Generational Accounting Theory and Application

Question: Discuss about the Generational Accounting for Theory and Application. Answer: Introduction The current study elucidates various factors that can drive the culture of the organization, systems, procedures that can help in controlling and directing diverse operations of a business entity with special reference to the functions of Qantas Airways. Qantas Airways is a flag carrier airline that operates in Australia and is the largest airline in terms of size of the fleet, international flights as well as international destinations. The company Qantas Airways has the fleet size of 131 and operates across 85 destinations. The company Qantas Airways has a total share of approximately 65% of the domestic Australian market and carries around 14.9% of total passengers travelling both in and out of Australia (Qantas.com.au 2016). Furthermore, the present study also evaluates different governance framework that refers to the assessment of the adherence to different rules and regulation, examination of the General Purpose Financial Reports for different users of financial declarations of Qantas Airways. Moreover, the present study also identifies different issues that can be related to the framework of the remuneration along with the internal and external controls of the organization. In addition to this, the current report also elucidates in detail the notions of prudence and adherence to the conceptual structure for the financial reporting (Qantas.com.au 2016). Factors that drive the culture of Qantas Airways Corporate Governance: As rightly put forward by Edwards (2013), the corporate governance indicates the particular approach that the board of a corporation adopts for the purpose of enhancement of the value of the shareholders. This corporate governance can ensure the generation, protection and at the same time building up the funds provided by the shareholders. As per the corporate governance statement declared by the company, the management of Qantas Airways upholds higher levels of corporate ethics Rahman (2013). The board of Qantas Airways consists of widely held Independent Non-Executive Directors along with the Executive Director that can provide suitable balance of competence, knowledge, independence as well as diversity to facilitate the Board in effectually discharge the tasks. The Board of Qantas Airways essentially lays a strong foundation for management as well as oversight. The Board of the company Qantas follows a charter and is accountable for the establishing, evaluating the strategic direc tion and monitoring the process of implementation of the strategy in the company Qantas Airways (Qantas.com.au 2016). The CEO of the organization is responsible for daily management of the overall Qantas group and the company secretary is answerable directly to the Board and the Chairperson on matters related to the appropriate functioning of the company. The board of Qantas Airways is also properly structured and divided into four different committees (Audit committee, Nominations committee, Remuneration Committee and the Safety, Environment, Environment and security committee) to enhance the value of the shareholders of the organization. Furthermore, the Board has also established a suitable corporate governance structure that consists of the Non-Negotiable Business Principles as well as Group polices and helps the management in promoting the ethical and responsible process of decision-making (Qantas.com.au 2016). The board safeguards the integrity of corporate financial reporting by keeping track of the independence of the external auditor of the firm (Miller and Power 2013). There are also policies in place that can restrain different types of non-audit services. In addition to this, the Board conforms with the Groups Continuous Disclosure Policy and presents timely and at the same time balanced disclosures and ensures that the shares of the company is traded in an orderly as well as informed market. The company has a Shareholder Communication Policy that effectively promotes effectual two way process of communication with the respective shareholders of the business entity and the wider community of the financiers. The boards can hereby respect the rights of particular shareholders of the organization (Kang and Gray 2013). In addition to this, the Board of the organization Qantas Airways also identifies and manages the risk of the firm to uphold the achievement of the firm and to accomplish the different corporate governance requirements. Again, as per the remuneration report of the firm, the board also remunerates fairly and responsibly. Issues with the remuneration rate The directors of the company Qantas Airways are accountable for preparation as well as presentation of the Remuneration Report. The remuneration report conforms to the principles prescribed under Section 30A of the Corporation Act 2001 (Qantas.com.au 2016). The remuneration report of the company reflects the fact that the pay for the CEO of the company is directly associated to the performance of the company Qantas Airways and the growth in the prices of the shares of the company. However, the base pay of the CEO of the company has not increased and the person decided to forego around 5% of the base pay. However, the CEO of the corporation has received cash bonus of $1904000 and the award of $952000. The short-term incentive plan is also considered the annual at risk incentive plan for different members of the staff of the Qantas Airways. The annual incentive awards include the bonuses that can be paid to Executive members based on the performance measured against the Short Term Ince ntive Plan as well as non-financial measures. The Board also evaluates the performance of the employee against the scorecard rated at (140%) (Qantas.com.au 2016). The long-term incentive plan for the incentive plan for the executives is also examined against the three-year performance plan. The remuneration report also replicates the strong performance of the organization that strengthens the position the company and helps it to attain the best results even during the period of the Global Financial Crisis. The overall performances of the corporation against the significant metrics support the entire structure of the remuneration (Deegan 2013). In addition to this, the remuneration report also replicates the excellent performance of the employees of the firm and delivered great experience to the consumers (Edwards 2013). The hard work of the employees also helped in the process of transformation of the business. The remuneration structure of the company Qantas Airways reflects the fa ct that the executive remuneration structure that is designed to attract and retain the entire executive team. The company has a remuneration committee that follows the remuneration committee charter and conforms to the Corporate Governance Framework of the ASX Corporate Governance Councils (Qantas.com.au 2016). Analysis of the General Purpose Financial Reports for users to make financial reports Conceptual Framework As rightly put forward by Kang and Gray (2013), the conceptual framework refers to the intentions of and the notions of the general purpose financial reporting. The conceptual framework can be considered as an effective tool that helps the board of an organization in the development of the standards that are essentially based on different consistent concepts. Again, the conceptual structure also aids the preparers of the general-purpose financial reports to develop effective and at the same time consistent policies of accounting at the time when the standard can permit the choice of the accounting policy (DRURY 2013). In addition to this, the conceptual framework also assists in the process of understanding as well as interpreting the standards. Furthermore, the intention and purpose of the conceptual framework is also to augment the framework of financial reporting by providing a complete, updated and at the same time clear set of notion (Aasb.gov.au. 2016). The financial declarations of the Qantas Airways, conforming to AASB CF helps in dealing with the objective of the financial statements, different qualitative characteristics that in turn determine the effectiveness of the financial reports (Aasb.gov.au. 2016). The different elements form the financial statements include the assets, liabilities as well as equity that in turn describes the financial position of the firm. The framework also provides the structure for the assessment of the performance of the firm from the income, expenses and the profit figure (Aasb.gov.au. 2016). In addition to this, the conceptual framework also provides the criteria for recognition of different items included in the financial declarations of the firm. Analysis of the financial Position The consolidated financial statements of the Qantas Airways are essentially the general purpose financial reports that the company prepares in conformation with the Australian Accounting Standards Board (AASB) and the Corporation Act. In addition to this, the company also presents the financial declarations in accordance with the International Accounting Standards Board and the International Financial Reporting Standards (Henderson et al. 2015). Assets: As per the financial reports recorded during the year 2015, the total assets of the company are $17530 M. The assets like all other elements of the consolidated financial statements of the Qantas Airways are presented in terms of the Australian Dollars that happens to be functional currency of the entire Qantas Group (Qantas.com.au 2016). The assets categorised as held for sale are enumerated at lower value of the cost and the fair value after the deduction of the costs of sales (Henderson et al. 2015). However, the net defined asset is enumerated at the fair value of different plan assets after deduction of the present value of the defined benefit obligation. Liabilities: The total liabilities of the company Qantas Airways are recorded to be $14083 M during the year 2015. However, there are certain current as well as non-current interest bearing liabilities that are used for financing the operations of the aircraft (Bonin 2013). As mentioned in the annual report of the company, this particular item of the balance sheet is also presented based on the historical cost and expressed in the functional currency that is the Australian Dollar. Equity: The Total Equity of the Qantas Airways is recorded to be $3447M during the year 2015 as per the annual report of the firm. As mentioned in the annual declaration of the firm, the net defined benefit liability is enumerated at fair value of plan liabilities after deduction of the present value of the defined benefit requirements. Again, the derivatives at fair value by way of the profit and loss are enumerated at the fair value (Uno and Bartelmus 2013). Analysis of the inventory The inventory of the company Qantas Airways increased from $322M during 2015 from $317M as per the financial records of the firm. The increase in the inventory is mainly due to the increase in the engineering expendables, decrease in the consumable stores and the decrease in the work in progress. The incapability to deal with the inventory in the business operations of the Qantas Airways might possibly impair the overall competitive position of the corporation (Qantas.com.au 2016). Analysis of the accounts receivable, provision for bad debt and doubtful debt The receivables of the company Qantas as recorded in the consolidated balance sheet is $959M during the period 2015. The figure for current receivables decreased from $1196M to $959M in 2015 (Qantas.com.au 2016). Again, the figure for the non-current receivables also decreased from the $158M to $134M. The decrease in the accounts receivables can be attributed for the decline in the trade debtors and the sundry debtors. The trade receivables are essentially recognized at the fair value and at the same time calculated at amortised cost by means of the interest method after allowing for the deduction of the allowance for impairment (Ryan et al. 2014). The management of Qantas Airways devised an optimal capital framework by reducing the debt and at the same time increasing the liquidity that led to the improvement of the return on invested capital to 16%. The transformation program of Qantas Airway also helped the corporation in paying off more than $1 billion of the net debt (Qantas.com .au 2016). Analysis of the plant, property and equipment The plant, property and equipment of Qantas Airways are recorded to be $136 M during the year 2015. However, the plant, property and equipment increased from $134M registered during the year 2014. The non-recurring fair value enumeration for the plant, property and equipment categorised as held