Advanced Financial Accounting Report: Newcrest Mining Case Study

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APR+ HA 3011 ADVANCED FINANCIAL
ACCOUNTING (ALISH)

Table of Contents
Introduction................................................................................................................................................2
Descriptions of Accounting Concepts....................................................................................................2
Conceptual framework and the Issue of Measurement.......................................................................3
Fundamental Qualitative Characteristics - Understanding of Relevance and Representational
Faithfulness...............................................................................................................................................4
Conclusion.................................................................................................................................................5
References................................................................................................................................................6
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Introduction
Newcrest can be said as one of the largest gold mining organization in the world. The
organization has been listed on the Australian Stock Exchange since 1987. Previously,
the organization has known as Newmont Australia Limited. The organization operates
its organizational activities throughout every corner of Australia. The organization has
more than 10000 employees. the organization is following the guidelines of the
Australian Accounting Standards Board (AASB) and International Financial Reporting
Standards to prepare financial reports. by following the accounting standards, the
organization can be able to provide valid financial reports for the users. In the field of
gold mining, the organization is providing significant services from more than 25 years
of its establishment. The organization manages its organizational operations very
effectively by following the guidelines of the accounting standards. The orgnaikzational
employes are palying a pivotal role in the success of te orgnaization. The shareholders
of the organization provide significant confidence in the organizational activities of the
organisation. With the support of organizational employees and shareholders, the
organization is able to enhance its organizational image in front of the customers. In
Australia, almost the entire organizations are following AASB guidelines. By providing
valid financial reports as per AASB guidelines, the organization is able to avail its
financial reports for the betterment of the users.
Descriptions of Accounting Concepts
The Newcrest organization has reported its financial results as per the Australian
Accounting Standards. This agency is responsible for the issuing, developing and
maintaining the accounting standards which has been implemented under the company
law of Australia. The functions of the board were set out within the Australian Security
and Investments Commission Act 2001. The Australian Accounting Standard presents
information towards the users on the basis of the preparation of accounts. The main
purpose of this standard is to have uniformity within the financial reporting of Newcrest.
This makes sure the consistency within the data that has been published by the
organization. The financial report of Newcrest has been in compliance with the
Australian Accounting standard. The company has also moved towards the fulfillment of
International Financial Reporting Standards. In addition to this, the financial report of the
company also encompasses certain financial information of non-IFRS. This includes the
earnings before interest and tax, earnings before interest, tax, depreciation, and
amortization along with some significant items. The profit that has been obtained after
the tax but prior to the significant items which are attributed towards the owner of the
business is also included. This is also well known as underlying profit. Some of the
certain non-IFRS information concerning the financial report also includes the free cash
flow. The free cash flow is analyzed to be the cash which is flowing from the operating
activities and reducing the cash which is flowing in the investing activities. The capital of
major projects and sustaining capital with the interest coverage ratio were also included
in the non-IFRS financial report information (PALMER, 2019). These measures were
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made effective usage by the management that is internal to the organization. This
facilitates the management to evaluate the performance or productivity of the
organizational business. Thus accordingly the management needs to make a decision
on the basis of resources which are being allocated within the business. These
decisions were incorporated within the company’s financial report. This helps the
organization to offer greater understanding concerning the fundamental performance of
the financial report concerning the operations of the business. In the reviewing process
of the company’s performance, the non-IFRS financial information needs to be utilized
in accordance with IFRS. The non-IFRS financial information of the company did not
cause to experience the review or audit through the external auditor of Newcrest
(Newcrest, 2018)
.
The non-IFRS measure does not encompass any standard description below the IFRS.
This could be measured through different approaches. The change in the viability of the
economy within the mining operations which is especially greater mining operating cost.
