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Conceptual framework

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Analysis of Village Roadshow Limited’s Annual Report 2017


Student: Dewi CHandra

id number : 11700688

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Table of Contents

  1. Introduction. 1
  2. Director’s declaration of Village Roadshow Limited in Annual Report 2017: 1
  3. Auditor’s opinion in Village Roadshow Limited’s Annual Report 2017. 2
  4. Assessing VRL performance in the market: 3
  5. Conceptual Framework-based recognition criteria: 3
  6. Qualitative characteristics of Financial Information: 8
  7. Conclusion: 9

References. 10


1.   Introduction

The conceptual framework (CF) is the set of guidelines and ideas listed compiled together in a simple way to communicate to the users. The conceptual also provides guidelines to make decisions and serves as a reference for undertaking particular activities in the company. The conceptual framework has been constantly updated while recognising various aspects of financial accounting. It is generally accepted list of rules and regulation which recognises the different accounting standards and provides a clear guideline by outlining the characteristics of financial accounting. Since it is generally accepted set of principles, all companies need to follow the CF properly (, 2018).

Village Roadshow Limited (VRL) is an Australian company which is known for its work in entertainment industry for its film production, distribution and cinema. The company is listed in Australian Security Exchange as VRL. This report will analyse the qualitative characteristic of a Village Roadshow’s annual report to evaluate whether the annual report has aligned all the CF characteristics to present a true and fair representation.


2.   Director’s declaration of Village Roadshow Limited in Annual Report 2017:

Director’s declaration is very important aspect in annual report which represent a duty of care to represent true and fair presentation of financial reporting. According to the ASIC, the director is responsible for governing and managing the company ensuring the company has been run properly (, 2018).

In case of VRL, the directors’ declaration states that all the financial statements give true and fair view and is according to the Corporations Act 2001 and also expresses that the debts will be paid by the company.

However, there is reasonable proof that the performance of VRL hasn’t been good enough in recent years to claim that the debts will be paid. These directors’ claim can be question in the grounds of recent performance of the company.

The directors’ claim of paying debts may be based on the fact the company has agreed to sell its Wet n’Wild amusement park for $40 million (Financial Review, 2018). Other than that, the directors have also agreed to take the pay cut of 25% in remuneration which will provide some support to pay its debt.


3.   Auditor’s opinion in Village Roadshow Limited’s Annual Report 2017

Auditor’s opinion is highly recognised and valued by the shareholders and investors as auditors give a true opinion by analysing and investigating the company’s financial reports. Since they are independent their opinion in unbiased and fair.

The annual report of VRL was audited by Ernest & Young (EY) and discussed some key matters in their report.

  • They performed the impairment assessment of VRL’s assets to test whether the assets exceed the recoverable amounts according to AASB 136 impairment of Assets
  • Revenue recognition, Interest bearing liabilities and Equity accounted investment were tested around four divisions of VRL’s business which included Theme Parks, Cinema Exhibition, Film distribution and Marketing Solutions.

Overall, the auditors have expressed their opinion that VRL financial reports represent true and fair view and have concluded that they have nothing to report of any material misstatement (Annual Report 2017 Village Roadshow Limited, 2018).


4.   Assessing VRL performance in the market:

Due to the tragic accident in one of its main competitors Dreamworld, has caused VRL’s share price to decreased (Chau, 2018). The table below shows the constant decrease in share price over the number of years. Even though this external uncontrollable factor contributed to VRL share price to decline, the shareholders are left with fears of constant decrease in price as the debt management and raising of equity has been poor. There is a $166 million of impairment loss recognised in 2018 financial year (Knight, 2018).

However, the management is enthusiastic and are implementing cost reduction policies to clear its debts. But the situation of balance sheet even after its sales of assets is not appropriate for shareholders.


5.   Conceptual Framework-based recognition criteria:

  • Assets:

Assets are the resources which are owned by a company that generate economic benefit to the company. According to AASB, the assets should be recognised in balance sheet which generates future economic value and its value can be measured (, 2018). In case of VRL annual report, the company has recognised all its current and non-current assets in the balance sheet as shown below.

Village Road Show Assets in Balance sheet as at 30 June 2017


The realization of impairment loss of assets in VRL is assessed at amortised cost and cost. The amount of the loss is assessed as the discrepancy between the asset’s carrying amount and the present value of predicted future cash flows (Annual Report 2017 Village Roadshow Limited, 2018).


  • Liabilities:

Liability is the company’s obligation that resulted due to past event and will have to pay in the future. Recognition for Liability states that it should be recognised in the balance sheet when the outflow of the resources embodying economic benefit is probable and the obligation is reliably measurable (, 2018).

