Conceptual Framework In An Organization Essay

Question:

Discuss about the Concept of Conceptual Framework in an Organization.

Answer:

Introduction:

This report has been prepared to analyze the concept of conceptual framework in an organization. This report depicts the user about the importance of accounting theory concepts in an organization. It has been evaluated in this report that how a conceptual framework helps an organization to manage the accounting and monetary figures and also help the organization to make a better decision about the operations of the company and all the financial matters. It has been analyzed through this study that how conceptual framework helps an organization to meet its goals. For conducting this study, JB HI FI has been taken into consideration. Further, it has been analyzed that how the operations and business functioning of the company get affected due to conceptual framework.

Company overview:

The main business functioning of JB HI FI is in the music industry. Company is operating its business from several decades. This company has been originated in 1974 by Mr. John Barbuto. This firm has begun with its first store in Victoria at East Keilor. This organization has listed on the ASX (Australian stock exchange) itself and currently, it is in the top list in the industry in terms of market share and revenue. It offers its clients a huge range of games, music, DVD movies, music and TV shows. Currently, this company has made many changes into its strategies and financial policies to enhance the operations and for business growth (JB HI FI, 2017).

Conceptual framework:

Conceptual framework is a framework which has been set by IASB and FASB to manage the financial and accounting reporting of an organization. Conceptual frameworks are basically a theory which assists the professionals to prepare the accounting reports. Conceptual framework always deals with many issues related to fundamental financial reporting (IASB, 2006). Firstly, the concept of conceptual framework has been taken into 1970. Basically, this concept has taken place with a mutual concern of IASB and FASB. The main objective of conceptual framework was establishing the understanding of final financial reports among the internal and external stakeholders of the company (ISAB Framework, 2001). This framework guides the accountant to prepare the final financial report.

Critical analysis of effectiveness of JB HI FI to meet conceptual framework obligation:

JB HI FI is in the top companies in the market of Australia. It has been found through this study that JB HI FI’s annual report has been prepared and presented according to the conceptual framework of IASB and FASB (FASB, 2007). It has been found that entire details of conceptual framework have been considered by the professionals while preparing the final financial reports of the company (IFRS, 2008). The framework has enhanced the effectiveness of the financial statements of the company. Financial statement of the company is as follows:

JB HI FI LTD (JBH) INCOME STATEMENT

Fiscal year ends in June. AUD in millions except per share data.

2016-06

Revenue

3954

Cost of revenue

3089

Gross profit

865

Operating expenses

Sales, General and administrative

1006

Other operating expenses

-361

Total operating expenses

644

Operating income

221

Interest Expense

4

Other income (expense)

1

Income before income taxes

218

Provision for income taxes

66

Minority interest

Other income

Net income from continuing operations

152

Other

Net income

152

Net income available to common shareholders

152

Earnings per share

Basic

1.51

Diluted

1.5

Weighted average shares outstanding

Basic

100

Diluted

101

EBITDA

263

JB HI FI LTD (JBH) BALANCE SHEET

Fiscal year ends in June. AUD in millions except per share data.

2016-06

Assets

Current assets

Cash

Cash and cash equivalents

52

Total cash

52

Receivables

98

Inventories

546

Prepaid expenses

Other current assets

6

Total current assets

703

Non-current assets

Property, plant and equipment

Other properties

419

Property and equipment, at cost

419

Accumulated Depreciation

-236

Property, plant and equipment, net

184

Equity and other investments

Goodwill

37

Intangible assets

49

Deferred income taxes

21

Total non-current assets

290

Total assets

992

Liabilities and stockholders' equity

Liabilities

Current liabilities

Accounts payable

302

Deferred income taxes

11

Deferred revenues

Other current liabilities

134

Total current liabilities

447

Non-current liabilities

Long-term debt

110

Other long-term liabilities

31

Total non-current liabilities

141

Total liabilities

588

Stockholders' equity

Common stock

49

Retained earnings

328

Accumulated other comprehensive income

27

Total stockholders' equity

405

Total liabilities and stockholders' equity

992

JB HI FI LTD (JBH) Statement of CASH FLOW

Fiscal year ends in June. AUD in millions except per share data.

2016-06

Cash Flows From Operating Activities

Other non-cash items

185

Net cash provided by operating activities

185

Cash Flows From Investing Activities

Investments in property, plant, and equipment

-52

Property, plant, and equipment reductions

0

Acquisitions, net

Net cash used for investing activities

-52

Cash Flows From Financing Activities

Long-term debt issued

Long-term debt repayment

-30

Common stock issued

6

Repurchases of treasury stock

-13

Cash dividends paid

-93

Other financing activities

0

Net cash provided by (used for) financing activities

-131

Effect of exchange rate changes

0

Net change in cash

3

Cash at beginning of period

49

Cash at end of period

52

Free Cash Flow

Operating cash flow

185

Capital expenditure

-52

Free cash flow

133

Supplemental schedule of cash flow data

Cash paid for income taxes

-66

Cash paid for interest

-4

(Bloomberg, 2017)

It has been analyzed through study over these reports, it has been found that the effectiveness of the final financial report of the company has been enhanced. Company has followed every guideline of conceptual framework to attempt the best presentation and preparation of final financial reports (IASB, 2006 and IASB 2007 b). These reports depict the best information about the company’s performance to every user. It has enhanced the understanding of every user about the financial figures of the company. Company has followed all the conditions of IASB and FASB and prepared the reports accordingly. (Jones and Wolnizer, 2003).

The depreciation technique, format of income statement, format of balance sheet, cash flow statement format etc has been prepared by the company itself to manage the financial figures of the company (ICAEW, 2006). It has been found that the reports of the company are now depicting a performance of the company due to the better utilization of the factors and figures of the accounting and financial terms.

It has been found that due to the conceptual framework, the performance of the company has been enhanced and due to a good performance in terms of revenue, profits and return to the shareholders, investment in the company has been enhanced and the goodwill of the company has been enhanced (Deloitte, 2008). Further, customers are also able to understand the final reports of the company and they are also making the decisions according to their capability to either remain the loyal customer or switch the brand (Jones, 2006).

Analysis over many articles and book, it has been found that these companies are supposed to make the reports according to the conceptual framework as the main motto of conceptual framework is to make it easier for the internal and external users to understand the final reports and make decision accordingly (Brigham and Ehrhardntt, 2013). It has been analyzed through this reports that conceptual frameworks are quite crucial for an organization to enhance its performance and make it more effectual to survive in the market. Through the help of these conceptual frameworks, company has managed to enhance its performance. Further, many other related aspects have also been studied and it has been found that these are the best policies which must be followed by the company to get a better outcome in terms of the profitability and growth of the company.

Summary:

It has been analyzed through conducting a study over the conceptual framework guidelines of JB HI FI that the performance of the company has been enhanced and due to a good performance in terms of revenue, profits and return to the shareholders, investment in the company has been enhanced and the goodwill of the company has been enhanced. Further, customers are also able to understand the final reports of the company and they are also making the decisions according to their capability to either remain the loyal customer or switch the brand (kim, 2011). Further, many other related aspects have also been studied and it has been found that these are the best policies which must be followed by the company to get a better outcome in terms of the profitability and growth of the company (Evangelinos, Nikolaou and Leal Filho, 2015).

Recommendation and conclusion:

Through an analysis over this report, it has been recommended to the user to implement the policies of conceptual framework to enhance the profitability and goodwill of the company. This report has been depicted about the importance of accounting theory concepts in JB HI FI. It has been evaluated in this report that a conceptual framework has helped the JB HI FI to manage the accounting and monetary figures and also help the organization to make a better decision about the operations of the company and all the financial matters. It has been analyzed through this study that company has managed to meet its goals due to conceptual framework. Further it has been analyzed that company has enjoyed the profitability due to conceptual framework guidelines.

SWOT analysis:

It is a study that is performed by the organizations to manage entire internal and external factors related to the performance of the company. SWOT analysis assists the company to administer the strategy and policy in a better manner. It is also helpful for the company to implement some changes into existing strategies and policies to improve the growth and performance of the company.

A SWOT Analysis study provides a pervasive imminent into the history of the company, business structure, financial structure, operations, corporate strategy and company’s management. This report includes a SWOT analysis on the services and products of the company and on the financial information. SWOT analysis of the company is as follows:

Strength:

Strength puts for the uniqueness of the operation of the company which offers significance to the company. Strength of the company is as follows:

  • Market entry barriers
  • Reduced labor cost
  • Skilled workforce
  • Experienced business units
  • Monetary assistance provided
  • High revenue and profitability

Weakness:

Weakness puts for the uniqueness of the operation of the company which offers cons to the company. Weakness of the company is as follows:

  • Future productivity (Doyle & Stern, 2006)

Opportunity:

Opportunity puts for the elements of the operation of the company which offers utilization of significance to the company. Opportunity of the company is as follows:

  • Growing profitability and rates
  • Constant increment in income level
  • Growing economy
  • New services and products (Elmuti & Kathawala, 2010)

Threat:

Threats puts for the uniqueness of the operation of the company which offers trouble to the company. Threat of the company is as follows:

  • external business risk
  • labor cost increment

Brand positioning:

Brand positioning is a kind of activity which is referred to the target customers to make an image into their mind about the brand positioning of the company. It is quite common that every brand activity have a normal goal and aim which is directed, guided and delivered by the reasons and benefits of the brand to purchase and it also focuses over entire points which have a contact with the clients (Hollensen, 2015).

Brand positioning could be defined as an activity of making a brand which provides in such a manner that a distinctive place is occupied and a value could be created in customer’s mind. It has been analyzed through conducting a research over the JB HI FI that this company has positioned its brand image through its logo and its tag line. More, the logo of the company is recognized by every client and it creates a value for the JB HI FI

References:

Blommberg. 2017. JB HI FI. Retrieved as on 18 June 2017

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Decision, vol. 39, no. 3, pp. 205-217.

Deloitte. 2008. Summary of International Accounting Standards. Available from: (Accessed 2 September 2008).

Doyle, P., & Stern, P. 2006. Marketing management and strategy. Pearson Education.

Elmuti, D. & Kathawala, Y. 2010“An overview of strategic alliances”. Management

Evangelinos, K., Nikolaou, I., and Leal Filho, W., 2015. The Effects of Climate Change Policy on the Business Community: A Corporate Environmental Accounting Perspective. Corporate Social Responsibility and Environmental Management, 22(5), 257-270.

FASB. 2007. FASB Statements of Financial Accounting Concepts. Chichester: John Wiley & Sons

Glasson, J., Therivel, R., and Chadwick, A., 2013. Introduction to environmental impact assessment. Routledge.

Hollensen, S. 2015. Marketing management: A relationship approach. Pearson Education.

IASB. 2006. Summary of International Accounting Standards. International Accounting Standard Boards. Retrieved 20 January 2007 from

IASB. 2007 b. Fair Value Measurement. Part 2: SFA's 157 Fair Value Measurements: Comments to be submitted. London: IASB

ICAEW. 2006. Measurement in Financial Reporting. London: Institute of Chartered Accountants in England and Wales

IFRS. 2008. International Financial Reporting Standards. London: IASB

ISAB Framework. 2001. Framework for the preparation and presentation of Financial Statements. International Standards Accounting Board

JB HI FI. 2017. Annual Reports and Financial Statements 2016. Retrieved as on 18 June 2017 file:///C:/Users/lenovo/Downloads/12501june07_725425761_jbhifireport.pdf

JB HI FI. 2017. Home. Retrieved as on 14 August 2017

Jones, M. 2006. Financial Accounting. Chichester: John Wiley & Sons

Jones, S., and Wolnizer, P. W., 2003. Harmonization and the conceptual framework: an international perspective. Abacus, 39(3), 375-387.

Kim, Y., 2011. The contribution of social network sites to exposure to political difference: The relationships among SNSs, online political messaging, and exposure to cross-cutting perspectives. Computers in Human Behavior, 27(2), 971-977

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