Advanced financial Reporting Assignment PDF

Running head: ADVANCED FINANCIAL REPORTING
Advanced financial reporting
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1ADVANCED FINANCIAL REPORTING
Table of Contents
a. Introduction.........................................................................................................................2
a. Revenue recognition...........................................................................................................3
b. Asset recognition................................................................................................................5
c. Liability recognition...........................................................................................................7
d. Conclusion..........................................................................................................................8
Reference..................................................................................................................................10

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a. Introduction
BHP Billiton is the Australian company that is engaged in the activities of
development, exploration, processing and production of oil, minerals and gas apart from pre-
development for potash. The operating segments of the company are potash and petroleum,
iron ore, copper and coal. The company was established in the year 1885 and it has it’s
headquarter in Melbourne, Australia. During the year 2001 Billiton company based in Britain
and BHP company merged together to form the BHP billiton Group. Iron ore segment of the
company mines the iron ore, copper segment of the company mines the the lead, silver,
copper, uranium, gold, zinc and molybdenum whereas the coal segment of the company
mines the thermal coal and metallurgical coal. The main objective of the company is to create
long-term sustainable value for the employees, shareholders, suppliers, contractors, business
partners and suppliers. Further the company, zero harm to the environment, host communities
and people and the compliance with the industry practice. At present the company has 9
members in its board, out of which 8 directors are independent and 1 director is non-
independent. Further, out of total 9 directors, 7 are non-executive directors. The company
received the Skills Development Summit Achiever Award 2013 as the Best Public Sector
Training Institution continuously for 3 years that is for the years 2011, 2012 and 2013. The
company achieved the dominant position by combining good judgement and luck (BHP
2018).
On the other hand Woolworths Supermarket is owned by Woolworths Limited. The
company was established in September, 1924 and at present it holds 80% of Australian super
market. Headquarter of the company is in New South Wales of Australia. The main products
of the company are groceries that include fruits, vegetables, packaged foods and meat. The
company is also engaged in selling of DVDs, Magazines, household products, beauty and

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health products, stationary items and baby products. At present the company has more than
1000 stores all over Australia apart from 968 supermarket and 19 convenience stores that
carries same logo. The company operates under 5 private or generic brand labels. Those are –
Woolworths Select, Woolworths Homebrand, Woolworths Fresh, Macro Wholefoods Market
and Woolworths Gold. The homebrand deals with products related to daily household
requirements and the groceries, Woolworth select deals with wide range of products that
include shampoo, food, potato chips and dog foods. The gold sector deals with the gold
product, the Woolworths Fresh deals with yummy meals and fresh soups and the Macro
Wholefoods deals with wide range of products for the families and various other products
like vegetarian foods, organic foods and gluten free foods. At present the company has 8
members in its board, out of which 7 directors are independent. Further, of all the 8 directors
6 are non-executive director. The company is proud to get itself associated with the award
that recognizes the young people’s achievements. Further, the company was named as the 3rd
best social media platform (Woolworthsgroup.com.au 2018).
a. Revenue recognition
As per AASB 15, BHP Billiton measures its revenue at fair values for the
consideration received or the revenue that is receivable based on meeting of the recognition
criteria as follows –
 Sale of the services and goods - revenue generated from sale of services or goods
while the significant rewards and risks associated with the goods or services are
passed on to the customer and when it is apparent that the revenue will be received (A
Review of the IASB’s Conceptual Framework for Financial Reporting 2018). Further,
the revenue to be recognized its amount shall be able to be measured reliably.
However, based on the terms of the customers the recognition can be based on the

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issuance of bill of lading or while the company completes the delivery based on the
agreement with customer.
 Sales priced on provisional basis – revenue generated from the sales priced on
provisional basis are recognised at projected fair values initially that is receivable with
regard to the relevant contractual or and forward price and the determined
specifications on hydrocarbon or mineral (Cajaiba-Santana 2014). Consequently, the
Sales priced on provisional basis are valued on marked to market basis at each of the
reporting period till the time when the final settlement or final pricing is confirmed
with the adjustment of fair value that is recognised for the revenue. Generally the
period of final invoicing and provisional pricing is ranged from 60 to 120 days.
 Interest and dividend income – the income from interest is recognized on accrual
basis through using the method of effective interest. On the other hand, the income
from dividend is recognized while the company’s right for receiving the payment is
established, generally declaration by the subsidiaries (Cheng et al. 2014).
As per AASB 15, Woolworths measures its revenue at fair values for the
consideration received or the revenue that is receivable based on meeting of the recognition
criteria as follows –
 Sale of the services and goods - revenue generated from sale of services or goods
while the significant rewards and risks associated with the goods or services are
passed on to the customer and when it is apparent that the revenue will be received
(De Villiers, Rinaldi and Unerman 2014). Further, the revenue to be recognized its
amount shall be able to be measured reliably. On the other hand, the revenue from
service is identified on the basis of completion stage of contract with customer.
 The revenues are recognized after giving the effect of GST except where GST is
incurred but the amount is not recoverable from taxation authority. In such

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circumstances, GST is treated as the part of expenses or the asset cost (Garrett,
Hoitash and Prawitt 2014).
 Revenues generated from the contracts with the customers are recognized only after
performance obligation is fulfilled and the controls on the services or goods are
transferred at the selling point (Kogan, Sudit and Vasarhelyi 2018).
b. Asset recognition
The assets are recognized by both the companies on the basis of the compliance
requirement stated under the corporate framework of the GPFR (general purpose financial
reporting). Further, the companies recognize their asset if it is apparent that the future
economic benefit from the asset will be the inflow to the company and the amount of the
benefit can be measured reliably (Morioka and De Carvalho 2016). From the financial
statement of BHP Billiton it has been identified that the company recognizes its asset in the
following ways –
 Trade and other receivable – the company recognizes the trade receivables at the fair
values initially and thereafter at the amortization cost through using the method of
effective interest. The amount is reduced by the allowances for the impairment.
Further the trade receivables are assessed by the company on continuous basis. The
carrying value of trade and other receivables are approximately equal to the fair value
of the receivables (Simnett and Huggins 2015).
 Inventories – irrespective of the inventory type and its stage of the production process
the inventories are recorded at lower of the net realisable value and cost. Cost is
primarily determined based on the average cost. For the processed inventories the cost
is obtained on the basis of absorption cost.

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 Plant, property and equipment – plant, equipment and property are recognised by the
company at cost reduced by impairment charges and the amount of depreciation. Cost
is determined on the basis of fair value of the consideration paid for acquisition of the
asset when it is acquired.
 Intangible assets – the intangible asset like goodwill’s value is considered as the
valued of the business acquisition exceeded from the value of identifiable asset,
contingent liabilities and liabilities. The difference in the value is considered as the
goodwill. If the consideration is lower than the fair value of acquired asset, contingent
liabilities and liabilities then the difference is immediately recognised in the income
statement of the company. The goodwill is recognized at cost reduced by the
impairment loss, if any (Zhang and Andrew 2014).
On the other hand the assets are recognized in the balance sheet by Woolworths in the
following ways –
 Trade and other receivable – the company recognizes the trade receivables at the fair
values initially and thereafter at the amortization cost through using the method of
effective interest. The amount is reduced by the allowances for the impairment.
Generally, the receivables of the company have the terms of maximum 30 days.
 Plant, property and equipment – plant, equipment and property are recognised by the
company at cost reduced by impairment charges and the amount of depreciation. Cost
of the self-constructed assets takes into consideration the cost of direct labour,
material and a part of the overheads. On the other hand, the cost of the development
properties takes into consideration the cost of holding, borrowing and the cost of
development till the completion of the asset (Kraal, Yapa and Joshi 2015).
 Intangible assets – intangible asset like goodwill is initially recognized at cost reduced
by the amount of impairment loss, if any.