In case of VRL, the balance sheet displays the total liability side with its current and non-current liabilities




  • Expenses

When there is a decrease in future economic benefit in relation to assets or an increase in liability, then expenses are recognised in the income statement. Another criteria is that the value should be reliably measurable (, 2018).

The table below shows the outflow of VRL in income statement listing all the accounts that increase liability or decreases assets such as depreciation and impairment of assets.



  • Revenue:

AASB recognises revenue in the income statement when there is an increase in future economic benefit related to assets and decrease in liability. Examples of revenue recognised are sale of goods, gain from investment etc (, 2018). Revenue recognised by VRL complies with the recognition criteria listed by AASB Conceptual framework.


  • Equity

Under AASB, Equity is defined as the residual interest in the assets of the company minus all the liabilities. It consists of shares, retain earning etc. The term residual has an important meaning in this definition as the recognition criteria of assets and liability together is enough to support the recognition of equity under balance sheet (, 2018).

VRL’s equity side consist of contributed equity, reserves and retained earnings. Contributed equity is also known as paid in capital which is the amount paid by shareholders to buy the shares.

2017     2016



6.   Qualitative characteristics of Financial Information:

  • Fundamental qualitative characteristics
    • Relevance

Financial information needs to be relevant to the users of the statement for evaluating and decision-making purpose. The information will only consider as relevant if the information provided can make a difference in decision making (, 2018). VRL is considered to be relevance by complying recent regulations such as AASB, IFRS and Corporations Act 2001.


  • Materiality

The information should not be omitted or misstated if that the information contains details that can impact the users’ decisions (, 2018). Therefore, the company must give all the financial information that has information for decision making.


  • Faithful representation

Faithful representation of a financial information means that the information need to be complete, clear, neutral and free from errors (, 2018). The company should always try to give the information in its best possible way explaining clearly. The company should include necessary explanation and details for the users to understand.

According to the audit report of Ernst & Young, VRL is giving its financial statements in a true and fair view, by complying with AASB and the Corporations Regulations 2001.


  • Enhancing qualitative characteristics
    • Comparability:

Comparability characteristics means that the users should be able to compare these information over the time and with similar other companies. The information must be able to compare in its related category giving users more choice in decision making (, 2018). In its annual report, VRL are presenting its financial statement to be easily compared with different years to know the progress of the company.


  • Verifiability:

The information should be able to represent and verify its faithfulness by independent individuals. It can be verified when the information can be audited by independent person. In other words, an independent person should be able to produce the same as the company did (, 2018).

Depreciation method that VRL uses is a straight-line basis over the estimated useful life of its assets.  This can be used to verify the carrying amount of the assets.

  • Timeliness:

The information should be provided in time for users to use the information. Also the users can analyse the trend of the company if the information can be used for longer period of time (, 2018).

VRL presents its financial statement in the annual report within timeframes, which are year 2016 and 2017.


  • Understandability:

The financial information should be clear and concise minimising the complexity if possible. However, complex information should not be omitted just to make the information simple. The company can classify if need to make it clear and concise (, 2018). The format of VRL’ annual report is easy to understand.


7.    Conclusion:

Overall, the companies need to provide the financial information to the stakeholders of the company in the form of annual reports for evaluating the performance of the company. It also gives investors and users of annual report a guide and knowledge about the company progress. But this information should contain all the qualitative characteristics of the financial information for general reporting purpose as mentioned in the conceptual framework of AASB.

After analysing the annual report of VRL, it can be concluded that the information provided in the annual report contains all the information for users for making key decisions. The Auditors (EY) have also concluded that the annual report has been produced according to the conceptual framework and Corporation Act 2001.



References (2018). [online] Available at: [Accessed 16 Aug. 2018].

Annual Report 2017 Village Roadshow Limited. (2018). [ebook] Available at: [Accessed 16 Aug. 2018]. (2018). Directors and financial reporting | ASIC – Australian Securities and Investments Commission. [online] Available at: [Accessed 16 Aug. 2018].

Chau, D. (2018). Village Roadshow intent on paying down debt exceeding $300m. [online] ABC News. Available at: [Accessed 16 Aug. 2018].

Financial Review. (2018). Debt, cinemas, Topgolf head Village’s list. [online] Available at: [Accessed 16 Aug. 2018].

Knight, E. (2018). Scary ride downhill for Village Roadshow shareholders. [online] The Sydney Morning Herald. Available at: [Accessed 16 Aug. 2018].




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