Methodology
Discuss about the Inspection On The Compliance Of Santos Limited.
In today’s business world, businesses all over the world have to face different kinds of issues due to the complex nature of their operations. One of such major issues is the compliance issue with the required accounting standards. It is the obligation of the business corporations to follow or comply with all the required accounting standards and principles for the preparation and presentation of their financial statements as it helps in conveying the true financial standing of them to the key stakeholders. The objective of this report involves in the examination of the compliance of Santos Limited with all the required accounting standards and principles. For this reason, the report analyzes some major accounting issues of the company to examine the compliance with required accounting standards. Santos Limited is one of the leading energy companies in Australia and the second largest independent oil and gas producer in Australia. A crucial strategy of Santos Limited is to make collaboration with the local communities, businesses and government in order to make natural gas and reliable energy solutions affordable for the Australians (santos.com, 2018).
As the main objective of this report lies in the inspection of the compliance of Santos Limited with the required accounting standards, qualitative research method will be used. More specifically, there is a need for the collection of secondary data to test the compliance off Santos Limited with the accounting standards (Ritchie et al. 2013). Thus, secondary data will be collected from the latest annual report of the company, official website of the company and other news related with Santos Limited. After the collection of secondary data, they will be thematically analyzed for the fulfillment of the research objectives. While conducting the research, it is required to consider the ethical considerations. In order to avoid any kind of bias or influence, required data will be collected from the authentic sources like the company website, reputed news sites and others.
The main aim of this part of the report is to examine different aspects of Santos Limited like financial statements, remunerations and others in order to ensure that the company has complied with all the required accounting standards.
Financial Statements: According to Australian Accounting Standard Board (AASB), Presentation of Financial Statements, it is the obligation on the business organizations operating in Australia to prepare and present their financial statements so that the users of financial statements can obtain all the required information for judging the financial performance and position of them (aasb.gov.au, 2018). As per AASB, Financial Statements, Paragraph 9, the financial statements of the business entities must provide necessary information about an entity’s assets, liabilities, equity, income and expenses including gains and losses and cash flow (aasb.gov.au, 2018). Thus, as per AASB, Financial Statements, Paragraph 10, a complete set of financial statements comprises statement of financial position, statement of profit or loss and statement of other comprehensive income, statement of change in equity, statement of cash flows and notes to the financial statements including significant accounting policies (aasb.gov.au, 2018).
Findings
According to the 2017 Annual Report of Santos Limited, the company has provided all the required financial statements as per the regulations of AASB in order to provide the users with all the required information (santos.com, 2018). All the details about assets, liabilities and equity can be obtained from the statement of financial position. Information regarding income, expenses, gains and losses can be obtained from consolidated income statement and consolidated statement of comprehensive income (santos.com, 2018). Information related to the change in financial position can be obtained from consolidated statement of change in equity. Cash inflow and outflow related information can be obtained from the consolidated statement of cash flows. In addition, Santos Limited has also provided all the necessary notes to the financial statements along with the significant accounting policies (santos.com, 2018).
Regulatory Bodies: The Australian Stock Exchange (ASX) listed business entities are required to comply with the regulations of some major regulatory bodies for the purpose of financial reporting. As per Australian Trade and Investment Commission, businesses operating in Australia are required to prepare and lodge financial reports with Australian Securities and Investment Commission (ASIC) (austrade.gov.au, 2018). It has also stated that the business entities are required to carry on their taxation activities as per the regulations of Australian Taxation Office. Apart from this, all the business entities are needed to prepare and present their financial statements as per the principles and standards of AASB and Australian Accounting Standards (austrade.gov.au, 2018).
As per the 2017 Annual Report of Santos Limited, Statement of Compliance, the company has prepared and presented their annual report as per the standards of Corporations Act 2001, Australian Accounting Standards and all the latest pronouncements of AASB (santos.com, 2018). In addition, Santos Limited follows the principle of ASIC Instrument 2016/91 for rounding of the amounts in accordance with the respective instrument. In addition, as per 2017 Annual Report, 2.4 Taxation, the company carries out all of their taxation related operations under Australian taxation law (santos.com, 2018).
International Accounting: As per the 2017 Annual Report, 1.1 Statement of Compliance, Santos Limited follows the standards and principles of International Financial Reporting Standards (IFRS) and International Accounting Standard Board for the development of an uniform international accounting standard all over the world (santos.com, 2018). It needs to be mentioned that IFRS has collaborated with the accounting standards of AASB so that all the countries all over the world follows the same accenting standards. The main aim of this step is to bring accuracy and transparency in financial reporting.
Remunerations: As per the 2017 Annual Report of Santos Limited, Remuneration Report, the company follows the obligation of preparing and presenting the remuneration report in the annual report for the year ended 31 December 2017. In addition, according to Corporations Act 2001, Section 308 (3C), Santos Limited follows the standard to get the remuneration report audited by the auditor at the end of the year (santos.com, 2018).
Auditors: From the 2017 Annual Report of Santos Limited, it can be observed that the company has followed the principles of getting all of their financial statements audited. The 2017 Annual Report of Santos Limited shows that Ernst & Young (E&Y) was the audit engagement partner of Santos Limited for the year FY 2017 (santos.com, 2018). As per the audit report of Santos Limited prepared by E&Y, all the financial statements prepared after complying with the Corporations Act 2001 give the true and fair view of the consolidated financial position of the business of Santos Limited; and the company has prepared and presented all the financial statements as per the standards of Australian Accounting Standard and Corporations Act 2001 (santos.com, 2018).
