Analysis Of Australian Company Accounting Theory - 1100 Words

Analysis Of Australian Company Accounting Theory: AGL Energy Limited (Australia) (Essay Sample) Content: Name:Course Code:Instructor:Date:Accounting Theory and ConceptAGL Energy Limited (Australia)Accounting is a tool or side of management that enables organization to present accurate data to the concerned stakeholders. Despite data presentation taking a better part of accounting, it is critical to acknowledge that accounting is built on well laid theories and concepts. Accounting theories and concepts are held together by the conceptual framework of accounting as the major block or foundation. From the people who key in data to those responsible for the production of final statements, these theories and concepts ensure flow, credibility and accessible financial information for all. AGL Energy Limited is one of the integrated companies providing electricity in Australia. AGL operates in the sensitive line of providing utility to household and commercial sector. Based on this the company is watched by both domestic and business energy users (AGL Limited Company website n. p). Since 1837, AGL has enjoyed effective market operation through provision of electricity to all it clients. Realizing the massive task the company has on annual basis; its top management has maintained annual merited recruitment to meet the ever increasing electricity demands (Edmonds, Edmonds, Mcnair Olds, pp. 28-32).A number of companies have enjoyed the utility industry specifically electricity but have opted out terming high cost of production and distribution, damages in terms electricity material and high debts. It is interesting to note that AGL has been able to maintain the market amid the challenges feared by other market players. One main strength of the company is a well established management with main focus on its financial sector or department as the hub of the company. The company is aware of that fact that any stumble on in hits statement would see the monopoly the company has enjoyed for long slip away. The effective reporting at AGL Ltd is built around accounti ng theories of usefulness, qualitative characteristics, assumption, historical cost and matching principles (Financial Accounting Standards Board Statement of Financial Accounting Concepts n.p)AGL Limited Account Theories and Concepts 1 The Usefulness accounting ConceptEvery company in Australia is very much of the high number of users depending their financial information to make vital decision. In the year 2013, AGL issued shares for public subscription. As much the share amount was large and price arguably high, a good number of people came out to subscribe and the IPO did not go the full month as it was planned. The company believes this was credit to its full and effective reporting. Buying or share subscription by the public is done after based on ones perception about the organizations stability. Prior to the IPO, AGL had just released it statement of financial position which showed stability in terms of assets and the general liquidity level of the company. Through its state ment of financial position, AGL managed to convince the public of the going concern which is major decision is making factor in a business (Bhattacharyya 2005, pp. 12-16). Potential investors in company shares are always pushed on this after assurance of the companys continued market stay. In this case, AGL through it statement of financial position (Balance sheet) proved the company was in the business to stay and in the best position to meet its liabilities. 2 Qualitative CharacteristicsFinancial reporting is not about data presentation as perceived by many but quality of financial information released to the market. Accounting conceptual framework provides that accounting information should be relevant, reliable, comparable and consistent. In the case of AGL, the company is very much aware that its shareholders need previous statement to place against or compare with current as a way of attaining any growth trends (Stickney 2010, pp.21-23). 3 AssumptionsAccounting or financial ar e expected to poses high level of accuracy based on the fact that these information influence vital decision making. Effective accounting theories operate on major assumptions of economic entity, going concern, monetary unit and periodic assumption a look at the statement provided by AGL the company is rooted on these assumption key ways of making in road into the market and extending its operation (Financial Accounting Standards Board 2000, pp. 17-21). 4 Historical Cost And Matching PrinciplesAGL Ltd as a company good reputation prepares its financial statements on the basis of Generally Accepted Accounting Principles. GAAP acknowledges the historical cost and matching principles as key to effective reporting since it provides room for asset valuation thus communicating important ratios such liquidity among others (Albrecht 2007, pp. 31-34).Financial Statements presented on well accounting theories and conceptsFiscal year is July-June. All values AUD millions. 2011 2012 2013 2014 2 015 5-year trend Sales/Revenue 7.07B 7.45B 9.72B 10.45B 10.68B Cost of Goods of Sold 6.19B 6.45B 8.25B 8.88B 8.79B COGS excluding DA 6.04B 6.27B 7.96B 8.56B 8.4B Depreciation Amortization Expense 148M 173.9M 287M 326M 391M Depreciation 127M 139.8M 240M 272M 362M Amortization of Intangibles 21M 34.1M 47M 54M 29M Gross Income 886.8M 1.01B 1.47B 1.56B 1.89B 2011 2012 2013 2014 2015 5-year trend Expenses 220.8M 241.1M 467M 578M 793M Research Development - - - - - Other SGA 220.8M 241.1M 467M 578M 793M Other Operating Expense 52M 63.4M - - 262M Unusual Expense (174.3M) 516.3M 380M 21M 282M EBIT after Unusual Expense 174.3M 184.5M (380M) (21M) 548M Non Operating Income/Expense (14.2M) (10.8M) (44M) (50M) (51M) Non-Operating Interest Income 47.9M 45.4M 41M 24M 20M Equity in Affiliates (Pretax) - - - - - Interest Expense 62M 73M 200M 202M 207M Gross Interest Expense 77.4M 99.8M 228M 217M 231M Interest Capitalized 15.4M 26.8M 28M 15M 24M Pretax Income 760M 146.1M 419M 7 35M 310M Income Tax 234.9M 48M 70M 190M 119M Income Tax - Current Domestic 130M 93.2M 110M 9M 103M Income Tax - Current Foreign - - - - - Income Tax - Deferred Domestic 104.9M (45.2M) (40M) 181M 16M Income Tax - Deferred Foreign - - - - - Income Tax Credits - - - - - Equity in Affiliates 33.6M