for sale can again be classified under the fair value hierarchy founded on the inputs to the valuation mechanisms utilized (Yong et al. 2016). Analysis of depreciation methods Depreciation as well as amortisation expenses were lower with $195 million of the reduction resulting from the non-cash impairment to the Qantas International fleet. The depreciation and amortisation was recorded to be $1422 during 2014 and it rose from $1096M (Qantas.com.au 2016). The depreciation method that the company Qantas Airways takes into consideration is the straight-line method that is based on different items of property, plant as well as equipment barring only the freehold land that is not depreciated. The depreciation rates of different owned assets are enumerated to apportion the cost or else the valuation of an asset, after deduction of the approximated residual value over the estimated useful life of the asset of the Qantas Group (Qantas.com.au 2016). Again, the assets are essentially depreciated right from the date of acquisition or else with regard to internally generated assets right from the time the specific asset is totally completed and is available for the ap plication. Treatment of leases The Qantas Group essentially leases the airline under finance leases that has the expiry dates between one and ten years. The analysis of the leases of the Qantas Airways reveals the fact that the finance leases comprises of the purchase alternative that is exercisable at the end of the term of the lease. However, the total finance leases amount to $1498M and the operating lease commitments amount to $2782M. The leases are not presented in the balance sheet of the company Qantas Airways. The annual report also replicates the fact that the capitalised operating lease liability is essentially enumerated at fair value at the date of the commencement of the lease. Again, the lease is recalculated over a specific term of the lease based on a principal and interest that is analogous to a finance lease (Qantas.com.au 2016). Analysis of the process of reporting revenue in the financial reports of Woolworths Limited: The revenue of the firm Qantas Airways is essentially recorded to be $15816M during the year 2015 where the net passenger revenue contributes $13667M and the net freight revenue provides $936M (Qantas.com.au 2016). The Qantas Group diminished the costs, directed towards the development of revenue, and thereafter continued to improve the overall experience for Qantas as well as Jet star consumers. The revenue of the business is calculated based on fair value based on diverse types of consideration for meeting different criteria for recognition. The revenue of the company Qantas Airways can be recognizes as net of returns as well as discounts (Qantas.com.au 2016). Prudence As rightly put forward by Barth (2013), prudence refers to the conservatism notion that again indicates the accounting principles that the accountants need to follow for recording of liabilities and at the same time expenses for the purpose of realization. However, this concept of prudence refers to the also calls for the need of increasing the awareness of the accountants in in adopting strategies as well as approximations on income assets and at the same time overstatement of expenses of the entity. Conceptual Framework The conceptual framework refers to the process of preparation and presentation of the financial statements that can help in the improvement of the financial reporting. The conceptual framework also helps in the process of mapping of the uncertainties (Edwards 2013). The recognition of uncertainties from different corporate helps in exercising prudence. Again, the prudence is also the notion that is inclusive of the degree of caution for exercising over the specific judgements for uncertainty (Barth 2013). Process for updating the conceptual framework The update as well as development of the conceptual framework refers to the removal of the IASB with special orientation to different principles of prudence (Rahman 2013). The process of updating the concept of prudence excludes significant facets of faithful representation (Yong et al. 2016). The updates also refer to the process of updating different references to the conceptual framework that includes proposed amendments to the standards such as the AASB 2, AASB 3, AASB 4, AASB 6, AASB 101, AASB 108, AASB 134 and many others (Aasb.gov.au. 2016). Advantages and disadvantages of on financial reporting The advantages comprises of the reference to prudence in the conceptual structure that brings steadiness in the information and brings the neutrality of different activities (Miller and Power 2013). The prevention for deliberate misstatement also helps in improvement of the financial reporting as per the conceptual framework. However, the disadvantages comprises of biasness that in turn affects the financial performance of the firm in the later period. Conclusion The financiers can evaluate different items of the financial reports of the corporation Qantas Airways. The above study helps in understanding the importance of disclosure policy of the Qantas Airways that fundamentally conforms to the Corporation Act 2001 as well as the Listing Rules of ASX. In addition to this, the constant disclosure strategy of the corporation can thus help in developing the investors confidence towards integrity in addition to the securities. The current study also provides a clear overview regarding conceptual framework and helps in analysis of different elements of the financial statements. Consequently, the investors can investigate the efficiency of the corporation in transferring the inventory of the corporation into sales before making any effective decision. In addition to this, the financiers are also responsive to different investments of the corporation for the plant, property as well as equipment of the corporation. The investments of the company for the plant, property and equipment can at first cause outflow of cash and thereby can assist the corporation in generation of the revenue in the future period. Therefore, the financiers can boost up the overall sentiments of the financiers optimistically. References Aasb.gov.au. (2016).Australian Accounting Standards Board (AASB) - Home. [online] Available at: https://www.aasb.gov.au [Accessed 23 Aug. 2016]. Barth, M.E., 2013. 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