Financial Accounting Assignment: Examining Operations of Jumbo Interactive Ltd
Task: Examine the annual report of your subject company and other relevant information that you have obtained via your research and undertake the following tasks in the financial accounting assignment:
- From the annual report of your allocated company and in relation to the elements of the financial report, provide relevant examples, describe and critically discuss the nature and the benefits of the conceptual framework for accounting.
- Identify and critically discuss if your allocated company is a reporting entity, provide detailed and relevant examples and factors to support your argument.
- Identify and discuss if your allocated company show revenues and gains? In your view, do you think differentiating revenues and gains is of a benefit to the users of the financial statements? Explain and provide examples.
- Explain and discuss the list of Property, Plant and Equipment, including impairment assessments in the financial statements and the related notes. How are these assets measured and valued?
As per the research on financial accounting assignment, the skill of financial reporting combined with different skills of establishing business is known advanced financial accounting (Liao et al., 2017). It is basically applicable to the professional environment on international level. It is important for the accounting professionals dealing with services related to financial reporting to have knowledge about IFRS. Hence, in general words it can be said that the inclusive exhibition of accounting as well as the principles and procedures of reporting is advanced financial accounting. It is used in numerous kinds of business or better operations and management. In the report, the benefits of conceptual framework in the operations of Jumbo Interactive Limited are highlighted. It is an Australian organisation and has it's headquarter in Australia. It is mainly involved in the activity of reselling the lottery games.
Benefits of conceptual framework or accounting
It is understood that without any framework or outline the standards of accounting would be developed in an abrupt manner. It may lack accuracy and the standards would not be enough to deal with problems that originate in the working environment. Mostly, the standards that would be framed without the application of conceptual framework would be unreliable and would not be in alignment with the corporate legislation. The presence of conceptual framework enables the financial statement users to comprehend that the standards and practices of accounting are primarily depended on this common idea. It works as a guide for transactions that are unusual in nature and are basically left open of being interpreted in any way the user wants to do it (Barker et al., 2020). It is believed that the idea of conceptual framework is built fir enhancing the reliability of accounting profession and other wise. There are many sections of accounting that are left open for situations of judgement and estimation rather allowing them to have a specific meaning. Hence, the main purpose of conceptual framework is to set out the ideas and concepts that underline the presentation and preparation of the statements of finance for reference of the external stakeholders.
It is the function of the conceptual framework to address situations and activities like the objective of financial reporting. Further, it even confronts the subjective characteristics that are beneficial to the financial information. It addresses the measurement, definition and recognition of the fundamentals through which the statement of finance are created. It takes into consideration the concepts of maintenance of capital and capital. Hence it can be said that the main purpose of conceptual framework is to provide assistance to IASB in the construction of forthcoming standards of accounting and its assessment. The main idea behind this purpose is to ensure that there is proper consistency among the standards of accounting. Further, conceptual framework even helps or assists IASB in sponsoring harmonisation amidst accounting standards, regulations and the process that is related to the exhibition of statements of finance. As the conceptual framework eliminates the numerous substitutes for accounting treatment of an organisation it proves to be a great assistance to the account preparer as well as the users of the financial statements. The benefits of accounting of conceptual frame work are that it is constructed on and connect to an established figure of objectives and concepts. It offers framework for explaining emerging and new practical issues. It further helps in enhancing the creativity and comprehension of the users of financial statements. Lastly, it enables the comparison of financial statements of different companies in an easy and convenient way (Barker and Teixeira, 2018). The companies are able to report its financial statements logically and efficiently with the help of conceptual framework. Hence, the above discussions prove that the every company must use the conceptual framework for enabling proper compliance and logical financial reporting.
Jumbo Interactive Limited-A reporting entity?
As per the annual report of Jumbo Interactive Limited it is not a reporting entity in subject to the act, hence it is committed to perform its operations in a manner which is very ethical in nature. Further, its manner of conducting its operations must be in accordance with the adherence that is highest to social and corporate responsibility. Therefore, according to highest standards it is required to act responsibly towards the workplace and the environment. It takes proper action steps towards diversity, staff inclusion and safety protection of the workers. As the organisation is not a reporting entity it is not required to present a statement of modern slavery practices (jumbointeractive.com, 2021). However, the company in order to keep its operations in accordance to the highest standards of accounting regulations for the purpose of providing proper support to the partnerships and operations. It has a supply chain that is relatively very simple in nature and takes into consideration the following services and products:
Entries of lotteries from charity and national lotteries
- Purchase of services and products required for the daily operations and also includes the stationery of offices.
- Staff training and employment
- Professional services that are such as legal advice and financial auditing which are external in nature
- Office space leasing
- Support services and infrastructure of IT
The organisation endeavours to join hands with only those suppliers or businesses that have an alignment with their values. It is the expectation of the organisation that its suppliers and partners would perform their operation as per the laws of modern slavery act and it must include the prohibition of practices that from any angle resonate to the concept of human slavery. The organisation has the policy of external hotline for the use of business partners and staffs along with the policy of whistle blower. The organisation follows a policy of gender diversity that objectifies to have around 45% female workers by the time of 2023. Further, it aims to have around 42% female employees of the total workers. In addition to the policy of gender equality it has developed a pragmatic approach that has its attention towards the concepts like female empowerment and programmes of championing that offers chances to women workers by empowering their programme. Under the EmpowHer programme of the organisation, it offers an allocated position to the women employee and this works along with the graduate programme. It is about to increase this allocated position under the EmpowHer programme by two places by the year 2021 (. The culture and values of the organisation has enabled the organisation to attain a position of excellence. The relationship of the organisation with its people (comprising of its suppliers, vendors, partners, employees, stakeholders and other external parties) are based on the particular sets of code of conduct that particularly explains its workplace.
Uses of differentiating revenues and gains
Revenue and gains in particular are two different kinds of income that an organisation earns. The money that an organisation is able to make through business activities that are peripheral in nature is termed as gain. On the other hand the money that organisations are able to generate through business activities that is their primary business is termed as revenues. Hence, it is predominant that even if an organisation earns money in both the cases, they are different concepts entirely (Al-Sulaiti et al., 2018). The distinction between the present value of any machinery and the value of it sale is an example of gain and this is not primarily profit that the organisation has earned from its primary business activities. It is evident that if the concepts are different the accounting treatment must also be different from each other. However, IFRS treats both revenues and gains under the head of income. As per the rules of IFRS, both the revenues that the organisation earns through the primary business activities and that it earns form the activities that are other than its primary businesses are treated under the head of revenue.
As per the standards of IFRS, any gain that a company registers is recorded in the profit and loss statement. It is recorded as the net of two amounts: the amount that have been received as proceeds from the disposal of an asset of long term nature and the amount that is listed for that machinery in the book of the company. Further, in the balance sheet the amount is treated as an amount of unrealised gain in the section of stockholder's equity. The amount that the organisation earns through the normal course of business is recorded in the profit or loss statement. In case of Jumbo Interactive Limited, the amount of money that it earns through reselling of the games of lottery must be treated as its revenue. This amount of revenue is entered in the income statement as revenue from sales or sales revenue. It is beneficial to differentiate the amount of revenue earned from primary activities and peripheral activities as it allows the external stakeholders to analyse if the company they want to invest in is capable of paying them lucrative dividend amount. Further, if the revenue from primary business activities and peripheral business activities are not separated it would be hard to locate if the company is hiding its net loss from primary business activities by disposing off the assets that are of no use to the organisation or does not participate in its primary business activities.
List of property, impairment assets, plant and equipment of Jumbo Interactive Limited
The disclosures of the organisation in respect to the impairment assessment of goodwill and the intangible asset are included in the working note 9 of the financial statement. The significant asset of the organisation is represents the carrying worth of the asset that are intangible in nature (Daniels et al., 2020). The organisation needs to examine the indefinite life of intangible asset goodwill and its amount for the purpose of impairment and there is requirement of assessing the intangible assets for the purpose of impairment indicators. As the balance of intangible assets and goodwill were material to the financial statements it was important to conduct the annual impairment test under the audit procedure. Further, the assessment procedure of the management is judgemental and complex and is inclusive of the assumption and estimates that are related to the predicted forthcoming economic or market conditions. Note 8 of the financial statements discusses about the property, plant and machinery of the organisation. It signifies that the plant, equipment and properties are amortised or depreciated from the acquisition date or in reverence to the assets that have been generated internally by the organisation since the duration the asset has been termed ready for use by the company.
The straight line method of depreciation is applied for the purpose of depreciation and even for the purpose of allocating the cost of the asset at the time of their disposal. The leasehold improvements are depreciated at either of expired term or the useful life of the asset as estimated whichever is shorter. An essential judgement by the administration about the internet lotteries has been done and it says that the agreement of the reseller with that of the Tatts group must remain in continuation. The goodwill of the organisation is examined for impairment on half yearly basis (jumbointeractive.com, 2021). The organisation examines half yearly if there has been any indication of the asset for impairment and if the assets of non-current nature have any amount of impairment in alignment with the policy of accounting. In terms of measurement and recognition, the plant and machinery and properties of the organisation are expressed at historical cost and this cost is inclusive of the expenses that the organisation has incurred in bringing down the assets to its set location. Further, it even comprises of the amount that the organisation has incurred in keeping the plant, machinery or property in operational condition.
Hence the above arguments and discussion prove that advanced financial accounting enables a company to properly prepare its statements that are important for acquiring investors for the organisation. The financial statements of an organisation are a report that talks about its viability and profitability. Different financial expressions like the financial ratios express the solvency and liquidity of the organisation that are important aspects for determining the dividend distribution of the organisation. The conceptual framework enables the organisation in proper compliance and logical reporting. It is the function of the conceptual framework to address situations and activities like the objective of financial reporting. Further, it even confronts the subjective characteristics that are beneficial to the financial information. It addresses the measurement, definition and recognition of the fundamentals through which the statement of finance are created
2021jumbointeractive.com.au. Available at: http://www.jumboimteractive.com.au/web/media/nil-financial-report-2020.pdf (Accessed: 3 February 2021) https://www.jumbointeractive.com/annual_reports/2020.pdf
Al-Sulaiti, J., Ousama, A.A. and Hamammi, H., 2018. The compliance of disclosure with AAOIFI financial accounting standards. Journal of Islamic Accounting and Business Research.
Barker, R. and Teixeira, A., 2018. Gaps in the IFRS conceptual framework. Accounting in Europe, 15(2), pp.153-166.
Barker, R., Penman, S., Linsmeier, T.J. and Cooper, S., 2020. Moving the conceptual framework forward: Accounting for uncertainty. Contemporary Accounting Research, 37(1), pp.322-357.
Daniels, B., Nix, W. and Morgan, M., 2020. Revising the Content of Intermediate Accounting: An Analysis of Perceptions of Accounting Educators. The Accounting Educators' Journal, 30.
Liao, L., Xiao, J.J., Zhang, W. and Zhou, C., 2017. Financial literacy and risky asset holdings: evidence from China. Accounting & Finance, 57(5), pp.1383-1415.