Review Of 8I Holdings Limited Annual Report – Compliance With Accounting Conceptual Framework

Measurement Requirements

This report takes into consideration the inspection of the adherence of one Australian company with the various requirements of accounting conceptual framework. For the purpose of this report, 8I Holding Limited (8IH) is taken into consideration.

8I Holding Limited, commonly known as 8IH is an investment company listed in the Australian Stock Exchange (ASX) and the company has major interests in the areas of private and public market investment, management of funds as well as financial education. More specifically, 8IH invests in private businesses and public listed corporations. The group also operates a licensed fund management business in Singapore through 8 Capital Pte Ltd; and it is regarded as one of the leading training providers for financial education in Singapore and Malaysia through 8VIC Global Pte Ltd (8iholdings.com 2018).

It is needed for the companies to comply with the principles and standards of accounting conceptual framework provided by International Accounting Standards Board (IASB) as the companies can gain the required standards and principles to prepare and present the financial statements from the IASB conceptual framework. IASB assists the standard setters to develop new accounting standards and policies (aasb.gov.au 2018).

Assets, liabilities, equity, income and expenses are the major elements of the conceptual framework; and the companies have the obligation to maintain the measurement and recognition requirements of these elements in financial reporting. There are certain benefits that the companies can get by complying with the standards of conceptual framework; such as it helps to increase the compatibility of the standards and policies, it results in effective communication of the financial information with the shareholders and others (aasb.gov.au 2018).      

There is a relation between the measurement of asset and inabilities with recognition of income and expenses. As per the conceptual framework of IASB, firms are restricted from the adoption of similar measurement mechanism for measuring all assets and liabilities in the presence of the fact that it fails in providing relevant financial information. Historical cost method, fair value method, realizable cost method and current cost methods are the available measurement mechanism as per the conceptual framework.

(Source: docs.wixstatic.com 2018)

According to the above image from the annual report of 8IH, historical cost method is not the only measurement mechanism that the company has adopted as they have adopted other measurement basis as per the requirements; and it can be seen in below:

(Source: docs.wixstatic.com 2018)

The above extracts from the annual report of 8IH are the evidences of the adoption of more than one measurement base by the company. More specifically, the company has used both the historical cost base as well as fair value base for the measurement of their different assets and liabilities. The main aim of the company behind the adoption of these measurement bases is to provide the investors and other users with the relevant information about their different assets and liabilities (docs.wixstatic.com 2018).

The fundamental qualitative characteristics are relevance and faithful representation; and their discussion is shown below:

Relevance: In case the financial information of the firms are relevant, the can make positive contribution in the decision making process of the users of the financial reports by positively influencing the decision-making process (Macve 2014). For this reason, both the predictive as well as confirmatory value of the financial information need to be there. These values assist the users to obtain feedback about the past financial evaluation and to make their own financial prediction.

Fundamental Qualitative Characteristics

(Source: docs.wixstatic.com 2018)

The above image from the annual report of 8IH shows that the company has provided the detailed financial information about revenue and investment income of their business that includes the information of the current as well as previous years. It confirms the presence of predictive value as the users of the financial statements can predict the future revenue and investment income from the provided information. In addition, it also supports the presence of confirmatory value as the users can compare the prediction with the prediction of the previous year. On this basis, it can be said that the financial information of 8IH is relevant (docs.wixstatic.com 2018).

Faithful Representation: The users can consider the financial information of a company is faithfully represented when they are complete, neutral and free from errors (Sutton, Cordery and van Zijl 2015). It can be considered as one major positive aspect of the financial reporting of 8IH that they have provided both the natural as well as numerical description of their assets, liabilities and other aspects through financial statements and notes to the financial statements; and it can be confirmed from the below examples:

(Source: docs.wixstatic.com 2018)

As per the above example, 8IH has provided complete information about the above aspects. In addition, as per the repot of the auditors, it can be ascertained that they are free from errors and neutral (docs.wixstatic.com 2018).

The enhancing qualitative characteristics are Comparability, Verifiability, Timeliness and Understandability; and their discussion is shown below:

Comparability: Financial information of the companies must be presented in the manner so that they can be compared with the financial information of the other company; and with the same company from different accounting period (Draft 2015). The evidence is provided below:

(Source: docs.wixstatic.com 2018 and annual-report-2017.btim.com.au 2018)

The above discussion shows that uses can easily compare the financial statements of 8IH with the other companies like Pendal Group Limited as above. These are the evidences of the presence of comparability characteristic in the financial statements of 8IH.

Verifiability: In case of 8IH, the users of the financial reports can apply their accounting knowledge and independent observation to verify the fact that whether the mentioned methods and techniques are used in the financial reporting of the company (Macve 2015).

