Ethical Revival of Prudence System †Free Samples to Students

Question: Discuss about the Ethical Revival of Prudence System. Answer: Introduction Qantas Airways owns Jetstar is considered as one of the discount priced airline operator in Australia. JetStar carries more than 8.5% passenger from Australia itself. It has been further seen to operate as per the home and the international network from Melbourne Airport. The primary fleet of the airline operator has been seen to be acknowledged with the A320 and Boeing 787 Dreamliner. Virgin Australia Airlines is discerned as the second principal airline carrier after Qantas Airways. The airline company is seen to be based in Bowen Hills in Brisbane. It has been further seen to be considered in 1999 and operated in one route. The airline carrier is considered to expand itself in 29 cities in areas such as Brisbane, Adelaide, Melbourne and Sydney. The objective has been seen to be based on the important concept which has been seen to be related to the show the methods adopted by both the companies and various types of the other notes from the Auditors Report, Remuneration Report and Financial reports. The final section of the segment of the lessons has been further able to discuss on the rational for the shareholders to invest. Conceptual framework of Accounting for both the companies It has been observed that both the companies have been seen with AASB and Corporations Act 2001. It has been seen that financial report of both the companies has been prepared as the IFRS. This standard is further seen to be issued by the international accounting board. The important consideration for this has been based on the various types of the consideration taken from the financial statements of both Jetstar Airways and Virgin Australia Airlines. This is further seen to be considered as per the historical cost evaluation except in sections of asset and liabilities which needs assessment as per the fair value and other relevant accounting policies (Steenkamp Steenkamp, 2016). The import aspect of the accounting aspect of revenue recognition is seen to be considered as per AASB 118 Revenue, AASB 111 Construction Contracts and Interpretation 13 Customer Loyalty Programmes. The company is yet to implement the AASB 15 Revenue from contracts with the customers, this has been seen to be based on the existing nature of the standards which has been set to be implemented as per the commence date of on or after 1st January 2018. The main activities of the company have been further able to decide if they will be able to swap the AASB 117 for leases and able to change the various considerations of the framework based on AASB 16. AASB 136: Impairment of Assets, is applicable for the recognition of the financial guarantees and the agreement which is seen to be related to the financial guarantees based on the implementation of AASB 137 Provisions, Contingent Liabilities and Contingent Assets (Marshall et al., 2013). Prudence theory applied in both the companies Theoretical application of prudence has been further seen to be based on the fact that none of the company overestimate of total revenues. Virgin Australia and Jetstar has applied the prudence concept based on the financial information which is conservative and the recording of the assets is not underestimated based on the liabilities. It has been further seen that the financial statements has considered the probable transaction into considerations. A variety of the important consideration for the prudence has not been applied as per the AASB 15 Revenue from Contracts with Customers (AASB 15) and the application of AASB 16 Leases (AASB 16). It is seen to be convinced of replacing the existing standards. For testing the viability of the various types of the methods, the companies have been able to decide on test the new method for lease only after 01.01.2019. Other considerations of prudence have been depicted with the regular review of the assets and in terms of assessment of the dec reasing values of these assets. The most important consideration for prudence is evident among both the companies by writing off the values in terms of fixed assets (Barker, 2015). Criteria followed for financial data Total Assets- The total asset of Qantas Airways is standing at $ 17708m in 2016; however the entire asset of virgin Australia is seen to be $ 6886.9 m in 2016. In addition to this, Virgin Australia is not having any amount of the dependent liabilities as on 30 June 2016. In terms of Qantas Airways Ltd, the assets have been seen to be categorised as per the assets held for sale and measured in terms of the fair value less cost of selling. The main benefit of Qantas Airways is seen with the measurement of fair value of plan assets less the present value. The different types of the other consideration has been further seen to be made with the preparation of financial statements of Virgin Australia Airlines with the assets which are not held for the assessment based on financial leases to be recognised at fair value (Wan Norhishamuddinet al., 2015). Tangible Assets and Intangible Assets- It has been depicted with the recognition of the intangible