Woodside Petroleum's Compliance with GPFR and Accounting Standards

This report assesses Woodside Petroleum's compliance with General Purpose Financial Reporting (GPFR) objectives and the conceptual framework of accounting. It evaluates the company's adherence to recognition criteria for elements like revenue, assets, liabilities, and borrowings, and examines the exhibition of fundamental and enhancing qualitative characteristics in its financial reporting. The report concludes that Woodside Petroleum effectively meets the requirements of GPFR and the conceptual framework, ensuring stakeholders receive reliable information for decision-making. It recommends incorporating non-financial measures to enhance the meaningfulness and usefulness of corporate reporting. Desklib provides access to similar solved assignments and study resources for students.

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CONTEMPORARY ISSUES IN ACCOUNTING

Woodside Petroleum
Executive summary
Both General Purpose Financial Reporting and adherence to conceptual framework of
accounting is crucial when it comes to an organization’s financial and non-financial
performance. This is because it assists users in making relevant financial decisions based on
the same. For the purpose of this report, Woodside Petroleum has been chosen wherein due
consideration has been exerted on its GPFR, recognition criteria, and compliance with
fundamental and enhancing qualitative characteristics.
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Woodside Petroleum
Contents
Introduction...........................................................................................................................................3
Compliance with objectives of GPFR.....................................................................................................4
Ability of target audience to use GPFR for gathering information.........................................................4
Satisfaction of recognition criteria.........................................................................................................4
 Revenue.........................................................................................................................................5
 Current assets and liabilities..........................................................................................................5
 Gas and oil properties....................................................................................................................5
 Borrowings....................................................................................................................................5
 Trade and receivables....................................................................................................................5
 Inventories.....................................................................................................................................6
 Provisions......................................................................................................................................6
 Operating lease payments.............................................................................................................6
Exhibition of fundamental qualitative characteristics...........................................................................6
Exhibition of enhancing qualitative characteristics...............................................................................7
Recommendation..................................................................................................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10
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Woodside Petroleum
Introduction
Based on the current corporate scenario, adherence to the objectives of GPFR and compliance
with conceptual framework of accounting is vital to thrive in the market. This is because it
facilitates effective decision-making on the part of users, thereby enhancing the reputation
and goodwill of companies. Moreover, adherence to conceptual framework also assists in
enhancing qualitative characteristics like understandability, comparability, timeliness, etc
(Seilber, 2015). This makes it clear that organizations who do not prioritize such steps may
fail to survive in such competitive environment wherein interpretation of financial
information in order to make decisions is vital in nature. This report will assist in evaluating
the effectiveness of Woodside Petroleum in complying with requirements of GPFR and
conceptual framework.
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Woodside Petroleum
Compliance with objectives of GPFR
Woodside Petroleum has appropriately adhered to the objectives of GPFR and conceptual
framework so that it can ensure that the stakeholders are provided enhanced and efficient
financial information that can help them in making significant decisions. Furthermore, the
company has also remained consistent it its approaches in order to account for the objectives
of GPFR. For such purpose, the company has disclosed enhanced accessibility to its users to
facilitate the prevalence of efficient information that can further help them in understanding
the relevant characteristics and quality of financial reporting. Moreover, the policies and
procedures of the company like dividend policy, Woodside’s reserves policy, etc are also
disclosed to the users for the purpose of complying with the objectives of GPFR. In addition
to this, the company has also provided significant information that can cause serious issues to
its financial performance. Such details are disclosed in the risk section of the company’s
annual report. The company has also disclosed relevant information about its strategic
approaches for addressing its overall organizational purposes. All these factors highlight the
fact that objectives of GPFR has been appropriately met by the company.
Ability of target audience to use GPFR for gathering
information
Even though GPFR may fail to offer all the necessary information required for decision-
making and accounting purposes, yet the target audience can easily consider the information
offered through such reports for making effective decisions in future. For instance, the
provision of sustainability or environmental performances of the company can assist
stakeholders in determining whether social concerns have been adequately taken care or not.
Furthermore, the information of risks that is disclosed in the risk section of the company can
be taken into account by the investors, lenders, and creditors for their own needs (Conceptual
Framework, 2016). Nevertheless, the information disclosed by Woodside Petroleum in
relation to its alterations in financial resources and claims except those attained from
creditors and investors so that future and past capability of the company in managing its cash
flows can be determined by the target audience for their own requirements (Douma & Hein,
2013).
