Read and gain in-depth understanding of the various normative and positive theories of financial...

Question

Read and gain in-depth understanding of the various normative and positive theories of financial accounting from the text book and from other relevant & credible literature b) Be aware of some of the limitations of the various theories of accounting c) Appreciate that there is no single unified theory of accounting d) Understand the various pressures and motivations that might have an effect on the methods of accounting selected by an organisation e) Understand what is meant by ‘creative accounting’ and why it might occur f) Understand Financial statement preparation process (from Business Activities to Financial Statements) and the various influenc
	
Document Preview: HOLMES INSTITUTE 
 
FACULTY OF 
HIGHER EDUCATION

HOLMES INSTITUTE 
 
FACULTY OF HIGHER EDUCATION 
 
 Group Assignment   
 
HI6025 Accounting Theory and Current Issue 
 
TRIMESTER 2 / 2017

Instructions:  
1. This assignment is to be submitted in accordance with assessment policy stated in the 
Subject Outline and Student Handbook.  
2. It is the responsibility of the student who is submitting the work, to ensure that the 
work is in fact her/his own work. Incorporating another’s work or ideas into one’s own 
work without appropriate acknowledgement is an academic offence. Students can 
submit all assignments for plagiarism checking (self-check) on Blackboard before final 
submission in the subject. For further details, please refer to the Subject Outline and 
Student Handbook.  
3. Maximum marks available: 20 marks.  
4. Due date of submission: Week 11 
5. Assignment should be of 3,000 words. Please use “word count” and include in report.  
Important Note: Please submit Assignment through SafeAssign 
 
1 | P a g e     H I XXXXXXXXXXG r o u p A s s i g n m e n t T XXXXXXXXXX7Group Assignment theme: 
Evaluate accounting quality, for a company of your choice, by assessing accounting policies 
and estimates and prepare an investigative report on Managers’ Accounting and Reporting 
Strategy Choice 
 
Recommended steps/ navigation to complete the assignment project: 
 
A) Ready: 
a. Form a group (maximum of 4 members) 
b. If you have difficulties forming such groups, please contact your lecturer as 
soon as possible. 
c. Select a company and get approval of the company (Any company listed with 
ASX and not taken by other groups) from your lecturer, on which your group  
want to progressively analyze  
B) Get set: 
 
a) Read and gain in-depth understanding of the various normative and positive 
theories of financial accounting from the text book and from other relevant & 
credible literature 
b) Be aware of some of the limitations of the various theories of...

Robert · Accepted Answer

Accounting Theory and current Issue
Running Header: Accounting Theory and Current Issue
Title: Accounting theory and Current Issue
Presented By:
Student Name:
Student ID:
Presented To:
Course Name:
Course ID:
Date: 20/09/2017
WORD LIMIT: 3057 (excluding references)
Contents
2Contents
3EXECUTIVE SUMMARY
4Introduction:
4PART B
4B.i
4B.ii
4B.iii
5B.iv
8B.v
9B.vi
9B.vii & B.viii
10PART C. i to iii
10PART D
101.0 Key Accounting Policies
112.0 Accounting Flexibility
123.0 Accounting Strategy
134.0 Quality of Disclosure
135.0 Red Flags
136.0 Compliant with the Conceptual Framework
14Conclusion:
Error! Bookmark not defined.Bibliography
EXECUTIVE SUMMARY
The report presented is an exhaustive analysis of the BHP-Billiton financial statements. Based on evaluation and assessment of the financial reports number evaluation reported is presented to include the accounting policies used by the company , the accounting strategy of the company, accounting flexibity, Redflags and comments on the conceptual framework are presented appropriately. For comparison sake Rio tinto financial statements are used.
Introduction: 
The current report is submitted as part of the task undertaken to evaluate the accounting quality and for assessing accounting policies and estimates as described.  For the sake of evaluation requirements BHP- Billiton (ASX: BHP) and its financial statements are selected for review and analysis. For the sake of comparison accounting policies of Rio Tinto (Riotinto) are considered and compared with the BHP Billiton (BHP).
PART B
B.i
Financial results are any company involves estimates at many instances. These estimates are arrived based significant judgements, assumptions. All these estimates, judgements and assumptions are driven from the accounting policy that has been selected by the Company. Financial results and position varies significantly based on the assumptions that are gone into the accounting estimates. 
Critical accounting policies of BHP Billiton those peculiar to mining operations are given below 
1. Exploration and Evaluation
2. Overburden Removal expenses
3. Closure and rehabilitation provisions
4. Reserve Estimates
B.ii
Apparently we don’t see any flexibilities of accounting policies and estimates used by the company. BHP Billiton accounting policies are more detailed and comprehensive and have details that are not mentioned in Rio Tinto.  
B.iii
Accounting policies that are used BHP Billiton is the same lines as Rio Tinto.  Please refer the below tabulation depicting the coverage of accounting policies for the both entities which is identical
	
	
	BHP Billiton
	Rio Tinto
	1
	Basis of Consolidation
	( 
	( 
	2
	Revenue Recognition
	( 
	(
	3
	Intangible Assets and Impairments
	(
	(
	4
	Exploration and Evaluation Expenses
	(
	(
	5
	Property, Plan and equipment
	(
	(
	6
	Deferred Stripping
	(
	(
	7
	Depreciation and impairment 
	(
	(
	8
	Reserve and Mineral resource Estimates
	(
	(
	9
	Close-down and restoration expenses
	(
	(
	10
	Inventories
	(
	(
	11
	Taxation
	(
	(
	12
	Post Employment benefits
	(
	(
	13
	Share Capital
	(
	(
	14
	Segment Reporting 
	(
	(
B.iv
We have compared the significant accounting policies of BHP Billiton with the same of Rio Tinto and similarities and differences if any have been noted below
	
	Significant Accounting Policy
	BHP Billiton
	Rio Tinto
	1
	Exploration and Evaluation Expenses
Exploration and evaluation expenses comprises costs that are directly attributable to conducting geological studies, drilling and sampling, examining, testing extraction methods, researching the exploration data, preparing the feasibility studies. 
	BHP has a policy to charge both exploration and evaluation expenses to income statements unless it is established that it is established that mineral deposits /petroleum interest are commercially recoverable/ viable or these are acquired as a part of asset acquisition or in a business combination and measured at fair value on acquisition.  
Carrying amount of capitalised assets are reviewed at the end of the reporting period for impairments.  
Accounting policies are predominantly same for both these entities except in case of the evaluation expense.  Unlike its competitor Rio Tinto, BHP can capitalize the exploration expense when the commercial viability has been established. Rio Tinto doesn’t capitalize the exploration expenses.  
	Rio Tinto has a policy to not to capitalise the exploration activity undertaken by the group.  
Rio Tinto group capitalizes the evaluation expenses only when there is high degree of confidence that project is commercially viable and project will provide satisfactory return relative to its risks. 
Carrying amount of capitalised evaluation expense of undeveloped mining projects are reviewed at the end of each reporting period for impairments as per the applicable standards
	2
	Stripping Costs
Stripping costs could be of developmental nature where expense incurred for the removal of overburden to access the mineral deposits.
Stripping costs could also Inter-burden removal costs where burden is removed during the course of production (after commencement of fires saleable minerals have been extracted) 
	Expenses with respect stripping expenses that are development nature (Stripping activity that provide of the access to future mineral extraction)are capitalized as long as these costs can be measured and it is probable that future economic benefits will flow to BHP and the component for which stripping is conducted is identifiable Post production these expense are depreciated based on units of production of the mineral deposit. 
Stripping costs which are incurred during the course of production (implies the benefits of the stripping occurring during the current reporting period) as considered into inventory valuation of the minerals. No capitalization and depreciation is applicable in these cases.
	Rio Tinto also follow identical accounting policy where stripping expense are capitalized only it is probable that economic benefits flow to the organization due to better access to the minerals.  The component of the mine whose access was bettered is identifiable and the costs relate the stripping can be easily identified.

Read and gain in-depth understanding of the various normative and positive theories of financial accounting from the text book and from other relevant & credible literature b) Be aware of some of the...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment