FINANCIAL REPORTING

Financial Reporting: Accounting For Property Plant and Equipment



Financial Reporting: Accounting For Property Plant and Equipment

Introduction

Accounting for property plant and equipment is a developing area in financial reporting and holds considerable importance in reporting financial statements through annual reports. International Accounting Standard Board is accountable for formulating International Financial Reporting Standards, and encouraging the function and function of these values. It outlines the standards for different financial reporting actions based on the accounting principles. Accounting for fixed assets regulated by international standards IAS 16, "Objects of property, plant and equipment» (Property, Plant and Equipment). The pertinent standards that are must when accounting for plant, property and equipment are focused on the qualitative characteristics (Clarke, 2009, 405). These standards include the important accounting aspects such as Understandability, Relevance, Reliability and Comparability.

Understandability

To meet the essential quality, users must possess a knowledge fair on the business, economic and accounting activities. Users must be willing to examine the financial information with reasonable diligence. However, because of the importance of the need for the decision making by financial means, users should not exclude information on the grounds of creating difficulty in understanding (Pounder, 2009, 221).

Relevance

Information must be relevant fulfilling the needs for correct and accurate decision making of the user. Information has the quality of relevance when it influences the economic decisions of those who use it helping them evaluate past, present or future or to confirm or correct past evaluations (Loren, 2009, 1203).

Reliability

Information has the quality of reliability when it is free from material errors, bias or prejudice and which users can rely on. The user can rely faithfully on is the information based on real images, figures and facts. Meaning the users can rely on is the image faithfully, what it purports to represent, or what can reasonably be expected to represent. Much of the financial information is subject to some risk of not accurately reflecting what it purports to represent. This is not due to bias but rather due to inherent difficulties either in identifying the transactional errors and other events. The financial information can also be inaccurate due to difficulties in devising and applying measurement techniques and presentation that can convey messages that are related to those transactions and events (Thomas, 2009, 331).

Comparability

Users should not be able to compare the financial information of a company over time in order to identify trends in its financial position and performance. Rather, users should be able to compare separate companies' financial statement in order to access their financial position, performance and changes in financial position in relative terms.

Application of Standards at Dyson Group

In many companies, fixed assets constitute more than half of all assets of the company. Information about the structure and volume of fixed assets is important in assessing the solvency of the company and its investment attractiveness. Same is the situation with Dyson Group. Out of £ 61336 total assets, the fixed assets are £ 43410 including the amount £ 30413 of plant, property and equipment (Dyson Group, ...