Contemporary Accounting Theory

This report analyzes and evaluates the conceptual framework for financial reporting and integrated/sustainability reporting in the context of Kidman Resources Limited and Kumba Iron Ore Limited. It discusses the history and adoption of the conceptual framework, concerns raised by the Australian accounting profession and academics, and the compliance of Kidman Resources Limited with the IASB conceptual framework. It also compares the sustainability reporting framework under GRI with the integrated reporting framework of IIRC.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
Name of the Student
Name of the University
Author’s Note

1CONTEMPORARY ACCOUNTING THEORY
1. Executive Summary
According to the findings of the report, Kidman Resource Limited has complied with the
standards of IASB conceptual framework for financial reporting for the purpose of
measurement, recognition and valuation of other assets and liabilities. The findings of the
second part of the report shows that Kumba Iron Ore Limited has prepared and presented
their integrated report by complying with all the checklists or indexes of integrated reports.
The findings of the report also shows that the corporate social responsibility reporting of
Kumba Iron Ore Limited is more efficient than the Kidman Resources Limited’s corporate
social reporting.

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Table of Contents
2. Introduction............................................................................................................................3
3. Part A.....................................................................................................................................3
Requirement (a)......................................................................................................................3
Requirement (b).....................................................................................................................4
Requirement (c)......................................................................................................................5
Requirement (d).....................................................................................................................6
4. Part B......................................................................................................................................8
Requirement (a)......................................................................................................................8
Requirement (b).....................................................................................................................9
Requirement (c)....................................................................................................................10
Requirement (d)...................................................................................................................11
Requirement (e)....................................................................................................................12
5. Conclusion............................................................................................................................13
6. References............................................................................................................................14

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2. Introduction
The main intention of this report is to analyse and evaluate about two different
aspects; they are conceptual framework for financial reporting and integrated/sustainability
reporting. For this report, two companies are selected; they are Kidman Resources Limited
and Kumba Iron Ore Limited. Data is collected from different sources like literatures, journal
articles, annual report and integrated report of the selected companies. The report is presented
in two parts. First part provided the discussion and analysis on the conceptual framework for
financial reporting and the second part analyses about integrated/sustainability reporting.
3. Part A
Requirement (a)
The presence of a history can be seen behind the development and adoption of the
conceptual framework for financial reporting of the International Reporting Standard Board
(IASB) by the countries all around the world (van Mourik & Katsuo, 2014). It is noteworthy
to mention the fact that the IASB conceptual framework introduced same accounting
standards for the countries all over the world so that the companies can adopt and follow the
same accounting standards and this was considered as the prime reason for Australia for the
adoption of the IASB conceptual framework for financial reporting (Barker & Penman,
2017). For this reason, the Australian Accounting Standard Board (AASB) developed the
Australian version of conceptual framework by collaborating with the accounting body of
IASB. However, different aspect can be seen in case of the adoption of conceptual framework
in United States (US) (André, Filip & Paugam, 2015).
It needs to mention that US had to face major economic crisis in the year of 1934 and
this reason majorly contributed to the decision of the development of conceptual framework
for financial reporting in US. After the occurrence of this financial crisis, US Securities and

4CONTEMPORARY ACCOUNTING THEORY
Exchange designated the FASB for the development of their conceptual framework with the
aim to improve the quality of their overall financial reporting (Ellwood & Newberry, 2016).
At the same time, the reason for the development of conceptual framework for United
Kingdom is different from Australia and US. Before the development of the IASB conceptual
framework, UK used rules based accounting standards for the purpose of financial reporting
which has certain major loopholes. The accounting body of UK developed their version of
IASB conceptual framework for financial reporting which was purely principles-based (Paul
Pacter,2013). These are the main reasons for the development of conceptual framework in the
countries all over the world.
Requirement (b)
The presence of certain concerns can be seen in the IASB conceptual framework in
Australia expressed by the Australian accounting profession. These concerns are discussed
below:
 As per the Australian accounting profession, the adoption of the new conceptual
framework of IASB has caused volatility in the total procedure of fair value
accounting. This has caused some significant differences in the present valuation of
the assets and liabilities of the companies. This has negative impact on the users of the
financial statements (Hodder, Hopkins & Schipper, 2014).
 The Australian accounting profession has raised their concern in the valuation and
measurement of assets, liabilities, income, expenses and other financial aspects with
the introduction of the IASB’s conceptual framework for financial reporting which
creates differences in the values of these aspects. This aspect negatively impacts the
decision-making process of different users of financial statement (Perera &Chand,
2015).

