Analysis Of Australian Company Accounting Theory: AGL Energy Limited (Australia) (Essay Sample)

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Accounting Theory and Concept
AGL Energy Limited (Australia)
Accounting is a tool or side of management that enables organization to present accurate data to the concerned stakeholders. Despite data presentation taking a better part of accounting, it is critical to acknowledge that accounting is built on well laid theories and concepts. Accounting theories and concepts are held together by the conceptual framework of accounting as the major block or foundation. From the people who key in data to those responsible for the production of final statements, these theories and concepts ensure flow, credibility and accessible financial information for all. AGL Energy Limited is one of the integrated companies providing electricity in Australia. AGL operates in the sensitive line of providing utility to household and commercial sector. Based on this the company is watched by both domestic and business energy users (AGL Limited Company website n.p). Since 1837, AGL has enjoyed effective market operation through provision of electricity to all it clients. Realizing the massive task the company has on annual basis; its top management has maintained annual merited recruitment to meet the ever increasing electricity demands (Edmonds, Edmonds, Mcnair & Olds, pp. 28-32).
A number of companies have enjoyed the utility industry specifically electricity but have opted out terming high cost of production and distribution, damages in terms electricity material and high debts. It is interesting to note that AGL has been able to maintain the market amid the challenges feared by other market players. One main strength of the company is a well established management with main focus on its financial sector or department as the hub of the company. The company is aware of that fact that any stumble on in hits statement would see the monopoly the company has enjoyed for long slip away. The effective reporting at AGL Ltd is built around accounting theories of usefulness, qualitative characteristics, assumption, historical cost and matching principles (Financial Accounting Standards Board Statement of Financial Accounting Concepts n.p)
AGL Limited Account Theories and Concepts
1 The Usefulness accounting Concept
Every company in Australia is very much of the high number of users depending their financial information to make vital decision. In the year 2013, AGL issued shares for public subscription. As much the share amount was large and price arguably high, a good number of people came out to subscribe and the IPO did not go the full month as it was planned. The company believes this was credit to its full and effective reporting. Buying or share subscription by the public is done after based on one’s perception about the organizations stability. Prior to the IPO, AGL had just released it statement of financial position which showed stability in terms of assets and the general liquidity level of the company. Through its statement of financial position, AGL managed to convince the public of the going concern which is major decision is making factor in a business (Bhattacharyya 2005, pp. 12-16). Potential investors in company shares are always pushed on this after assurance of the company’s continued market stay. In this case, AGL through it statement of financial position (Balance sheet) proved the company was in the business to stay and in the best position to meet its liabilities.
2 Qualitative Characteristics
Financial reporting is not about data presentation as perceived by many but quality of financial information released to the market. Accounting conceptual framework provides that accounting information should be relevant, reliable, comparable and consistent. In the case of AGL, the company is very much aware that its shareholders need previous statement to place against or compare with current as a way of attaining any growth trends (Stickney 2010, pp.21-23).
3 Assumptions
Accounting or financial are expected to poses high level of accuracy based on the fact that these information influence vital decision making. Effective accounting theories operate on major assumptions of economic entity, going concern, monetary unit and periodic assumption a look at the statement provided by AGL the company is rooted on these assumption key ways of making in road into the market and extending its operation (Financial Accounting Standards Board 2000, pp. 17-21).
4 Historical Cost And Matching Principles
AGL Ltd as a company good reputation prepares its financial statements on the basis of Generally Accepted Accounting Principles. GAAP acknowledges the historical cost and matching principles as key to effective reporting since it provides room for asset valuation thus communicating important ratios such liquidity among others (Albrecht 2007, pp. 31-34).
Financial Statements presented on well accounting theories and concepts
Fiscal year is July-June. All values AUD millions.

2011

2012

2013

2014

2015

5-year trend

Sales/Revenue

7.07B

7.45B

9.72B

10.45B

10.68B

 

Cost of Goods of Sold

6.19B

6.45B

8.25B

8.88B

8.79B

 

COGS excluding D&A

6.04B

6.27B

7.96B

8.56B

8.4B

 

Depreciation & Amortization Expense

148M

173.9M

287M

326M

391M

 

Depreciation

127M

139.8M

240M

272M

362M

 

Amortization of Intangibles

21M

34.1M

47M

54M

29M

 

Gross Income

886.8M

1.01B

1.47B

1.56B

1.89B

 

 

2011

2012

2013

2014

2015

5-year trend

Expenses

220.8M

241.1M

467M

578M

793M

 

Research & Development

-

-

-

-

-

 

Other SG&A

220.8M

241.1M

467M

578M

793M

 

Other Operating Expense

52M

63.4M

-

-

262M

 

Unusual Expense

(174.3M)

516.3M

380M

21M

282M

 

EBIT after Unusual Expense

174.3M

184.5M

(380M)

(21M)

548M

 

Non Operating Income/Expense

(14.2M)

(10.8M)

(44M)

(50M)

(51M)

 

Non-Operating Interest Income

47.9M

45.4M

41M

24M

20M

 

Equity in Affiliates (Pretax)

-

-

-

-

-

 

Interest Expense

62M

73M

200M

202M

207M

 

Gross Interest Expense

77.4M

99.8M

228M

217M

231M

 

Interest Capitalized

15.4M

26.8M

28M

15M

24M

 

Pretax Income

760M

146.1M

419M

735M

310M

 

Income Tax

234.9M

48M

70M

190M

119M

 

Income Tax - Current Domestic

130M

93.2M

110M

9M

103M

 

Income Tax - Current Foreign

-

-

-

-

-

 

Income Tax - Deferred Domestic

104.9M

(45.2M)

(40M)

181M

16M

 

Income Tax - Deferred Foreign

-

-

-

-

-

 

Income Tax Credits

-

-

-

-

-

 

Equity in Affiliates

33.6M
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