Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
The study has provided an idea on the AASB framework concerning the development and representation of the financial statement. The Study has provided insight into different regulations and principles about the financial statement. The Study has compiled the financial reports with the AASB conceptual framework. Further, the Study has analyzed the financial statement of the BHP group and established a relation of their financial statement with the AASB conceptual frame. The AASB 35 has applied as the conceptual framework for the company in the development and reporting of its financial statement. Finally, the Study has provided an idea on the different accounting standards concerning the measurement and evaluation of the various items in the financial statement.
Table of Contents
Financial statements are being created through following AASB conceptual framework. The financial statements are the essential financial information that represents a company’s financial position. The AASB has represented as a government agency that develops and maintains the financial report standard into Australia. The board records different standards depending on which financial report has been done and represented towards the public. For the better understanding of the importance of this reporting standard of the financial statement the Study has analyzed the AASB conceptual framework. The Study has analyzed the conceptual framework of the AASB and depending on this the financial statement of the BHP group Limited has analyzed. This report includes an evaluation of the importance of this framework for external users. Lastly, the Study includes an analysis of the four different accounting standards for a better assessment of the financial statement of the company.
The AASB conceptual framework refers to the regulation that regulates the Australian company’s accounting process. The AASB framework helps in improving financial reporting for a company. AASB framework formulates the regulation in preparation and the representation of the financial statement (Huber 2017, p. 3). The impact of the framework on the financial statement has analyzed below:
- This assist AASB for promoting synchronization of regulations, accounting standards and procedures relating to the representation of financial statements by providing a basis for reducing the number of alternative accounting managements permitted by Australian Accounting Standards (Cordery and Sinclair 2016, p. 4).
- Financial position has represented through the representation of the assets and liability.
- The accounting standards of AASB specify when and how economic events are to be recognized, measured and displayed. External entities, for example, banks, investors and regulatory agencies, rely on accounting standards to ensure that the relevant and accurate information is provided about the entity. These technical pronouncements have ensured transparency and accountability into reporting and set the boundaries for financial reporting measures (Yong, Lim and Tan 2016, p. 62).
- The AASB framework helps developing fair and accurate financial statement which helps in reducing the material misstatement into the financial statement.
- This framework develops accounting standards according to which the financial statements are being formulated.
- This enhances the qualitative characteristics of the financial information which enhances the usefulness of the financial information for the stakeholders.
- Verifiability into the framework helps in assuring users, that information faithfully represents the economic phenomena it purports to represent.
Since AASB is responsible for preparing the financial reporting criteria, hence this is associated with the maintenance of the faith into the reporting process. As per the views of (Muehlenbrock 2017, p. 16), AASB conceptual framework formulates regulation for the preparation of the ethical financial report which helps the investors to evaluate the financial statement. Following the AASB conceptual regulations, this helps in generating faith into the financial information so that the external stakeholders or users take a decision for their investment, decisions and compare with other companies. Along with this company reporting through following the AASB framework, reduces the martial misstatement into their financial statement and financial statement information is accessible for their external stakeholders.
BHP Group Limited formerly name was BHP Billiton, and it is a trading entity which includes the mining, metals and petroleum dual-listed company. It was founded in 1885 and by 2017, this company becomes the world largest international company and third-largest company by revenue in Melbourne. In the development of the financial statement, the company follows AASB. However, the conceptual framework has been developed for the representation of the financial statement and the preparation of the financial reports (Macve 2015, p. 8). This has been recognized that in the preparation and the representation of the financial statement the company has followed the AASB conceptual framework instead of international accounting statement framework. According to Wines and Scarborough (2015), this has been recognized that the company has developed AASB No. C.F. framework for the development of their financial statement. Following the conceptual framework, the company has generated a fair representation of the financial information towards the stakeholders. Below mentioned things are being complied with the conceptual framework whole the company has represented their financial statement. As per the AASB framework, financial statements should have the key elements such as usefulness, understandability, relevance, reliability, usefulness and comparability.
- The general purpose of the financial reporting to provide sufficient information to the potential investors, lenders and other creditors (Mardini, G.H. et al. 2015, p. 6).
- In the company the main objective of financial reporting is that it follows the AASB standards to reflect the company overall true statement about the assets, liabilities, equity, income and expenses in financial reports.
- Prepared the financial reports based on going concern basis
- The company recorded the data based on the historical cost principles
- Use the American dollars in the presentation of the financial statements, according to comply with AASB they make it round of the amount.
- A UK listed when entered in the BHP company these entities and their subsidiaries company have similar consolidated financial statement under the same board of directors with identical objectives and management structure.
- In this company creates the statements according to the preference of the decisions makers to take initiatives regarding the company development
- They provide faithful representation by using the fair value measurement standard so that the company can make the critical judgements and estimates.
- In company, assets are recorded after deducted the depreciation and impairments charges. The assets are recognized on fair value cost on the time of acquisition.
- The liability portion has been represented depending on the obligation of the company which is legally enforceable as a consequence of a binding contract or statutory requirement. Liability has been described depending on the past transactions
- Equity has been represented as the residual interest in the assets. Which has been identified after deducting all their debt from the asset value?
- As per the conceptual framework in a corporate entity, funds contributed by shareholders, retained earnings and the reserves presenting appropriations of retained earnings and capital maintenance adjustments can be shown separately.
- As per the framework, the profit and loss statement has represented the company’s performance for the period.
- Complying with the conceptual framework of the AASB the definitions of income and expenses identify their essential features, but they do not attempt to specify the criteria which would need to meet before they are recognized in the income statement.
- Complying with the conceptual framework the company has distinguished between the item of income and expenditure. Along with that combining them in different ways has also permitted them to make several measurements of equity performances.
