A Review on OZ Minerals’ Conceptual Framework and Australian Accounting Standard Board

This report analyzes and evaluates the extend of compliance of Oz Minerals with the various regulations and principle of Conceptual Framework. It includes a critical analysis of their financial reporting, recent news, and a comparison with industry standards.

Running head: ACCOUNTING THEORY AND ISSUES
Accounting Theory and Issues
A Review on OZ Minerals’ Conceptual Framework and Australian Accounting Standard Board
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING THEORY AND ISSUES
Executive Summary
The major objective of the report is to analyze and evaluate the extend of compliance of Oz
Minerals with the various regulations and principle of Conceptual Framework. As per the result
of the analysis, there is compliance from the side of the company with all the required principle
as well as rule of AASB conceptual framework for various aspects of their financial reporting
like the recognition of assets, liabilities and others. Moreover, the company has made compliance
with the principles of General Purpose Financial Reporting for the true and fair preparation as
well as presentation of their financial statements so that the users can gain all the required
information at the time of their decision-making process. Thus, full compliance from Oz Mineral
can be seen with the Conceptual Framework.

2ACCOUNTING THEORY AND ISSUES
Table of Contents
Introduction......................................................................................................................................3
Company Profile..............................................................................................................................3
Conceptual Framework....................................................................................................................5
General Purpose Financial Reporting..............................................................................................6
Remuneration Report.......................................................................................................................7
Critical Analysis..............................................................................................................................9
Property, Plant and Equipment (PPE).........................................................................................9
Contingent Liability...................................................................................................................10
Inventories.................................................................................................................................11
Revenue.....................................................................................................................................12
Dividends...................................................................................................................................13
Recent News..................................................................................................................................13
Comparison....................................................................................................................................14
Conclusion.....................................................................................................................................14
References......................................................................................................................................16

3ACCOUNTING THEORY AND ISSUES
Introduction
The presence of Conceptual Framework in accounting provides the companies with
major assistance in the correct preparation as well as presentation of the financial statements. At
the same time, it helps the business organizations in dealing with different kind of accenting
issues like the deliverance of required financial information and many others. In Australia,
Australian Accounting Standard Board (AASB) has provided the Australian business entities
with the required Conceptual Framework for carrying on various tasks related to financial
reporting (Newberry 2015). At the same time, this conceptual framework of AASB helps the
accounting bodies in developing the required financial rules and principles. The main objective
of this report is the analysis and evaluation of different aspects of conceptual framework for one
of the Australian companies, OZ Minerals. The main scope of this report lies in different types
of requirements of conceptual framework.
Company Profile

4ACCOUNTING THEORY AND ISSUES
Oz Minerals is a leading modern mining company of Australian and the main focus of the
company can be seen on copper. The main strategic objective of the company is the creation of
value for all the stakeholders. The company was established in the year of 2008 as a result of a
merger of Oxiana Limited and Ziniflix; and the company is headquartered at Adelaide, Australia.
The main products of the company are copper and gold. The main operation of Oz Minerals can
be seen in copper-gold silver mine at Prominent Hill; and the company is on their way in
developing Australia’s biggest copper-gold resources at Carrapateena (ozminerals.com 2018).
(Source: ozminerals.com)
From the above figures, it can be observed that there are major improvements in the
financial performance of Oz Minerals in 2017 as compared to 2016. Increase can be seen some
of the major aspects like group revenue, EBITDA, underlying EBIT, underlying NPAT and
NPAT. For these reason, Oz Minerals has become able in providing more dividends to their
shareholders.

5ACCOUNTING THEORY AND ISSUES
(Source: asx.com.au)
It can also be observed from the above figure that there is major improvement in the
share price of the company over the period of five years starting from 2014 to 2018. Thus, on the
overall basis, improved performance of Oz Minerals can be seen in the recent years.
Conceptual Framework
The main function of conceptual framework is to provide the required rules and
regulations for various purposes like objective as well as purposes of the General Purpose
Financial Reporting (GPFR). Apart from this, the conceptual framework provides great
assistance to the International Accounting Standard Board (IASB) in developing the required
standards for financial reporting (aasb.gov.au 2018). The basis of the preparation of the financial
statements of Oz Minerals can be seen below:

6ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
The above figures state that Oz Minerals complies with the rules and standards of AASB
Conceptual Framework and Corporations Act 2001 at the time to prepare and present their
general purpose financial reports. Moreover, the company also follows the principles of
International Financial Reporting Standards (IFRS) and IASB for the purpose of financial
reporting (ozminerals.com 2018). It is crucial to say that the AASB Conceptual Framework has
major role in promoting as well as maintaining the accounting regulations and standards. At the
same time, the continuation of AASB Conceptual Framework can be seen in Generally Accepted
Accounting Principles (GAAP) for the review of different financial standards. With the
assistance of AASB conceptual framework, the users of financial statements can obtain the
required financial information for their decision-making purpose (aasb.gov.au 2018).

