Financial Reporting Quality and Mining Companies

This assignment examines financial reporting quality within the context of gold mining companies. Students are tasked with analyzing the application of qualitative characteristics outlined in the IFRS conceptual framework to assess the quality of financial reporting in this sector. The analysis should consider the specific challenges faced by mining companies and their implications for sustainable development. Additionally, the influence of factors like size and environmental disclosure practices on reporting quality should be explored.

Accounting Theory and Issues 1
ACCOUNTING THEORY AND ISSUES
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Accounting Theory and Issues 2
Executive Summary
The conceptual accounting framework is considered as objectives and ideas which result
in the development of a consistent set of standards and rules. The primary objective of the
conceptual framework is, therefore, to guide accountants on the procedures and policies for the
preparation of accounting financial information in the various company. This paper seeks to give
insight into the accounting system of Evolution Mining Company.
It discusses how the company has complied with the fundamental qualitative characteristics
of financial information including those features which enhances the qualitative characteristics
such as timeliness, understandability and comparability. The other focus of the paper is on the
accounting problems faced by the Evolution Mining Company as discussed in the paper below.
Moreover, the paper has highlighted on the key recommendations to be used by the company
to prevent accounting problems and such recommendations entail, the enhancement of the
qualitative characteristics of accounting information. The paper concludes by giving an overview
of whether the company has complied with the qualitative characteristics of accounting
information or not as required by the Australian Security Exchange.
Introduction
Evolution Mining Limited is an Australian gold miner company established in 2011 as a mid-tier
gold producer with the merging of Conquest Mining Ltd and Catalpa Resources Ltd as well as
the concurrent acquisition of Newcrest Mining's interests in the Cracow and Mt Rawdon mines.
Since its establishment, the company has grown through acquisition; acquiring Cowal and
Mungari in July and August of 2015 respectively as well as Ernest Henry in November 2016.
Having created a reputation for consistency and reliability Evolution has won several accolades
such as Craig Oliver Award, 2016 Miner of the Year to mention a few (Piper, 2018 p.33).

Accounting Theory and Issues 3
Conceptual Framework
The conceptual framework for financial reporting creates the concepts that lie in financial
reporting. Financing reporting provides information useful to both the potential and existing
investors, creditors and others in the making decisions on resource allocation and investments. It
is also useful in evaluating prospects of cash flow and the provision of information on resources
of a business organization including claims. The key conceptual framework elements include
relevance, faithful representation, understandability and comparability. An information should be
relevant in decisions relating to allocation of resources, investment and credit allocation.
An information which is relevant can make a difference in the decisions of users by helping them
in the evaluation of potential past, present and future transaction effects on future cash flows. A
faithful representation of the real world economic phenomena is useful in investing, credit
resource allocation decisions.
Thus the information must be verifiable, neutral and complete. Comparability enhances the
financial reporting information usefulness in making investment, credit and resource allocation
decisions (Piper, 2018 p.33). Understandability enables users having a reasonable knowledge of
business and economic activities and financial accounting to study the information and
comprehend its meaning. The critical requirements for a general purpose financial reporting are
that one a company must comply with the accounting standards and such a report has to be
prepared in accordance with the Australian Accounting Standards.
The other requirement is that the general purpose financial reporting should offer an accurate
representation of the financial position, cash flows and financial performance of a particular

Accounting Theory and Issues 4
company in a structured manner. Moreover, the general purpose financial reporting should also
be in a position to provide relevant information which is useful to a variety of users to enable
them to make viable economic decisions. Lastly, it is required of the general purpose financial
reporting to indicate the results of the stewardship of management of the resources which have
been allocated in a particular company. However, to comply and meet the requirements, the
financial statements must be prepared on the basis of measurement and recognition criteria
which would represent the financial position and performance of an entity faithfully.
Critical Analysis
Stakeholder Theory
According to the theory, the primary aim of the business entity is the creation of value for
the key stakeholders of the company. The executive members of the company should ensure
therefore that the various interests of the stakeholders such as employees, customers,
shareholders, customers and suppliers are aligned and therefore go together in the same
particular direction (Piper, 2018 p.33). The stakeholder theory has however been criticized by
different individuals especially in relation to the fiduciary obligations. According to the critics of
the theory, they argue that the theory results in the breakage of the fiduciary duties which the
managers of the company have on shareholders and this has been considered as unethical.
However, there are several benefits which have been obtained by the company due to the use of
the stakeholder approach.
Generally, the primary activity of any particular business entity is not to make profits for
the shareholders, but rather it entails the enhancement of the state of the world including the