This could be lead towards the decisions for altering the plans of production or closure
and suspension of operations related to mining. Another example could be analyzed as
the decline in the market value of Newcrest’s copper and gold inventory. Newcrest
estimates the ore reserves and mineral resources values have also been declined in the
market. The statutory table which has been presented in the annual report of the
company provides the details of statutory compensation disclosures. The compensation
disclosures in the statutory table were calculated in accordance with the Corporate Act
of 2001 along with appropriate accounting standard. Each and every executive were
remunerated in Australian currency. Remuneration has been provided in the United
States dollar which is dependable upon the presentation currency of Newcrest. Each
and every component of remuneration is being converted from the Australian currency
of the dollar to the United States dollar. This has been converted through the utilization
of the average rate that has been identified to be 0.77 during the period of 2017. The
explanation related to the relevant items of remuneration was also included in the
statutory table. The data has been provided with relative to share-based
compensations. These were calculated with the help of accounting standards.
Moreover, this also provides the amortized fair value related to the instruments of equity
granted to the company’s executives (Leonard, 2018).
Conceptual framework and the Issue of Measurement
The organization is following e guidelines of AASB accounting standards to prepare
financial statements. But, there are several guidelines exists that the organization is not
following. Due to these reasons, the organization is facing significant challenges.
Production issues can be said as one of the most significant challenges that the
organization faced. Production issues can provide a significant threat to the
organization. Unanticipated costs and liabilities of the organization are the main reason
for the occurred issues in the accounting measurement process. The organization has
to put more focus on its production process. Cost management is a very critical issue
that the organization is facing. Cost allocation is a very necessary factor for the
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organization. Being a gold mining organization, it is very crucial to allocate costs in each
and every department of production. The organization has to calculate the number of
liabilities for the enhancement of the organization (Legislation, 2015). The organization
has to follow the AASB and IFRS guidelines to include organizational liabilities in
financial reports. Due to ineffective inclusion of liabilities within the financial reports, the
organization is not able to calculate its proper profitability ratios. The organization is
facing several operational issues due to proper maintenance logistic calculations. The
organizational top management has the responsibility to include all the financial and
accounting activities within the financial reports. The employees are playing a very
pivotal role in the success of the organization. So, the top senior management of the
organization has the responsibility to focus on all the aspects of the employees.
Compensation liabilities are directly related to organizational employees. The
organizational management team has to calculate the number of liabilities which has
been allocated for the employees' health and safety aspects. The organization has to
include the amount of compensating liabilities within the financial reports. This type of
activity can be able to enhance the images of the organization. Another issue that has
been found by evaluating the financial reports of the organization is related to the
mismanagement of the landowner group. As a gold mining organization, the Newcrest
has the responsibility to undertake the landowner group. Without the inclusion of the
calculation of landowner groups, the organization cannot be able to provide effective
financial reports to the users. The organizational management team has the
responsibility to collect all the information of accounting transactions. Exclusion of any
details of accounting information can mislead the valuation of financial reports. it is very
important for the auditors to maintain the standards of financial reports (IFRS, 2019)
Fundamental Qualitative Characteristics - Understanding of Relevance and
Representational Faithfulness
The conceptual framework of the company elaborates the essential qualitative
characteristic concerned to faithful representation. The information has been
represented faithfully when it is completed. The complete representation mainly
includes the necessary information which is fundamental for the users to comprehend
the event. A neutral representation refers to the information which does not encompass
any biases within the presentation and selection of the financial information. As per the
qualitative characteristics of the company’s financial statement the information needs to
be free from any errors. In other words, it means that there should not be any omission
or errors within the depiction of the event. Moreover, the procedure which is used
towards creating the report information was chosen and implemented without any
errors. The essential characteristics of the company’s assets could be identified as the
resources which should include future benefits of economics (Accounting, 2018) .
The fundamental qualitative characteristics of Newcrest’s financial reporting could be
identified as
Relevance: the information which has been provided need to be relevant to the users’
need. This would be very beneficial for impacting the economic results of the user. This
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is also possible to incorporate reporting mainly the related information. The information
that is also included is the misreported or omitted information that impacts the economic
decisions concerned to the users. The relevant information has been presented in
Newcrest’s annual report. This information has been provided within suitable details.
This could be used in the most efficient way through financial report users. Every
related item has an attached description which could be fundamental for the users to
understand it properly (Employers, 2017)
.
