Advanced Corporate Reporting

A nonifying entity is required to trick out its monetary address based on IASB cloth and it is so personaful for polar types of users to rate the pecuniary surgical process of the sketchage entity and make suit fitted endings. In this essay, the emolument of abstract mannikin in preparing of pecuniary constitution exit be thinked. And overly, 2011 yearbook calculate of CLP Holdings limit result be re gulled to hike discuss how its qualitative characteristics of the information atomic number 18 useful for shareholders.Finally, one of its qualitative characteristics impart be selected to be the more or less important and a conclusion exit be made at the end of this essay. Usefulness of conceptual good workout The IASB Framework sets out the definitions and experience criteria for the elements of monetary narrations. Before the framework was set, companies office use variant definitions and recognition criteria to recognize their legal proceedi ng, even it is the aforesaid(prenominal) spirit of transactions. For example, non- trustworthy assets tail end be recognized in appeal manakin or revaluation specimen.If there was no framework, a troupe aptitude use hail computer simulation to recognize its machinery enchantment revaluation model was use to recognize property. However, the entity is required to be consistent to adopt cost model or revaluation model for a long pointedness to a lower place the framework. As a result, the framework is useful for consistent chronicle treatments. Because of the consistency, it is easier to analyse the entities performance over clock, even performance betwixt disparate entities in the same industry.Also, it is easier for the surveying entity to prepare fiscal opuss, especially in preparing coalesced monetary arguings for multinational entities. Most countries adopt IFRS nowadays. This is an international framework and they shadow use the same definition and recog nition criteria when considering how to treat various transactions much(prenominal) as sales, purchases and valuation of stock. It provide reduce the time for parameter the news study treatment of contrasting transactions. Qualitative characteristics of fiscal reportAs a shareholder, the financial command should have four study qualitative characteristics and these characteristics give be discussed as follow 1. Relevance A relevant financial record should be name sufficient and have confirmatory value. It should be able to holler the proximo of the enterprise and shareholders muckle make a fitting ending based on the description. In 2011 annual report of CLP Holdings Limited (CLP), there is a attempt oversight report which is relevant to shareholders. all told entities will probably have different types of attempt.Nevertheless, CLP set a take chances focus framework which consists of risk governance structure and risk management process. The risk governance structure states that who will be responsible for dealings with risks and the risk management process diagram shows how to manage its risks. Additionally, CLP assessed its top layer risks and future challenges so that shareholders can count on how risky if they invest in this gild. separate example of relevance is the trend of earnings and dividends per share in the then(prenominal) ten historic period. The trend can champion existing and potential difference shareholders predict the future performance of CLP.Since 2002, Earnings and dividends per share are change magnitude scotch out 2009 shareholders then whitethorn predict they can still get an change magnitude earnings and dividends per share in the glide slope long time and they may be willing to invest more in the enterprise. Last precisely not least, financial statement of CLP has confirmatory value because of its 5-year summary statement. The figs of the medieval v years has already confirmed in the previ ous(prenominal) annual reports. For example, do revenue sharply increased in 2011 and the main reason is the cost increase revenue from energy production line in Australia.Shareholders may predict that CLP is expanding its business to Australia and the revenue from this segment will continuously rise in the coming few years. Besides the increase revenue, dividends declared of CLP are precise simmer down and shareholders do not worry if they cannot receive the dividend. Hence, shareholders will approximate that CLP is charge to invest. 2. Faithful representation A reliable financial statement should be nimble in a true and sporty view. That content it should be neutral, free from clobber errors, complete and prudence.From the point of studyors view, the financial statement of CLP is inclined(p) in a true and fair view and it complies with Hong Kong monetary inform Standards (HKFRS) and Hong Kong Companies Ordinance. As the auditors report is clean, it reflects that the financial statement is free from material errors and the major(ip) transactions are completely recorded during 2011. On the opposite hand, CLP has an audit committee which comprises with five members all of them are Independent Non-executive Directors (INED) while lead of them are members of Hong Kong Institute of Certified Public Accountants (HKICPA).INED do not go in in any operation and decision making of the company and do not have any relationship to the shareholders, so they are not influenced by shareholders and can be no bias in weft of information putting in the financial report. In addition, the financial report is audited by the third party and the opinion can be form neutrally. Furthermore, the financial report should be prepared in a wise manner which heart assets or revenue cannot be overdraw whilst liabilities and expenses cannot be netherestimated.For CLP, its inventory is stated at a lower cost or net realizable value. Prudence concept is applied when the com pany prepare its financial statement. 3. Comparability A qualitative financial statement should be corresponding, no matter internal or external. Shareholders must(prenominal) be able to canvas the financial performance between different years of the reporting entity and at the same time, they also are able to compare the financial performance between different companies in the same industry. The financial statement of CLP can fulfil this qualitative characteristic.Besides its statement shows the figures of both years (2010 and 2011), it shows the increasing or decreasing percentage of its revenue, expenses, assets and liabilities in 5-min annual report and scotch value section. It gives a clear picture to shareholders to compare between two years. Moreover, the financial report is prepared based on HKFRS, the invoice constitution is consistent and because of this, it is easier for shareholders to compare the financial performance between different years.Financial statement of CLP can also be compared with Power Assets Holdings Limited (HKEL), which is the major enemy of CLP. In 2011, revenue of CLP is about nine times of HKEL and the in operation(p) service is a double of HKEL. However, profit before taxation of CLP is ba aver $1,000 jillion more than that of HKEL. Shareholders may query why there is however a small difference between profit of both companies and what is contingency on the operation of CLP. in that locationfore, they can make a correct decision with the comparison. 4. UnderstandabilityBesides the above three qualitative characteristics, dateability is important for shareholders too. There are many reports at the bottom of the financial statement such as a quick guide of its classification of different entities and explanation of obscure useful life. These further explanations can also help shareholders understand the financial performance of CLP more. As not all shareholders have teeming method of accountancy knowledge, some of them may not know how to evaluate the performance through income statement and financial position.Thus, statement of gold flow can help them understand the performance easier because this statement is prepared in funds dry land it clearly reflects the net cash inflows and outflows from different activities. The liquidity and the passage cite of CLP can be understood even if shareholders are neediness of accounting knowledge. The items of an understandable financial statement should also be add up and classified. tax in Consolidated Income Statement is aggregated at a lump-sum figure and the analysis of the revenue only revealed in the Notes to the Financial Statements.An another(prenominal) example is jargon loans and other borrowings. An analysis of this item is also revealed in the notes. buzzword loans and other borrowings is not only aggregated at a lump-sum figure, and also is classified as a current liabilities with other short-run liability. In my opinion, faithful representation is the most important qualitative characteristic. Users of financial report are not only shareholders, but also lenders, government, suppliers, employees, customers and the public.A financial report is prepared on the basis of true and fair which means that financial report is reliable and can be use under different circumstances. For instance, the entity wants to borrow loan from bank, the bank can rely on the financial report and estimate the risk of this loan according to accounting ratios and cash flow. For suppliers, when they consider giving credit terms to the company, they can rely on the statement of cash flow and some short-term items homogeneous current assets and current liabilities.Furthermore, the financial report must be audited. If the report is not prepared in true and fair view, the annual report will be qualified. As a result, this qualitative characteristic is the most important. termination To sum up, the financial report must be prepar ed on the basis of the conceptual framework because the framework provides general theories and recognition criteria in preparing financial report. Additionally, a qualitative report should be relevant, reliable, comparable and understandable.Shareholders can predict the future financial performance based on the past events and the forecast of the company. Also, the report can be compared internally and outwardly and be understood so that shareholders can decide how to invest their money. On the other hand, the most important characteristic is faithful representation. Financial report must be prepared in a true and fair view so that the report can be unqualified and be used appropriately by the community. (Word 1598) Reference 1. o CLP HOLDINGS LIMITED, (2012). CLP Group 2011 yearbook comprehend.Available from https//www. clpgroup. com/ourcompany/aboutus/resourcecorner/publications/Pages/publication. aspx Accessed 28. 10. 2012 2. ELLIOTT, Barry & ELLIOTT, Jamie, (2007). Financial Accounting and encompassing. England Pearson Education Limited, pp. 161 181 3. HONG KONG INSTITUTE OF CERTIFIED earth ACCOUNTANTS (HKICPA), (2010). conceptual Framework for Financial Reporting 2010. Available from http//app1. hkicpa. org. hk/ebook/index. php Accessed 28. 10. 2012 4. POWER ASSETS HOLDINGS LTD, (2012). annual Report 2011.Available from http//www. powerassets. com/pahWeb/IR/FinancialReports/AnnualReports/AnnualReport2011_en. htm Accessed 12. 11. 2012 5. PUTHRAN, Santosh, (2009). IASB Framework Financial Statements. Available from http//www. managementaccountant. in/2009/07/iasb-framework-financial-statements. hypertext mark-up language Accessed 10. 11. 2012 6. capital of Seychelles UNIVERSITY, MELBOURNE AUSTRALIA, (n. d. ). Conceptual framework. Available from http//www. staff. vu. edu. au/faux/ military issue%203%20Conceptual%20Framework%201%202002. ppt Accessed 28. 10. 2012 modernistic Corporate ReportingA reporting entity is required to prepare its financial r eport based on IASB framework and it is so useful for different types of users to evaluate the financial performance of the reporting entity and make suitable decisions. In this essay, the usefulness of conceptual framework in preparing of financial report will be discussed. And also, 2011 annual report of CLP Holdings Limited will be reviewed to further discuss how its qualitative characteristics of the information are useful for shareholders.Finally, one of its qualitative characteristics will be selected to be the most important and a conclusion will be made at the end of this essay. Usefulness of conceptual framework The IASB Framework sets out the definitions and recognition criteria for the elements of financial statements. Before the framework was set, companies might use different definitions and recognition criteria to recognize their transactions, even it is the same nature of transactions. For example, non-current assets can be recognized in cost model or revaluation mode l.If there was no framework, a company might use cost model to recognize its machinery while revaluation model was used to recognize property. However, the entity is required to be consistent to adopt cost model or revaluation model for a long period under the framework. As a result, the framework is useful for consistent accounting treatments. Because of the consistency, it is easier to compare the entities performance over time, even performance between different entities in the same industry.Also, it is easier for the reporting entity to prepare financial statements, especially in preparing consolidated financial statements for multinational entities. Most countries adopt IFRS nowadays. This is an international framework and they can use the same definition and recognition criteria when considering how to treat different transactions such as sales, purchases and valuation of stock. It will reduce the time for arguing the accounting treatment of different transactions. Qualitative characteristics of financial reportAs a shareholder, the financial statement should have four major qualitative characteristics and these characteristics will be discussed as follow 1. Relevance A relevant financial statement should be predictable and have confirmatory value. It should be able to predict the future of the enterprise and shareholders can make a suitable decision based on the statement. In 2011 annual report of CLP Holdings Limited (CLP), there is a risk management report which is relevant to shareholders. All entities will probably have different types of risk.Nevertheless, CLP set a risk management framework which consists of risk governance structure and risk management process. The risk governance structure states that who will be responsible for dealing with risks and the risk management process diagram shows how to manage its risks. Additionally, CLP assessed its top tier risks and future challenges so that shareholders can predict how risky if they invest in t his company. Another example of relevance is the trend of earnings and dividends per share in the past ten years. The trend can help existing and potential shareholders predict the future performance of CLP.Since 2002, Earnings and dividends per share are increasing except 2009 shareholders then may predict they can still get an increasing earnings and dividends per share in the coming years and they may be willing to invest more in the enterprise. Last but not least, financial statement of CLP has confirmatory value because of its 5-year summary statement. The figures of the past five years has already confirmed in the past annual reports. For example, total revenue sharply increased in 2011 and the main reason is the rising revenue from energy business in Australia.Shareholders may predict that CLP is expanding its business to Australia and the revenue from this segment will continuously rise in the coming few years. Besides the increasing revenue, dividends declared of CLP are ve ry steady and shareholders do not worry if they cannot receive the dividend. Hence, shareholders will evaluate that CLP is worth to invest. 2. Faithful representation A reliable financial statement should be prepared in a true and fair view. That means it should be neutral, free from material errors, complete and prudence.From the point of auditors view, the financial statement of CLP is prepared in a true and fair view and it complies with Hong Kong Financial Reporting Standards (HKFRS) and Hong Kong Companies Ordinance. As the auditors report is clean, it reflects that the financial statement is free from material errors and the major transactions are completely recorded during 2011. On the other hand, CLP has an audit committee which comprises with five members all of them are Independent Non-executive Directors (INED) while three of them are members of Hong Kong Institute of Certified Public Accountants (HKICPA).INED do not participate in any operation and decision making of the company and do not have any relationship to the shareholders, so they are not influenced by shareholders and can be no bias in selection of information putting in the financial report. In addition, the financial report is audited by the third party and the opinion can be formed neutrally. Furthermore, the financial report should be prepared in a prudent manner which means assets or revenue cannot be overstated whilst liabilities and expenses cannot be underestimated.For CLP, its inventory is stated at a lower cost or net realizable value. Prudence concept is applied when the company prepare its financial statement. 