Overview of Oz Minerals
Business organizations consider the accounting conceptual framework as a major tool that provides them with assistance to prepare and present the financial statements of the businesses. Apart from this, business entities can get the solution of various types of accounting issues with the use of the guiding principles of accounting conceptual framework (Nobes 2014). It needs to be mentioned that Australia has their own conceptual framework for financial reporting provided by the Australian Accounting Standard Board (AASB). There is a connection between the AASB conceptual framework and the General Purpose Financial Reporting as the conceptual framework provides the required guiding principles for the preparation of general purpose financial reports of the business entities. The main aim of this report is the analysis and evaluation of the adherence of the Australian companies with the principles and guidelines of AASB conceptual framework along with the principles of general purpose financial reporting. For the purpose of this report, Oz Minerals is taken into consideration.
Oz Minerals is an Australian mining corporation. Established in the year of 2008, Oz Minerals is headquartered at Adelaide, Australia. It needs to be mentioned that reason for inception of the company is the merger of Oxiana Limited and Ziniflix. Copper and gold is considered as the main focused area of Oz Minerals as the main mining operation of the company is at Prominent Hill involves in the mining of copper and gold. Most, importantly, Oz Minerals is working on the development of Australia’s largest copper-gold resources at Carrapateena (Ozminerals.com 2018). The following tables show the overview of the recent financial performance of Oz Minerals:
According to the above table, it can be seen that Oz Mineral has been able in improving their financial performance for the year 2017 as compared to the year 2016. As per the above tables, increase can be seen in some major financial parameters like revenue, EBITDA, EBIT, NPAT and others. The following table shows the movement of the share price of Oz Mineral for last five years:
According to the above figure, it is visible that there has been increase in the share prices of the company for the last five years. All these aspects are proof of improved financial performance of Oz Minerals for the financial year 2017.
The main aim of the development of accounting conceptual framework is to deliver all the needed guiding principles for different reasons like the preparation of the general purpose financial reports of the organizations, solving different accounting issue and others. Apart from this, the International Accounting Standard Board (IASB) gets major assistance from the conceptual framework for the development and introduction of financial reporting regulations and standards. The directors of Oz Minerals have complied with some of the principles and standards for the purpose of their financial reporting and they are shown below:
The intention of the company to comply with all the required guidelines and principles of conceptual framework in financial reporting can be seen from the above table. It can be seen that Oz Minerals has made compliance with the principles of Corporations Act 2001, Australian Accounting Standards and AASB for the purpose of their general purpose financial reports. At the same time, Oz Minerals has made compliance with International Financial Reporting Standards (IFRS) and IASB for financial reporting (Ozminerals.com 2018).
AASB Conceptual Framework and GPFR
It needs to be mentioned in this context that there are three specific objectives of conceptual framework. They are to give information about the financial position of the company, financial performance of the business and the change in financial position of the companies (aasb.gov.au 2018). The analysis of the 2017 Annual report of Oz Minerals shows that the company has released all the above-mentioned information with the assistance of the statements like consolidated statement of comprehensive income, consolidated statement of change in equity, consolidated balance sheet, consolidated statement of cash flows and the notes to the financial statements. Hence, the above discussion shows the full adherence of Oz Minerals with major aspects of conceptual framework (Ozminerals.com 2018).
Another major aspect for the financial reporting of the companies is the General Purpose Financial Reporting (GPFR). It needs to be mentioned that the investors and other users of the financial reports can obtain the required financial information for making the investment decisions. It needs to be mentioned that there are some major components of GPFR; they are balance sheet, income statement or statement of profit or loss, statement of cash flows and the statement of change in equity (Henderson et al. 2015). It implies that the central reason for the publication of these general purpose financial reports is to deliver the needed information to the investors and other users of the financial statements. Another major component of GPFR is the qualitative characteristics of financial reporting. There are two types of qualitative characteristics; they are fundamental qualitative characteristics and enhancing qualitative characteristics (Achim and Chi? 2014). Two fundamental qualitative characteristics are Relevance and Faithful Representation; and four enhancing qualitative characteristics are Verifiability, Comparability, Timeliness and Understandability. In order to make the financial information useful and purposeful, the presence of these qualitative charatecrstcs is required in the general purpose financial reports (Callen, Khan and Lu 2013). The directors of Oz Minerals have ensured the true and faithful representation of financial information by complying with the guidelines of GPFR.
