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ACC706-Conceptual Framework Of BHP Billiton

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  • Course Code: ACC706
  • University: King's Own Institute
  • Country: Australia


This assignment requires a consideration of accounting theory concepts with critical analysis with application to General Purpose Financial Reporting by corporations. Students are required to prepare a comprehensive report directed to an Australian ASX Top 100 listed corporation detailing a critical analysis of the effectiveness of the corporation to meet the obligations of the conceptual framework of accounting.



BHP Billiton is basically a dual listed company consisting of BHP Billiton Plc and BHP Billiton Ltd. Although these entities prevail as distinct entities, yet they operate under a single organization or group called as BHP Billiton that is a global resources company and headquartered in Melbourne, Australia. Moreover, the company is primarily involved in the production of several commodities like copper, iron ore, uranium, coal, etc. The company remains focused on creating constant value for all the shareholders by maximizing the operating margins and assuring effectiveness in relation to proper utilization of assets (BHP Billiton, 2017). Nonetheless, coal, copper, and iron ore are the major sources of income for the company even though it has prevalence in other essential minerals as well. Further, BHP has adhered to the AASB standards and the underlying conceptual framework offered by the board. Hence, the general purpose accounting principles are also taken due care of by the company to bring larger corporate reporting parity (Choi & Meek, 2011). This report intends to discuss the conceptual framework, general accounting principles, and both positive and negative issues encountered by BHP in discharging its obligations. Therefore, the entire report will cater to the fundamentals of BHP Billiton.

Conceptual framework

In association with the company’s efficiency in discharging its responsibilities towards adherence with the conceptual framework, it has fulfilled all the requirements for the same. In other words, the company has adequately complied with the fundamental and enhancing guidelines that are essential for the fulfilment of conceptual framework (Needles & powers, 2013). Besides, such adherence to the conceptual framework has allowed BHP to remain competitive in the market by keeping the stakeholders informed about its situation. This facilitates in proper decision-making on the part of stakeholders that is a positive indicator for future progress (Douma & Hein, 2013).

In order to comply with the faithful representation characteristic of conceptual framework, the company’s primary guidelines of the directors’ rules and regulations play a key role in determining whether such attribute has been followed or not. Nevertheless, the independence of directors is guided by the adherence of rules like US rules, UK rules, and Australia rules. In addition to this, the directors are also duty bound to depict a true and fair view of the company’s performance in the financials and to do so, fulfilment of requirements of the Corporations Act 2001 remains mandatory. In addition, there is a guideline that permits the company frame effective reporting controls and processes for releasing significant information to their stakeholders in due course of time (BHP Billiton, 2017). Moreover, BHP is also focused towards highest standards of disclosure by assuring that all investors are offered timely and equivalent access to high quality information to facilitate effective decision-making. This sheds light upon the fact that qualitative characteristics of conceptual framework like timeliness, relevance, and reliability are duly catered by the company to enhance the significance and meaningfulness of data present in the financials (Leo, 2011). 


In addition to the above, another major factor in relation to conceptual framework of accounting is the company’s compliance with the Joint Ores Reserves Committee. The reason behind this can be attributed to the fact that such guideline ensures that both internal and external users are confident of the company’s efficiency of affairs. Further, such guidelines are primarily for public reporting in association with mining, exploration, etc and the same is duly fulfilled by BHP, thereby facilitating in better decision-making on the part of users. In addition, there is also a risk management guideline within the framework of BHP that plays a vital role in management and identification of potential risks so that long-term value can be created for the stakeholders (BHP Billiton, 2017). Besides, the prevalence of functions of internal control also assist in preventing the impact of such risks through fulfilment of required guidelines and requirements. Overall, such control function within the group can assist in minimizing the feasibilities of risks and additional surveillance of aggregate procedures. Nonetheless, these guidelines have assisted BHP in complying with its requirements of disclosure, thereby paving a path for the fulfilment of requirements of conceptual framework for financial reporting. Furthermore, it can also be seen that the company has provided relevant details of both current and past years performance that can be easily compared by users in determining whether progress is achieved or not (Petersen & Plenborg, 2012). With the prevalence of such details, BHP has also fulfilled the requirements of comparability and understandability on the part of users because provision of past and present details can allow them in making better decisions (Merchant, 2012).

General purpose accounting principle

From the annual report of BHP Billiton, it is observable that there is enough disclosure of relevant financial and non-financial information that can be beneficial to the stakeholders in their decision-making process. Further, the company has also described its underlying performance by disclosing the ideologies of its alternate performance measures. However, BHP has not included specific data in its financial statements to the extent provided by UK and Australian Law (BHP Billiton, 2017). This is because any matter related to impending matters and developments in negotiation course can result in significant injury to BHP’s prejudicial interests. Moreover, such disclosure can be misguiding as it is premature in nature and is related to commercially sensitive contracts, thereby resulting in undermining confidentiality betwixt suppliers and the company on a whole. Overall, the categories of information not included in the company’s annual report consists of estimates and forward-looking anticipations prepared for internal management. Further, data related to the company’s assets susceptible to change, information associated to commercial contracts and pricing modules, etc are also excluded (Carmichael & Graham, 2012). Therefore, with the inclusions and exclusions of significant segments in the company’s financial statements, it is observable that the aspect of enhanced disclosure measures has been adequately addressed to fulfil the requirements of General Purpose Financial Reporting (Peteersen & Plenborg, 2012). 


Furthermore, the preparation of financials of the company has been completed in accordance with the significant IFRS standards. Besides, there are various management judgements and policies of accounting that has been utilized for the preparation of GPFR reports or statements (BHP Billiton, 2017). For instance, the mining affairs of the company is widespread across countries and exposed to various regimes of tax that prevail across nations. Hence, it becomes the company’s duty to pay all their taxes in relation to royalties, profits, etc. Moreover, all details of the same can be found in notes to financial statements of the company. Similarly, in relation to contingent liabilities, there are several liabilities on the back of commitment and economical resources being diversified to associates, joint ventures, and subsidiaries (Laux, 2014). Furthermore, in relation to PPE, the same is recorded at cost less impairment expenses and accumulated depreciation. Such expenses are the fair value of consideration to acquire the asset at their respective acquisition dates and comprises of direct costs of bringing the asset to the required location. Similarly, when it comes to intangibles and goodwill, the same has been identified by the company in their annual reports so that the objective of GPFR can be effectively addressed. In relation to this, wherein the fair value of paid consideration for a procurement of business exceeds the fair value of liabilities, assets, and procured contingent liabilities, the difference is treated as goodwill (BHP Billiton, 2017). Similarly, taxation, recognition of revenue, trade receivables, etc also form part of the financials of the company that sheds light on the fact that they have looked after the General Purpose Accounting Principles, thereby facilitating in proper decision-making on the part of stakeholders. Besides, it is also fair to assume that the company’s reported financial position and performance is effectively accurate in nature because efficient management judgement and accounting policies has been used. Moreover, BHP has also been in alignment with the significant regulations associated to reporting that are in their place. However, if a broader framework like Triple Bottom Line and GRI (global reporting initiative) had been adopted by BHP, it would easily highlight the environmental and social expenses related to the mining business through GPFR. 


Positive and negative issues faced by BHP

The current negative issues encountered by BHP are associated to its mineral and petroleum projects. For example, in relation to noise pollution, the contractors at the site are facing hearing loss issues. However, the company has been facing issues to attain full oversight of such contractor noise-induced hearing loss in its various segments owing to limited data access and regulatory regimes (Davies & Crawford, 2012). Furthermore, the company identified a major issue with the onshore US impairment evaluations that were conducted in 2015. Such issue was due to a failure to differentiate betwixt specific assumptions and assumptions of market participants that includes the application of deferred income taxes in ascertaining impairment of onshore assets of US. Further, one negative issue is the spreading of company’s products to every corner of the world through regular research of growth options (BHP Billiton, 2017).

However, such issue of spreading the products of the company is also positive in nature because this can assist in sustaining the global economic development, thereby paving a path for better revenues and growth. Furthermore, the company has also been facing issues in relation to procurement of natural resources but this has allowed it to focus on international opportunities, thereby paving a clear path for international expansion and emergence of international markets (Parrino et. al, 2012). Besides, this issue has also encouraged the company to focus on joint ventures, acquisitions, and mergers. For example, many grass roots projects of exploration were completed by the company in Chile and US, thereby representing expansion into the foreign and emerging markets. This is the reason why BHP still observes this issue as a major component within its business strategy or model and actively focuses on new opportunities around the world. This can be proved by the fact that BHP has its prevalence in more than hundred countries (BHP Billiton, 2017). Overall, selection of emerging markets could not be possible for BHP if it had not undergone the issues of procuring natural resources from remote locations. This is the reason why it attained the advantage of selecting the countries in which it shall function and places where focus must be on the resources, thereby permitting competitive advantage. 



BHP Billiton has effectively focused on the conceptual framework of corporate reporting and for such purpose; it has also catered to the general purpose accounting principles that are beneficial to stakeholders in effective decision-making. Even though BHP faces stiff competition from other players in the market, yet compliance with such requirements has granted it a competitive advantage over others. This is the sole reason why it has attained a prominent place in the market and doing business in an effective manner. However, there are various issues that are faced by the company and if not taken due care, it shall face negative implications. Considering the situation it is imperative for BHP to take due care for every instances.  Besides, the strategies built by the company to enter international markets to avoid future complications is a positive indicator that additional value will be created for all the stakeholders, thereby paving a path for proper dealing with the financial down turns in future. Overall, the company has been effective in its strategies and its focus on materialistic segments can easily assist in outperformance of other primary players. Further, this will lead to grabbing up of more opportunities and create a favourable position for the company despite the cut throat competition.  



BHP Billiton. (2017). BHP 2017 Annual report and accounts.  [Accessed 31 August 2018]

Carmichael, D.R. and Graham, L. (2012)  Accountants Handbook. Financial Accounting and General Topics, John Wiley & Sons.

Choi, R.D. and Meek, G.K. (2011) International accounting. Pearson .

Davies, T. and Crawford, I. (2012)  Financial accounting. Harlow, England: Pearson.

Douma, S., & Hein, S. (2013)  Economic Approaches to Organizations. London

Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting.  Accounting and Business Research. [online]. 44(4),  380-382. DOI: 10.1080/00014788.2014.897867

Leo, K. J. (2011). Company Accounting. Boston:McGraw Hill

Merchant, K. A. (2012) Making Management Accounting Research More Useful. Pacific Accounting  Review. [online]. 24(3), 1-34. Available from: [31 August 2018]

Needles, B.E. &  Powers, M. (2013) Principles of Financial Accounting. Financial Accounting Series: Cengage Learning.

Parrino, R, Kidwell, D. and Bates, T. (2012) Fundamentals of corporate finance. Hoboken, NJ: Wiley

Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England: Financial Times/Prentice Hal


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