Financial Reporting: AASB Conceptual Framework and BHP Group Analysis

This report provides an in-depth analysis of financial reporting, focusing on the application of the AASB (Australian Accounting Standards Board) conceptual framework. It begins with an overview of the AASB framework, explaining its role in regulating accounting processes and improving financial reporting for companies in Australia. The report then examines the framework's impact on financial statements, including the representation of assets, liabilities, equity, income, and expenses. A significant portion of the report is dedicated to analyzing the financial statements of BHP Group Limited, demonstrating how the company complies with the AASB conceptual framework. The analysis covers the presentation of financial position, income statement, and cash flow statement, highlighting how the company's financial data aligns with the framework's guidelines. Furthermore, the report discusses four key AASB standards (AASB 13, AASB 116, AASB 138, AASB 137, and AASB 16) and their relevance to BHP Group's financial reporting, including the valuation of assets, intangible assets, and the treatment of leases. The conclusion summarizes the key findings and emphasizes the importance of the AASB framework in ensuring accurate and transparent financial reporting.

Running head: FINANCIAL REPORTING
Financial reporting
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The Study has provided idea on the AASB frame work in relation to the development and
representation of the financial statement. The study has provided idea on different regulations
and principles in relation to the financial statement. The study has complied the financial
statement with the AASB conceptual framework. Further, the study has analysed the financial
statement of BHP group and established a relation of their financial statement with the AASB
conceptual frame. The AASB 35 has been applied as the conceptual framework for the
company in development and reporting of their financial statement. Finally, the study has
provided idea on the different accounting standards in respect to the measurement and
evaluation of the different items in financial statement.

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Table of Contents
Introduction................................................................................................................................3
AASB conceptual framework in financial statement.................................................................3
AASB for the external users......................................................................................................4
AASB conceptual frame work complying with the BHP group LTD.......................................5
AASB conceptual framework into the BHP group LTD...........................................................5
AASB standard in to the financial statement.............................................................................7
References................................................................................................................................10

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Introduction
Financial statements are being created through following AAASB conceptual
framework. The financial statements are the essential financial information that represents a
company’s financial position. The AASB has been represented as a government agency that
develops and maintains the financial report standard in to the Australia. The board records
different standards depending on which financial report has been done and represented
towards the public. For the better understanding of the importance of this report standard of
the financial statement the study has analysed the AASB conceptual framework. The study
has analysed the conceptual frame work of the AASB and depending on this the financial
statement of the BHP group Limited has been analysed. This includes the evaluation of the
importance of this framework for the external users. Lastly, the study includes an analysis of
the four different accounting standards for the better evaluation of the financial statement of
the company.
AASB conceptual framework in financial statement
The AASB conceptual framework refers to the regulation that regulates the Australian
company’s accounting process. The AASB framework helps in improving financial reporting
for a company. AASB framework formulates regulation in preparation and the representation
of the financial statement (Huber 2017). The impact of the framework on the financial
statement has been analysed bellow:
1. This assist AASB for promoting synchronisation of regulations, accounting standards
and procedures relating to the representation of financial statements by providing a
basis for reducing the number of alternative accounting managements permitted by
Australian Accounting Standards (Cordery and Sinclair 2016).
2. Financial position has been represented through the representation of the assets and
liability.

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3. The accounting standards of AASB specify when and how economic events are to be
recognized, measured and displayed. External entities, for example, banks, investors
and regulatory agencies, rely on accounting standards to ensure that the relevant and
accurate information is provided about the entity. These technical pronouncements
have ensured transparency and accountability into reporting and set the boundaries for
financial reporting measures (Yong, Lim and Tan 2016).
4. The AASB framework helps is developing fair and true financial statement which
helps in reducing the material misstatement into the financial statement.
5. This framework develops accounting standards according to which the financial
statements are being formulated.
6. This enhances the qualitative characteristics of the financial information which
enhances the usefulness of the financial information for the stakeholders.
7. Verifiability in to the framework helps in assuring users, that information faithfully
represents the economic phenomena it purports to represent.
8. This assist auditors in formulating an opinion as to understand whether financial
statements complies with the AAS.
AASB for the external users
Since AASB is responsible for preparing of the financial reporting criteria, hence this
is associated with the maintenance of the faith into the reporting process. As per the views of
Muehlenbrock (2017), AASB conceptual framework formulates regulation for the
preparation of the ethical financial report which helps the investors to evaluate the financial
statement. Following the AASB conceptual regulations, this helps in generating faith into the
financial information depending on which the external investors take decision for their
investment. Along with this company reporting through following the AASB frame work,

