Contemporary Issues in Accounting - Analysis of Santos Limited

This report analyses and evaluates different aspects of accounting conceptual framework with Santos Limited as a case study. It covers objectives, recognition criteria, qualitative and enhancing characteristics.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues
in Accounting
Name of the Student - NIRAJ TAMRAKAR
Student Id - 11601212

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Abstract
The main objective of this report is to analyse and evaluate different aspects of accounting
conceptual framework and for this report; Santos Limited is taken into consideration. In the first
part, the analysis of the objectives of conceptual framework is done. Second part involves in the
analysis of recognition criteria. The last part involves in the analysis of qualitative and enhancing
characteristics.

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Table of Contents
Introduction......................................................................................................................................3
Conceptual Framework Objectives..................................................................................................3
Recognition Criteria.........................................................................................................................8
Fundamental Qualitative Characteristics.......................................................................................12
Enhancing Qualitative Characteristics...........................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Introduction
At the time of performing the business operations, the business entities have to face
different kinds of difficult business issues. In the recent years, accounting issues are the most
faced issues by the business entities all over the world and the main reason contributing towards
the raise of this issue is the non-compliance with the rules and regulations of accounting
conceptual framework. It is the high obligation of the business entities of Australia to prepare
and present their financial statements after complying with the standards and principles of
accounting conceptual framework. The conceptual framework issued by International
Accounting Standard Board (IASB) and Australian Accounting Standard Board (AASB) is a
major directory where the business entities of Australia can get all the required rules and
regulations to prepare and present the financial statements (aasb.gov.au 2018). The main
objective of this report is to analyse and evaluate different aspects of accounting conceptual
framework and for this report, Santos Limited is taken into consideration. Santos Limited is a
major Australian oil and gas company and it is in top 100 companies of Australian Securities
Exchange (ASX) (santos.com 2018).
Conceptual Framework Objectives
According to the conceptual fretwork of IASB and AASB, there are three major
objectives of general purpose financial reporting and Santos Limited is needed to follow these
major objectives to prepare and present various financial accounts. The three objectives are
discussed below:

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The first objective of general purpose financial reporting involves in the convey of the
actual financial health of the business entities by providing all information about the economic
resources of the enmities (aasb.gov.au 2018). All this information can be found in the statement
of financial position of the business entities. In the latest annual report of Santos Limited, the
entity has provided all the necessary information of their business economic resources through
the consolidator statement of financial position (santos.com 2018). It can be found as below:
(Source: santos.com 2018)

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The second objective of general purpose financial reporting involves in expressing the
financial performance of the business entities with the neccesaery performance related financial
information (aasb.gov.au 2018). This kind of information can be found in the income statement.
In the latest annual report, Santos Limited has provided all the necessary performance related
information through consolidated income statement. In addition, the company also provides
financial notes related with the income statement (santos.com 2018). It can be found below:
(Source: santos.com 2018)
The third objective of general-purpose financial reporting involves is providing necessary
information related with the changes in the financial situation of the business entities
(aasb.gov.au 2018). This information can be shown with the statements of change in equity and

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cash flow. In the latest annual report, Santos Limited has published both the statement of change
in equity and cash flow statement or providing the information related to the changes in the
financial situation of the companies (santos.com 2018).
(Source: santos.com 2018)

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(Source: santos.com 2018)
The management of Santos Limited prepares and presents their general-purpose financial
statements by complying with the rules and regulations of Corporations Act 2001, Australian
Accounting Standards, AASB (aasb.gov.au 2018). Apart from this, for the purpose of general
purpose financial reporting, Santos Limited also follows the rules and regulations of
International Financial Reporting Standards (IFRS) and IASB. Based on all these evidences, it is

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clear that Santos Limited fully complies with all the objectives of conceptual framework
(santos.com 2018).
Recognition Criteria
Apart from the objectives, the obligation is on the management of Santos Limited to
comply with the provided recognition criteria for the recognition of different financial elements
like assets, liabilities, equity, revenue and expenses. As per AASB and IASB, the companies are
required to consider certain aspects while recognizing these financial elements. They are as
follows:
1. At the time of recognition, Santos Limited needs to take into consideration all the
financial information related to these financial elements like assets, liabilities and others
(aasb.gov.au 2018).
2. At the same time, the accountants of Santos Limited need to take into consideration the
aspects of faithful representation of the above-mentioned financial elements (aasb.gov.au
2018).
3. Lastly, Santos Limited needs to consider the cost and benefits of the financial elements
(aasb.gov.au 2018).
For the satisfaction of all these criteria, Santos Limited is highly required to develop their
financial statements as per the regulations of the AASB and IASB conceptual framework. It can
be seen from the below discussion of recognition criteria:

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Assets
As Santos Limited operates in the oil and gas industry, exploration and evaluation assets
are the major fixed asset of the company and their recognition is done at the cost value
equivalent to the payment of cash and the related standard is AASB 116 Property, Plant and
Equipment under section 334 of the Corporations Act 2001. The same criteria is also applied for
the oil and gas assets (aasb.gov.au 2018).
(Source: santos.com 2018)
Trade and other receivables are recognized at the fair value that is equivalent to cost after
the deduction of impairment losses. Long-term receivable are recognized at amortized cost after
deducting impairment losses as per AASB 9 Financial Instruments (aasb.gov.au 2018).
(Source: santos.com 2018)
Santos limited does the recognition of their inventories at cost and net realizable value as
per the regulations of AASB 102 Inventories (aasb.gov.au 2018).

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(Source: santos.com 2018)
Liabilities
In case of trade and other payable, the recognition is done when the goods and services
are received as per AASB 9 Financial Instruments (aasb.gov.au 2018).
(Source: santos.com 2018)
Santos Limited recognizes their interest bearing loans and borrowings at fair value. In
addition, provisions are recognized at the presence of any obligation (aasb.gov.au 2018).
(Source: santos.com 2018)
Equity

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In Santos Limited, ordinary shares are recognized as equity and they do not have any par
value as per AASB 1004 Contributions (aasb.gov.au 2018).
(Source: santos.com 2018)
Revenue
Santos Limited recognizes the revenue of their business in the income statement at the
time of the transfer of risk and reward of ownership and they are measured on fair value basis as
per AASB 118 Revenue (aasb.gov.au 2018).
(Source: santos.com 2018)
Expenses
Santos Limited recognizes their revenue in their income statement at the time of their
occurrence (santos.com 2018).
Thus, from the above discussion, one aspects is clear that Santos Limited fully complies
with the principles and regulations of AASB for the recognition of these financial elements.

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Fundamental Qualitative Characteristics
Relevance
The users of financial statements can make effective decisions in the presence of relevant
financial information (aasb.gov.au 2018). According to the latest financial report of Santos
Limited, the company always provide relevant financial information about their financial
resources (santos.com 2018).
Faithful Representation
It is the obligation on the business entities to present their financial statements faithfully
to increase the usefulness of the financial information (aasb.gov.au 2018). As per the audit report
of Santos Limited, the company has developed their financial statements as per the regulations of
AASB and IASB (santos.com 2018).
Enhancing Qualitative Characteristics
Comparability
The users become able to identify the similarities and differences in the economic
resources of the companies (aasb.gov.au 2018). In case of Santos Limited, the users can compare
the financial information of the company with the other companies and different timelines
(santos.com 2018).

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Verifiability
There is a relation between verifiability and faithful representation as faithful
representation makes the users able in verifying the accounting information of the companies
(aasb.gov.au 2018). As Santos Limited complies with all the required accounting standards, they
become verifiable at the same time (santos.com 2018).
Timeliness
Companies are responsible for the timely publication of the financial statements for the
good of the users (aasb.gov.au 2018). Santos Limited publishes their financial statements at a
particular time of the years for the users (santos.com 2018).
Understandability
Users can use the financial information more purposefully in case they are easily
understandable (aasb.gov.au 2018). Santos Limited provides their financial statements in simple
formats with necessary classification and end notes forming them user-friendly (santos.com
2018).
Conclusion
From the above discussion, one can observe the fact that Santos Limited complies with
all the required principles and standards of IASB and AASB principles of conceptual framework
at the time to prepare and present the financial statements. More specifically, the compliance
with conceptual framework objectives can be seen from Santos Limited. The company also

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follows the regulations of recognition criteria. Moreover, the presence of both fundamental and
enhancing qualitative characteristics can be seen in the financial information of Santos Limited.

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References
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 10 Apr.
2018].
Aasb.gov.au. (2018). Conceptual Framework for Financial Reporting. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 10 Apr.
2018].
Aasb.gov.au. (2018). Contributions. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB1004_12-07_COMPjan15_07-15.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Financial Instruments. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf [Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Intangible Assets. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 10 Apr.
2018].

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Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf
[Accessed 10 Apr. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf
[Accessed 10 Apr. 2018].
Santos.com. (2018). Annual Report 2017. [online] Available at:
https://www.santos.com/media/4319/2017-annual-report.pdf [Accessed 10 Apr. 2018].
Santos.com. (2018). Santos - Investors. [online] Available at: https://www.santos.com/investors/
[Accessed 10 Apr. 2018].
Santos.com. (2018). Santos - What We Do. [online] Available at: https://www.santos.com/what-
we-do/ [Accessed 10 Apr. 2018].