5CONTEMPORARY ACCOUNTING THEORY
 The Australian accounting profession raised the concern that the not-for-profit
organizations of Australian would be affected with the introduction of the conceptual
framework of IASB due to the fact that IASB conceptual framework was introduced
mainly for the listed profit-making companies. Since, Australia has the judicial
obligation of developing segment-based financial reporting frameworks, the
Australian not-for-profit companies would be affected in the presence of the IASB
conceptual framework (Gebhardt, Mora & Wagenhofer, 2014).
Requirement (c)
There are certain concerns of the academics related to the quality of conceptual
framework of IASB and these concerns are shown below.
 It needs to be mentioned that rules and regulations under the new conceptual
framework of IASB is majorly strict and rigid and this rigidness restricts the
regulation setters from the inclusion of new accounting ideas in the existing
standards. This can be considered as a major barrier in the quality improvement of
IASB’s conceptual framework (Cheng et al., 2014).
 The new accounting standards of IASB conceptual framework have been developed
in the presence of the old accounting standards in Australia (Barth, 2013). This aspect
leads to the development of conflict between the new set of accounting standards and
the old existing accounting standards. This puts restriction on the quality
improvements of the existing conceptual framework (Edogbanya & Kamardin, 2014).
 Lack of acceptability of the new set of accounting standards under the IASB
conceptual framework is considered as another major constrain in the quality
development of the IASB conceptual framework. This is because all types of users of
the financial statements have not been able in accepting the contents and accounting

6CONTEMPORARY ACCOUNTING THEORY
rules of the existing conceptual framework under the umbrella of IASB (Henderson
et al., 2015).
Requirement (d)
i. It can be seen from the 2018 annual report of Kidman Resources Limited, Note 2 that
the management of the company has prepared their general purpose financial reports
through maintaining compliance with the requirements of the interpretations of the
Australian Accounting Standards issued by the Australian Accounting Standards
Board (AASB) and Corporations Act 2001 (kidmanresources.com.au, 2019). The firm
has also maintained their compliance with the International Financial Reporting
Standards (IFRS) that the IASB issues. This is the proof of the fact that the company
has prepared all of their financial statements as per the IASB’s conceptual framework.
The major components are consolidated statement of profit or loss and other
comprehensive income, consolidated statement of financial position, consolidated
statement of changes in equity and consolidated statement of cash flows
(kidmanresources.com.au, 2019).
ii. There are certain recognition principles and measurement bases as per the IASB
Conceptual Framework that Kidman Resources Limited has adopted for their revenue,
assets and liabilities. These can be seen in below.
According to Note 5 of the 2018 annual report of Kidman Resources Limited, revenue
is recognized in the presence of the probability that the firm will receive the future
economic benefits and these can be measured on reliable basis. In addition, the
company uses fair value measurement base for measuring revenue
(kidmanresources.com.au, 2019).
The asset base of Kidman Resources Limited includes trade and other receivables,
investments, property, plant and equity and intangibles. The recognition of trade and

7CONTEMPORARY ACCOUNTING THEORY
other receivables is done at amortized cost after the deduction of any impairment
provision. In case of property, plant and equipment, the recognition and measurement
is done at historical cost base after the deduction of accumulated depreciation and
impairment. Intangible assets are stated at cost after the deduction of accumulated
amortization (kidmanresources.com.au, 2019).
Liabilities of Kidman Resources Limited include trade and other payable, borrowings
and provisions. The measurement base considered for the measurement of trade and
other payable is amortized cost which are not discounted. The initial recognition of
loans and borrowings is done at fair value of the consideration received that is net of
transaction cost. The used measurement base is amortized cost under the effective
interest method. The company recognizes the provisions in the presence of any
obligation due to any past events (kidmanresources.com.au, 2019).
iii. As per the IASB Conceptual Framework, there are five qualitative characteristic; they
are relevance, faithful representation, comparability, timeliness, verifiability,
understandability (kidmanresources.com.au, 2019). The 2018 annual report of
Kidman Resources Limited consists of the most relevant information of the financial
items such as their description, measurement, recognition and others. The company
has ensured their faithful representation through complying with the required financial
reporting regulations. The annual report also includes the “Notes to the consolidated
financial statements” which consists of the necessary justifications and clarifications
associated with the accounting treatments that helps in verifying and understanding
the accounting procedures undertaken by the firm (kidmanresources.com.au, 2019).
Provided information in the annual report can easily be compared and all information
is presented at the time of decision-making of the users. These exhibit the presence of

