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MCR004A Accounting System and Process Assignment Sample

Assessment criteria

In assessing group report consideration will be given to overall neatness, completeness and quality of report, timeliness of submission and demonstrated application of appropriate issues in financial accounting and reporting.

Report is expected to be made in a clear, concise, and understandable manner. It is required that an outline be made at the inception of the report to show introduction, body, and conclusion of the report.

Group Report Topic:

Each group will be allocated a topic from section 2.5 of the subject outline (Topics are listed below) and each group will be allocated a company from ASX 500 top listed. Group report includes: (a) Overview of the selected company and (b) explanation of the selected topic with relation to selected company. Group Company selection and topic selection should be available in Moodle in week 2.

Accounting Systems and Processes Assessment 1 Group Report T2, 2022

Group Report Topics:

(a) Conceptual Framework
(b) Accounting Regulatory Body: AASB
(c) Company Regulatory Body: ASIC
(d) Accrual accounting concept
(e) Inventories: Perpetual method and Periodic method
(f) Accounting for current assets
(g) Accounting for non-current assets



The assignment includes the analysis of the financial statement’s qualitative characteristics. The fundamental qualitative characteristics and the enhancing qualitative characteristics of the company have been discussed. The assignment also discusses the significance of the qualitative characters in decision making. It also includes a detailed analysis of the fundamental and enhanced qualitative characteristics per the reporting standards. The Financial reporting standards for assignment help prepared by the Australian accounting standards board applicable to the Australian economy's public and private sector entities have been discussed. Further, the assignment includes a detailed analysis of the qualitative characteristics of the financial information incorporated in the financial statements of the BHP group.

Overview of the company

The broken Hill proprietary company or BHP is a petroleum metal and public mining company of Australia head with its headquarters in Melbourne. It was founded in the year 1885. The company is engaged in the development to proceed in and extraction of coal, copper, oil, gas, and minerals. The company incorporates four divisions: copper, iron ore, petroleum, and coal. The sale of the company's products is across the globe in countries such as Singapore and United States. The organization's objective is to bring the individuals and utilities together in a way that creates a better world. The organization has been achieving this objective by using high-standard assets, prominent stocks, and opportunities for building long-term value and massive returns for its stakeholders (Bhp, 2022).

Overview of the topic

Recording financial information and accounting data are considered one of the most significant issues among the users, regulators, and professionals of such financial information. The misconduct in big corporations regarding the appropriate recording of financial information, such as WorldCom and Enron, has led to a significant mistrust in the significance of the financial statements being free from any misrepresentation. The capability of the financial statements in understanding the financial health of the company has also been under significant doubt; IASB has issued specific financial reporting frameworks to improvise fairness in the financial data. Understanding the company's financial position and making the financial statements useful for the investors and the management of the company is important to understand the qualitative characteristics of the BHP group. The qualitative characteristics of the financial statements of the BHP group have been divided into two parts: fundamental qualitative characteristics and enhancing qualitative characteristics.

Fundamental qualitative characteristics

The following qualitative characteristics are required to be present in the accounting information to make it useful for making decisions:

• Relevance
• representational faithfulness

Figure 1: Elements of Fundamental qualitative characteristics
(Source: Made by the Author)

1. Relevance: Relevance is the helpfulness of the data for financial decision-making. To be relevant, the accounting information must incorporate:

• Confirmatory value: It is the information from the past event. Confirmatory value is based upon the feedback of past evaluations of the events. For example, the revenue of the past year and the current year can be compared to understand the company's performance in terms of revenue.

• Predictive value: It is the power of predicting possible future events (Rathnayake Mudiyanselage, 2020, p. 45). Although the financial information itself does not predict or forecast, the financial statement users can interpret the values for their prediction. For example, any of the current years can be used as a basis for the future year’s revenue.

So, the accounting data is relevant if it provides information about the past and predicts future events so that proper action to deal with the re circumstances can be taken care of. For example, suppose a company experiences a strong quarter and improved results for the creditors. In that case, it is relevant for the creditors' decision-making process for enlarging or extending the available credit to the firm.

2. Representational faithfulness: The other name for representational unfaithfulness is reliability. It is the extent to which the data accurately depict the transaction that is obligatory claims and resources of the company (Abed et al., 2022, p. 15). The accounting data is required to incorporate the following to possess representational faithfulness:

• Complete: The financial statements must be complete and should not exclude any type of transaction.