3. Comparability A qualitative financial statement should be comparable, no matter internal or external. Shareholders must be able to compare the financial performance between different years of the reporting entity and at the same time, they also are able to compare the financial performance between different companies in the same industry. The financial statement of CL P can fulfil this qualitative characteristic.Besides its statement shows the figures of two years (2010 and 2011), it shows the increasing or decreasing percentage of its revenue, expenses, assets and liabilities in 5-min annual report and economic value section. It gives a clear picture to shareholders to compare between two years. Moreover, the financial report is prepared based on HKFRS, the accounting policy is consistent and because of this, it is easier for shareholders to compare the financial performance between different years.Financial statement of CLP can also be compared with Power Assets Holdings Limited (HKEL), which is the major competitor of CLP. In 2011, revenue of CLP is about nine times of HKEL and the operating profit is a double of HKEL. However, profit before taxation of CLP is only $1,000 million more than that of HKEL. Shareholders may query why there is only a small difference between profit of both companies and what is happening on the operation of CLP. Th erefore, they can make a correct decision through the comparison. 4. UnderstandabilityBesides the above three qualitative characteristics, understandability is important for shareholders too. There are many explanations at the bottom of the financial statement such as a quick guide of its classification of different entities and explanation of indefinite useful life. These further explanations can also help shareholders understand the financial performance of CLP more. As not all shareholders have enough accounting knowledge, some of them may not know how to evaluate the performance through income statement and financial position.Thus, statement of cash flow can help them understand the performance easier because this statement is prepared in cash basis it clearly reflects the net cash inflows and outflows from different activities. The liquidity and the going concern of CLP can be understood even if shareholders are lack of accounting knowledge. The items of an understandable finan cial statement should also be aggregated and classified. Revenue in Consolidated Income Statement is aggregated at a lump-sum figure and the analysis of the revenue only revealed in the Notes to the Financial Statements.Another example is bank loans and other borrowings. An analysis of this item is also revealed in the notes. Bank loans and other borrowings is not only aggregated at a lump-sum figure, but also is classified as a current liabilities with other short-term liability. In my opinion, faithful representation is the most important qualitative characteristic. Users of financial report are not only shareholders, but also lenders, government, suppliers, employees, customers and the public.A financial report is prepared on the basis of true and fair which means that financial report is reliable and can be used under different circumstances. For instance, the entity wants to borrow loan from bank, the bank can rely on the financial report and estimate the risk of this loan acco rding to accounting ratios and cash flow. For suppliers, when they consider giving credit terms to the company, they can rely on the statement of cash flow and some short-term items like current assets and current liabilities.Furthermore, the financial report must be audited. If the report is not prepared in true and fair view, the annual report will be qualified. As a result, this qualitative characteristic is the most important. Conclusion To sum up, the financial report must be prepared on the basis of the conceptual framework because the framework provides general theories and recognition criteria in preparing financial report. Additionally, a qualitative report should be relevant, reliable, comparable and understandable.Shareholders can predict the future financial performance based on the past events and the forecast of the company. Also, the report can be compared internally and externally and be understood so that shareholders can decide how to invest their money. On the oth er hand, the most important characteristic is faithful representation. Financial report must be prepared in a true and fair view so that the report can be unqualified and be used appropriately by the community. (Word 1598) Reference 1. o CLP HOLDINGS LIMITED, (2012). CLP Group 2011 Annual Report.Available from https//www. clpgroup. com/ourcompany/aboutus/resourcecorner/publications/Pages/publication. aspx Accessed 28. 10. 2012 2. ELLIOTT, Barry & ELLIOTT, Jamie, (2007). Financial Accounting and Reporting. England Pearson Education Limited, pp. 161 181 3. HONG KONG INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (HKICPA), (2010). Conceptual Framework for Financial Reporting 2010. Available from http//app1. hkicpa. org. hk/ebook/index. php Accessed 28. 10. 2012 4. POWER ASSETS HOLDINGS LTD, (2012). Annual Report 2011.Available from http//www. powerassets. com/pahWeb/IR/FinancialReports/AnnualReports/AnnualReport2011_en. htm Accessed 12. 11. 2012 5. PUTHRAN, Santosh, (2009). IASB Framework Financial Statements. Available from http//www. managementaccountant. in/2009/07/iasb-framework-financial-statements. html Accessed 10. 11. 2012 6. VICTORIA UNIVERSITY, MELBOURNE AUSTRALIA, (n. d. ). Conceptual framework. Available from http//www. staff. vu. edu. au/faux/Topic%203%20Conceptual%20Framework%201%202002. ppt Accessed 28. 10. 2012