and the intangible assets, with the consideration of non-current tangible assets, which are further seen to be regarded for revenue as per the recoverable amount of the assets. The amortisation is considered as per residual life and useful life as per the date of reporting (Guthrie Pang, 2013). Depreciation The important aspect of Qantas Group has been seen with the depreciation recognition as per straight line basis for PPE except for freehold land. The rate of depreciation of the assets is calculated by total assessment cost is estimated as per the residual values for the various types the useful life of the assets. In a similar way the depreciation and amortisation of the Virgin Airlines is taken into consideration as per the date on which they are classified as held for sale. The depreciation on the PPE is stated as per cost less accumulated depreciation and impairment losses. Same as Qantas, Virgin Airlines recognises the depreciation of the assets with the straight line and estimate the same, with the useful life of the residual value (Microsoft, 2015). Rationale for the shareholders investing in the companies The different types of the considerations made from the directors report has been able to state on the various implication on the shareholders investing in both Qantas Airline and Virgin Airlines. Based on the report of Virgin Airlines, the revenue of the company has been observed to rise from $4,749.2 million to $5,021.0 million. The comparative period has been able to reflect on the total equity which is accounted as 60% of the equity from Tigerair Australia in 16 October 2014. The investor need to further consider on increasing the net operating expenditure from $4,802.7 million to $5,278.7 million. This particular aspect has been seen to be negative for Qantas. The increasing equity has been considered to be conducive for investing in Virgin Airlines (Kober, Lee, Ng, 2013). As per the CEO statement as per the annual report of 2016, is seen to significantly contribute with high figures in 2015-16. The total add to in financial performance is also obvious with the growing operating margin recognised with the increasing EBIT for Jetstar Group, Qantas Loyalty, Qantas International and Qantas Domestic. It has been further discerned that over two thirds of the total remuneration of Qantas has been measured with the international operations, strategy of the portfolio and loyalty business. It needs to be considered by the investors the increasing in the profit before tax from $ 975 m in 2015 to $ 1532 in 2016. As per the financial examination it has been observed that Jetstar (Qantas) is not only in better position than Virgin Airlines and the operating expenses is lower, which makes it a better contender than the latter (Menegatti, 2014). Conclusion The main aspects of the study have able to highlight the present framework of accounting for both Qantas Airways and Virgin Airlines. The a variety of aspect of the study has been able to check for the compliance of the financial report as per the prescribed standard. The conceptual framework of the report has been further seen to be considered as per the AASB and Corporations Act 2001. It has been further discerned from the financial statements that the main accounting framework is seen to be based IFRS. This standard is issued by the international board of accounts. The main consideration of the financial statement has been based on previous cost evaluation, except in some of the areas where the possessions and liabilities needs assessment based on fair value and the relevant accounting policies. Reference List Barker, R. (2015). Conservatism, prudence and the IASBs conceptual framework. Accounting and Business Research, 45(4, SI), 514538. https://doi.org/10.1080/00014788.2015.1031983 Guthrie, J., Pang, T. T. (2013). Disclosure of goodwill impairment under aasb 136 from 2005-2010. Australian Accounting Review, 23(3), 216231. https://doi.org/10.1111/j.1835-2561.2013.00204.x Kober, R., Lee, J., Ng, J. (2013). GAAP, GFS and AASB 1049: Perceptions of public sector stakeholders. Accounting and Finance, 53(2), 471496. https://doi.org/10.1111/j.1467-629X.2012.00469.x Marshall, A., Baden, D., Guidi, M. (2013). Can an Ethical Revival of Prudence Within Prudential Regulation Tackle Corporate Psychopathy? Journal of Business Ethics, 117(3), 559568. https://doi.org/10.1007/s10551-012-1547-4 Menegatti, M. (2014). New results on the relationship among risk aversion, prudence and temperance. European Journal of Operational Research, 232(3), 613617. https://doi.org/10.1016/j.ejor.2013.08.003 Microsoft. (2015). Entity Framework. Data Developer Center, 0117. Retrieved from https://msdn.microsoft.com/en-gb/data/ef.aspx Steenkamp, N., Steenkamp, S. (2016). AASB 138: catalyst for managerial decisions reducing RD spending? Journal of Financial Reporting and Accounting, 14(1), 116130. https://doi.org/10.1108/JFRA-02-2015-0026 Wan Norhishamuddin, W. R., Hwa, T. K., Nur Medeena, M., Ahmad Shahrin, S., Mohd Isa, A. (2015). Depreciation between Conventional and Green Office Buildings. Procedia Economics and Finance, 31(15), 661670. https://doi.org/10.1016/S2212-5671(15)01154-5