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c. Liability recognition
In accordance with the requirement of GPFR (general purpose financial reporting)
liability shall be recognized under the balance sheet it it is likely that outflow of resources
will be taken place for the settlement of present obligation resulted from the past events and
the amount for which can be reliably measured. BHP Billiton recognizes their liabilities as
follows –
 Trade and other payables – amount for trade and other payables states the non-interest
bearing payables. Carrying value of the payables are approximately equal to the fair
value of the payables that records the liabilities for the services and goods provided to
group before the end of the reporting period that remains unpaid.
 Interest bearing liabilities - interest bearing liabilities of the company are recognised
at fair values initially after giving effect of transaction costs. Subsequently the
borrowings are valued at the amortization cost through using the effective method of
interest. Further, the borrowings are eliminated from balance sheet while the specific
obligation mentioned in the contract is satisfied expired or cancelled. The variance
among the carrying amount of the financial liability that is transferred or extinguished
to any other party and consideration for the same has been paid that includes the non
current asset that is transferred or the liabilities assumed is recorded under the income
statement as any other finance cost or income (Jin, Shan and Taylor 2015).
 Finance lease liabilities – Liabilities related to finance leases have been recognised by
the company. It is recognised at fair values initially for the amount of consideration
received after giving effect of transaction costs subsequently the Boring sir visit at the
amortization cost to the effective method of interest the bodies are eliminated from
balance sheet by the specific obligation mention in the contract is satisfied expired or
cancelled the variance among the carrying amount of the financial liability that is

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extinguished or transfer to any other party and consideration for that has been paid
that includes the non current asset that is transferred or the liabilities assumed is
recorded under the income statement as any other finance cost of income
On the other hand the liabilities are recognized in the balance sheet by Woolworths in
the following ways –
 Borrowings - interest bearing liabilities or borrowings of the company are recognised
at fair values initially after giving effect of transaction costs. Subsequently the
borrowings are valued at the amortization cost. Difference, if any between the
redemption value and cost is recorded under the consolidated profit and loss account
during the period in which the borrowings are obtained.
 Trade and other payables – Woolworths recognizes its trade and other payables at the
fair values and the carrying value of the payables are approximately equal to the fair
value of the payables. It records the liabilities for the services and goods provided to
group before the end of the reporting period that remains unpaid (Dakis 2016).
d. Conclusion
It can be concluded from the above discussion and analysis that both BHP Billiton as
well as Woolworths recognises the assets, liabilities and revenues as per the requirement of
GPFR (General Purpose Financial Reporting). However, as the company’s operational
activities are different as Woolworths is engaged in retail business and BHP Billiton is
engaged in mining business the items recognised as assets, liabilities and revenues of the
companies differ from each other. The companies however, recognise all the items in
compliance with GPFR.

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Reference
A Review of the IASB’s Conceptual Framework for Financial Reporting. (2018). [ebook]
Australian Accounting Standard Board. Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ITC29_07-13.pdf [Accessed 17 Apr.
2018].
BHP. (2018). BHP Billiton | A leading global resources company. [online] Available at:
https://www.bhp.com/ [Accessed 20 May 2018].
Cajaiba-Santana, G., 2014. Social innovation: Moving the field forward. A conceptual
framework. Technological Forecasting and Social Change, 82, pp.42-51.
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international
integrated reporting framework: key issues and future research opportunities. Journal of
International Financial Management & Accounting, 25(1), pp.90-119
Dakis, G.S., 2016. Upcoming changes to contributions and leasing standards. Governance
Directions, 68(2), p.99.
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and
an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7),
pp.1042-1067.
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal
of Accounting Research, 52(5), pp.1087-1125.
Jin, K., Shan, Y. and Taylor, S., 2015. Matching between revenues and expenses and the
adoption of International Financial Reporting Standards. Pacific-Basin Finance Journal, 35,
pp.90-107.

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Kogan, A., Sudit, E.F. and Vasarhelyi, M.A., 2018. Continuous online auditing: A program
of research. In Continuous Auditing: Theory and Application (pp. 125-148). Emerald
Publishing Limited.
Kraal, D., Yapa, P.W.S. and Joshi, M., 2015. The Adoption of International Accounting
Standard (IAS) 12 Income Taxes: Convergence or Divergence with Local Accounting
Standards in Selected ASEAN Countries?.
Morioka, S.N. and De Carvalho, M.M., 2016. A systematic literature review towards a
conceptual framework for integrating sustainability performance into business. Journal of
Cleaner Production, 136, pp.134-146.
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.
Woolworthsgroup.com.au. (2018). Woolworths Group: Quality Brands and Trusted
Retailing. [online] Available at: https://www.woolworthsgroup.com.au/ [Accessed 20 May
2018].
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.