Contemporary Issues In Accounting Conceptual-Myassignmenthelp.Com

Question: What Is The Contemporary Issues In Accounting Conceptual? Answer: Introduction JetStar is considered as a brand of Qantas Airways, which is known to be supreme in the low-cost airline operating division in Australia. It is responsible for carrying more than 8.5% of passengers alone in the country. The main operations are seen to extend from home to international network with its destined airport in Melbourne. The main tie-ups have been identified in terms of Airbus A320 and Boeing 787 Dreamliner (Qantas.com. 2017). Virgin Australia Airline established in 1999 is considered as the predecessor of Qantas Airways. The main operation of the airline company is based in Bowen Hills in Brisbane. The main operations of the aircraft are seen to be based on a single route. So far Virgin Australia has been able to expand itself across 29 cities including some of the most noted one such as Brisbane, Adelaide, Melbourne and Sydney (Virginaustralia.com. 2017). The main intention of the study is to show the current accounting framework and examine whether the current accounting standards comply with the requirement prescribed by AASB. The report has also check whether for the companys financial reporting shows the conceptualization of prudence. The important source to consider the evaluation has been done based on intangible assets, tangible assets, the precision method and various findings from the annual general meeting report. The latter part of the study has been able to highlight on the reason of shareholders investing in the companies Conceptual framework of Accounting for both the companies Both JetStar and Virgin Australia Airlines compliance with the conceptual framework has been identified with AASB and Corporations Act 2001. The financial statements of both the companies are further seen to be prepared as per IFRS norms. The aforementioned standards have been seen to be issued by the International Accounting Board. In the progression of the financial statements of both Jetstar Airways and Virgin Australia Airlines it has been discerned that they have followed historical cost evaluation except in areas where assets and liabilities needs to be assessed at fair value. The exception is in further noted in areas where these are considered as per accounting policies. The revenue recognitions conceptual framework has been prepared with per AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. Despite of this, the companies are set to replace the standards with AASB 15 Revenue from contracts with the customers in the annual report of the company on or after 1st January 2018. The main determination of the existing AASB 117 for leases and revise the framework based on AASB 16. AASB 136: Impairment of Assets has been further noted to be applicable for impairment of assets and the financial guarantees are taken into consideration as per AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Prudence theory applied in both the companies The general theory of application of prudence has been seen to overestimate the amount of revenues. Both the airline companies have been seen to apply the concept of prudence in their financial reporting. This particular aspect is evident with the conservative nature of asset recording and non-underestimation of the liabilities. The financial statements has been further seen to be based on private transactions and considered every aspect of prudence theory. The delay in the acceptability of the new accounting standards has further depicted compliance with this theory (Lipka 2013). It has been seen that the company has not adopted applied AASB 15 Revenue from Contracts with Customers (AASB 15) and AASB 16 Leases (AASB 16), as it has not been able to get the viability of replacing the existing standards that is AASB 118 Revenue. The process of dealing the recognition of the new standards has been seen by setting their adoption date on or after 1 January 2018 for the revenues and on or after 1 January 2019 for the new standards of leases. Some of the other aspects of prudence has been identified with regular review of the assets and check the reason for declining values of these assets. Typically the most vital component of prudence with both the companies has been identified with not writing down of the fixed assets value (Berger 2016). Criteria followed for financial data Total Assets- Based on the annual report and analysis published by both the companies in 2016 it has been observed that the total assets of Qantas Airways were $ 17708 m in 2016. The total assets of Virgin Australia Airlines stood at $ 6886.9 m in 2016. In addition to this, the contingent liabilities have not seen to be present for Virgin Australia airlines as at 30 June 2016. With respect to Qantas Airways Ltd the total amount of assets has been seen to be measured based on fair value less selling cost. The different types of net benefits of Qantas Airways have been further measured as a fair value of plant assets less the present value. Some of the various types of different considerations in the preparation of financial statements of Virgin Australia have been based on assets which are held under financial leases and recognised as per fair value (Rossing 2013). Tangible Assets and Intangible Assets- The various types of considerations for tangible and intangible assets for Qantas Airways has been classified under revenue generation and the total recoverable amount of the same. The considerations of intangible assets are further seen to be based on impairment losses less cost. The different types of methods for determining the amortisation has been further seen to consider that the useful life and residual life is evaluated as at reporting date. Assets having indefinite lives are not held for consideration as impairment is done on annual basis (Krieger and Mayrhofer 2016). Depreciation Qantas Group has recognised reputation as per straight-line method for its valuation of property plant and equipment. The exception is seen to prevail for freehold land. The deposition rates imposed on these assets are seen to be calculated on total valuation costs, the residual lives and the estimated useful lives. The aforementioned depreciation rates on the assets are charged on the date of acquisition. The particular assets which are held under financial leases and appreciated provided the company is having the ownership (Wang and Li 2015). Virgin Airlines has taken into consideration the amortisation of the assets based on date they are held for sale. The specific depreciation charged on PPE has been further seen to state cost less accumulated depreciation and impairment losses. Similar to Qantas Airways the deposition of assets for Virgin Airlines is also seen to be considered on straight-line method for determining its useful life of assets (Qantas.com.au. 2017). Rationale for the shareholders investing in the companies The main considerations of the directors statement have been able to show the reason why an investor should look forward to invest in both the companies. It is an further seen that based on the report published by Virgin Airlines, the revenue of the company has jumped from$4,749.2 million to $5,021.0 million. The comparative period for the total equity has been able to account for 60% of the profits accumulated from Tigerair Australia on 16 October 2014. The investors need to particularly be aware of the increasing net operating expenditure which is considered as a downside for Virgin airlines. The aforementioned consideration has been seen to be conducive in making investment decision in both the airline companies (Kober, Lee and Ng 2013). In a similar way based on the CEOs statement published by Qantas Airways in 2016 it has been determined that the group has been significantly able to contribute to the overall value. The net increase in the financial performance has been evident with the increasing operating margin which has been further recognised in terms of increasing operating margin from the Jetstar Group, Qantas Loyalty, Qantas International and Qantas Domestic. It has been further observed that more than two thirds of the total earnings of Qantas Airways are based on the international operations, loyalty programs and portfolio strategy. The investors should be particularly looking forward to the increasing PBT of $ 975 m in 2015 to $ 1532 in 2016. Based on the financial report analysis of both the companies, it has been seen that Jetstar (Qantas) is not only in better position in compared to Virgin Australia airlines but it is also cost efficient which makes it a better choice for the investor (Guthrie and Pan g 2013). Conclusion The various stages of discussions of the study have been able to state current accounting framework of Qantas Airways and Virgin Airlines. The report has been further able to examine whether the current accounting standards comply with the requirement prescribed by AASB. The report has also check whether for the companys financial reporting shows the conceptualization of prudence. JetStar and Virgin Australia Airlines compliance with the conceptual framework has been identified with AASB and Corporations Act 2001. Both the airline companies have been seen to apply the concept of prudence in their financial reporting. This particular aspect is evident with the conservative nature of asset recording and non-underestimation of the liabilities. The delay in the acceptability of the new accounting standards has further depicted compliance with the prudence theory. The investors should be particularly looking forward to the increasing PBT of $ 975 m in 2015 to $ 1532 in 2016 for Qantas. References Berger, L. (2016) The impact of ambiguity and prudence on prevention decisions, Theory and Decision, 80(3), pp. 389409. doi: 10.1007/s11238-015-9512-1. Guthrie, J. and Pang, T. T. (2013) Disclosure of goodwill impairment under aasb 136 from 2005-2010, Australian Accounting Review, 23(3), pp. 216231. doi: 10.1111/j.1835-2561.2013.00204.x. Kober, R., Lee, J. and Ng, J. (2013) GAAP, GFS and AASB 1049: Perceptions of public sector stakeholders, Accounting and Finance, 53(2), pp. 471496. doi: 10.1111/j.1467-629X.2012.00469.x. Krieger, M. and Mayrhofer, T. (2016) Prudence and prevention: an economic laboratory experiment, Applied Economics Letters, pp. 16. doi: 10.1080/13504851.2016.1158909. Lipka, D. (2013) The max U approach: Prudence only, or not even prudence? A Smithian perspective, Econ Journal Watch, 10(1), pp. 214. Qantas.com. (2017).Our Company | Qantas. [online] Available at: https://www.qantas.com/travel/airlines/company/global/en [Accessed 11 Aug. 2017]. Qantas.com.au. (2017). [online] Available at: https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf [Accessed 11 Aug. 2017]. Rossing, J. P. (2013) Prudence and Racial Humor: Troubling Epithets, Critical Studies in Media Communication, 31(4), pp. 115. doi: 10.1080/15295036.2013.864046. Wang, J. and Li, J. (2015) Precautionary Effort: Another Trait for Prudence, Journal of Risk and Insurance, 82(4), pp. 977983. doi: 10.1111/jori.12054. Virginaustralia.com. (2017). [online] Available at: https://www.virginaustralia.com/cs/groups/internetcontent/@wc/documents/webcontent/~edisp/2016-asx-financial-report.pdf [Accessed 11 Aug. 2017].