Faithful representation: the data figures which have been presented in the annual report
of the company need to be free from material error. The data need not mislead users.
Therefore this financial information should truly represent the events and transactions.
This representation of transactions should be continued while portraying the
fundamental substances related to these events. Newcrest Mining organization
presents information regarding different items in brief. In addition to this, the
organization has provided a thorough account related to the items that need additional
explanation. The information which the auditor has audited within the annual report has
not misled the users.
The company has integrated environmental management within the business facts. The
company has ensured that the environment has minimized risk. The company has
managed and identified the risk of achieving positive results from the environment. The
company acknowledged that the processing and mining are identified to be the major
energy consumer, water consumer, and various other resources. The company has
worked efficiently to minimize the consumption of energy and emission of gases. The
ICMM membership, the company has put more emphasis to be the leader of
sustainable mining activities. The company has been participating in the forum for
enhancement of revenue transparency. The company is an active EITI multi-
stakeholder groups' member. Therefore the company takes a more effective part in the
agenda and discussion related to MSG upon EITI. They essentially relate the agenda
and discussion of EITI with the Australian implementation strategy (Cleartax, 2018)
Conclusion
Newcrest is operating its organizational operations in Australia. The organization is
mainly dealing with gold mining projects. As a gold mining organization, Newcrest has
to undertake all the financial activities within its financial reports. The organization
follows AASB standards and IFRS standards to maintain its financial reports. The
internal auditors have the duties to prepare adequate financial reports for the
organization. By following the guidelines of AASB and IFRS, the organization can be
able to prepare effective financial reports for the organization. In this case, the top
management team has to identify the issues which can impact the financial report's
valuation. The auditors have to include useful accounting information within the financial
reports. It is evident that the organization has not included compensation liabilities. Due
to this reason, the organization is facing significant challenges due to the exclusion of
compensation liabilities in the financial reports. Without the inclusion of compensation
liabilities within the liabilities, the organization is not able to provide effective financial
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reports to the stakeholders. Significant implementation of AASB and IFRS standards
can enhance the preparation process of financial reports.
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References
Accounting (2018). Accounting Standard AASB 2018-7 Amendments to Australian
Accounting Standards – Definition of Material. [online] Legislation.gov.au. Available
at: https://www.legislation.gov.au/Details/F2019L00021 [Accessed 22 May 2019].
Cleartax (2018). IFRS ( International Financial Reporting Standards ) - Meaning &
Standards. [online] Cleartax.in. Available at: https://cleartax.in/s/ifrs [Accessed 22 May
2019].
Employers (2017). What is the Difference Between Workers Comp and Employers
Liability? | 1-800-THE-LAW2. [online] 1800THELAW2. Available
at: https://www.1800thelaw2.com/blog/difference-workers-comp-employers-liability [Acc
essed 22 May 2019].
IFRS (2019). IFRS - What are the IFRS Standards in Accounting. [online] Corporate
Finance Institute. Available
at: https://corporatefinanceinstitute.com/resources/knowledge/accounting/what-are-ifrs-
standards/ [Accessed 22 May 2019].
Legislation (2015). AASB 1 - First-time Adoption of Australian Accounting Standards -
July 2015. [online] Legislation.gov.au. Available
at: https://www.legislation.gov.au/Details/F2019C00121 [Accessed 22 May 2019].
Leonard, K. (2018). The Definition of Organizational Management.
[online] Smallbusiness.chron.com. Available
at: https://smallbusiness.chron.com/definition-organizational-management-37684.html [
Accessed 22 May 2019].
Newcrest (2018). 2018 ANNUAL REPORT. [online] Newcrest.com.au. Available
at: https://www.newcrest.com.au/media/annual_reports/Newcrest_Annual_Report_2018
_1.pdf [Accessed 22 May 2019].
PALMER, B. (2019). International Financial Reporting Standards (IFRS). [online]
Investopedia. Available at: https://www.investopedia.com/terms/i/ifrs.asp [Accessed 22
May 2019].
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