Accounting Theory and Issues: Oz Minerals Conceptual Framework Review

This report provides a comprehensive analysis of Oz Minerals' financial reporting practices, focusing on its compliance with the Australian Accounting Standards Board (AASB) Conceptual Framework. The report evaluates Oz Minerals' adherence to various accounting principles, including those related to general-purpose financial reporting (GPFR), property, plant, and equipment (PPE), contingent liabilities, inventories, revenue, and dividends. It examines the company's remuneration report and recent news related to its financial performance. The analysis demonstrates Oz Minerals' compliance with the AASB framework and its commitment to providing transparent and accurate financial information to stakeholders. The report highlights key aspects of Oz Minerals' financial statements, including revenue recognition, asset valuation, and dividend payments, and compares its performance over several years. The report concludes that Oz Minerals effectively uses the conceptual framework for financial reporting.

Running head: ACCOUNTING THEORY AND ISSUES
Accounting Theory and Issues
A Review on OZ Minerals’ Conceptual Framework and Australian Accounting Standard Board
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING THEORY AND ISSUES
Executive Summary
The major objective of the report is to analyze and evaluate the extend of compliance of Oz
Minerals with the various regulations and principle of Conceptual Framework. As per the result
of the analysis, there is compliance from the side of the company with all the required principle
as well as rule of AASB conceptual framework for various aspects of their financial reporting
like the recognition of assets, liabilities and others. Moreover, the company has made compliance
with the principles of General Purpose Financial Reporting for the true and fair preparation as
well as presentation of their financial statements so that the users can gain all the required
information at the time of their decision-making process. Thus, full compliance from Oz Mineral
can be seen with the Conceptual Framework.

2ACCOUNTING THEORY AND ISSUES
Table of Contents
Introduction......................................................................................................................................3
Company Profile..............................................................................................................................3
Conceptual Framework....................................................................................................................5
General Purpose Financial Reporting..............................................................................................6
Remuneration Report.......................................................................................................................7
Critical Analysis..............................................................................................................................9
Property, Plant and Equipment (PPE).........................................................................................9
Contingent Liability...................................................................................................................10
Inventories.................................................................................................................................11
Revenue.....................................................................................................................................12
Dividends...................................................................................................................................13
Recent News..................................................................................................................................13
Comparison....................................................................................................................................14
Conclusion.....................................................................................................................................14
References......................................................................................................................................16

3ACCOUNTING THEORY AND ISSUES
Introduction
The presence of Conceptual Framework in accounting provides the companies with
major assistance in the correct preparation as well as presentation of the financial statements. At
the same time, it helps the business organizations in dealing with different kind of accenting
issues like the deliverance of required financial information and many others. In Australia,
Australian Accounting Standard Board (AASB) has provided the Australian business entities
with the required Conceptual Framework for carrying on various tasks related to financial
reporting (Newberry 2015). At the same time, this conceptual framework of AASB helps the
accounting bodies in developing the required financial rules and principles. The main objective
of this report is the analysis and evaluation of different aspects of conceptual framework for one
of the Australian companies, OZ Minerals. The main scope of this report lies in different types
of requirements of conceptual framework.
Company Profile

4ACCOUNTING THEORY AND ISSUES
Oz Minerals is a leading modern mining company of Australian and the main focus of the
company can be seen on copper. The main strategic objective of the company is the creation of
value for all the stakeholders. The company was established in the year of 2008 as a result of a
merger of Oxiana Limited and Ziniflix; and the company is headquartered at Adelaide, Australia.
The main products of the company are copper and gold. The main operation of Oz Minerals can
be seen in copper-gold silver mine at Prominent Hill; and the company is on their way in
developing Australia’s biggest copper-gold resources at Carrapateena (ozminerals.com 2018).
(Source: ozminerals.com)
From the above figures, it can be observed that there are major improvements in the
financial performance of Oz Minerals in 2017 as compared to 2016. Increase can be seen some
of the major aspects like group revenue, EBITDA, underlying EBIT, underlying NPAT and
NPAT. For these reason, Oz Minerals has become able in providing more dividends to their
shareholders.

5ACCOUNTING THEORY AND ISSUES
(Source: asx.com.au)
It can also be observed from the above figure that there is major improvement in the
share price of the company over the period of five years starting from 2014 to 2018. Thus, on the
overall basis, improved performance of Oz Minerals can be seen in the recent years.
Conceptual Framework
The main function of conceptual framework is to provide the required rules and
regulations for various purposes like objective as well as purposes of the General Purpose
Financial Reporting (GPFR). Apart from this, the conceptual framework provides great
assistance to the International Accounting Standard Board (IASB) in developing the required
standards for financial reporting (aasb.gov.au 2018). The basis of the preparation of the financial
statements of Oz Minerals can be seen below:

6ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
The above figures state that Oz Minerals complies with the rules and standards of AASB
Conceptual Framework and Corporations Act 2001 at the time to prepare and present their
general purpose financial reports. Moreover, the company also follows the principles of
International Financial Reporting Standards (IFRS) and IASB for the purpose of financial
reporting (ozminerals.com 2018). It is crucial to say that the AASB Conceptual Framework has
major role in promoting as well as maintaining the accounting regulations and standards. At the
same time, the continuation of AASB Conceptual Framework can be seen in Generally Accepted
Accounting Principles (GAAP) for the review of different financial standards. With the
assistance of AASB conceptual framework, the users of financial statements can obtain the
required financial information for their decision-making purpose (aasb.gov.au 2018).

7ACCOUNTING THEORY AND ISSUES
General Purpose Financial Reporting
General Purpose Financial Reporting (GPFR) is majorly beneficial for the investors and
the users of financial reports as it provides them with the required financial information required
for the purpose of their investment decision-making. Income statement, balance sheet, cash flow
statement and change in equity statements are the components of GPFR. The central role of
GPFR can be seen in providing the necessity financial information to the financial statements
users for decision-making purpose (Warren, Reeve and Duchac 2013). It needs to be mentioned
in this context that the general purpose financial reports of the business entities should contain
the fundamental and enhancing qualitative characteristics. The fundamental qualitative
characteristics of GPFR are relevance and faithful representation; the enhancing qualitative
characteristics are comparability, understandability, verifiability and timeliness. In the presence
of all these characteristics, financial information becomes more useful to the users of the
financial statements. Moreover, the presence of these characteristics ensures that the business
entities present their financial statements truly and faithfully (Hail 2013).
Remuneration Report
As per the 2017 Remuneration Overview and Report of Oz Minerals, the compliance of
the company with the AASB Conceptual Framework and Corporations Act 2001 can be seen
while calculating the remuneration of the executive key management personnel. The
remuneration framework of Oz Minerals complies with certain principles. As per these
principles, the remuneration framework of Oz Minerals is linked with the performance of
rewards of the executives. At the same time, governance and transparency are two key aspects of
the remuneration framework of Oz Minerals (ozminerals.com 2018). The follows table shows the
remuneration structure of Oz Minerals:

8ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
Thus, it can be noticed from the above that the remuneration mix of Oz Minerals contain
three parts; they are Fixed Remuneration, Short-Term Incentives and Long-Term Incentives and
last two are based on the performance of the directors (ozminerals.com 2018).
The following table shows the financial outcome of Oz Minerals against the financial
metrics from 2013 to 2017:

9ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
It can be seen from the above that there is increase in both EBITDA and Net Profit of the
company in the year 2017 as compared to the previous years. At the same time, increase in net
cash inflow can also be seen along with the increase in basic EPS, share prices and payment of
dividends. All these aspects indicate towards the fact that the executive personnel have become
able in achieving their financial target for the company that contributed towards the improved
financial outcome for Oz Minerals. It needs to be mentioned in this context that the management
of Oz Minerals has not brought any changes in the remuneration framework in the year 2017
(ozminerals.com 2018).
Critical Analysis
Property, Plant and Equipment (PPE)
AASB 116 Property, Plant and Equipment provides all the Australian companies with
the regulations for the accounting of their business property, plant and equipments under Section
334 of Corporations Act 2001 (aasb.gov.au 2018). The obligation on the companies is the
determination of the carrying values of the assets along with the depreciation value. The
following table shows the accounting treatment of PPE by Oz Minerals:

10ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
From the above table, it can be seen that Oz Minerals recognizes their PPE at cost value
after the deduction of accumulated depreciation and accumulated impairment losses. It implies
that the company follows the principle of AASB Conceptual Framework (ozminerals.com 2018).
Contingent Liability
Contingent Liabilities are referred to the obligation of the businesses that have been
developed as a reasons of any previous event. Thus, the companies are needed to record all the
information related to their contingent liabilities. As per AASB Conceptual Framework,
companies can get all the required regulation for the accounting treatment of contingent
liabilities from AASB 137 Provision, Contingent Liabilities and Contingent Assets under
Section 334 of Corporations Act 2001 (aasb.gov.au 2018). Followings are the recorded
contingent liabilities for Oz Minerals for the year 2017:

11ACCOUNTING THEORY AND ISSUES
(Source: ozminerals.com)
It can be seen from the above figure that Oz Minerals has certain contingent liabilities in
their business operations and they have followed AASB Conceptual Framework for the
accounting treatment of these liabilities (ozminerals.com 2018).
Inventories
As per the AASB Conceptual Framework, the Australian entities are obliged to comply
with the principles of AASB 102 Inventories under Section 334 of Corporations Act 2001 for
the accounting treatment of their business inventories (aasb.gov.au 2018). The requirement for
them is the recognition of all the write downs of their inventories. The following table shows the
treatment of inventory by Oz Limited: