The Companies Listed on the Australian Stock Exchange - Term Paper Example

DISCLOSURE OF ANNUAL REPORTS Name: Course: Instructor: Institution: City: Date: Introduction Shareholders and other stakeholders are entitled to information on the state of affairs and financial performance of the companies listed on the Australian Stock Exchange especially on those they have invested in or planning to invest in. Annual reports provided by the listed companies are important when they are accurate, can be understood and easily interpreted by the current and prospective investors. Corporation Act 2001, Australian Stock Exchange, Australian Accounting Standard Board and Australian Securities and Investments Commission provide listed companies with guidelines for preparing their annual reports. Relationship between AASB, ASIC, ASX and Corporation Act 2001 Australian Accounting Standard Board (AASB) operates under the Australian Securities and Investments Commission Act 2001. AASB also develops the auditing standards applied under company law. On the other hand, the Australian Securities and Investments Commission (ASIC) have the responsibility to enforce the accounting standards provided by the AASB under the Corporation Act 2001. ASIC can give companies relief from certain corporation act requirements situation where an entity has met entity requirements and application of AASB standards. ASIC can also suggest certain practices it considers important to AASB for consideration. ASIC also helps in the application of AASB regulations and rules. Australian Stock Exchange (ASX) provides companies with the listing facilities and transfer of securities and equities of the listed entities. ASX also makes sure listed companies follow the AASB accounting standards while preparing and disclosing their comparable financial statements. On the other hand, Australian Securities and Investments Commission provides guidelines that helps issuers and their advisors understand the interpretation and administration of procedural requirements of Chapter 6D of the Corporation Act 2001. ASIC works towards providing greater clarity relating to the duties of all parties that prepare disclosure document and lodge the disclosure document then offer securities for sale or issue under the disclosure document. The Australian Securities and Investments Commission (ASIC) have the responsibility to enforce the accounting standards provided by the AASB under the Corporation Act 2001. ASIC can give companies relief from certain corporation act requirements situation where an entity has met entity requirements and application of AASB standards. On the other hand, Australian Accounting Standard Board (AASB 1039) states the minimum information that should be included in an annual report. These include but not limited to, a statement of comprehensive income for annual reporting periods, a statement of cash flows for the annual reporting period, a statement of financial position as at the end of reporting year and a statement of changes in equity for annual reporting period. Corporation Act 2001 requires disclosing entities to comply with the continuous annual report disclosure requirements, which include provision of information that if made available will have material effect on the value or price of the company’s securities. A listed entity must avail such information to the Australian stock exchange while disclosing companies, which are not listed, should disclose such information to the Australian Securities and Investment Commission (ASIC) within the stipulated time. On the other hand, AASB 1039 does not require listed companies to report analysis and discussions in the prepared report since Corporation Act Section 299A requires them to include a financial and an operational report in the report of director, which is part of the annual report. Corporation Act 2001 requires disclosing entities to comply with the continuous report disclosure requirements, which include preparation of half-year report that entails financial statements that meets the accounting standards, notes about the financial statements as required by the Corporation 2001 regulations and accounting standards and director’s reports and declaration as stated in part 2M.3 of the corporation 2001 Act. Listed companies must provide their half-year report within 2 months of the half-year end while the non-listed disclosing must provide their half-year report to ASIC within 75 days of the half-year end. On the other hand, AASB 1039.28 states that a listed company must state on its report whether it has prepared its financial report on a not going concern basis or on situation where going concern becomes inappropriate after the date of reporting. AASB 8 requires a listed company to disclose revenues from sales, a measure of profit or loss, a measure of total liabilities and a measure of total assets. Australian stock exchange has outlined various principals guiding the disclosures of annual reports for the listed companies. ASX requires listed companies to lay the oversight and management foundations. AXS requires listed companies to establish and disclose specific responsibilities and roles of its management and board and ways of monitoring and evaluating their performances. On the other hand, Corporation Act 2001 requires disclosing entities to comply with the continuous report disclosure requirements, which include preparation of annual financial reports for every financial year as stated in part 2M.3 of the Corporation 2001 Act. Listed companies must forward the annual reports to ASX while non-listed disclosing companies must forward such information to ASIC within 3 months of the financial year-end. ASX requires listed companies annual reports to comprise of the corporate governance report, financial report, the report of the auditor on the financial and remuneration reports. These reports should also be produced in time and balanced annual disclosure of all matters that interested parties should expect to have material effect on the prices of its securities. On the other hand, Corporation Act 2001 requires disclosing entities to comply with the continuous report disclosure requirements, which include provision of correct information to ASX to prevent portraying a false security’s market. AASB requires listed entities to present in the report the currency used. In addition, such companies must adopt new and revised accounting standards. A listed company should structure its board in order to have an appropriate composition, size, commitment and skills in order to perform more effectively. A listed company should disclose annual report with integrity. Australian stock exchange requires listed companies to respect rights of the security holders by ensuring they provide information that enables security holders to exercise various rights attached to them. Adequacy of Disclosure Shareholders and other stakeholders are entitled to information on the state of affairs and financial performance of the companies listed on the Australian Stock Exchange especially on those they have invested in or planning to invest in. This report uses annual report of Goodman Group, a real estate company listed on Australian Stock Exchange to determine whether the company has disclosed adequate information. The company in its annual report has included its corporate governance report, corporate social responsibility report, and the financial position, statement of income, auditors report, directors’ report, remuneration report and statement of cash flows. Statement of Compliance Goodman Group is a profit-oriented entity and its financial annual report has been prepared in accordance with the standards and regulations provided by AASB and Corporation Act 2001. The financial statements also comply with the ASX requirements since report of the board and role of management in preparation of the report has been clearly stated. Basis of Preparation The financial statements of Goodman Group have been prepared on accrual basis and based on historical cost and does not account for changes in the value of money. The company bases its cost on the fair value for the amount given when an asset is sold or exchanged. Furthermore, the company has applied relevant accounting policies while generating its reports. The company has also stated its areas of operation, explanation of tax expenses and specific items of revenues and expenses. Goodman group prepared its annual report in accordance with the AASB guidelines, corporations Act 2001, International Financial Reporting Standards. The company has also specified that it presented its financial report in Australian dollars. Materiality Information on materiality is specified in AASB 1031. Information in a report is material if its omission, non-disclosure or misstatement can individually or collectively influence the economic decisions of those who depend on it especially on the financial report basis or may affect accountability of those responsible for the management of the company. AASB 1031 provides quantitative thresholds, which may be used by current or prospective investors to determine the materiality of particular information in case there is no convincing argument or necessary evidence. Critical Accounting Assumptions, estimates and Judgments On preparing its annual reports, Goodman Group’s management make assumptions, estimates and judgments that may reduce or increase amounts reported on the financial statements. Management should continuously evaluate its assumptions, estimates and judgments on the revenues, liabilities, assets, expenses and contingent liabilities. These assumptions and estimates are usually based on experience and future expected events that might affect the value of such items. These estimated or assumed figures will not be the same as the actual values and have risk of causing adjustments on the assets, revenues, liabilities and expenses. Management should therefore include such assumptions, estimates and judgments on its annual reports. Adoption of New or Revised Accounting Standards AASB has adopted new or revised accounting standards that they expect listed companies to be aware of and apply while preparing financial statements. Goodman Group has adopted all the revised and new accounting standards listed by AASB and are relevant to the specific period of reporting and relevant to the company’s operations. The company has however not adopted new or revised accounting standards that are not relevant for the specific reporting period. Estimation of Asset Lives Goodman Group has been determining the useful life and expected depreciation on its property, plant and equipment. The useful lives of the property, plant and equipment may change over time depending on the technical innovation and other factors. Therefore, it is right to say that the charge on depreciation will increase when the asset’s useful life is less that the initially estimated, or a non-strategic asset that has been written down or written off or becomes technically obsolete. Conclusion Listed companies like Goodman Group do financial reporting in order to communicate monetary and provide supporting information to current and future shareholders and other stakeholders of the company. Investors who plan to use financial statements to make their investment decision should be informed that listed companies does not necessarily provide all the information required for such investments. Investors should therefore depend on the ASX website, the financial press and analyst’s reports to extract information for investment purposes. Financial statements are not usually prepared to show a company’s market value, but they usually provide shareholders, external fund providers and other stakeholders with necessary information, which can help in estimating the value of a company. Goodman group prepared its annual report in accordance with the AASB guidelines, corporations Act 2001, International Financial Reporting Standards. The company has also specified that it presented its financial report in Australian dollars. It can be concluded that based on the materiality, basis of preparation, estimation of asset lives, and adoption of new or revised accounting standards and consideration of accounting assumptions, estimations and judgments, Goodman Group has met necessary reporting requirements. This disclosure of the report is adequate since it provides shareholders and other stakeholders with necessary information to further their investments. The information when combined with the data on the ASX website, the financial press and analyst’s reports current and prospective shareholders can extract adequate and necessary information for investment purposes. References A-csear 2015: 14th Australian centre on social and environmental accounting research conference. Academic Publishing. Australia. (2007). Australian corporations & securities legislation, 2007. North Ryde, NSW, CCH Australia. Australia. (2011). Australian corporations & securities legislation 2011. North Ryde, N.S.W., CCH Australia. Australian Accounting Standards Board, Available at http://www.aasb.gov.au/, retrieved on24 April 24, 2017 Australian Securities and Investment Commission, available at http://www.sasic.gov.au/ Australian Security Exchange, Available at http://www.asx.com.au/, retrieved on 24 April 2017 Baxt, R., &, Hanrahan, P. (2015). Securities and financial services law. Chatswood, N.S.W., LexisNexis Butterworths. Goodman Group Annual Reports, available at http://www.goodman.com/investor- centre/goodman-group-australia/annual-reports, retrieved on 24 April 2017 Read More