Accounting Theory

Posted on April 5, 2019 by Cheapest Assignment

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Assessment Type: Written Report

The report should have following sections for minimum:
Section 1: Identify Key Accounting Policies Key policies and estimates used to measure risks and critical factors for success must be identified.
Section 2: Assess Accounting Flexibility Accounting information is more open to distortion if managers have a high degree of flexibility in choosing policies andestimates.
Section 3: Evaluate Accounting Strategy Flexibility in accounting choices allows managers to strategically communicate economic information or distort performance.
Issues to consider include:
  • Norms for accounting policies with industry peers
  • Incentives for managers to manage earnings
  • Changes in policies and estimates and the rationale for doing so
  • Whether transactions are structured to a chieve certain accounting objectives.
Section 4: Evaluate the Quality of DisclosureIssues to consider include:
  • Whether disclosures seem adequate
  • Adequacy of footnotes to the financial statements
  • Whether notes sufficiently explain and are consistent with current performance
  • If GAAP reflects or restricts the appropriate measurement of key measures of success
  • Adequacy of segment disclosure.
 Section 5: Identify Potential Red Flags Issues that warrant gathering more information include:
  • Unexplained changes in accounting, especially when performance is poor
  • Unusual increases in inventory or receivables in relation to sales revenue
  • Increases in the gap between net income and cash flows or taxable income
  • Use of R&D partnerships, SPEs or the sale of receivables to finance operations
  • Unexpected large asset write-offs
  • Large fourth-quarter adjustments
  • Qualified audit opinions or auditor changes
  • Related-party transactions.Section 6: Compliant with the Conceptual Framework
  • Conclusion


The term ‘Accounting Theory’ can be explained as a set of various methodologies as well as guidelines that are used to know about the different principles and applications associated with financial accounting. Everything related to accounting starting from its inception and the evolution over time, has been included in this report along with the changes that have been made in theories of accounting over a specific time span. This is generally a tool, which helps the government bodies to monitor the financial transactions as well as reporting of financial data via annual financial statements. Due to this reason, the policies and principles related to accounting have been included in the government’s regulatory framework.

The following report discusses the accounting theories that are implemented by Woolworths’s Retail and Grocery suppliers and the issues that are faced by it currently. This company has been included in Australian Stock Exchange. The different aspects of theories of accounting like the degree of flexibility, potential red flags as per the compliance with accounting theory’s conceptual framework, disclosure quality are of prime importance in the report (Rueda, Garrett & Lambin, 2017).

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Section 1: Key Accounting Policies

Somme of the most important and significant Accounting policies that have been incorporated by Woolworths are mentioned as following:

  • Statement of Compliance

The financial statements for general purpose are formed by Woolworths Retail and Grocery suppliers as per the regulations and guidelines stated in the Corporations Act of 2001. The accounting standards that are used by Woolworths consist of certain guidelines that ensure that the notes, as well as financial statements of any particular company, are in compliance with the International Financial Reporting Standards or IFRS.

  • The basis of Preparation

The Financial data shown by Woolworths fast food is based on the historical concepts of cost accounting that are measured at the fair value’s revalued amount that is calculated at the end of every accounting duration. The determination of fair value that is being used in making the financial statements is done by considering the fact that the net realizable amount for overall financial transactions is AASB 102. This can also be done by considering the value to be AASB 136 (Sgarbossa & Russo, 2017).

  • The basis of going concern

The idea is going to be influenced by the premises related to the monetary explanations arrangement and will be… The conclusions are made after considering the factor that there is no existence of the material vulnerability i…

  • Basis of Consolidation

The overall costs and salaries that will originate from the business auxiliaries and have been either discarded or…

  • Business Combinations

Woolworths has been able to effectively manage the tax liabilities that are deferred along with those assets that… The shared payments’ basis of all the acquirers that are associated with replacement via some consolidated liability and… However, the assets that a kept classified and are held for sale according to the AASB 5 standards are the…

  • Investments in accomplices

Assets, and results of the associated liabilities that accomplices are further incorporated in the cash… This is done when the hypotheses are considered accessible to be purchased that is done as per AASB 5 where the Noncurrent assets are made accessible so that they can be acquired and discounts can be made. According to the indications that have been made by Esteem System, the accomplice’s interests are…

Similarly, during the time the energy of consolidated component is outperformed by the hardships of some accomplice… Some major setbacks have been observed to an extent where the substance that has been blended…

  • Current as well as deferred tax for a specific period

The meaning of current and deferred taxes can be stated as those taxes that are recognized in expenses… In the specified scenario, the tax recognition can be performed exclusively the losses as well as profits. In some other option, these taxes arise in the form of initial accounting for the purpose of getting a… The business combination consists factors like effects of tax in the services related to Accounting.

  • Inventories

The statements that are related to inventories are considered at a much lower value when compared to the… Most of the methods used for inventory valuation at Woolworths are the ‘First In First Out’ methods. However, in a majority of cases the costs that are considered in the variable… The calculation of net realizable by estimation of the difference between the selling price and the complete…

  • Investments made in Joint Ventures

The assets, results, assets and some other liabilities of attempts made in joint form are intertwined as per the mentioned value of combined cash along with the clarifications associated with the usage of esteem procedures in the operations of accounting. This is to be done except for the time when theory, is considered accessible that can be acquired, where the cases would be considered with respect to the AASB 5.

The Noncurrent assets that are considered as accessible materials to procure along with some discounts. According to the esteem system, any zeal for any particular joint meander is primarily considered as the specified clarification related to the financial condition at a certain value that is merged along with the calculation that is to be seen as the offer of consolidated component for the mishap and advantage as well as some other broad pay related to the meander in a joint manner (Giovannetti & Marvasi, 2016).

