What is Corporation Limited a telecommunication limited in Australia?
The company in focus is Telstra Corporation Limited a telecommunication limited in Australia with a market capitalization of more than A$ 50 Billion. With this in mind, the company uses the Generally Acceptable Accounting Principles for its accounting requirements and for financial making decisions. As the biggest telecommunication limited in Australia, the there are various streams of flow of income in the company.
In 2016, the company revenue rose to an all-time high of A$ 27.1 billion while the operation income dropped to A$ 6.3 billion. This is a good sign for the financial position of the company after using the GAAPS. Profits rose to A$ 5.8 billion in 2016 while the total assets and total equity rose to A$40.45 billion and A$ 14.51 billion respectively.
Discuss how to identify an income of a company. Introduce what are the recognition and measurement requirements of incomes used by the chosen company
If you prefer, you can print the template and make the budget by hand, but you should keep in mind that all income and expenses must correspond to the same period of time. That is, if we introduce monthly income and expenses, those expenses that we only pay once a year will have to be divided between the twelve months. For telecommunication industry, the income identified
We start by listing all the money entries (Bragg, 2004). The most important are usually the Social Security payroll or pension in the case of retirees, but do not forget other possible incomes such as alimony, interest on bank accounts, subsidies, extra work and perceptions of social security systems.
Explain why GAAP is crucial for financial reporting and business practices in general
The Accounting Principles constitute mandatory bases or rules that allow the registered operations and the balances of the accounts presented in the Financial Statements to express a true and fair view of the assets, the financial situation and the results of the companies (Bragg, 2010).
These principles have their origin in the experience obtained from the solution of accounting problems and in the laws, and must be accepted by accountants as bases for accounting practice.
The Accounting Principles are developed in different countries by institutions that may be governmental or non-governmental, which work in a coordinated manner. With the development of economic transactions, the need for them has undoubtedly transcended the internal domains, since due to the lack of comparability, the Financial Statements become little useful to analyze the global economic trends (Delaney, 2001).
One of the main reasons for the introduction of GAAP is the basic understanding that a user should have about the figures that a company presents to be compared with others. In order to comply with this comparability and that it be fully valid, the financial statements must follow certain rules in their preparation and preparation. For example: let us imagine for a moment that the financial statements were elaborated according to particular rules that establish the counters of each company, would the comparability of the same be possible (Everingham, Kleynhans and Posthumus, 2003). Of course, not because there is a high probability that different criteria will be established between the counters of each company. This is one of the main reasons why the existence of GAAP is relevant, since its fundamental purpose is to establish rules and rules for the presentation of final statements.
Provide one example to illustrate the implementation of GAAP in the financial reporting of your chosen company, and explain
When the application of the established Accounting Principles is not sufficient to correctly interpret the balances of the accounts, the explanations necessary for their understanding will be included in the Report (Annexes to the Financial Statements).
Generally accepted accounting principles (GAAP) are considered as guides that dictate the guidelines for the registration, treatment and presentation of financial or economic transactions. In order to support the applicability of accounting principles, basic assumptions are established, which are generally accepted and applied initially for any financial statement that is presented in accordance with generally accepted accounting principles (Weygandt, Kimmel and Kieso, n.d.).
An example of implementation of GAAPs in Telstra Corporation Limited, It is for this reason that the idea that human resources are the fundamental factor of success is strengthened even more, taking into account the contribution or not of their knowledge and skills to create, the differences or limitations to which they can be eliminated Companies in today's world. Effective and effective management of them is today the fundamental priority to achieve the level of competitiveness required. The principle of entity or principle of the entity establishes the assumption that the assets of the company are independent of the personal property of the owner, considered as a third party (Sowden-Service, n.d.). A separation between the property (shareholders or partners or owner) and the administration (management) is made as an indispensable procedure of rendering account by the latter. The entity has a life of its own and is subject to rights and obligations, different from the people who formed it.
Give one example when GAAP is not used by your chosen company. Explain how this will impact on the performance and valuation of the companies from the perspective of investors
The principle of equity is synonymous with fairness and justice, and has the status of basic postulate. It is a guideline with a sense of ethics and fairness, for the accounting evaluation of the facts that are the subject of accounting, and refers to the fact that accounting information should be prepared fairly on third parties and the company itself. Examples of instances when Telstra communication limited does not have to use GAAP is when depreciating its assets. There are different ways of depreciating assets of a company, the straight line method and the reducing balance method.
The effect that the financial statements reflect the interests of the parties equitably and that the information they provide is as fair as possible for the interested users, without favoring or disfavoring anyone in particular (Sowden-Service, n.d.). Any asset, such as cash, goods, fixed assets in power and / or use of the entity and over which it is exercised, without being necessarily credited the ownership thereof, as long as it does not conflict with third parties who also claim ownership, Are subject to being recorded in books by way of regulation, through an adjustment seat, which is extended to differences in acquisition or registration costs at an earlier date.
A going concern adds value to the resources it uses, establishing its gain by difference between the value and the cost of the resources used to generate the income, showing in the balance sheet the resources not consumed at its acquisition cost, and not at its current market value. This principle eliminates the possibility of applying the criterion of what is perceived for the attribution of results. The latter method is outside GAAP (Racine, 2010). Realization Economic results should only be counted when they are realized, that is when the operation that originates them is improved from the point of view of the legislation or commercial practices Applicable and all the risks inherent in such an operation have been fundamentally weighed. Principle of Prudence it means that when choosing between two values ??for an asset element, one should usually opt for the lowest, or an operation to be accounted for So that the owner's fee is lower.
Bragg, S. (2004). GAAP implementation guide. Hoboken, N.J.: Wiley.
Bragg, S. (2010). The ultimate accountants' reference. Hoboken, N.J.: Wiley.
Bragg, S. (2014). GAAP guidebook. Centennial, Colorado: AccountingTools, Inc.
Delaney, P. (2001). Wiley GAAP 2001. New York: John Wiley and Sons.
Everingham, G., Kleynhans, J. and Posthumus, L. (2003). Introductory GAAP. Kenwyn: Juta.
Racine, S. (2010). Accounting principles. Charleston, SC: BiblioLife.
Sowden-Service, C. (n.d.). Gripping GAAP.
Weygandt, J., Kimmel, P. and Kieso, D. (n.d.). Accounting principles.
Wild, J., Shaw, K. and Chiappetta, B. (n.d.). Fundamental accounting principles.