this, the accurate teamwork and the protection of the employees interests encourage the organizational performance. It has been noted by Hubig (2013), that there is a higher concern about the serving of public interest and the business ethics which are followed by the organization. Thus, it can be said that the objective of this study is to scrutinize the strategies of a specific firm by analyzing that whether the guiding principles of the conceptual framework conform to the regulations and rules of the firm at the time of preparing the annual reports. For the particular study, the company Woolworths Limited of Australia is considered as a pilot organization. Therefore, a comparative study has been accomplished between the selected firm Woolworths Limited and its core competitor Wesfarmers Limited with the aim to differentiate between these companies. In addition to this, the other aim is also to identify that whether the mentioned companies follo w the compliance to the guidelines of AASB standards or not. Importance of Compliance with the Conceptual Framework and AASB Standards in the Annual Reports According to the rules of the Australian Stock Exchange (ASX), all the listed firms should reveal that they have followed the guiding principles of the Corporate Governance Council (CGC) of ASX. This disclosure should be given in the annual report of the firm and the significance for implementing the CGC principles of ASX are as follows: Remunerating fairly and responsibly Managing the risks and the internal controls Respecting the shareholders rights Making the disclosures timely and in a balanced way Providing safety towards the truthfulness of financial reporting Promoting more responsible and ethical decision making skills Structuring the board as it adds value to the firm Putting proper foundation for management and disclosure Comparison The organization Woolworths Limited is considered as the pilot company for this study. This study has been performed on the basis of the comparative study of the organizational strategies through the annual report of the company in comparison with the tough and close competitor that is Wesfarmers Limited. Non-Compliance by Woolworths Limited It has been noted that some non-compliance by the firm Woolworths Limited has been identified in the services of trolley collection. Opined to the Fair Work Ombudsman, it has been found that the findings of the inquiry of the organization Woolworths Limited developed a particular perception that the specified firm does not practices compliance within the workplace. Rather, it can also be said that the particular company Woolworths Limited practices non-compliance within the operation and regulation of the organization. It has been detected that when the inspectors visit the workplace of the firm Woolworths Limited, they visited about 130 sites of the particular firm across Australia (Woolworths Online 2016). From this visit, the inspectors found that the company Woolworths Limited pays at lower rates to some of its trolley collectors and this rate is as low as $ 10 for every hour (Fair Work Ombudsman 2016). It has been noted that at the time of commencement of the particular inquiry, the minimum rate of an adult labor was between $ 18.01 and $ 22.51 for every hour (Fair Work Ombudsman 2016). Generally, this rate differentiates as per the hourly rate of an adult on the basis of the category of the staffs present within the organization. These include casual employees, part-time employees and full-time employees. Image 1: Non-Compliance by Woolworths (Source: Fair Work Ombudsman 2016) In addition to this, it has been noted that more than three out every four which is equivalent to 79 % of the total sites of the firm Woolworths Limited which have been visited by the inspectors across Australia had suggestions regarding some kind of non-compliance with the workplace rules, regulations and laws (Woolworthslimited.com.au 2016). Additionally, it has been found that around one of each two which is equivalent to 49 % have presented various severe issues about the multiple indicators of the non-compliance, such as no recoding about the time, no pay slips of the employees and reports of underpayments (Fair Work Ombudsman 2016). Detailed analysis implies that most of the collectors of trolley of the firm Woolworths Limited were from overseas nations and these people were mainly working as the workers under the specified firm below the minimum rate of adult labor per hour. It has been found that most of the labors of the company Woolworths Limited come from Syria, Korea, In dia, Lebanon, India, Iraq and Sudan and susceptible to compulsion and exploitation. Therefore, it can be concluded that the specific firm had adopted a specific business strategy that will help to seek the transfer of the capital risk to the workers of the firm by practicing procurement. Compliance by Wesfarmers Limited From the detailed analysis, it has been noted that the core competitor of the organization Woolworths Limited that is Wesfarmers Limited have accepted the errors that have been made by the company at the Target subsidiary (Wesfarmers.com.au 2016). The acceptance of the errors in the field of accounting of the firm indicates that the specified firm had done an accounting scandal mistakenly. However, it has been found that the company Wesfarmers has accepted their errors in accounting. This specifies that the organization Wesfarmers Limited follows the guiding principles of the conceptual framework of the accounting standard. Image 2: Compliance by Wesfarmers (Source: Ft.com 2016) The organization Wesfarmers Limited has described this action of the staffs that were included in the scheme of the supplier rebate, did not conform to the accounting policies. The particular firm Wesfarmers Limited revealed that the findings of a probe that were associated with accounting. This concludes that the total earnings of the Target subsidiary were drive up by about A$ 21 million in the ultimate six months of the nation 2015 (Ft.com 2016). According to the annual report of the particular company, this particular incident is counted as a serious problem for the specified firm Wesfarmers Limited as the total amount is not material. On the other hand, detailed analysis indicates that this particular incident will damage both the actions and reputation of the firm. Value of the Organization Loss of Reputation of the organization Woolworths Limited: Detailed analysis indicates that the particular company Woolworths Limited faces different increasing competition from both the existing and new competitors of the firm. In addition to this, the decreasing economic situation of the market further interrupts the economies of the world. Additionally, if the value proposition of the consumers does not furnish enormously as per the demand of the consumers, then the Woolworths Limiteds earnings might get affected adversely (Woolworthslimited.com.au 2016). Therefore, the breaches of security and privacy measures, unauthorized access to customers or disclosure of data associated with the consumers of Woolworths Limited along with fraudulent activities might influence the reputation of the organization and it might also harm the performance of the organization adversely. Image 3: Directors Report (Source: Woolworthslimited.com.au 2016) Stockholders of Woolworths: From the detailed analysis, it has been found that the stock price of the firm Woolworths Limited was around AUD 23.44 in October 2015, however, this stock price decreases with the passage of time (Au.finance.yahoo.com 2016). Therefore, it has been noted that the share price of the specified firm has been reduced to AUD 20.89 in June 2016 with the passage of time (Au.finance.yahoo.com 2016). This situation indicates the lack of confidence of the stakeholders in the movement of share prices. Stockholders of Wesfarmers: The share price of the particular company Wesfarmers Limited was around AUD 38.14 in October 2015, however, it raised to AUD 40.10 in June 2016 as the time passes (Au.finance.yahoo.com 2016). This indicates the confidence of the stakeholders in the movement of the share prices. Sustainability and Social Responsibility The public companies reveal the financial results to the public by the help of annual report. Additionally, the sustainable reports and social responsibility report of a firm should be published so that users can analyze the reports of the organization (Coombs and Holladay 2012). These are considered as a transparent and effective communication which transforms the company and helps to build brand image. CSR reports give priority to governance and ethics, people, society, environment and supply chain. Social Responsibility at Woolworths It has been found that Woolworths has adopted different social responsibilities but it has been noted that company remains unable to keep all its promise that it has made for the betterment of the society (Woolworthslimited2015.csr-report.com.au 2016). This include the company promised to decrease its waste but it remains unable to keep its promise. Image 4: Social Responsibility at Woolworths (Source: Woolworthslimited2015.csr-report.com.au 2016) Social Responsibility at Wesfarmers Wesfarmers always tries to build its brand image by generating opportunities for employment of indigenous women within the firm and this has increased the rate of employment (Sustainability.wesfarmers.com.au 2016). Therefore, it can be said that Wesfarmers tries to show responsibility towards the society. Image 5: Social Responsibility Wesfarmers (Source: Sustainability.wesfarmers.com.au 2016) Prudence in Conceptual Framework Revision In Woolworths, the estimates and judgments involve a high degree of complexity for carrying out liabilities and assets amount within next period (Woolworthslimited.com.au 2016). The revision of accounting estimates implies that this revision might influence the particular period or future or both the time periods. Image 6: Prudence and Woolworths (Source: Woolworthslimited.com.au 2016) Suggestions Thus, it can be suggested that the compliance with the conceptual framework and AASB standards requirements are primary factor for every firm. The organizational strategies help to enrich the value of an organization. Woolworths has to regain its value to represent true and faith accounting value to all its stakeholders. Conclusion Therefore, it can be concluded that annual report of a firm helps the stakeholders to analyze the financial condition of the firm. Thus, annual reports are considered as the primary source of information. It can also be said that the analysis of the annual reports help the investors to invest in the firm. The comparative study concludes that Woolworths does not follow conceptual framework, however, Wesfarmers follow it. Thus, it can be said that the financial situation of Wesfarmers is comparatively better than Woolworths. 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