8CONTEMPORARY ACCOUNTING THEORY
all qualitative characteristics of financial information (kidmanresources.com.au,
2019).
4. Part B
Requirement (a)
When comparing the sustainability reporting framework under GRI with the
integrated reporting framework of IIRC, it can be seen that some crucial differences exist
between them which are mentioned below.
Sustainability reporting is considered as the practice to measure, disclose and to be
accountable to both the internal as well as external stakeholders of the businesses for the
progress towards the sustainable future. Thus, it is considered as a crucial document that
contains the performance of the companies against specific targets of economic, social,
environmental and governance objectives for supporting the sustainable development
(globalreporting.org, 2019). On other hand, integrated reporting framework is considered as a
communication mechanism for the companies that shows how their strategy, governance,
performance and prospects contribute towards the value creation of the companies on short,
medium and long-term (integratedreporting.org, 2019).
It implies that sustainability reporting framework is concerned about the
communication of the strategies of the companies in order to manage different environmental
and social issues due to their business operations. This is a mechanism of public
communication on the aspect that how the company undertakes the assessment of the
environmental and social issues that is material for their business operations. It provides
information on how the companies have managed those issues and how they are performing
against these material issues (Haldar, 2015). However, integrated reporting can be considered
as the advanced version of sustainability reporting framework because it undertakes

9CONTEMPORARY ACCOUNTING THEORY
communicating their long, short and medium term value creation process with the help of
integrated approach for both the sustainability related risks and traditional risks. Since it is an
innovative reporting framework, the intention of integrated reporting is to demonstrate how
the companies integrate their social and environmental thinking into the business in order to
create value instead of separately reporting the sustainability and financial performance
related information. These are the major differences between sustainability reporting and
integrated reporting (Maas, Schaltegger & Crutzen, 2016).
Requirement (b)
It can be seen that the conventional accounting based on sustainability and integrated
reporting has certain advantages and limitations; and they are discussed below:
Advantages – The main advantage of the conventional accounting under sustainability or
integrated reporting is that it puts the obligation on the organizational managers to provide
equal attention to the sustainability and environmental issues along with the financial issues
due to the increased attention of the investors all over the world toward the sustainability and
environmental issues (Thomson, 2015). This majorly helps the organizational managers in
the process of strategic planning. For example, balance scorecard approach of strategic
planning and performance measurement helps in taking into consideration multiple
perspective apart from the financial perspective which helps the companies in integrating
environmental and social dimensions in their corporate reporting framework. For this reason,
the users become able in obtaining information on both the financial and non-financial
perspective of the firms (Bebbington, Unerman & O’dwyer, 2014).
Limitations –At the same time, there are some disadvantages. It needs to be mentioned that
there are certain limitations to measure the social responsibilities related to sustainability
which is a challenging process in order to measure and quantify. After that, limitation can be

10CONTEMPORARY ACCOUNTING THEORY
seen in the enforcement of the sustainability reporting in conventional accounting process
(Thomson, 2015). In most of the cases, sustainability or integrated reporting is optional for
the companies and thus, there is not any authority to penalize a company for non-compliance.
However, companies have the option to develop their own sustainability reporting
framework, but there will be no one to measure the progress of this kind of reporting. These
are the major limitations of this type of conventional accounting (Bebbington, Unerman &
O’dwyer, 2014).
Requirement (c)
Applicability of some theories can be seen with the sustainability reporting and
integrated reporting. One of the important theories is the Stakeholder theory which states that
the companies are needed to take into consideration the interest of all stakeholders. This
theory is connected with the corporate social reporting (Cho et al., 2015). As per this theory,
the main purpose of the firms is to ensure the maximization of the profit of the stakeholders
where profit does not only mean money but sustainability and human welfare and thus, the
action of the companies affect the interest of the stakeholders. As per the content of this
theory, the companies are needed to adopt sustainability or integrated reporting framework
for the purpose of providing the stakeholders with the information on their financial
performance and sustainability performance (Öberseder, Schlegelmilch & Murphy, 2013).
Another relevant theory in this aspect is the Agency theory which is derived from the
concept of organizational legitimacy which is a condition that exists when the value system
of a company is consistent with the value system of the larger society system. It states that the
companies are needed to voluntarily report in their activities on sustainability reporting in
order to maintain the social contract between the company and society (Cho et al., 2015).
Through the application of this theory in this context, it can be said that the companies have
the obligation to disclose information of their sustainability reporting information through the

11CONTEMPORARY ACCOUNTING THEORY
adoption of the sustainability reporting framework or integrated reporting framework. These
two theories are applicable in this aspect(Öberseder, Schlegelmilch & Murphy, 2013).
Requirement (d)
Checklist of Various Components of an Integrated Report
Checklist of Various Components of an Integrated Report
1. Responsibility – A statement of responsibility from the Management
2. Strategic Focus – Strategies employed by the company
3. Stakeholder Relationship – Strategies to engage with the stakeholders
4. Materiality – Material issues considered by the company
5. Organizational and External Overview – Details of the company’s activities
6. Governance – Details on the governance of the company
7. Business Model – Adopted business model for the company
8. Risk and Opportunity –What are the risks and opportunities
9. Performance – Performance related information
10. Basis of Preparation and Presentation – Bases that are considered for preparing the
statements
(Source: integratedreporting.org, 2019)
Kumba Iron Ore Limited – Kumba Iron Ore Limited has prepared their integrated report of
2018 by complying with the standards of IFRS, International <IR> Framework of the IIRC,
the GRI standards, the King IVTM Report on Corporate Governance for South Africa 2016 and
others which complies with the last component of the index (angloamericankumba.com,
2019). The section called “ABOUT THIS REPORT” includes the director’s responsibility
statement. The company has reported most of the information of the above index under the

12CONTEMPORARY ACCOUNTING THEORY
section called “OUR BUSINESS”. The section called “OUR STRATEGY” includes the
information of the company’s strategy. After that, the company maintains a quality
relationship with their stakeholders through the identification of the priority stakeholders and
engaging with them through different initiatives. Kumba Iron Ore Limited has disclosed the
information on the determination of materiality and the material issues in the integrated
report (angloamericankumba.com, 2019). Under the section named “OUR BUSINESS
MODEL”, the company has disclosed information of their value creation model through the
adopted business model. The company has provided information of their business under the
section named “WHO WE ARE”. All the required information on governance is provided
under the section named “GOVERNANCE”. Kumba Iron Ore Limited has disclosed the
information on their performance under the section named “MEASURING OUR
PERFORMANCE”. It implies that the firm has provided all the information in their
integrated reporting (angloamericankumba.com, 2019).
Requirement (e)
It is important to mention the fact that there is not any integrated report prepared by
Kidman Resources Limited in the year 2018 for reporting corporate social responsibility. In
fact, the company has not prepared any other report for the reporting of corporate social
responsibility apart from financial reporting. It needs to be mentioned that Kidman Resources
Limited has not disclosed any information about their corporate social responsibility initiative
in their annual report (kidmanresources.com.au, 2019).
It can be seen from the above discussion that Kidman Resources Limited has not done
corporate social responsibility reporting neither through integrated report not through annual
report. Under the section named “CORPORATE GOVERNANCE” in the official website of
Kidman Resources Limited, the company has provided information on their different
corporate governance procedures and policies (kidmanresources.com.au, 2019). However,

13CONTEMPORARY ACCOUNTING THEORY
when comparing the reporting of corporate social responsibility of with the above-mentioned
index of integrated reporting, it can be observed that Kidman Resources Limited has not been
able in following the components of the above-discussed index due to the absence of any
kind report for the reporting of corporate social responsibility reporting. The same aspect can
be seen when comparing Kidman Resources Limited with the contents of the integrated
report of Kumba Iron Ore Limited (angloamericankumba.com, 2019). Due to the adoption of
the integrated reporting framework, Kumba Iron Ore Limited has been able in maintaining a
balance between the corporate social responsibility reporting and financial reporting. The
absence of these aspects can be seen in case of Kidman Resources Limited.
5. Conclusion
The above discussion indicates that the conceptual framework for financial reporting
under the umbrella of IASB has introduced same set of accounting standards for the
companies all over the world and this was the major reason for the adoption of this
conceptual framework for the countries all over the world. The report also shows that
Regeneus Limited has followed the principles of conceptual framework for all of their
financial statements. As per the second part of the report, the presence of certain differences
between the sustainability reporting framework and integrated reporting framework has made
them unique in their own ways for the purpose of corporate social reporting.

14CONTEMPORARY ACCOUNTING THEORY
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