Accounting Theory and Issues: Oz Minerals Financial Report Analysis

This report provides a detailed analysis of Oz Minerals, an Australian mining company, focusing on its compliance with the AASB conceptual framework and its financial performance in 2017. The report examines various aspects, including the company profile, conceptual framework adherence, general-purpose financial reporting (GPFR), and remuneration reports. It conducts a critical analysis of key areas such as property, plant, and equipment (PPE), liabilities, inventories, revenue, and dividends, demonstrating Oz Minerals' adherence to accounting standards. The report also includes recent news about the company and a comparison with Orica Limited. The analysis highlights Oz Minerals' strong financial performance and its adherence to accounting regulations, making it a potentially feasible investment opportunity. The report emphasizes the importance of the conceptual framework in guiding financial reporting and decision-making.

Running head: ACCOUNTING THEORY AND ISSUES
Accounting Theory and Issues
Name of the Student
Name of the University
Author’s Note

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Executive Summary
The aim of the report is the analysis of the compliance with different factors of conceptual
framework by Oz Minerals, one of the major gold and copper mining companies in Australia.
The result of the analysis indicates towards the full compliance of Oz Minerals with the
requirements of AASB conceptual Framework. At the same time, the report sheds light on the
strong financial performance of the company in the financial year 2017. For this reason, it will be
a feasible decision for an investor to invest $10,000 in the company to get good return.

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Table of Contents
Introduction......................................................................................................................................3
Company Profile..............................................................................................................................3
Conceptual Framework....................................................................................................................5
General Purpose Financial Reporting (GPFR)................................................................................7
Remuneration Report.......................................................................................................................8
Critical Analysis..............................................................................................................................9
Property, Plant and Equipment (PPE).........................................................................................9
Liability......................................................................................................................................10
Inventories.................................................................................................................................11
Revenue.....................................................................................................................................12
Dividend....................................................................................................................................13
Recent News..................................................................................................................................14
Comparison with Other Organizations..........................................................................................15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17

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Introduction
Business organizations consider the accounting conceptual framework as a major tool
that provides them with assistance to prepare and present the financial statements of the
businesses. Apart from this, business entities can get the solution of various types of accounting
issues with the use of the guiding principles of accounting conceptual framework (Nobes 2014).
It needs to be mentioned that Australia has their own conceptual framework for financial
reporting provided by the Australian Accounting Standard Board (AASB). There is a connection
between the AASB conceptual framework and the General Purpose Financial Reporting as the
conceptual framework provides the required guiding principles for the preparation of general
purpose financial reports of the business entities. The main aim of this report is the analysis and
evaluation of the adherence of the Australian companies with the principles and guidelines of
AASB conceptual framework along with the principles of general purpose financial reporting.
For the purpose of this report, Oz Minerals is taken into consideration.
Company Profile
Oz Minerals is an Australian mining corporation. Established in the year of 2008, Oz
Minerals is headquartered at Adelaide, Australia. It needs to be mentioned that reason for
inception of the company is the merger of Oxiana Limited and Ziniflix. Copper and gold is
considered as the main focused area of Oz Minerals as the main mining operation of the
company is at Prominent Hill involves in the mining of copper and gold. Most, importantly, Oz
Minerals is working on the development of Australia’s largest copper-gold resources at
Carrapateena (Ozminerals.com 2018). The following tables show the overview of the recent
financial performance of Oz Minerals:

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(Source: Ozminerals.com 2018)
According to the above table, it can be seen that Oz Mineral has been able in improving
their financial performance for the year 2017 as compared to the year 2016. As per the above

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tables, increase can be seen in some major financial parameters like revenue, EBITDA, EBIT,
NPAT and others. The following table shows the movement of the share price of Oz Mineral for
last five years:
(Source: asx.com.au 2018)
According to the above figure, it is visible that there has been increase in the share prices
of the company for the last five years. All these aspects are proof of improved financial
performance of Oz Minerals for the financial year 2017.
Conceptual Framework
The main aim of the development of accounting conceptual framework is to deliver all
the needed guiding principles for different reasons like the preparation of the general purpose
financial reports of the organizations, solving different accounting issue and others. Apart from
this, the International Accounting Standard Board (IASB) gets major assistance from the
conceptual framework for the development and introduction of financial reporting regulations
and standards. The directors of Oz Minerals have complied with some of the principles and
standards for the purpose of their financial reporting and they are shown below:

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(Source: Ozminerals.com 2018)
The intention of the company to comply with all the required guidelines and principles of
conceptual framework in financial reporting can be seen from the above table. It can be seen that
Oz Minerals has made compliance with the principles of Corporations Act 2001, Australian
Accounting Standards and AASB for the purpose of their general purpose financial reports. At
the same time, Oz Minerals has made compliance with International Financial Reporting
Standards (IFRS) and IASB for financial reporting (Ozminerals.com 2018).
It needs to be mentioned in this context that there are three specific objectives of
conceptual framework. They are to give information about the financial position of the company,
financial performance of the business and the change in financial position of the companies
(aasb.gov.au 2018). The analysis of the 2017 Annual report of Oz Minerals shows that the
company has released all the above-mentioned information with the assistance of the statements
like consolidated statement of comprehensive income, consolidated statement of change in

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equity, consolidated balance sheet, consolidated statement of cash flows and the notes to the
financial statements. Hence, the above discussion shows the full adherence of Oz Minerals with
major aspects of conceptual framework (Ozminerals.com 2018).
General Purpose Financial Reporting (GPFR)
Another major aspect for the financial reporting of the companies is the General Purpose
Financial Reporting (GPFR). It needs to be mentioned that the investors and other users of the
financial reports can obtain the required financial information for making the investment
decisions. It needs to be mentioned that there are some major components of GPFR; they are
balance sheet, income statement or statement of profit or loss, statement of cash flows and the
statement of change in equity (Henderson et al. 2015). It implies that the central reason for the
publication of these general purpose financial reports is to deliver the needed information to the
investors and other users of the financial statements. Another major component of GPFR is the
qualitative characteristics of financial reporting. There are two types of qualitative
characteristics; they are fundamental qualitative characteristics and enhancing qualitative
characteristics (Achim and Chiş 2014). Two fundamental qualitative characteristics are
Relevance and Faithful Representation; and four enhancing qualitative characteristics are
Verifiability, Comparability, Timeliness and Understandability. In order to make the financial
information useful and purposeful, the presence of these qualitative charatecrstcs is required in
the general purpose financial reports (Callen, Khan and Lu 2013). The directors of Oz Minerals
have ensured the true and faithful representation of financial information by complying with the
guidelines of GPFR.

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Remuneration Report
It can be seen from the 2017 Annual Report of Oz Minerals that the remuneration
committee of the company has adhered to the principles of Corporations Act 2001 and AASB
conceptual framework in order to calculate the remuneration of their executive directors. The
linkage of company’s remuneration framework can be seen with the performance of the
executive directors (Ozminerals.com 2018). A major objective of the remuneration framework of
Oz Minerals is to maintain governance and transparency in remuneration. The remuneration
structure of Oz Minerals for the year 2017 cab be seen as below:
(Source: Ozminerals.com 2018)
The above table indicates towards the presence of three types of variables in the
remuneration framework of Oz Minerals; they are Fixed Remuneration, Short-Term Incentives
STI) and Long-Term Incentives (LTI). However, the payment of STI and LTI is dependent on

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the performance of the directors. The financial performance of Oz Minerals against the financial
metrics from 2013 to 2017 can be seen in below:
(Source: Ozminerals.com 2018)
As per the above table, increase in EBITDA and Net Profit of Oz Minerals can be seen in
2017 as compared to 2016. Increase can also be seen in EPS, dividend payment, share price and
other aspects that show the good performance of the directors to achieve their targets. According
to the 2017 Annual Report, there is not any change in remuneration framework in the year 2017
(Ozminerals.com 2018).
Critical Analysis
Property, Plant and Equipment (PPE)
According to AASB conceptual framework, the Australian companies are needed to
comply with AASB 116 Property, Plant and Equipment under section 334 of Corporations
Act 2001 for the recognition of their business PPE. Moreover, they are obliged to determine the
carrying value and deprecation for the PPE (aasb.gov.au 2018). The accounting treatment of PPE
in Oz Minerals can be seen in below:

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(Source: Ozminerals.com 2018)
The above table implies that Oz Mineral complies with the principles of AASB
conceptual framework for the accounting of PPE (Ozminerals.com 2018).
Liability
One major part of the liability of Oz Minerals is the contingent liability that is developed
due to any previous accounting events. According to the AASB conceptual framework, the
Australian companies are regulated to follow the standards of AASB 137 Provision, Contingent
Liabilities and Contingent Assets under Section 334 of Corporations Act 2001 for recoding
any contingent liability (aasb.gov.au 2018). The following table shows the contingent liability of
Oz Miners for 2017:

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(Source: Ozminerals.com 2018)
The above figure shows that Oz Mineral has reported all the information about their
business contingent liability as per AASB conceptual framework (Ozminerals.com 2018).
Inventories
AASB conceptual framework puts the obligation on the Australian companies to comply
with the standard of AASB 102 Inventories under Section 334 of Corporations Act 2001 for
the recognition and accounting of business inventories (aasb.gov.au 2018). The below table
shows the accounting treatment of inventory in Oz Minerals:

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(Source: Ozminerals.com 2018)
It is visible from the above that Oz Minerals has considered the lower of cost incurred for
the recognition of inventory as per AASB conceptual framework (Ozminerals.com 2018).
Revenue
For the accounting treatment of revenue, the Australian companies are instructed to
follow the standards of AASB 118 Revenue under Section 334 of Corporations Act
(aasb.gov.au 2018). The following table shows the revenue treatment of Oz Minerals for 2017:

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(Source: Ozminerals.com 2018)
It can be seen from the above that Oz Minerals has complied with the regulations of
AASB conceptual framework for their revenue recognition process (Ozminerals.com 2018).
Dividend
As per AASB conceptual framework, the companies are needed to follow the principles
of AASB 132 and AASB 137 under section 334 of the Corporations Act 2001 (aasb.gov.au
2018). The dividend payment of Oz Minerals can be seen in below:

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(Source: Ozminerals.com 2018)
It needs to be mentioned that Oz Minerals follows the AASB conceptual framework for
the recognition and accounting process of dividend (Ozminerals.com 2018).
Recent News
An important news about Oz Minerals is the selling of all the stakes of Oz Minerals by
private equity fund KKR. It needs to be mentioned that the private equity fund KKR had a plan
of full takeover of Oz Minerals. KKR was the biggest shareholder of Oz Minerals with 10%
stake in the company. Due to this news of takeover, there was 67% rise in the share price of Oz
Minerals. In this context, it needs to be mentioned that KKR dropped the decision of full
takeover of Oz Minerals due to the recent decrease in the share price of Oz Minerals. The deal
would make $50 million of profit for KKR. According to the latest speculations, there might be
some other reason for not taking over Oz Minerals by KKR that the company does not want to
disclose (smh.com.au 2018).

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Comparison with Other Organizations
The following table shows the comparison of the financial summary of Oz Minerals with
Orica Limited:
(Source: Ozminerals.com 2018 and Orica.com 2018)
It can be observed that Oz Minerals has increased the EBITDA in 2017 from 2016, but
there is decrease in EBITDA in 2017 for Orica Limited. After that, it is visible from the above
table that Oz Minerals has registered increase in EBIT in 2017 as compared to 2016, but
decrease can be seen in the EBIT of Orica Limited in 2017 as compared to 2016. Same aspect
can be seen in case of NPAT. Increase in NPAT can be seen for Oz Minerals in 2017 from 2016
while Orica Limited registered decrease in NPAT in 2017 from 2016. Hence, it can be seen that
Oz Minerals has performed well in the year 2017 as compared to its competitor companies like
Orica Limited.

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Conclusion
From the above discussion, it can be seen that Oz Minerals is a major Australian
company involved in the mining business. As per the conceptual framework analysis, Oz
Minerals follows the principles of Corporations Act 2001, AASB, Australian Accounting
Standards, IFRS and IASB for the development and presentation of financial reports. Moreover,
the remuneration committee follows the principles of AASB conceptual framework and
Corporations Act 2001 for the calculation of conceptual framework. At the same time, it can be
seen that Oz Minerals also follows the principles and guidelines of various standards of AASB
conceptual framework for the recognition of PPE, liabilities, revenue and others; they are AASB
116, AASB 102, AASB 137 and others. Most importantly, it can be seen that Oz Minerals has
performed well in 2017 when compared to other companies like Orica Limited. Moreover, the
analysis states that Oz Minerals has been able in increasing their EBITDA, EBIT, NPAT, EPS,
dividend payment and others in 2017 as compared to 2016. Thus, it is concluded that the
company has full compliance with conceptual framework and has improved financial
performance. In this situation, if an investor has $10,000, he can well invest this amount of
money in the company because he can gain desired return on investment in the presence of full
compliance with AASB conceptual framework and strong financial performance.

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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 13 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 13 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 13 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 13 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 13 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 13 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 13 Aug. 2018].
Achim, A.M. and Chiş, A.O., 2014. FINANCIAL ACCOUNTING QUALITY AND ITS
DEFINING CHARACTERISTICS. SEA: Practical Application of Science, 2(3).
Asx.com.au. (2018). [online] Available at:
https://www.asx.com.au/asx/share-price-research/company/OZL [Accessed 13 Aug. 2018].
Callen, J.L., Khan, M. and Lu, H., 2013. Accounting quality, stock price delay, and future stock
returns. Contemporary Accounting Research, 30(1), pp.269-295.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Orica.com. (2018). Annual Report . [online] Available at:
http://www.orica.com/Investors/annual-report#.W3E8fM4zbIV [Accessed 13 Aug. 2018].
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 13 Aug. 2018].
Ozminerals.com. (2018). Who We Are | OZ Minerals. [online] Available at:
https://www.ozminerals.com/about/ [Accessed 13 Aug. 2018].

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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 13 Aug. 2018].