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General Purpose Financial Reporting
General Purpose Financial Reporting (GPFR) is majorly beneficial for the investors and
the users of financial reports as it provides them with the required financial information required
for the purpose of their investment decision-making. Income statement, balance sheet, cash flow
statement and change in equity statements are the components of GPFR. The central role of
GPFR can be seen in providing the necessity financial information to the financial statements
users for decision-making purpose (Warren, Reeve and Duchac 2013). It needs to be mentioned
in this context that the general purpose financial reports of the business entities should contain
the fundamental and enhancing qualitative characteristics. The fundamental qualitative
characteristics of GPFR are relevance and faithful representation; the enhancing qualitative
characteristics are comparability, understandability, verifiability and timeliness. In the presence
of all these characteristics, financial information becomes more useful to the users of the
financial statements. Moreover, the presence of these characteristics ensures that the business
entities present their financial statements truly and faithfully (Hail 2013).
Remuneration Report
As per the 2017 Remuneration Overview and Report of Oz Minerals, the compliance of
the company with the AASB Conceptual Framework and Corporations Act 2001 can be seen
while calculating the remuneration of the executive key management personnel. The
remuneration framework of Oz Minerals complies with certain principles. As per these
principles, the remuneration framework of Oz Minerals is linked with the performance of
rewards of the executives. At the same time, governance and transparency are two key aspects of
the remuneration framework of Oz Minerals (ozminerals.com 2018). The follows table shows the
remuneration structure of Oz Minerals:

8ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
Thus, it can be noticed from the above that the remuneration mix of Oz Minerals contain
three parts; they are Fixed Remuneration, Short-Term Incentives and Long-Term Incentives and
last two are based on the performance of the directors (ozminerals.com 2018).
The following table shows the financial outcome of Oz Minerals against the financial
metrics from 2013 to 2017:

9ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
It can be seen from the above that there is increase in both EBITDA and Net Profit of the
company in the year 2017 as compared to the previous years. At the same time, increase in net
cash inflow can also be seen along with the increase in basic EPS, share prices and payment of
dividends. All these aspects indicate towards the fact that the executive personnel have become
able in achieving their financial target for the company that contributed towards the improved
financial outcome for Oz Minerals. It needs to be mentioned in this context that the management
of Oz Minerals has not brought any changes in the remuneration framework in the year 2017
(ozminerals.com 2018).
Critical Analysis
Property, Plant and Equipment (PPE)
AASB 116 Property, Plant and Equipment provides all the Australian companies with
the regulations for the accounting of their business property, plant and equipments under Section
334 of Corporations Act 2001 (aasb.gov.au 2018). The obligation on the companies is the
determination of the carrying values of the assets along with the depreciation value. The
following table shows the accounting treatment of PPE by Oz Minerals:

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(Source: ozminerals.com)
From the above table, it can be seen that Oz Minerals recognizes their PPE at cost value
after the deduction of accumulated depreciation and accumulated impairment losses. It implies
that the company follows the principle of AASB Conceptual Framework (ozminerals.com 2018).
Contingent Liability
Contingent Liabilities are referred to the obligation of the businesses that have been
developed as a reasons of any previous event. Thus, the companies are needed to record all the
information related to their contingent liabilities. As per AASB Conceptual Framework,
companies can get all the required regulation for the accounting treatment of contingent
liabilities from AASB 137 Provision, Contingent Liabilities and Contingent Assets under
Section 334 of Corporations Act 2001 (aasb.gov.au 2018). Followings are the recorded
contingent liabilities for Oz Minerals for the year 2017:

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(Source: ozminerals.com)
It can be seen from the above figure that Oz Minerals has certain contingent liabilities in
their business operations and they have followed AASB Conceptual Framework for the
accounting treatment of these liabilities (ozminerals.com 2018).
Inventories
As per the AASB Conceptual Framework, the Australian entities are obliged to comply
with the principles of AASB 102 Inventories under Section 334 of Corporations Act 2001 for
the accounting treatment of their business inventories (aasb.gov.au 2018). The requirement for
them is the recognition of all the write downs of their inventories. The following table shows the
treatment of inventory by Oz Limited:

12ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
The above table shows that Oz Minerals recognizes their inventories at the lower of cost
incurred that is according to the principles of AASB (ozminerals.com 2018).
Revenue
At the time to carry on the business operations, it is required for the Australian businesses
to make compliance with the AASB Conceptual Framework of AASB 118 Revenue under
Section 334 of Corporations Act (aasb.gov.au 2018). In this case, it is the requirement for the
companies to consider the revenues as the income from the day-to-day business sources such as
sales, interest and others. The revenue treatment of Oz Minerals can be seen below:

13ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
From the above table, it can be seen that Oz Minerals recognizes the revenue of this
business at the time of the transfer of the risks and rewards to the customers. The main two
sources of revenue for Oz Minerals are revenue from copper and revenue from gold and silver.
Hence, from the above discussion, it can be seen that Oz Minerals does all the accounting
treatments of revenue as per AASB Conceptual Framework (ozminerals.com 2018).
Dividends
It is the obligation on the Australian companies to comply with the AASB Conceptual
Framework of AASB 132 and AASB 137 for the accounting treatment of dividends (aasb.gov.au
2018). Apart from this, another major obligation on the companies is the disclosure of all the
information related to the dividends. The following table shows the dividend payment by Oz
Minerals:

14ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
From the above table, it can be seen that Oz Minerals has provided their shareholders
with less amount of dividend as compared to the previous years. In this context, it also needs to
be mentioned that Oz Minerals complies with the principles of AASB Conceptual Framework
for the accounting of various aspects of dividends (ozminerals.com 2018).
Recent News
In the recent time, it can be seen that the private equity fund KKR sells down stake in Oz
Minerals. KKR was planning for the full takeover of Oz Minerals; but in the near future, there is
not any possibility of the full takeover of Oz Minerals by KKR as KKR has sold out of the
company. In the month of October, 2017, KKR emerged as the largest shareholder of Oz
Minerals with a 10 per cent stake in the company (smh.com.au 2018). It can be observed that
there was a 67 per cent rise in the share price of Oz Minerals after the news of full takeover of
the company by KKR became public. As per the speculations, the main reason for KKR to give
up the decision of a full takeover of Oz Minerals is the recent drop in the share prices of Oz
Minerals. It was speculated that KKR appeared to make a profit of $50 million from this
transaction. Thus, it can be seen that the recent rude financial condition of Oz Minerals with no

15ACCOUNTING THEORY AND ISSUES
debts and $552 million of cash is one of the major reasons for the decision of KKR (smh.com.au
2018).
Comparison
The above discussion involves in the analysis of AASB Conceptual Framework related to
Oz Minerals. While comparing with the other ASX listed companies like Crown Resorts Limited
and others, it can well be found that Oz Minerals has complied with all the required standards
and principles of all the accounting bodies for the purpose of financial repotting; such as
Corporations Act 2001, AASB Conceptual Framework, IFRS and IASB. Moreover, while
comparing with Crown Resorts Limited, it can be observed that the financial performance of Oz
Minerals is way better than Crown Resorts Limited in the financial year of 2017 as there is
increase in some of the major financial parameters for Oz Minerals like net profit, EBITDA,
EBIT and others.
Conclusion
Based on the above whole discussion, it can be seen that Oz Minerals is a major mining
company operating in Australia; and it can also be seen that the company has become able in
improving their financial performance in the recent years. The analysis of different parts of the
2017 Annual Report of Oz Minerals indicates towards the fact that the company has made full
compliance to the standards and principles of AASB Conceptual Framework while developing
and presenting their financial reports. In case of the compliance with all the requirements of
GPFR, the presence of all the required financial statements is there in the annual report of Oz
Minerals so that the users of the financial statements can obtain all the required financial
information at the time of their investment decision-making process. Apart from this, the

16ACCOUNTING THEORY AND ISSUES
discussion also shows that due to the rude financial condition of Oz Minerals, KKR dropped the
decision to fully takeover the company. However, on the basis of the above discussion, it needs
to say that has complied with all the standards of AASB Conceptual Framework.

17ACCOUNTING THEORY AND ISSUES
References
Aasb.gov.au. (2018). Financial Instruments: Presentation. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB132_07-04_COMPoct09_02-10.pdf
[Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Framework for the Preparation and Presentation of Financial Statements.
[online] Available at: http://www.aasb.gov.au/admin/file/content105/c9/Framework_07-
04_COMPjun14_07-14.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-04_COMPjun09_01-09.pdf
[Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Presentation of Financial Statements. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf
[Accessed 3 Aug. 2018].
Aasb.gov.au. (2018). Provisions, Contingent Liabilities and Contingent Assets. [online]
Available at: http://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-
04_COMPjun14_04-14.pdf [Accessed 3 Aug. 2018].

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Aasb.gov.au. (2018). Revenue. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf
[Accessed 3 Aug. 2018].
Asx.com.au. (2018). [online] Available at:
https://www.asx.com.au/asx/share-price-research/company/OZL [Accessed 5 Aug. 2018].
Hail, L., 2013. Financial reporting and firm valuation: relevance lost or relevance
regained?. Accounting and Business Research, 43(4), pp.329-358.
Ker, P. (2016). Private equity fund KKR sells down stake in copper miner OZ Minerals. [online]
The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/companies/private-equity-fund-kkr-has-sold-down-its-stake-
in-copper-miner-oz-minerals-20160309-gneuiz.html [Accessed 5 Aug. 2018].
Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public Money
& Management, 35(5), pp.371-376.
Ozminerals.com. (2018). 2017 Annual and Sustainability Report. [online] Available at:
https://www.ozminerals.com/uploads/media/OZMinerals_2017_Annual_and_Sustainability_Rep
ort.pdf [Accessed 5 Aug. 2018].
Ozminerals.com. (2018). Who We Are | OZ Minerals. [online] Available at:
https://www.ozminerals.com/about/ [Accessed 5 Aug. 2018].
Warren, C., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage
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