It can be seen from the 2017 Annual Report of Oz Minerals that the remuneration committee of the company has adhered to the principles of Corporations Act 2001 and AASB conceptual framework in order to calculate the remuneration of their executive directors. The linkage of company’s remuneration framework can be seen with the performance of the executive directors (Ozminerals.com 2018). A major objective of the remuneration framework of Oz Minerals is to maintain governance and transparency in remuneration. The remuneration structure of Oz Minerals for the year 2017 cab be seen as below:
The above table indicates towards the presence of three types of variables in the remuneration framework of Oz Minerals; they are Fixed Remuneration, Short-Term Incentives STI) and Long-Term Incentives (LTI). However, the payment of STI and LTI is dependent on the performance of the directors. The financial performance of Oz Minerals against the financial metrics from 2013 to 2017 can be seen in below:
As per the above table, increase in EBITDA and Net Profit of Oz Minerals can be seen in 2017 as compared to 2016. Increase can also be seen in EPS, dividend payment, share price and other aspects that show the good performance of the directors to achieve their targets. According to the 2017 Annual Report, there is not any change in remuneration framework in the year 2017 (Ozminerals.com 2018).
Compliance of Oz Minerals with AASB Framework and IFRS
According to AASB conceptual framework, the Australian companies are needed to comply with AASB 116 Property, Plant and Equipment under section 334 of Corporations Act 2001 for the recognition of their business PPE. Moreover, they are obliged to determine the carrying value and deprecation for the PPE (aasb.gov.au 2018). The accounting treatment of PPE in Oz Minerals can be seen in below:
The above table implies that Oz Mineral complies with the principles of AASB conceptual framework for the accounting of PPE (Ozminerals.com 2018).
One major part of the liability of Oz Minerals is the contingent liability that is developed due to any previous accounting events. According to the AASB conceptual framework, the Australian companies are regulated to follow the standards of AASB 137 Provision, Contingent Liabilities and Contingent Assets under Section 334 of Corporations Act 2001 for recoding any contingent liability (aasb.gov.au 2018). The following table shows the contingent liability of Oz Miners for 2017:
The above figure shows that Oz Mineral has reported all the information about their business contingent liability as per AASB conceptual framework (Ozminerals.com 2018).
AASB conceptual framework puts the obligation on the Australian companies to comply with the standard of AASB 102 Inventories under Section 334 of Corporations Act 2001 for the recognition and accounting of business inventories (aasb.gov.au 2018). The below table shows the accounting treatment of inventory in Oz Minerals:
It is visible from the above that Oz Minerals has considered the lower of cost incurred for the recognition of inventory as per AASB conceptual framework (Ozminerals.com 2018).
For the accounting treatment of revenue, the Australian companies are instructed to follow the standards of AASB 118 Revenue under Section 334 of Corporations Act (aasb.gov.au 2018). The following table shows the revenue treatment of Oz Minerals for 2017:
It can be seen from the above that Oz Minerals has complied with the regulations of AASB conceptual framework for their revenue recognition process (Ozminerals.com 2018).
As per AASB conceptual framework, the companies are needed to follow the principles of AASB 132 and AASB 137 under section 334 of the Corporations Act 2001 (aasb.gov.au 2018). The dividend payment of Oz Minerals can be seen in below:
It needs to be mentioned that Oz Minerals follows the AASB conceptual framework for the recognition and accounting process of dividend (Ozminerals.com 2018).
