AOG Aveo Group FP Ordinary/Units Stapled Securities Real Estate

Financial Analysis of BHP Billiton
8

Advanced financial accounting
Table of Contents
Introduction    2
Description of Accounting concepts    3
Conceptual framework and issue of measurement    4
Fundamental qualitative characteristics-understanding of relevance and representational faithfulness     7
Conclusion     8
Reference List    9
        
Introduction
The report contains a brief discussion on the accounting concepts, conceptual framework on which accounting rests along with the issue of measurement in the conceptual framework and also an analysis of the fundamental qualitative characteristics of financial reporting namely relevance and faithful representation. Accounting concepts are the fundamental accounting principles on which the accounting system rests like the concept of Accrual, going concern, conservatism, substance over form, separate entity concept, consistency, money measurement concept where in all transactions are valued in money and non-monetary cost impact may be reported in the notes to the financial statements. The conceptual framework provides the framework to be followed in choosing the accounting policies by the management while preparing the financial statements. The third section deals with the understanding and importance of fundamental characteristics of financial reporting namely relevance and faithful representation. A study of the financial statements of Aveo Group has been made to study the accounting concepts, application of conceptual framework in measurement of assets and the concept of relevance and fair representation of the financial statements.
Description of accounting concepts
The accounting concepts means the fundamental assumptions on which the accounting of businesses is done. (Accountingtools.com, 2019) The basic accounting concepts are
a) accrual concept
The accounting for Revenues and expenditures is done in the related financial year and not on cash basis.
The Aveo group has prepared the accounts in confirmity with Accounting standards issued by AASB and also IFRS issued by IASB. As per the general accepted accounting principles, following accrual concept is mandatory.The auditors do not review the financial statements unless it is prepased on accrual basis.The company in Notes to Accounts in Revenue Recognition has mentioned that in current year Deferred Management Fees accrued during the year is now disclosed in the revenue line. Earlier, the cash received was shown as revenue and the difference between accrued revenue and cash receipt was shown as changes in the fair value of Residents loan in the Income statement.Interest revenue is recognised on accrual basis
b) Conservatism concept-
Revenue is recognized solely when exists a reasonable certainty that they will be realized and expenditures are accounted immediately as they are incurred.
Aveo has adopted the Conservatism concept as disclosed in Notes to the Consolidated Financial statements Section 1A.Profit and loss Information a) Revenue Recognition states “No revenue is recognized if there is significant uncertainty regarding recoverability of the consideration due or if the costs incurred or to be incurred cannot be measured reliably” (Aveo Group, 2018)
Also, in accounting for provisions, it has been mentioned that if it ascertained that there would be an outflow of economic resources of the company and the amount can be reasonably determined, an adequate provision is created by creating a charge on the Income statement.
c) Consistency concept-
Consistency concept states that the business continues to follow an accounting method or estimate on a continous basis. Any changes in accountig method or assumptions needs to be properly disclosed.Consistency concept allows comparison across different years possible.
The Aveo group has consistently followed same accounting policies in the preparation and presentation of financial results and position across various years and when there is any deviation, an adequate disclosure has been made stating the nature and financial impact of the same so that comparisons across different years can be made.
d) Economic entity concept-
According to The concept the business is a separate legal entity and is separate from its owners.
For Aveo group, Equity holders have been considered separate from the business and they are entitled to get dividends and other distributions declared by the company and to vote at the security holder’s meeting. This shows the separate legal status of the company and its stakeholders.
e) Going concern concept-
The basic assumption in this concept is that the business will continue to operate till indefinite time. Through the application of Going concern concept, business deferr their income and expenses to the period to which they actually relate.
For the Aveo Group, deferred Tax asset and liabilities have been computed and reflect on the financial statements. If any company fails to be a going concern, the realisable value of assets and settlement values of liabilities needs to be reported. But, the books have been prepared on cost basis as all assets expect financial assets have been prepare on the basis of cost less...