Accounting Theory and Issues 5
creation of value for the stakeholders which form the critical benefit which has been obtained by
the company (Baur, 2014 p.174). Moreover, when the right thing is done for the customer, the
company would gain financially. Thus it is vital to focus on the various stakeholders of the
company.
Accounting Problems
There are a variety of accounting problems and issues faced by the company. One of the
key problems is that of fraudulent reporting activity which entails the reporting of certain false
figures with the aim of making the company appear as if it is financially stable. However, this
has damaged the image of the firm including its reputation leading to criminal charges. The other
fraudulent activity which had earlier been committed by the company is that of deferring the
gross profit by use of revenue recognition system which is unacceptable by the General Accepted
Accounting Principles (Henderson et al.2015 p.10).
Another accounting problem the company faces is that of the use of varying accounting
methods in every particular financial year. The use of different accounting techniques in the
company has created a lot of confusion resulting in miscommunication among various
employees (Herman, 2016 p.40). It is therefore essential for the company to comprehend the
various accounting techniques which should be used to avoid such an accounting issue.
Measurement Requirements
According to the annual report of the company, Evolution Mining Limited often complies
with the measurement requirements of the conceptual framework. One of the key measurement
requirements is that the measurement cost in the often justified by certain benefits which are as a
result of the information which is available for the potential, investors and creditors who rely on
the information for decision-making purposes (Kroeger and Weber, 2014 p.520). The other

Accounting Theory and Issues 6
measurement requirement which has been complied with by the company is that of a faithful
representation of relevant information on the economic resources, the efficiency of the
management, utilization of resources of the company by the board and various claims levelled
against the Evolution mining company.
Besides the above mentioned measurement requirement which has been adhered to by the
company, the other typical requirement is that of preparation of financial information on the
basis of a measurement technique which would have an impact on the statement of
comprehensive income including the notes to the financial statements and the statement of the
cash flows. During the process of establishing the measurement requirements, the company often
takes into account various factors such as the cost incurred in the use of measurement of a
particular item in a statement of financial position which later provides another measure in the
notes of the financial statements (Baumgartner, 2014 p.260).
According to Chatburn et al. (2018 p.20), the other factor which it considers is the losses
and gains which are reported in the financial statements. Such a factor is looked into due to the
changes which may occur as a result of the use of one particular measurement technique to
another which could mislead the various users of financial statements. Furthermore, there is the
consideration of the number of various measures used since there is an assumption that with a
minimum number of measures, it becomes easier to offer relevant information to the various
stakeholders of the company.
Compliance of Evolution Mining Company with the Fundamental Qualitative
Characteristics
According to the annual reports of the company, it has complied with the fundamental
qualitative characteristics. For example, in its financial reporting, it faithfully represents

Accounting Theory and Issues 7
information by ensuring that the reports are free from material error, complete and neutral. The
faithful representation has been enhanced by the company by the use of estimates and
assumptions which are closely related to the underlying standards and economic constructs
(Kythreotis, 2014 p.15). The common proxies used by the company in the measurement of the
faithful representation include corporate governance statement, neutrality, freedom from bias and
unqualified audit report.
The other way through which the firm has complied with the fundamental qualitative
characteristics is by providing information which is relevant which can make a difference in the
decisions made by the different users. The relevance of the information is based on the
confirmatory and predictive value (Birt, Muthusamy and Bir, 2017 p.118). The company
measures the predictive value on the basis of the use of fair value, provision of forward-looking
statements by the annual reports and the disclosure of information on the basis of risks and
business opportunities in the annual reports. Moreover, the financial reports of the company
entail both the financial and non-financial information which are considered as relevant to the
different users of the firm.
Apart from the above mentioned ways through which the company has complied with the
fundamental qualitative characteristics, Evolution Company provides understandable information
which is an essential qualitative characteristic. Generally, understandability increases due to
characterization, classification and presentation of information in a clear and precise manner to
allow various users to understand their meanings (Al-dmour et al.2017 p.10). To measure
understandability, the company uses various items such as the organization of information in the
annual report in a proper manner, the inclusion of a glossary of unfamiliar terminologies, the
disclosure of information in the notes of the financial statements and provision of information in

