Estimates and Accounting Policy Judgement

The Australian Securities & Investments Commission in their review of 2011 financial reports unearth that listed entities in their reporting did not follow or meet expectations of the Australian Accounting Standard Board (AASB) requirement. According to ASIC (2012), the most affected accounting policies that did not meet full disclosure were standards concerned with performance and uncertain economic conditions and useful information for investors. Standards that deal with performance and uncertain economic condition and were not fully disclosed by reporting entities include revenue recognition, expense deferral and other comprehensive income, asset values, off- balance sheet arrangement and going concern. The standards that help disclose useful information to investors and did not meet disclosure requirement include non-IFRS financial information disclosures, operating and financial review, current versus non-current classifications, estimates and accounting policy judgements and financial instruments.

The commission was concerned with non-compliance of estimates and accounting policy judgements. The commission in their investigation observed that some entities did not make material disclosures of sources of estimation uncertainty and significant judgements in applying accounting policies . According to ASIC (2012), non compliance with estimates and accounting policies leads to material misstatement of economic value of transactions of the firm, and therefore, it is important for firms to fully comply with disclosure requirements of the policy to allow users of financial statements evaluate financial performance and position of a reporting entity with all relevant and necessary financial information. The Board of Wesfarmers Limited is concerned about the company’s reputational standing in the market if ASIC found any deviations from AASB requirements in this matter. The Board, therefore, sought review of the relevant disclosures in the company’s annual report undertaken as recommended by ASIC. This business research report seeks to review Wesfarmer Limited’s compliance of estimates and accounting policies to the requirements set by the Australian Accounting Standards Boards in order to meet Australian Securities and Investment Commission guidelines.

Continue reading Free Sample Essay on Estimates and Accounting Policy Judgement