Accounting Policies of ASX Listed Company-Free-Samples for Students

Question: Assess accounting policies and estimates of your selected ASX listed Company. Answer: Introduction With the increasing ramification of economic changes and complex business structure, each and every company in Australia has to report their financial statement by following proper level of GAAP rules, regulations and international financial accounting standard. There are several normative and positive theories of financial accounting which could be undertaken by company to prepare their financial statements in determined approach. In this report, accounting standards and policies followed by Australian listed company has been followed in determined approach. There are several Australian companies which have been following IFRS standards and GAAP rules while reporting their financial statements with reporting authorities on international level. However, due to increasing complexity and different legal compliance, these companies have been facing problem in establishment of harmonization in their accounting and reporting frameworks. In this report, estimation of the financial data has been reflected. After that, red flags and problems have been identified which reflects companys reporting formats. Ideally, in case of conflict between IFRS standards and GAAP rules, company override GAAP rules with IFRS standards while following accounting and reporting frameworks. Accounting policies could be defined as set of rules, accounting standards and policies which are used by organization to prepare accounting and reporting frameworks. It is evaluated that accounting policies adopted by company depends upon the management and accounts discretion. In this report, Atlassian Software Company has been taken into consideration and after evaluating the accounting and financial frameworks, various red flags and estimation has been found. Present description of organization In this report, Atlassian Software company has been taken into consideration to identify the estimates in accounting reporting and red flags which company has faced in its reporting frameworks. It is an Australian supermarket company trading as supermarket chain and selling goods and service to clients through its off line and online supermarket channel. The CEO of company is John Durkan and having more than 1, 17,000 employees. This company has followed proper IFRS standards and GAAP rules to establish harmonization in GAAP rules and International accounting standards in its reporting frameworks (Kieso, Weygandt and Warfield, 2010) Accounting policies and GAAP rules followed by Atlassian Software company With the increasing international business of Atlassian Software company, it has followed various accounting policies and GAAP rules in its accounting and reporting frameworks (Irvine and Moerman, 2017). Atlassian Software company, in its depreciation charging method has followed straight line method to identify present value of assets. However, this method has shown inefficiency in showing the true value of assets and will result charging less amount of depreciation as compared to overall assets value. (Hussey and Ong, 2017). Company has recorded all of its lease transactions as per AASB16 rules and standards. Atlassian Software Company has implemented provision of right of use assets in reporting of its underlying leased assets. However, the leased expenses charged by company have been treated as capital expenditure. Consolidation of financial statements and reporting of same have been done by following proper AASB-5 IFRS set rules and given standards (Cairns, et al. 2011). As per the IAS-136 Atlassian Software Company has implemented impairment test and charged all of its impairment loss from goodwill and other cash generating units (de Ricquebourg and Jonathan, 2013). Atlassian Software Company has prepared its consolidated financial statement as per AASB 101. These all AASB standards and GAAP rules has also allowed company to prepare its financial statements as per the IFRS rules and standards. AASB-117 is the accounting standard which has been followed by Atlassian Software Company to record its financial lease transaction. Estimates used by Atlassian Software Company Atlassian Software Company has followed IFRS and AASB standards while recording of its financial transaction in its books of accounts. There are several future estimates which have been used by Atlassian Software Company in its financial reporting frameworks such as income tax payment, valuation of inventories management, joint venture transactions, commitment of company and evaluating the recording frameworks of organization (Clinton, Pinello and Skaife, 2014). Atlassian Software Company has taken all the estimates collected from subsidiaries companies and on the basis of collected information it has prepared its consolidated financial statement. In addition to this, lease agreement and differed tax payment are the estimation used by company in its annual report. (Nobes and Stadler, 2015). However, there are several outcomes which could be observed by Atlassian Software Company in its reporting framework. If company follows proper level IFRS rules and accounting standards then it will make easy for investors to interpret the data. As per the AASB-5 Atlassian Software Company has made proper level of consolidated of its financial statement and made disclosure of its estimations in its financial notes of accounts (Steman, 2016). Atlassian Software Company has established harmonization in its IFRS rules and GAAP standards. Atlassian Software Company has implemented IAS-136 to implement impairment test to identify the true and fair view of its assets in the books of account. It has maintained estimation for liabilities for wages and salary including all the non-monetary transactions and set off within 12 months from the reporting period. Estimates used by rivals In Australian super market business, there are several rivals who are following IFRS rules and estimation in their reporting frameworks. Nonetheless, the estimation used by all of these companies is different from each others. These estimations are used to set off the unbalanced reporting structure and reporting of consolidated financial statement with the reporting authorities. There are several rivals such as Woolworth, Wesfarmers and Morrison plc who have made these compliance in easy and determined approach. Morrison plc has made estimation for recording of its debt assets and deferred payment in its books of account (Mardini, Crawford and Power, 2015). All the contingent liabilities and other expenses which are not charged by these companies in their books of accounts are shown under the footnotes and notes to account. There are other estimations which are used by these rivals in their reporting frameworks such as determining the present value factors, flow of cash in business a nd financial leverage estimation. Comparison of accounting policies and estimates used by Atlassian Software Company and Morrison plc Accounting rules Atlassian Software Company Morrison plc AS per IFRS-5 ( Rehabilitation and injecting of funds Atlassian Software Company has followed IFRS-5 provisions and rehabilitation for injecting money and capital in the business operation of company. Nonetheless, these transactions have been recorded as capital nature transactions (Cline, Garner and Yore, 2014). Company has made proper level of bifurcation in its revenue and capital nature transactions. However, expenses incurred for the benefits of more than one year are booked as capital nature transaction. IAS-136 As per the IAS-136, company as implemented proper level of impairment test to identify the true and faire view of assets on periodic basis. This impairment test is implemented on the basis of annual basis in its accounting and reporting frameworks Morrison plc implements its impairment test on random basis. It is evaluated that whenever company estimates that there is changes in its assets value as per the value shown in market value. Income tax payment and tariffs paid for one year charged as revenue expenditure and expenses for more than one years are treated as capital expenditure. Atlassian Software Company takes estimation from subsidiary company and prepare its consolidated financial statements as per the AASB-5 Company has prepared its financial statement as per the AASB-5. However, all the estimation taken from the subsidiaries company is done by taking management representation letter from all of subsidiaries companies. IFRS-23 (treatment of income tax payment All the tariffs and income tax payment is considered as operating expenses. However, company has charged deferred tax as capital expenditure (Chen, Cumming, Hou, and Lee, 2016). Assesse accounting flexibility Atlassian Software Company has recorded all of its assets at its cost value after implementation of impairment test as per the IAS-136. Company has charged all of its impairment loss from goodwill and other cash generating units. In addition to this, classification of assets has been made in Atlassian Software Company as per the AASB-105 (Christensen, et al. 2015). In addition to this, inventory management is done by following inventory management techniques and determining the economic order quantity. This process will strengthen the reporting of company and passing entries for self- insured liabilities of the Atlassian Software Company. These assets is based on the set number of estimates in different value of Atlassian Software Company and management practice implemented in the books of accounts such as future inflation, application of accounting standards, charging depreciation amount and deferred revenue and taxes and return on investment (Ball, Li and Shivakumar, 2015). Evaluation of accounting strategies and policies Atlassian Software Company has recorded several estimates in its financial books such as future inflation, application of accounting standards, charging depreciation amount and deferred revenue and taxes and return on investment. These estimations set in financial statements will increase the accounting strategies and policies implemented by Atlassian Software Company in its reporting frameworks. However, if proper level of estimations is not used then it may result to discrepancies in the reporting frameworks. Atlassian Software Company has adopted FIFO method to maintain effective level of inventory management in organization. This level of inventory management method has been followed by Atlassian Software Company after following all the rules and regulations of Atlassian Software Company (Sytnik, 2014). In addition to this, depreciation method followed by company is straight line method in which all the depreciation charged is not equal to the assets value in organization. This c ould be understood with the help of given example that Atlassian Software Company has recorded all of its assets and liabilities at their cost value after implementing SLM depreciation method as per IFRS rules. Nonetheless, Company has overridden the GAAP rules for depreciation charging on assets. If company has followed GAAP rules then it would have followed For instance, plants and machinery in Atlassian Software Company has been recorded at cost value as per the IFRS rules and standards. On the other hand, a GAAP rule provides that Atlassian Software Company should record its assets at the cost value and market value whichever is lower. However, Company disclosed all of its required details and assumptions in its notes to account. (Brochet, Naranjo and Yu, 2016). Changes in accounting estimates by the Atlassian Software Company After evaluating the annual report of Atlassian Software Company, it is observed that company has various estimations and assumptions such as impairment test implication loss, market value present factors, deferred tax payment, contingent liabilities. These estimations have several impacts on the profit and loss accounts. For instance, amount of tax paid by company has been charged as operating expenses in business and resulted to decrease in overall profit of company. It has shown that expenses and investment made by company for more than 1 year should be charged as capital expenditure in organizations. This level of business functioning will increase the overall future value of organization and sustainability of business throughout the time. However, if company changes its set estimates then it will result to destruction of its reporting frameworks and making calculations with retrospective efforts. Atlassian Software Company used straight line method in calculating the depreciatio n amount on the assets of company. However, changing the SLM method to written down value method have also resulted to charging depreciation and all the assets from retrospective efforts. This will increase the depreciation amount charged on the assets of company by 12% throughout the time (Bischof, Brggemann and Daske, 2014). Suggestion for accounting policies and estimates prepared by Atlassian Software Company With the increasing ramification of economic changes, Atlassian Software Company has implemented various accounting policies, such as using FIFO method in inventory management, tax implication, accounting and recording of deferred tax and implementing proper estimation and reporting frameworks (Barth, 2013). It is evaluated that company has problem in complying with IFRS rules and standards and GAAP Rules. As per the GAAP rules, company should have estimation of proper accounting values. For instance, contingent liabilities and bifurcation of capital and revenue expenses should be disclosed in the notes to accounts of company. In addition to this, depreciation methods and changes for the same should also be disclosed in the annual report. There are several estimations such as impairment test implication loss, market value present factors, deferred tax payment, contingent liabilities which should be based on the proper facts and accounting principles of company (Aobdia, Lin and Petacc hi, 2015). However, there are several red flags and problem which is faced by company while establishment of reporting and accounting compliance such as recording tax payment and bifurcating revenue and capital expenditure. Red flag in accounting report of Atlassian Software Company Atlassian Software Company has several Red flags in its accounting and reporting frameworks. However, with the increasing ramification and GAAP rules standards. Red flags in accounting report of Atlassian Software Company are defined as problems and threats faced by company in its reporting and accounting frameworks. It is evaluated that if these red flags are not mitigated by company then it may result to destruction of companys value and accounting frameworks (Atkins and Maroun, 2015). Ideally, Atlassian Software Company has identified these problems while reporting its financial statements. In addition to this, remarks given by auditors while auditing the books of accounts will also result increase the overall red flags in several part of the reporting. Monitor revenue and capital expenditure of company Atlassian Software Company has faced red flag in reporting of its expenditure. It becomes very cumbersome to record expenditure of company as revenue and capital expenditure. It is evaluated that Atlassian Software Company has charged all of investment as capital expenditure and expenses relate to operating functions has been charged as capital expenditure. It has shown that company has made bifurcation in its expense to reduce its tax burden and used all the revenue expenses to reduce the overall profit and loss of the year. However, as per the IFRS rules and standards Atlassian Software Company needs to charge all of deferred income tax as capital expenditure and tax expenses related to one year should be charged as revenue expenditure. Nonetheless, bifurcation of these expenses is the major red flag which Atlassian Software Company has been facing in its reporting frameworks. Method of charging depreciation on the assets of company After evaluating the IFRS rules and standards, it is considered that charging depreciation on the assets of company is completely based on the discretion of the management department. Atlassian Software Company has charge straight line method which has resulted to charging depreciation on the assets of company. Nonetheless, charging depreciation through SLM method would result to leaving some of the value of assets uncharged from the profit and loss account. Therefore, company should decide which method of depreciation should be used to disclose the true and fair view of assets (Jaggi, et al. 2016). Inventory valuation method Inventory valuation in Atlassian Software Company is based on the IAS-3. There are several inventory valuation methods such as FIFO, LIFO and other inventory management method. Atlassian Software Company has adopted FIFO method to manage inventory in organization. It has observed that FIFO method has helped Atlassian Software Company to manage the inventories in warehouse of company. This method has allowed company to maintain effective inventory management to reduce the overall cost of production of company. It is observed that if company changes its FIFO inventory management method to LIFO inventory method then it will change the estimations used by company. These inventory methods reduce the overall cost of production of company in determined approach. Changes in net income, cash flow and related party transactions impact As per the IAS24, Atlassian Software Company has to take care of its all related party transactions in its accounting and reporting frameworks. . It is evaluated that if company is having pecuniary relation with other companies then it should not enter into business transactions with those companies. .However, Atlassian Software Company could enter into related party transactions by passing special resolutions in its meeting. . After evaluating the annual report of company, it is evaluated that company has made all of its business transactions with other organizations by passing resolution. Moreover, company has shown its entire contingent liabilities in the notes to account. These are the expenses which may or may not arise in the organization. As per the IFRS rules, company could showcase these information in the notes to accounts. Atlassian Software Company has also followed foreign exchange management policies to make legal compliance for all the foreign transactions. In addition to this, remittance of money from one country to another country has been made by company by following proper level of rules and regulation of FEMA act 2001. Atlassian Software Company have to face red flag arise in accounting and reporting of in various cases such as related party transactions. Therefore, it is inferred that if company follow proper level of rule and IFRS standards in its accounting and reporting frameworks then it will strengthen companys sustainability in determined approach. Conclusion In this report, accounting standards and accounting policies followed by Atlassian Software Company in its reporting frameworks has been done. It is considered that accounting policies are the rules and regulations which needs to be complied by accountant and management department while reporting its financial statement. After evaluating the annual report of Atlassian Software Company, it could be inferred that company has established proper level of harmonization in its IFRS accounting standards and GAAP rules while reporting its financial statements with reporting authorities. After evaluating the annual report of company, it is observed that company has established proper level of harmonization in IFRS standard and GAAP standards. However, these all red flags which are identified in this report may be mitigated by Atlassian Software Company if it follows proper level of IFRS rules and GAAP standards References Aobdia, D., Lin, C.J. and Petacchi, R., 2015. Capital market consequences of audit partner quality.The Accounting Review,90(6), pp.2143-2176. Atkins, J. and Maroun, W., 2015. 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