Accounting Theory and Issues 8
graphs and tables. Additionally, the company usually takes into account the comparability
qualitative characteristics of information. The comparability feature of information has enabled
the users of the company to recognize differences and similarities in various sets of economic
phenomena.
According to Mbobo and Ekpo (2016 p.188), the firm measures comparability of
information using a number of items. Such include, the presentation of ratios and financial index
numbers in the annual reports, provision of comparable results of the previous accounting
periods and those of the current accounting periods. The others are notes to the revisions of the
accounting judgments and estimates which explains the effect of the changes and the
comparability of information of the company with those of the other organization in the same
mining industry.
The last qualitative characteristics which Evolution Mining Company has complied with
is that of timeliness. Generally, the company makes available the information to the different
users at a time which it has not lost its capacity to influence the decisions made (Zheng and
Chen, 2017 p.3). The timeliness of the information is estimated by the company on the basis of
the number of days taken by the company’s auditor in signing the books of account.
Compliance of Evolution Mining Company with Enhancing Qualitative Characteristics of
Information
Evolution Mining Company has indeed complied with the enhancement of the qualitative
characteristics of information, and this is according to the annual financial reports. Some of the
qualitative characteristics which have been complied by the company include verifiability such
that the financial information produced by the company is provided in the same assumptions and

Accounting Theory and Issues 9
data. Thus the information is made verifiable by the key financial users for decision making
(Lee, 2017 p.215).
The other enhanced qualitative characteristics of the financial information which is
adhered to by the company are the comparability where the policies and accounting standards
applied by the company are used consistently in various financial periods (Yakovleva, 2017
p.100). The users of the financial information of the firm can, therefore, gather insightful
conclusions in relation to the performance and trends of Evolution Mining Limited for a
particular period. The financial information provided in the annual reports of the company is
clear and thus can be understood by the average user, which forms a way in which the
organization enhances the qualitative characteristics of information (Ly et al.2015 p.220).
Consequently, the financial performance of the company can easily be established.
Timeliness is another enhancing qualitative characteristics which the company has complied
with in its preparation of annual financial reports (Zhu et al.2014 p.4). Evolution Company often
avails financial information to the users for proper decision making. The company values its
stakeholders. Thus it ensures that it avails financial information promptly.
The users of financial reports that is lenders, creditors and investors are therefore able to
use the reports to make viable decisions because, the information contained in the reports all
complies with the qualitative characteristics of information such as understandability,
comparability and relevance among others. Based on the information contained in the annual
reports of the company, the basic knowledge of accounting has been provided and therefore the
users of the information do not need much than that which has been provided to evaluate the
company. Moreover all the requirements for the general purpose financial reporting has been met

Accounting Theory and Issues 10
by the company. The diagrams below indicates the operating and financial review of the
company
Cash Flow
Consolidated Statement for the Year 2017

Accounting Theory and Issues 11
Recommendation
To avoid the accounting problems, Evolution Mining Company should therefore keep on
enhancing the fundamental qualitative characteristics of information to remain relevant in the
industry. Additionally, the company should comply with conceptual accounting framework
standards and procedures to enable it to improve on the qualitative characteristics of accounting
information. The company should also focus on reducing the number of accounting problems

Accounting Theory and Issues 12
such as fraudulent activities by reporting the correct figures in the financial reports and this will
enhance its image and reputation in the industry.
Conclusion
To conclude, Evolution Mining Company has complied with the conceptual framework
requirement because it has enhanced all the qualitative characteristics of accounting information
such as comparability, understandability and timeliness among others. The key recommendations
for the company should be reduction of fraudulent activities by reporting right figures in annual
reports. Other recommendations include, compliance with the accounting conceptual framework
and enhancement of the qualitative characteristics of information.
References
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Accounting Theory and Issues 13
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Accounting Theory and Issues 14
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