An important news about Oz Minerals is the selling of all the stakes of Oz Minerals by private equity fund KKR. It needs to be mentioned that the private equity fund KKR had a plan of full takeover of Oz Minerals. KKR was the biggest shareholder of Oz Minerals with 10% stake in the company. Due to this news of takeover, there was 67% rise in the share price of Oz Minerals. In this context, it needs to be mentioned that KKR dropped the decision of full takeover of Oz Minerals due to the recent decrease in the share price of Oz Minerals. The deal would make $50 million of profit for KKR. According to the latest speculations, there might be some other reason for not taking over Oz Minerals by KKR that the company does not want to disclose (smh.com.au 2018).
GPFR and Qualitative Characteristics
The following table shows the comparison of the financial summary of Oz Minerals with Orica Limited:
It can be observed that Oz Minerals has increased the EBITDA in 2017 from 2016, but there is decrease in EBITDA in 2017 for Orica Limited. After that, it is visible from the above table that Oz Minerals has registered increase in EBIT in 2017 as compared to 2016, but decrease can be seen in the EBIT of Orica Limited in 2017 as compared to 2016. Same aspect can be seen in case of NPAT. Increase in NPAT can be seen for Oz Minerals in 2017 from 2016 while Orica Limited registered decrease in NPAT in 2017 from 2016. Hence, it can be seen that Oz Minerals has performed well in the year 2017 as compared to its competitor companies like Orica Limited.
Conclusion
From the above discussion, it can be seen that Oz Minerals is a major Australian company involved in the mining business. As per the conceptual framework analysis, Oz Minerals follows the principles of Corporations Act 2001, AASB, Australian Accounting Standards, IFRS and IASB for the development and presentation of financial reports. Moreover, the remuneration committee follows the principles of AASB conceptual framework and Corporations Act 2001 for the calculation of conceptual framework. At the same time, it can be seen that Oz Minerals also follows the principles and guidelines of various standards of AASB conceptual framework for the recognition of PPE, liabilities, revenue and others; they are AASB 116, AASB 102, AASB 137 and others. Most importantly, it can be seen that Oz Minerals has performed well in 2017 when compared to other companies like Orica Limited. Moreover, the analysis states that Oz Minerals has been able in increasing their EBITDA, EBIT, NPAT, EPS, dividend payment and others in 2017 as compared to 2016. Thus, it is concluded that the company has full compliance with conceptual framework and has improved financial performance. In this situation, if an investor has $10,000, he can well invest this amount of money in the company because he can gain desired return on investment in the presence of full compliance with AASB conceptual framework and strong financial performance.
References
Aasb.gov.au. (2018). Financial Instruments: Presentation. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB132_07-04_COMPoct09_02-10.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Framework for the Preparation and Presentation of Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-14.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Inventories. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-04_COMPjun09_01-09.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Presentation of Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Provisions, Contingent Liabilities and Contingent Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-14.pdf [Accessed 13 Aug. 2018].
Aasb.gov.au. (2018). Revenue. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf [Accessed 13 Aug. 2018].
Achim, A.M. and Chi?, A.O., 2014. FINANCIAL ACCOUNTING QUALITY AND ITS DEFINING CHARACTERISTICS. SEA: Practical Application of Science, 2(3).
Asx.com.au. (2018). [online] Available at: https://www.asx.com.au/asx/share-price-research/company/OZL [Accessed 13 Aug. 2018].
Callen, J.L., Khan, M. and Lu, H., 2013. Accounting quality, stock price delay, and future stock returns. Contemporary Accounting Research, 30(1), pp.269-295.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Orica.com. (2018). Annual Report . [online] Available at: https://www.orica.com/Investors/annual-report#.W3E8fM4zbIV [Accessed 13 Aug. 2018].
Ozminerals.com. (2018). 2017 Annual and Sustainability Report. [online] Available at: https://www.ozminerals.com/uploads/media/OZMinerals_2017_Annual_and_Sustainability_Report.pdf [Accessed 13 Aug. 2018].
Ozminerals.com. (2018). Who We Are | OZ Minerals. [online] Available at: https://www.ozminerals.com/about/ [Accessed 13 Aug. 2018].
The Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/private-equity-fund-kkr-has-sold-down-its-stake-in-copper-miner-oz-minerals-20160309-gneuiz.html [Accessed 13 Aug. 2018].
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
