Accounting Regulation and Financial Development

Question: Discuss about the Accounting Regulation and Financial Development. Answer: Introduction: Caltex Australia Limited is engaged in foreign currency transactions. In accordance with the annual report of the company, the company had net foreign exchange loss of $26million which shows that company had incurred several transactions in foreign currency (Annual report of Caltex, 2016). Study of annual report shows that Caltex is exposed to the impact of exchange rates on transactions related to refinery margin, crude and product payables and capital expenditure. For an accounting of transactions, management of Caltex had complied with Australian Accounting Standards and International Financial Reporting Standards. For hedging and future contracts AASB 9 Financial Instruments has been followed. The company had followed all necessary standards for preparations of financial statements in order to show a true and fair view of financial position (Akisik, 2013). Foreign subsidiary companies Foreign subsidiaries of Caltex is Ampol Singapore. It is a wholly owned subsidiary assisting Caltex in product sourcing requirements. The major role of this subsidiary is the management of sourcing of transportation of fuels product supplies and associated shipping to Australia.The statistics provided to the management of Caltex has been accustomed in order to align it with the new business model. The Group concludes and represents operating segments by considering the information provided by the Groups chief operating decision maker, and same has been summarised in the annual report. Comparative information has been restated by considering transactions of consolidation (Annual report of Caltex, 2016). Accounting for consolidation has been done by considering norms of AASB 101 Presentation of Financial Statements and AASB 10 Consolidated Financial Statements (Parker, 2013). Other relevant matter to be provided by board of directors in annual report By considering the analysis of the annual report, the company should provide more appropriate disclosure of accounting policies followed by them in order to justify transaction (Annual report of Caltex, 2016). It is because; presently company had merely described transaction not accounting policies followed in it. In accordance with the study of Rahman (2013), companies have an obligation to disclose accounting standards in a proper manner to provide better under stability to users. Furthermore, the company had provided only consolidated financial statement, but they had not provided individual financial statements in order to show financial position in a better manner (Yu and Wahid, 2014). Although, it is an optional requirement, but it provides better viewpoint to stakeholders to understand the financial position of the company. Directors of the company are also required to incorporate their future plans and business strategies in order to show their future potential for earning higher profits. It is because; the present company has only added their current plans, strategies and technologies used by them for operational activities (Akisik, 2013). However, there is little information about their future opportunities. Due to this factor, the investor will not be able to analyse the potential of the company in providing returns and viable decisions cannot be made by them. By adding above describe information, Caltex Australia Limited will be able to provide better presentation of financial position to assist stakeholders in the process of making rational decisions. References Rahman, A.R., 2013. The Australian Accounting Standards Review Board (RLE Accounting): The Establishment of Its Participative Review Process. Routledge. Yu, G. and Wahid, A.S., 2014. Accounting standards and international portfolio holdings. The Accounting Review. 89(5). Pp.1895-1930. Parker, R.H., 2013. Accounting in Australia (RLE Accounting): Historical Essays (Vol. 58). Routledge. Akisik, O., 2013. Accounting regulation, financial development, and economic growth. Emerging Markets Finance and Trade. 49(1). Pp.33-67. Annual report of Caltex. 2016. [Online]. Available through https://www.caltex.com.au/our-company/investor-centre/annual-reports-and-reviews . [Accessed on 8th January 2016].