Essay Objective:
The objective of this case study is to understand Australian Conceptual Framework in accounting standard setting and in business practices.
Discussions: You should select a company listed on the Australian Stock Exchange (ASX) and find a copy of 2014/2015 or 2015/2016 annual report of the chosen company.
According to Australian Conceptual Framework Paragraph 37 (2009 version), it states: 'Prudence is the inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.'
You need to answers following questions:
a) You are required to discuss and evaluate the concept of Prudence.
b) Explain why Prudence is very important in financial reporting.
c) Give TWO (2) examples when Prudence is applied in the annual report of the chosen company. Discuss how Prudence is applied.
d) Using the examples you discussed in part c) explore the implications of Prudence for financial statements in future financial year.
I choose QANTAS company and have to prepare annual report of this company along with Australian conceptual framework and examples.