Section 2: Accounting Flexibility

Accounting Theories

Many accounting experts consider the accounting flexibility as a very important aspect when it comes to the accounting policies implementation. This also depends on the specified extent where the managers are provided with the power to choose their own policies as well as estimated according to their will and convenience. For Woolworths Retail and Grocery supplier, three major entities are considered for handling the governance in the corporate sector that is called as company secretary, management and the board of directors. The Woolworths Board of directors holds the power for forming the policies related to accounting.

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The company secretary plays the role of providing the necessary advises management and advises to board members related to accounting policies and better governance. This person is accountable to the company’s board of directors. In the same manner, the management’s duty is to ensure that all the strategies that have been developed and planned by directors’ board are implemented very efficiently as well as to report the senior authorities regarding the progress and results of implementing the strategies. The main power of making and implementing the strategies is held by the board of directors. However, a minimum amount of power is transferred to the management and managers. Hence, the accounting flexibility is lesser for Woolworths that restricts the scope of forming any distortion in accounting (Tidy, Wang & Hall, 2016).

SIS – Accounting System Literature Review

Section 3: Accounting Strategy

This particular section of the complete study is all about the unique accounting strategies that… The major role of any consolidated entity is to ensure that all the individual entities and… This particular thing needs to be apart from the returns’ maximization for stakeholders as well as equities and debts optimization. The consolidated feature of Woolworths remains unchanged as the accounting policies are in… Woolworths’s capital structure comprises of net debts that includes cash, cash equivalents, borrowing collection, equity held by equity holders as well as the parents, reserves, issues capital and earnings that have been retained. The non-controlling interests that are disclosed are attached to the annual reports or financial statements.

Woolworths operates in almost every part of the world in the form of subsidiaries that exist in an established manner in the markets. These are in the name of Woolworth’s consolidated entities. Every particular subsidiary of Woolworths is not subjected to some kind of external imposition related to the requirements of any capital. The most important technique that is used by this company is an operation of cash flow to maintain the asset expansion of the firm from the perspective of being a consolidated entity. This thing is also used for making the repayment and dividends of the matured debts as well as routine tax outflow (Le Velly & Dufeu, 2016).

Section 4: Quality of Disclosure

The disclosure quality is another very important feature of the annual financial statements that are prepared by considering some of the target audience. The primary audience usually comprises of creditors and investors that make use of the data and information mentioned in any financial statement with the objective of making useful investments. The provision of correct information in the financial statements is very important as there are investors that belong to different backgrounds, who intend to make some good investments. The management discussion, financial statements, director’s report and financial statement’s descriptive notes are the minimum acceptable data related to investments.

Disclosures comprise of three levels known as complete, sufficient and fine disclosures. With the increase in the disclosure level, financial disclosure’s quality also gets enhanced. For Woolworths Retail and Grocery suppliers, disclosure level is adequate or sufficient as the necessary amount… The creditors and investors of this company do not consider the financial data to be sufficient for understanding the…

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Section 5: Potential Red Flags

The careful analysis of information provided by the company in its financial statement gives a fair… Certain indicators exist in the accounting systems of a company that can be termed as… The analysis of these red flags is extremely necessary for the elimination of any potential threat to an organization.

HI6028 Taxation Theory, Practice & Law Free Sample

Some of the potential red flags that might exist in the accounting statements of Woolworths Retail and Grocery suppliers are mentioned below.

  1. Looking at the previous as well as present year’s inventory figures, it is very evident that the inventory amount has increased in a year. However, the company has not mentioned it in its bottom line. An inventory of USD 55 MM has been reported for 1st Jan 2017 against about USD 48 MM on 1st Jan 2016.
  2. Receivables of USD 170 MM against USD 152 MM have been reported on 1st Jan 2017 and 1st Jan 2016. In general, having a lot of accounting receivables is a good symptom for a company as it looks as a company asset. However, this might also act as a potential threat to the firm if the amount keeps increasing.
  3. Despite showing profitable figures on papers and web information, there is a chance that the company might get poor as the cash flow stops if it gets stuck at one point.
  4. Other expenses made by an organization are considered as a very important component for their respective income statements. The regular or low quantity of these components is not a reason for concern. However, the more careful observation must be made regarding the figure as there might be a scope of this could be an ideal financial irregularity source.

Accounting Theories

In addition, the company’s annual report has included that there are more than 16,000 employees on Jan 1, 2017. This can potentially pose a risk of forgery. The comparison between the assets and liabilities also need to be considered in… Higher assets compared to liabilities are always good for the organization but if this is vice v…

Section 6: Compliance with conceptual framework

The Woolworths Retail and Grocery suppliers is a company that is listed on the Australian Stock Exchange and ….. The ASX rules state that the responsibilities and roles of companies must be disclosed along with the matters that.. All the aspects have been clearly described by the Woolworths. Another major rule of background verification has also been mentioned by the company for all the candidates as…

Business Law

Compliance is related to the nomination that is present along with the members that… The Woolworths has also given the compliance related to board skill matrixes that are a part of the… This is very useful for diversifying the other aspects related to any particular business. Another compliance the company has given that is a major portion of the board members are supposed to work in an independent manner. The Woolworths has also followed the ASX principles while formulating its committee for audit and other similar operations and has assigned the necessary number members that possess the adequate amount of skills and knowledge (Spink, Moyer & Whelan, 2016).


The above study has explained all the aspects that are related to accounting by considering a multinational company… The different aspects of accounting theory along with the given amount of duration have been explained in this study. The rules and principles that are associated with the Australian Stock Exchange and their compatibility with… The principles that are in accordance with companies operations have been efficiently adopted by Woolworths for…

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