Remuneration Report Woolworths Limited Free-Samples for Students

Question: Write a report on the Importance of Financial Reporting and Conceptual Framework in the Financial Statements of the Modern Day Organizations. Answer: Introduction The given report will highlight the importance of financial reporting and conceptual framework in the financial statements of the modern day organizations. With this regard, the organization Woolworths has been selected. Based on different aspects of financial reporting, the financial statements of the organization will be evaluated. Remuneration Report of the organization Woolworths Limited From the annual report, it can be inferred that the organization Woolworths have abide by the rules and regulations of ASX while making their remuneration report. The management of the organization has successfully established a committee named PPC (People Policy Committee) which looks after the composition of Group remuneration report. However, it has been seen that the organization has obtained a growth rate of 0.1% in remuneration percentage in 2016, in comparison to 2015. Conceptual Framework Levi (2015) opines that the conceptual framework helps in understanding of the aims and objectives of financial reporting for all the modern organizations. It also helps a particular organization to take valuable decisions in terms of equity and debt instruments and offers effective financial decisions to the respective users of financial statements. In case of the organization Woolworths, it can be inferred that the organization successfully implements all the rules and regulations of the conceptual framework. In addition to this, the management of the organization has projected their financial statements while taking into consideration about the regulations of the conceptual framework. This has been done in order to improve the credit rating of the organization. General Purpose Financial Reports for users for making financial decisions Inventory Figure 1: Statement of Inventory of the organization Woolworths (Source: Woolworthslimited.com.au 2016) From the above figure, it can be inferred that the percentage of closing inventory of the firm has increased, while the net investment in total inventory have declined in 2016, in comparison to the last financial year. From this, it can be inferred that the management of the firm has failed to manage inventory in a proper way, due to inefficiency of working capital cycle of the firm. This cannot be considered as a positive sign of the organization. Accounts Receivable The details of accounts receivable of the firm can be obtained with the help of the balance sheet statement, which is as follows:- Figure 2: Balance Sheet of the organization Woolworths (Source: Woolworthslimited.com.au 2016) From the balance sheet of the firm, it can be inferred that the total amount of accounts receivable has increased in comparison to the previous years. In addition to this, it can be identified that the trade receivables were recovered at a fair value rate and interest method has been used by deducting the total allowance of impairment. In addition to this, it can be deduced that the total amount of financial cost of the organization has declined, which can be considered as a good sign of the organization. Liabilities From the balance sheet of the organization (Figure 2), it can be inferred that the total liabilities including long-term and short-term amounts to around $1236 Million. This can be a real cause of concern for the organization as there is very less chance of settlement of the total amount of liabilities. This can also hamper the working capital cycle of the firm as the liquidity of the form may be hampered. PPE (Plant, Property and Equipment) From Figure 2, it can be inferred that the total amount of investment in PPE has grown up to a large percentage in the past 2 years. This can be considered as a positive sign for the organization as they have successfully invested in new stores, which resulted in total amount investment in PPE. In addition to this, it has been seen that the organization also purchased several modern operational and supply chain management systems in order to compete with all its competitors. Leases From the financial report of the organization, it can be highlighted that the leases are mainly classified as financial leases. Intangible Assets The management of the firm implements a straight line depreciation method in order to calculate the total amount if depreciation of the PPEs of the organization. As per the annual report of the firm, the total amount of useful life of the PPEs is approximately 2.5 years. Contingent Legal Liabilities From the annual report of Woolworths, it is evident that the management of the firm has reflected legal disputes and investigations to all their stakeholders. This can be considered as a positive sign and has helped the organization to gain the confidence of all their stakeholders. The total amount of contingent liability of the firm has been reflected in accordance to IAS 18. From this, it is reflected that the organization implements all rules and regulations of financial reporting standards. Prudence and Transfer pricing McLeay and Riccaboni (2012) infer that the concept of accounting principles required to record expenses and liabilities is known as prudence. This concept has made the accountants more careful while recording total amount of expenses of the business entity, and not over or under pricing them. On the other hand, it can be inferred that Woolworths has successful compiled with the rules and regulations of SARS requirements in case of Transfer pricing. Advantages and disadvantages of financial reporting The advantage and disadvantage of financial reporting can be presented with the help of the following table:- Advantages Disadvantages Financial reporting helps the organization to bring consistency of information in their financial statement Biasness can be formed in case of financial reporting. It helps of prohibit miss-interpreted figures in their financial statements Such rules can affect the organization in later financial periods. Table 1: Advantages and disadvantages of financial statements (Source: Beaver 2014.) Conclusion From the above analysis, it can be inferred that it is important for all the firms to abide by the rules and regulations of the financial reporting standards. The organization Woolworths is largely successful to implement all the regulations of the accounting standards in their annual report to give true and fair picture of their business to all their respective stakeholders. In addition to this, the disclosure policies of the organization meet all the requirements of the Corporation Act, 2001 as per ASX rules and policies. It is recommended that the organization needs to imply all the accounting standards in their financial statement References Beaver, W.H., 2014. Financial reporting: an accounting revolution. Prentice Hall. Bonner, S.E., 2015. Judgment and decision making in accounting. Prentice Hall. Chester, G., 2014. Contemporary Issues in Accounting. Journal of Accountancy (pre-1986), 148(000005), p.102. Levi, M.D., 2015. International Finance: Contemporary Issues. Routledge. Mattessich, R., 2014. Critique of accounting: examination of the foundations and normative structure of an applied discipline. Praeger Pub Text. McLeay, S. and Riccaboni, A. 2012. Contemporary issues in accounting regulation. Springer Science Business Media. Salas, O.A. and Campos, M.J.S., 2016. Finance and Accounting for Managers (Vol. 28). Profit Editorial. Uno, K. and Bartelmus, P, 2013. Environmental accounting in theory and practice (Vol. 11). Springer Science Business Media. Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning. Woolworthslimited.com.au. 2016.Quality Brands and Trusted Retailing - Woolworths Limited. [online] Available at: https://www.woolworthslimited.com.au [Accessed 23 Aug. 2016]. Zhou, Z., Ou, J. and Li, S., 2016. Ecological Accounting: A Research Review and Conceptual Framework. Journal of Environmental Protection, 7(05), p.643.