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reduces the martial misstatement into their financial statement. This helps in reducing the
misinterpretation of the financial information by the external investors.
AASB conceptual frame work complying with the BHP group LTD.
The company has been an Australian company which enables them to fellow AASB
framework in the development of the financial statement and reporting of the financial
information. The AASB conceptual framework helps the company to identify the requirement
of the accounting standard in to the preparation of their financial report. According to Wines
and Scarborough (2015), this has been recognised that in the implementation of the
conceptual framework of the AASB the board depends on the formulation under AASB no.
CF. This frame work associated with the preparation and the presentation of the financial
statement of the company.
AASB conceptual framework into the BHP group LTD.
In the development of the financial statement the company follows AASB. However,
the conceptual framework has been followed for the representation of the financial statement
and the preparation of the financial statement (Macve 2015). This has been recognised that in
the preparation and the representation of the financial statement the company has followed
AASB conceptual frame work instead of international accounting statement framework. This
has been recognised that the company has followed AASB No. CF framework for the
development of their financial statement. Following the conceptual framework the company
has generated a fair representation of the financial information towards the stake holders.
Below mentioned things are being complied with the conceptual framework whole the
company has represented their financial statement.
Financial position

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1. The company has represented their financial position depending on their assets and
liability value.
2. Liability has been represented as the obligations of the company.
3. Assets are being represented as the resource which have been controlled by the entity
as a result of past events and also from this future economic benefits are expected to
flow to the entity.
4. Equity has been represented as the residual interest in the assets. Which has been
identified after deducting all their liability from the asset value.
5. The liability portion has been represented depending on the obligation of the company
which is legally enforceable as a consequence of a binding contract or statutory
requirement.
6. Liability has been represented depending on the past transactions.
7. As per the conceptual framework in a corporate entity, funds contributed by
shareholders, retained earnings and the reserves presenting appropriations of retained
earnings and capital maintenance adjustments can be shown separately.
Income statement
1. As per the framework the profit and loss statement has represented the company’s
performance for the period.
2. Complying with the conceptual framework of the AASB the definitions of income
and expenses identify their essential features but they do not attempt to specify the
criteria which would need to meet before they are recognised in the income statement.
3. Complying with the conceptual framework the company has distinguished between
item of income and expenditure. Along with that combining them in different ways
has also permitted them to make several measurement of equity performance.

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4. Direct and indirect expenditure has been recorded depending on their gain and losses
(Simnett. and Huggins 2015).
Cash flow statement
1. The cash flow statement has been represented depending on the cash inflow and
cash out flow.
2. Depending on the conceptual framework the statement has represented the
surplus.
3. The cash item has only been included
Depending on the AASB conceptual framework the company has formulated the
financial statement and represented their true value to the stakeholders. Following the
framework the company has reduced the misstatement into their financial statement which
has helped them to represent a fair value of their financial assets (Nobes and Stadler 2015).
AASB standard in to the financial statement
The study has discussed 4 standards complying with the financial statement of the
company. These 4 standards are discussed below:
AASB 13
According to Tan Kantor, Abbott, and Jubb (2017), this standard represents the fair
value of the financial information. This helps the stakeholders in measuring fair value of the
financial assets provided into the financial statement. BHP group limited represents their
interest rate on bond, assets value and free cash flow using the fair market value method. This
helps the company to evaluate the actual profit coming through following the market rates.
AASB 116

