Financial Accounting Management Report for BHP Billiton

This financial accounting report analyzes the financial performance and accounting practices of BHP Billiton. The report covers several key areas, including the financial information of investment entities, the application of recognition concepts within the conceptual framework, and the treatment of impairment in accordance with AASB 136/IAS 1. It also examines fair value changes and the required disclosures for changes in accounting policy, as well as a summary of accounting estimates. The analysis references BHP Billiton's 2018 annual report and relevant accounting standards. The report delves into topics such as portfolio turnover, fair value of securities, and the impact of dividends. It also provides guidance on disclosures related to impairment losses and changes in accounting policy, ensuring compliance with accounting standards. The report concludes with a summary of accounting estimates, highlighting the importance of management judgment in areas such as project viability and exploration expenses.

Running head: FINANCIAL ACCOUNTING MANAGEMENT
Financial accounting management
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Table of Contents
Task 1.........................................................................................................................................2
Research topic 1.........................................................................................................................2
A. Financial information of investment entity.....................................................................2
B. Application of concept of recognition in conceptual framework....................................2
Research topic 2.........................................................................................................................3
A. Addressing problem in accordance with AASB 136 / IAS 1..........................................3
B. Fair value changes...........................................................................................................4
Research topic 3.........................................................................................................................4
A. Advise for disclosure required for changes in the accounting policy.............................4
B. Summary of accounting estimates..................................................................................5
Reference....................................................................................................................................6

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Task 1
 Name of the company – BHP Billiton
 Link to down loan annual report -
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf
 Current share price of the company – 52.02 (Finance.yahoo.com 2019)
Research topic 1
A. Financial information of investment entity
Performance of the investment company is resulted from the income earned by it on
the investment made by it that is in form of interests and dividends and the changes in fair
value of the investment during the holding period. Further information required are –
 Portfolio’s turnover and associated cost of transaction like commission
 Information regarding the portfolio risk
 Dividend and interest earned
 How the changes in fair value takes place for the investment that is managed by
investment entity as compared to the changes in the similar type of investment in the
market as a whole.
 Fair value of securities hold by the investment entity (Aasb.gov.au 2019).
B. Application of concept of recognition in conceptual framework
In accordance with the framework, any item which satisfies the definition criteria of
liability, asset, expenses and income shall be recognised if –
 The said item has value or cost and the cost or value can be reliably measured

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 It is apparent that the future economic gain associated with this item, if any, will be an
income for the entity (Aasb.gov.au 2019).
In case of income, it is stated by the framework that the income reported under
income statement while the increase in the future economic gain associated with the
reduction in the liability or increase in the assets is generated and the value for which can be
reliably measured. Appreciation in the fair value of the investment securities signifies
increase in the asset. In case of dividend, when the right regarding receipt of payment is
established, the dividend can be recognised. As the change in the fair value and the dividend
varies in nature, they will be separately reported (Aasb.gov.au 2019).
Research topic 2
A. Addressing problem in accordance with AASB 136 / IAS 1
AASB101/IAS 1 does not allow departure from the accounting standards, even when
the managers are in the view that the compliance with the AASB will be misleading and will
create conflict with the objecting of the financial statement. Hence, the managers shall
provide the additional disclosures for mitigating the aspects with regard to perceived misleads
(Aasb.gov.au 2019). Following shall be disclosed in the annual report –
 Title of relevant standards that is AASB 136 / IAS 136 – impairment of assets in the
given case
 That it is required to recognize the amount of impairment loss for the amount by
which the carrying amount exceeds the assets recoverable value
 That the application of the said AASV is perceived as misleading as the management
is in the view that the impairment is of temporary nature (Aasb.gov.au 2019).

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 That in the view of the management adjustment is needed for achieving the
presentation of fair value that is expenses shall be reduced and carrying value of
assets is increased by $ 80,000 (Aasb.gov.au 2019).
To explain the above in simple way tax has not been considered. However, if the tax
is considered, the adjustment required at 30% tax rate is increasing the tax expenses as well
as deferred tax liability by $ 800,000 * 30% = $ 24,000.
B. Fair value changes
For BHP Billiton the value of property, plant and equipment was $ 80,497 million at
the end of the period closed on 30th June 2017 and at the end of the value changed to $ 67,182
million. Changes in the value of the asset took pace due charges of impairment and
accumulated depreciation amounting to $ 59,546 million (annual report 2018, Pg no. 177)
(Bhp.com 2019).

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Research topic 3
A. Advise for disclosure required for changes in the accounting policy
As changes in the accounting policy by the entity was voluntary, provision of ASB
108, Para 29 shall be applied as follows –
 Nature of the changes and the reason that application of new accounting policy will
provide more reliable and relevant information to the possible extent
 Value of adjustments made for current as well as the previous period to each of the
financial statements and the line items those are affected
 Adjustments made, if any to the diluted and basic earnings per share
 Circumstances that directed to existence of the condition and description regarding
how as well as since when changes in the accounting policy applied (Aasb.gov.au
2019).
B. Summary of accounting estimates
 Development activities started after the sanctioning of the project by appropriate level
of the management. Here judgment is required by the management to determine while
the project is viable economically. For applying the judgment here management is
required to estimate and assume regarding the future circumstances and events
including estimate for reserve (annual report 2018, Pg no. 178) (Bhp.com 2019).
 Evaluation and exploration expenses resulting from certain items of the expenses are
capitalised for the interest area where it is likely to be received. It requires the
management to estimate and assume regarding the future circumstances and events
(annual report 2018, Pg no. 177) (Bhp.com 2019).

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Reference
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB108_08-15.pdf [Accessed 19 May
2019].
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_08-15.pdf [Accessed 19 May
2019].
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB128_08-15.pdf [Accessed 19 May
2019].
Aasb.gov.au., 2019. Conceptual framework . [online] Available at:
https://www.aasb.gov.au/Pronouncements/Conceptual-framework.aspx [Accessed 19 May
2019].
Bhp.com., 2019. [online] Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf [Accessed 19 May 2019].
Finance.yahoo.com., 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/BHP/ [Accessed 19 May 2019].

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