Abacus Limited Report of Financial Statements

This report has been written to ensure that financial statements are in accordance with AASB standards. The first section of the study provides background material on Abacus Limited as well as an introduction to accounting standards. The body is made up of qualitative aspects of valuable financial details and transparency, particularly in the field of plant property and equipment.
Abacus Properties Limited is a private limited corporation based in Oban's Abacus Building on 8th Street. It was established on the 19th of April, 1990. This company was initially categorized under ISIC 74909. The principal activities of Abucus Property Limited have remained consistent throughout the year. These activities are property ventures, property funds management, retail and industrial properties, investments in office and storage facilities. The strategies of Abacus include taking advantage of its vast knowledge in investment, investing in core businesses with12-15% returns and reinvesting the sales proceeds. The books of accounts of Abacus Group are prepared according to International Financial Reporting Standards and the Australian Accounting Standard Board (consolidated financial statements of abacus 2016, pp1-10). There are many accounting standards in the world. The possibility of conflicting accounting standards has been minimised by the existence of Generally Accepted Accounting Standards. In this paper is a report primary users of financial statements, qualitative characteristics of useful financial information, the disclosure of financial statements and how financial statements have been used to meet the needs of users of Abacus Company Limited.

Main findings

Consolidated financial statements of Abucus Company Limited shows financial information about the company. These financial statements are prepared on the basis of going concern. The information is useful to primary users of the financial statements such as lenders, creditors and potential investors and current investors who use the financial statements to make their decisions. These primary users of the financial statement are the ones who affect core daily operation of the business. The absence of any of the primary users of financial statements exposes the firm to a risk of liquidation. Secondly, the International Accounting Standards Board demands that they access financial statements. Finally, creditors, investors, and lenders are classified are primary users since it’s a requirement in corporate governance (GAAP, 2010, p 3). The lenders need to know the amount of debt that Abucus has accrued. They also need to know the assets of Abucus Ltd to determine if Abacus has enough security for them to offer the required financial assistance to the company. The quantity of long term and short term loans that Abacus can get from lenders depends on the availability of adequate security and evidence of effective fund management by the Board of directors.

Investors are the owners of a company. However, they may be too busy or simply lack requisite management skills required to run the business. The number of investors in a company can also be large such that the situation demands the appointment of representatives in the system of management. The investors can access data or financial information of Abacus Ltd to determine the financial state of the business. The profit that the Abacus Ltd make is of significance to investors and potential investors. High profitability increases the amount of dividend obtained. Investors are equally concerned with the management of funds. For instance, when Abacus Limited reinvests the profit made in a sound manner, investors may have little returns at the current financial year but then the growth of the business is guaranteed and the investors will thus look forward to better return in future. Potential investors are equally impressed by growth prospects of Abacus Limited.The end result is that Abacus Ltd increases its pool of funds and thus increases its investments.

The creditors use financial statements to determine the quantity of goods and services that they can offer to Abucus Ltd on credit. Creditors issue goods and services on credit with the expectation that they will be repaid in the future or on a given day. A positive cash flow, the number of creditors and quantity of credit are crucial indicators of the creditworthiness of Abacus Ltd. Creditors have to look at the balance sheet to get liabilities of Abacus Ltd and thus be able to determine if Abacus is a creditworthy business.

Other users of financial statements are the governments, general public, employees, suppliers, and customers ( IFRS, 2014, 3). The government uses financial statements to confirm the tax returns of a given company. In addition, it uses the information to plan for effective distribution of resources in a given region, state or country. Finally, the government uses financial information to determine goods and services produced in a given year hence aids in the determination of national income through the product approach. The management of Abacus Ltd uses financial information to make an important decision in the company like where and when to invest or in the determination of the best sources of funds. Abacus limited has no legal obligation to issue financial statements to their suppliers, customers, and employees. The last group can use the financial statements as they deem fit.

According to the conceptual framework of IFRS 2010, there are two main qualitative characteristics of useful financial information. First, there are enhancing qualitative characteristics. These are comparability, timeliness, verifiability, and understandability. Comparability refers to the ease with which the financial statements are consistent in the application of principles on specific items such that financial statements can be compared to financial statements of other companies. The ability of different users of financial statements to agree on the faithful representation of item on the financial statement is called verifiability. Companies should present information in a timely manner to enable users of financial statements to make a decision. Contents of the financial statements are in a concise manner that users of financial statement with some knowledge of business or accounts find it understandable.

The second qualitative characteristic is the fundamental qualitative characteristic. Examples of fundamental qualitative characteristics are relevance and faithful representation. Relevant financial information is one that makes difference on decisions made by users of financial statements. It has a predictive value but not necessarily the prediction. A financial statement with a predictive value often has confirmatory value. Faithful representation implies that the financial statement should show the real economic phenomenon. Main factors to consider in this case are completeness, neutrality, and error-free financial statements. A complete depiction is one that enables the user of financial statement to understand contents of the financial statement. A neutral financial statement is one that is free from bias.

Abucus limited has complied to AASB 116 in accounting for plant property and equipment (PPE) in a number of ways (AASB 2015, p 8). First, Abucus Limited has treated the initial cost involved in the acquisition of PPE as an asset and has been reccorded in the balance sheet as fixed assets. The maintenance cost, provisions, and disposal of fixed assets have been recorded in profit and loss account. Notes have been provided in financial statements of Abucus Limited (AASB 2015, pp 16-21). The notes provided help users of financial statements to understand the financial statement. The balance sheet, profit and loss account, and the statement of cash flows of Abucus Limited have financial returns of 2015 and 2016 hence aid in comparability. The financial statements have consistently followed AASB.

Conclusion

In conclusion, Abucus Limited has followed disclosure requirements of AASB in the disclosure of plant property and equipment. Abacus has consistency and timeliness in the financial statements. It is my recommendation for the company to continue preparing its financial statements in the same way in the future.















































Reference

Consolidated Financial Statements of Abacus Property Group. (2016). http://www.abacusproperty.com.au/sites/default/files/2016%20Financial%20Annual%20Report_website%20static%20report%20with%20covers.pdf [Accessed on September, 28 2017]

Australian Accounting Standards Board.(2015) http://www.aasb.gov.au/admin/file/content105/c9/AASB1_07-15.pdf [Accessed on September, 28 2017]

International Financial Reporting System.(2014) https://www.ifrs.com/ [Accessed on September, 28 2017]

Generally Accepted Accounting Principles. (2010) http://ebooks.narotama.ac.id/files/Accounting%20for%20Managers/Chapter%202%20%20%20Generally%20Accepted%20Accounting%20Principles.pdf [Accessed on September, 28 2017]

Conceptual Framework: Objectives and Qualitative Characteristics. Suppliment to IFSR outlook. (2010). Issue no 86. http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$File/Supplement_86_GL_IFRS.pdf [Accessed on September, 28 2017]

Objective of General Purpose Financial Reporting (2015) http://www.aasb.gov.au/admin/file/content102/c3/SAC2_8-90_2001V.pdf [Accessed on September, 28 2017]

Conceptual frame work of financial reporting. (2010) http://www.fasb.org/resources/ccurl/515/412/Concepts%20Statement%20No%208.pdf [Accessed on September, 28 2017]

AASB (2015) Property Plant and Equipment, Compiled AASB standard –compiled early applicants only. http://www.aasb.gov.au/admin/file/content102/c3/AASB116_07-04_ERDRjun10_07-09.pdf [Accessed on September, 28 2017]









Appendix

2016 2015 $'000 $'000

Property, plant and equipment held for sale Current

Hotel properties 130,000 3,080

Total current property, plant and equipment held for sale 130,000 3,080

Non-current

Hotel properties - 114,030

Storage properties 4,051 3,489

Office equipment / furniture and fittings 625 500

Total non-current property, plant and equipment 4,676 118,019

Total property, plant and equipment including held for sale 134,676 121,099

2016 2015 $'000 $'000

Land and buildings

At the beginning of the period, net of accumulated depreciation 107,480 142,259

Additions 630 1,353

Fair value movement through the income statement 8,513 361

Fair value movement through comprehensive income 8,812 350

Disposal (3,106) (35,760)

Effect of movements in foreign exchange - 333

Depreciation charge for the period (918) (1,416)

At the end of the period net of accumulated depreciation 121,411 107,480

Gross value 137,106 122,258

Accumulated depreciation (15,695) (14,778)

Net carrying amount at end of period 121,411 107,480

Plant and equipment

Gross value 42,526 40,392

Accumulated depreciation (29,261) (26,773)

Net carrying amount at end of period 13,265 13,619

Total 134,676 121,099

Source: Abacus financial report for 2016 p 33