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The main objective of this Standard is to specify the accounting treatment for
property, plant and equipment so that the users of the financial statements can ascertain
information about an entity’s investment in its property, plant and equipment and changes in
those investments (Tan Kantor, Abbott and Jubb 2017). The company’s financial report has
been the proof of following this standard into their accounting process. Through following
this standard the company has valued their fixed assets and representd their strength in to
market. An increasing trend has been recognised in the value of PPE into the balance sheet.
AASB 138
This standard complies with the measurement of the intangible assets present into the
company. Following this standard BHP group has valued their goodwill and represented their
value into the balance sheet. This helps the shareholder to understand the company’s actual
value through taking intangible assets into the consideration for the total assets valuation.
AASB 137
Following this accounting standard the company has complied their financial
statement with the provision, contingent liability and contingent assets. The contingent
liabilities and assets have been recorded into the foot note as the possibility of generating an
obligation or a benefit depends on the future event and the provision has been recorded into
the income statement.
AASB 16
As per Joubert, Garvie, and Parle (2017), this accounting standard undertakes a single
lessee accounting model, which involves a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. This
has been recognised that Woodside turns into the operator of the WA-1-R lease in March
2018 following its acquisition of Esso’s working interest in the title. Through following this

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accounting standard BHP has been provided with an option to acquire a further 10 % interest
on WA-1-R from Woodside as per equivalent terms to its Esso transaction. Through
following this standard the company has recorded their income from Operating lease rentals
into their income statement each year (Bhp.com, 2019).
Conclusion
The study has provided idea on the financial statement in relation to the AASB
conceptual framework. This has explained the AAASB conceptual framework in respect to
the maintaining of the accounting record and representing financial statement. The study has
identified the requirement of following the AASB conceptual framework regulation for the
external investors. The study has identifies the importance of the AASB conceptual
framework in relation to the evaluation of the financial information. The study has also
provided idea on the impact of the conceptual framework in relation to the development of
the financial statement for the BHP group. Lastly the study has provided idea on the different
accounting standards under the AASB and evaluated those standards with the financial
statements.

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References
Bhp.com (2019). [online] Bhp.com. Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf [Accessed 2 May 2019].
Cordery, C.J. and Sinclair, R., 2016. Decision-Usefulness and Stewardship As Conceptual
Framework Objectives: Continuing Challenges.
Huber, W., 2017. Irreconcilable differences? The FASB's conceptual framework and the
public interest. International Journal of Critical Accounting, 9(5/6), pp.514-523.
Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for
Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The
Journal of New Business Ideas & Trends, 15(2), pp.1-11.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?.Abingdon: Routledge.
Muehlenbrock, S., 2017. Intangibles disclosure: A user-based approach to enhanced external
financial reporting (Doctoral dissertation, University of Brighton).
Nobes, C.W. and Stadler, C., 2015. The qualitative characteristics of financial information,
and managers’ accounting decisions: evidence from IFRS policy changes. Accounting and
Business Research, 45(5), pp.572-601.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research
add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Tan‐Kantor, A., Abbott, M. and Jubb, C., 2017. Accounting Choice and Theory in Crisis: The
Case of the Victorian Desalination Plant. Australian Accounting Review, 27(3), pp.273-284.

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Tan‐Kantor, A., Abbott, M. and Jubb, C., 2017. Accounting Choice and Theory in Crisis: The
Case of the Victorian Desalination Plant. Australian Accounting Review, 27(3), pp.273-284.
Wines, G. and Scarborough, H., 2015. Australian government budget balance numbers: The
hybrid nature of public sector accrual accounting. Accounting Research Journal, 28(2),
pp.120-142.
Yong, K.O., Lim, C.Y. and Tan, P., 2016. Theory and practice of the proposed conceptual
framework: Evidence from the field. Advances in accounting, 35, pp.62-74.