- Direct and indirect expenditure has been recorded depending on their gain and losses (Simnett. and Huggins 2015, pp. 7-9).
Depending on the AASB conceptual framework the company has formulated the financial statement and represented their actual value to the stakeholders. Following the framework, the company has reduced the misstatement into their financial statement which has helped them to represent the fair value of their financial assets (Nobes and Stadler 2015, pp.11-12).
The Study has discussed four standards complying with the financial statement of the company. These four standards are discussed below:
According to (Tan Kantor, Abbott, and Jubb 2017, p. 280), this Standard represents the fair value of the financial information. This helps the stakeholders in measuring the fair value of the business assets provided in the financial statement. This value considered the current exit price; the orderly transaction means not the forced transaction and between market participants. BHP group limited represents assets, non-current asset, goodwill and free cash flow using the fair market value method. BHP company fair value includes the direct cost of moving the asset to the location and condition are compulsory for operations. They considered Paragraphs 91–99 of AASB 13 ‘Fair Value Measurement’ for the disclosure of valuation methods and input used for the fair value measurement by the company in financial reports. It helps the company to evaluate the actual profit coming through following the market rates (bhp.com, 2018).
The main objective of this Standard is to specify the accounting treatment for property, plant and equipment so that the users of the financial statements can ascertain information about an entity’s investment in its property, plant and equipment and changes in those investments (Tan Kantor, Abbott and Jubb 2017, pp. 279-280). The company’s financial report has been proof of following this Standard into its accounting process. According to the Standard, BHP company following the cost model in which property, plant and equipment are recorded at the cost after less the depreciation and impairment charges. Moreover, the company considered the cost of the asset on fair value on the time of the acquisition. The company uses the straight-line method for the building, plant and equipment of the business and also use the unit of the production method for the mineral rights and petroleum interests reserve on land. Through following this Standard, the company has valued its fixed assets and represented its strength into the market. An increasing trend has been recognized in the value of PPE into the balance sheet.
This Standard complies with the measurement of the intangible assets present into the company, and it also provides the how to measure the carrying amount and requirement for the disclosure of the intangible assets (Aasb.gov.au, 2014, p. 11). Following this standard BHP group has valued their goodwill and other intangibles assets by deducted accumulated amortization and impairment losses which represented their fair value into the balance sheet. This helps the shareholder to understand the company’s actual value by considering intangible assets for the total assets’ valuation.
As per (Joubert, Garvie, and Parle 2017, p. 2), AASB 16 accounting standard undertakes a single lessee accounting model, which involves a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. This has been recognized that Woodside turns into the operator of the WA-1-R lease in March 2018 following its acquisition of Esso’s working interest in the title. Through following this accounting standard, BHP has been provided with an option to acquire a further 10 % interest on WA-1-R from Woodside as per equivalent terms to its Esso transaction. Through following this Standard, the company has recorded its income from Operating lease rentals into its income statement each year (Bhp.com, 2019).
The Study has provided an idea on the financial statement concerning the AASB conceptual framework. This has explained the AASB conceptual framework concerning the maintaining of the accounting record and representing the financial statement. The Study has identified the requirement of following the AASB conceptual framework regulation for external investors. The Study has recognized the importance of the AASB conceptual framework concerning the evaluation of financial information. The Study has also provided an idea on the impact of the conceptual framework about the development of the financial statement for the BHP group. Lastly, the Study has provided insight into the different accounting standards under the AASB and evaluated those standards with the financial statements.
- Bhp.com (2019). [online] Bhp.com. Available at: https://www.bhp.com/-/media/documents/investors/annual-reports/2018/bhpannualreport2018.pdf [Accessed 2 May 2019].
- Cordery, C.J. and Sinclair, R., 2016. Decision-Usefulness and Stewardship as Conceptual Framework Objectives: Continuing Challenges, pp.1-41.
- Huber, W., 2017. Irreconcilable differences? The FASB’s conceptual framework and the public interest. International Journal of Critical Accounting, 9(5/6), pp.514-523.
- Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The Journal of New Business Ideas & Trends, 15(2), pp.1-11.
- Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?.Abingdon: Routledge.
- Muehlenbrock, S., 2017. Intangibles disclosure: A user-based approach to enhanced external financial reporting (Doctoral dissertation, University of Brighton).
- Nobes, C.W. and Stadler, C., 2015. The qualitative characteristics of financial information, and managers’ accounting decisions: evidence from IFRS policy changes. Accounting and Business Research, 45(5), pp.572-601.
- Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research add value? Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
- Tan‐Kantor, A., Abbott, M. and Jubb, C., 2017. Accounting Choice and Theory in Crisis: The Case of the Victorian Desalination Plant. Australian Accounting Review, 27(3), pp.273-284.
- www.bhp.com. 2019. Financial Statements. [ONLINE] Available at https://www.bhp.com/-/media/documents/investors/annual-reports/2018/bhpannualreport2018.pdf. [accessed 4 May 2019]
- Aasb.gov.au. (2014). Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB138_07-04_COMPjun14_07-14.pdf [Accessed 5 May 2019].
- Wines, G. and Scarborough, H., 2015. Australian government budget balance numbers: The hybrid nature of public sector accrual accounting. Accounting Research Journal, 28(2), pp.120-142.
- Mardini, G.H. et al. (2015) Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8. Journal of Applied Accounting Research. [Online] 16 (1), 2–27
- Yong, K.O., Lim, C.Y. and Tan, P., 2016. Theory and practice of the proposed conceptual framework: Evidence from the field. Advances in accounting, 35, pp.62-74.
If you need assistance with writing your essay, our professional essay writing service is here to help!Find out more
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please: