As a new accounting graduate, you have just joined the financial reporting unit of a listed company* when your manager, the Chief Financial Officer (CFO), approaches you with your first task.
In their last meeting, the Board of Directors of your company discussed the importance of ensuring that their financial reports meet the objective of general purpose financial reporting and qualitative characteristics of useful financial information as outlined in the IASB September 2010 ‘Conceptual Framework for Financial Reporting’ (CF). Board members are concerned about the company’s reputational standing in the market relating to deviations from these objective and qualitative characteristics, specifically in Property, Plant and Equipment (PPE).
Therefore, the Board decided to have a review of the relevant disclosures in the company’s latest annual report pertaining to PPE and whether these disclosures are aligned with the CF’s objective and qualitative characteristics.
Based on the Board’s decision, the CFO asks you to draft a business research report addressed to the Board of Directors on the following:
a. Explain the objective of general purpose financial reporting and the qualitative characteristics of useful financial information according to The Conceptual Framework for Financial Reporting.
b. Critically analyse to what extent the latest annual report of your company meets the disclosure requirements for PPE as per AASB 116.
c. Based on your findings in part b, critically analyse to what extent the disclosures on PPE satisfy the fundamental and at least one of the enhancing qualitative characteristics of useful financial information.
d. Based on your findings in part c, critically discuss to what extent the disclosures on PPE align with the objective of general purpose financial reporting and, as a conclusion, recommend actions for improvement.
*You need to choose a suitable company by yourself from:
1. is constituent of the S&P/ASX 200 index;
2. published audited annual reports for the year ended 30 June 2016 in English, fully complying with IAS/IFRS or AASB; and
3. does NOT belong to the financial sector.