Timeliness: As per this characteristic, financial information must be available to the users at the time of their decision-making process. In case of 8IH, the users of the financial reports can obtain the required financial information from their financial statements through annual report on the timely manner (Gerber, Gerber and van der Merwe 2015).

Understandability: In 8IH, the financial statements are accompanied by the notes that contain the used methods, assumptions, judgments and techniques. The users of the financial statements can access them for gaining easy understanding about the financial performance and position of the company (Müller 2014).

Financial statements of the firms contain the required financial information that the investors, lenders, creditors and other users use for analysing the financial position and performance.

Enhancing Qualitative Characteristics

(Source: docs.wixstatic.com 2018)

The above discussion shows that 8IH has disclosed the required financial information through four types of financial statements. Statement of comprehensive income provides the information on the financial performance of the firm; statement of financial position shows the information about the financial standing of the company; statement of change in equity shows the change in financial performance of the company; and the statement of cash flows shows the information about both the cash inflows and outflows. Thus, based on this, it can be surely said that the users can use the financial statements of 8IH for the purpose of decision making as they can gain all the require information from them (docs.wixstatic.com 2018).  

On the basis of the earlier discussion, it can be observed that the users of the financial statements can apply their basic accounting knowledge and independent observation for the analysis of the financial statements of 8IH. At the same time, it is required to be mentioned that there are certain financial calculations as well as judgments that cannot be understood with the basic accounting knowledge as they require advisor’s understanding (Whittington 2014). Certain examples are provided below:

(Source: docs.wixstatic.com 2018)

It needs to be mentioned that it is difficult to understand the risk management mechanism of the companies in the presence of basic accounting knowledge. Apart from these, other aspects can be understood in the presence of basic accounting knowledge.

General purpose financial reporting puts the obligation on the business organizations to deliver all the required financial information to the users of the financial reports so that they can effectively make decisions. It can be seen from the above parts of the discussion that 8IH discloses all the required financial information through certain financial statements like statement of comprehensive income, statement of financial position and others. It implies that the company has made compliance with the requirement of general purpose financial reporting (Henderson et al. 2015).

Conclusion and Recommendations

The above discussion indicates towards the fact that 8IH has complied with all the requirements of the conceptual framework. In the presence of these compliances, there is not any accounting issues in the process of financial reporting of the company. However, certain recommendations are provided below for 8IH with the aim to bring improvements in their financial reporting:

• 8IH has their business operations in Australia, but the company follows the Singapore Financial Reporting Standards. Hence, the recommendation for 8IH is to comply with the standards of Australian Accounting Standard Board (AASB) with the aim to provide the company with more financial liberty in the country’s financial system.
• Apart from the above, it is recommended to 8IH to provide the list for the assets and liabilities measured under fair value and historical cost method separately for the ease of understanding of the users.

References

8I Holdings | Empowering Growth. 2018. 8IH | Our Story. [online] Available at: https://www.8iholdings.com/about-us [Accessed 13 Dec. 2018].

Aasb.gov.au., 2018. [online] Conceptual Framework for Financial Reporting. Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 13 Dec. 2018].

Annual-report-2017.btim.com.au. 2018. Annual Report 2017. [online] Available at: https://annual-report-2017.btim.com.au/uploads/BTIM_FinancialStatements2017.pdf [Accessed 13 Dec. 2018].

Docs.wixstatic.com. 2018. Annual Report 2017. [online] Available at: https://docs.wixstatic.com/ugd/b94e24_4950f9f627884ef78a0b2a4c68d7b482.pdf [Accessed 13 Dec. 2018].

Draft, I.E., 2015. Conceptual Framework for Financial Reporting. 2015-05-01)[2015-07-20]. https://kjs. mof. gov. cn/zhengwuxinxi/gongzuotongzhi/201506 P.

Gerber, M.C., Gerber, A.J. and van der Merwe, A., 2015. The conceptual framework for financial reporting as a domain ontology. In Twenty-first Americas Conference on Information Systems, Puerto Rico (pp. 1-18).

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Macve, R., 2014. What should be the nature and role of a revised Conceptual Framework for International Accounting Standards?. China Journal of Accounting Studies, 2(2), pp.77-95.

Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.

Müller, J., 2014. An accounting revolution? The financialisation of standard setting. Critical Perspectives on Accounting, 25(7), pp.539-557.

Sutton, D.B., Cordery, C.J. and van Zijl, T., 2015. The purpose of financial reporting: The case for coherence in the conceptual framework and standards. Abacus, 51(1), pp.116-141.

Whittington, G., 2014. Fair value and the IASB/FASB conceptual framework project: an alternative view. In Accounting and Regulation (pp. 229-268). Springer, New York, NY.