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Woodside Petroleum
Satisfaction of recognition criteria
In relation to Woodside Petroleum, the company has effectively satisfied the recognition
criteria of various elements in its financial statements. It has recognized all vital elements in
its financial statements that sheds light on its accuracy in reporting.
 Revenue
Woodside Petroleum has recognized its revenue and measured it at their fair value of
obtained consideration to such extent that it becomes feasible that financial benefits are
flowed to the company. Further, the revenue from sale of manufactured hydrocarbons is also
recognized when potential rewards and risks of ownership gets passed to the consumers
(Hemmer & Labro, 2008). In addition, such revenue is recognized based on the company’s
interest of working in the producing field (Hill, 2014). Moreover, revenue from pay or take
contracts are recognized in earnings when such product has been withdrawn by customers
and recorded as unearned income in the alternate situation.
 Current assets and liabilities
The current liabilities and assets of Woodside Petroleum are measured at their expected
amounts to be attained from or paid to taxation agencies. Further, deferred liabilities and
assets are measured at their rates of expected tax that must be applied in the tenure wherein
such liability is required to be settled or asset is needed to be realised (Woodside Petroleum,
2016).
 Gas and oil properties
Gas and oil properties of the company are reflected at cost minus impairment expenses and
accumulated depreciation. Such properties comprise of initial expenses to construct, acquire,
complete, or install infrastructure and production facilities like platforms and pipelines
(Woodside Petroleum, 2016).
 Borrowings
In addition to this, the group has also recognized borrowings at their respective fair values
minus transaction expenses. Such borrowings are carried at amortized expenses and any
variation betwixt the received proceeds and redemption value is also recognized in the
statement of income through usage of effective interest method (Woodside Petroleum, 2016).
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Woodside Petroleum
 Trade and receivables
Woodside Petroleum has also recognized its trade and other receivables at their respective
fair values and subsequently measured them at amortized expense minus an allowance for
uncollectible figures.
 Inventories
In relation to inventories, the company has valued the same at lower of cost and total
realizable amount. (Woodside Petroleum, 2016)
 Provisions
When it comes to provisions, Woodside Petroleum has recognized the same when it has a
current obligation whether constructive or legal as an outcome of past events (Woodside
Petroleum, 2016).
 Operating lease payments
In relation to payments associated with operating leases, the Group has recognized the same
as an expense in its income statement on a straight-line method over the term of lease.
Besides, incentives that are associated with such leases are also recognized by the company
in its income statement as a part of net lease expense (Woodside Petroleum, 2016). All these
recognitions of major elements in the financial report clearly shed light on the fact that
Woodside Petroleum has effectively met the recognition criteria for financial reporting.
Exhibition of fundamental qualitative characteristics
It can be seen from the annual report of Woodside Petroleum that the company has
effectively exhibited fundamental qualitative characteristics into its reporting framework.
Besides, this has allowed the company remain strong in its industry and the stakeholders are
also offered proper guidance in their decision-making processes with the help of such
compliance (Peteeren & Plenborg, 2012). In relation to materiality, the company has a
guideline that allows it to determine the significance of information in association with the
ASX principles (Cooper et. al, 2011). Furthermore, the material risks that can cause a major
effect on the financial performance of the company are also disclosed by the company in its
risk section, thereby satisfying the materiality criteria. Furthermore, the company has
disclosed a section in its report wherein the directors have assured that the financial
statements follow Section 295A of Corporations Act 2001 and the AAS respectively (Choi &
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Woodside Petroleum
Meek, 2011). With such disclosure, the company has adhered to faithful representation
qualitative characteristic in its reporting.
Further, the company has agreed that disclosure of some information may cause an injury to
its financials but still it has reported such information in order to make stakeholders rely upon
the same and take valid decisions. This fulfils the reliability qualitative characteristic of
financial reporting (Woodside Petroleum, 2016). The company has offered relevant
information regarding its sustainability concerns that can allow stakeholders in making
proper decisions, thereby fulfilling the relevance qualitative characteristic of corporate
reporting.
Exhibition of enhancing qualitative characteristics
Woodside Petroleum has taken due steps for providing relevant financial information to its
stakeholders in a timely manner. For such purpose, the company has provided important
details on its website too wherein stakeholders are offered information in due time. This
ensures the fulfilment of timeliness qualitative characteristic of corporate reporting (Freeman
& Alexander, 2013). Further, the performance summary of the company can be used by its
stakeholders in understanding the fact whether it has progressed or not, thereby satisfying
understandability as well (Tysiac, 2015). Moreover, such performance summary is also
disclosed for the last year so that users can easily compare the past performance with that of
the current performance and thereafter make proper decisions based on the same (Woodside
Petroleum, 2016). Hence, the company has also adhered to the enhancing qualitative
characteristics in its reporting approach.
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Woodside Petroleum
Recommendation
Even though Woodside Petroleum has catered to the objectives of GPFR and conceptual
framework, yet it has not disclosed non-financial measures in a proper way. Moreover, it
must be taken into consideration that the usefulness of financial statements can be enhanced
in the prevalence of both financial and non-financial measures (Peirson et. al, 2015). Besides,
presence of non-financial measures can enhance the credibility of the organization on a larger
scale because users can rely upon the information for making efficient decisions (Conceptual
Framework, 2016). Therefore, it is recommended that both financial and non-financial
measures must be present to enhance the meaningfulness and usefulness of corporate
reporting.
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Woodside Petroleum
Conclusion
Woodside Petroleum has accurately complied with the objectives of GPFR and requirements
of conceptual framework of accounting. For such purpose, the company has fulfilled the
requirements of both fundamental and enhancing qualitative characteristics in its reporting.
Besides, it has also catered to the recognition criteria of various significant elements that can
allow stakeholders rely upon the same and take proper decisions. Overall, the effectiveness of
satisfying the obligations of a proper financial report has been looked after by the company
that can allow it to sustain its position in the market.
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Woodside Petroleum
References
Choi, R.D. and Meek, G.K., 2011. International accounting. Pearson .
Conceptual Framework 2016, Conceptual Framework Pronouncements. [online] Available
from: <http://www.aasb.gov.au/Pronouncements/Conceptual-framework.aspx> [Accessed 20
April 2018]
Cooper, C, Coulson, A. and Taylor, P. (2011). Accounting for human rights: Doxic health
and safety practices – The accounting lesson from ICL. Critical Perspectives on Accounting,
22(8), 738-758. Retrieved from
https://pdfs.semanticscholar.org/29fe/f2147778ed83c4ee682b6e457a70b344a28a.pdf
Douma, S. and Hein, S. 2013. Economic Approaches to Organizations. London
Freeman, E. and Alexander, M. 2013. Stakeholder management and CSR: questions and
answers. Oxford Press
Hemmer, T. and Labro, E 2008. On the optimal relation between the properties of
managerial and financial reporting systems. Journal of Accounting Research, 46, pp. 1209–
1240. Available through: https://www.scopus.com/record/display.uri?eid=2-s2.0-
54249141091&origin=inward&txGid=85d117d174c0e27c36a27eeee1be7d6b [Accessed 18
April 2018]
Hill, L. B. (2014) Discussion of The role of revenue recognition in performance reporting.
Accounting and Business Research. [online]. 44(4), 380-382. Available from:
https://doi.org/10.1080/00014788.2014.897867
Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. (2015) Business Finance, 12th
ed. North Ryde: McGraw-Hill Australia.
Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England:
Financial Times/Prentice Hall.
Seilber J. (2015) FASB removes concept of extraordinary, retains guidance on unusual item
[online]. Available from: http://www.pwc.com/us/en/cfodirect/assets/pdf/in-brief/us2015-
01-fasb-extraordinary-unusual-items.pdf [Accessed 20 April 2018]
Tysiac K. (2015) No more extraordinary items: FASB simplifies GAAP [online]. Available
from: http://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-
201511630.html [Accessed 20 April 2018]
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Woodside Petroleum
Woodside Petroleum 2016, Woodside Petroleum Annual report & accounts 2016 [online].
Available from: http://www.woodside.com.au/Investors-Media/announcements/Documents/
01.03.2017%20Annual%20Report%202016.pdf [Accessed 20 April 2018]
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