Financial Instrument: As per the annual report of Santos Limited, the company has the made the classification of financial instruments in some categories; they are financial assets at the amortized costs, financial assets as fair value thorough profit or loss, financial assets at fair value thorough the other comprehensive income and financial liabilities at the amortization costs and the derivative instruments.
Share Option: Santos Limited classifies their ordinary shares as equity. The issued shares do not have par value and there is not any limit in share authorization.
Derivatives: The company enters into the derivatives financial instruments for the management of their exposure from the foreign exchange rates and interest rates arising from the normal course of business. The major derivative instruments used by Santos Limited are forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps. The company also uses commodity derivatives for the management of the exposure of the company from change in the oil price.
The above discussion sheds light on some of the crucial aspects for the financial reporting of Santos Limited for the faithful representation of financial statements. It can be observed that Santos Limited has complied with every accounting regulations and standards as a part of their financial reporting process and this aspect has positive implications for the future of the entity (Barth, 2013). It can be observed that Santos Limited follows the principles and standards of Australian Accounting Standards, AASB and Corporations Act for the preparation and presentation of their financial statements. This aspect has major implications on the relevant and faithful representation of the financial statements so that the users can get all the required information about the financial performance and situation of the company. This particular aspect implies that the compliance with the necessary accounting standards is inherent part of Santos Limited’s management. It also implies that the company feels responsible for providing all the required financial information through the necessary financial statements to the users so that they can determine the financial position of the company (Erb & Pelger, 2015).
In addition, Santos Limited’s compliance with the international standards such as IFRS and International Accounting Standard Board (IASB) implies towards the extended support of the company to bring uniformity in the financial reporting system (Burca, Mates & Puscas, 2015). Moreover, Santos Limited lets the regulatory bodies like ASIC, Australian Trade and Investment Commission and others to govern their financial activities so that the company does not have to face any kind of issues in their accounting and financial reporting process (Mazhambe, 2014). It implies that Santos Limited is always ready to cooperate with these regulatory bodies to bring positive change in the financial market and financial reporting. To get the financial statements audited is another positive side of the financial reporting of Santos Limited. In the presence of all these compliances and positive aspects, it can be implies that Santos Limited has less change to get involved in any kind of accounting and financial reporting related issues in the near future. Moreover, these aspects show the positive mentality of Santos Limited to fight against the accounting issues (Dunbar & Laing, 2017).
Conclusion and Recommendations
In the above discussion, the application of different types of accounting standards and regulations can be seen for testing the compliance of Santos Limited with the necessary financial reporting related standards and principles. It can be observed that Santos Limited has complied with all the required accounting standards of Australian Accounting Standard, AASB, Corporations Act 2001, IFRS and IASB for the preparation and presentation of financial statements and this aspect can be supported from the above findings. The presence of these same facts can be seen in the audited report of Santos Limited by E&Y. In addition, it can also be seen that Santos Limited let ASIC, Australian Trade and Investment Commission, Australian taxation laws and others govern the financial activities and preparation of financial statements. Thus, based on the above discussion, it can be concluded that Santos Limited has presented all of their financial statements faithfully and the compliance of Santos Limited with all the requited accounting standards and corporate laws has ensured this faithful representation of financial statements. At the same time, it is the recommendation to Santos Limited is to keep complying with all these standards by providing the disclosure of these compliances.
References
Financial reporting in Australia – Austrade . (2018). Austrade.gov.au. Retrieved 8 May 2018, from https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Financial-reporting-in-Australia
Annual Report 2017. (2018). Retrieved from https://www.santos.com/media/4319/2017-annual-report.pdf
Presentation of Financial Statements. (2018). Retrieved from https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
Ritchie, J., Lewis, J., Nicholls, C. M., & Ormston, R. (Eds.). (2013). Qualitative research practice: A guide for social science students and researchers. Sage.
Barth, M. E. (2013). Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), 331-352.
Erb, C., & Pelger, C. (2015). “Twisting words”? A study of the construction and reconstruction of reliability in financial reporting standard-setting. Accounting, Organizations and Society, 40, 13-40.
Burca, V., Mates, D., & Puscas, A. (2015). Standard-Setters Versus Big4 Opinion, Concerning Iasb Revision Project of the Conceptual Framework for Financial Reporting. the Case of Presentation and Disclosures Chapter. Studia Universitatis „Vasile Goldis” Arad–Economics Series, 25(2), 81-107.
Mazhambe, Z. (2014). Review of International Accounting Standards Board (IASB) Proposed New Conceptual Framework: Discussion Paper (DP/2013/1). Journal of Modern Accounting and Auditing, 10(8).
Dunbar, K., & Laing, G. K. (2017). Deconstructing the Accounting Standard AASB 13 Fair Value: Exit vs Entry Price for Assets. The Journal of New Business Ideas & Trends, 15(2), 12-19.
Santos – What We Do. (2018). Santos.com. Retrieved 8 May 2018, from https://www.santos.com/what-we-do/
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