• Neutral: The accounting information must be free from any type of bias. The accounting information cannot be completely neutral as there is an involvement of estimation and subjectivity in preparing the financial statements.

• Error-free: The accounting information must be free from any type of errors that wrongly represent the financial statements (Frank, 2020, p. 141).

Enhancing qualitative characteristics of BHP’s financial statement

Understandability: The understandability of the financial data is coherent to the knowledge about economic functions and the performance of the business. Therefore, the company's financial statement in the annual report must be able to provide ample information to the users so that the users can understand the information (Innayatulloh and Siswantoro 2019, p. 220). In the case of BHP group Ltd, the financial statement is supported by the notes to the financial statement. Therefore, users with adequate knowledge can refer to the notes and understand the economic and business aspect.

For instance, the note to revenue is given in the annual report (2021) of BHP group ltd on page 139. In the note, the segmental analysis has also been given. Other notes about the revenue have been provided that will help the users to understand the revenue generation of the firm in depth.

understand the value of land and buildings that were recorded at the beginning of the financial year 2021. Information about the depreciation recorded on the land, equipment, and many more items that are a part of the plant, property, and equipment has been recorded. Therefore, the users will be able to understand the data properly.

The company's financial statement is backed up with data in the notes to the financial statement that the users of the company can use to understand the significance of the data and accordingly use the data for benefit.

Comparability: The term comparability in terms of the financial statement refers to comparing the data presented in the financial statements of the company across time as well as different companies. In the case of BHP group ltd, the income statement and cash flow statement in the annual report present data across three years and data across two years is represented in the balance sheet.

For instance, on page 131 of the annual report (2021) of BHP group ltd, the current assets of the company in 2020 are at $21471 million, and in 2021 it is $26693 million (bhp.com 2022.). Therefore, the company's balance sheet has been able to portray data across two years, allowing the users of the annual report to compare and conclude that the increase in current assets of the company has improved the company's liquidity position. Similarly, in the income statement of the company, the net income generated by the company across three years (2019, 2020, and 2021) has been presented, allowing the users to conclude that net income declined in 2020 due to a fall in revenue and again increased in 2021 due to significant increase in revenue by approximately $18000 million.

Furthermore, comparability is being achieved in the statement of equity as well. The data across three years have been presented in the statement of equity. For instance, in 2018, the share capital of BHP group ltd was $1186 million that declined to $1111 million in 2019 (bhp.com 2022.). The presence of such data that can be compared so easily helps the users conclude that there must be some sort of setback in the company that reduced the share capital. Upon further investigation, it has been found that in 2019BHP group ltd bought back $75 million share capital and cancelled, resulting in the disappearance of the $75 million from the market and the statement of equity of the company.

Verifying: A company's financial statements must be verified so that the users can rely on the information. For an instance, if the company has recorded an inflated net income or revenue, then the actual profitability position of the company cannot be assessed or evaluated by the company. Therefore, companies confirm the verifiability by employing independent auditors who would scrutinize every information that the company has generated and then confirm the verifiability of the financial statements in the annual report. In the case of BHP, the independent auditor is Ernst & Young Australia (bhp.com 2022). In the page 203 of annual report (2021), the declaration of the independent auditor has been given. The auditor has declared and confirmed that the company has followed financial reporting framework that is the Australian Corporations Act 2001, to prepare the consolidated financial statements. Several other information provided by the independent auditors conclude that the financial statements provided by BHP group ltd are authentic and can be fully reliable.

Timeliness: The financial statement will not hold any major credibility if the shareholders and management of the company does not receive it at a proper time. Timeliness implies to the fact that the financial statements of the company should be available to the shareholders and management of the company promptly to make proper decisions. In the case of BHP group ltd, the annual report (2021) was available in the official website on 14th September 2021; therefore, it is certain that the annual report must have been available to the management of the company way before the date of publishing. Hence, it can be assumed that the annual report of BHP group ltd is being prepared on time.


As per the discussion above, it can be stated that the company has discussed and disclosed all the data in the company's financial statements very efficiently. The financial statements have been represented faithfully. The financial statements have also disclosed the information based on two to three years that will enable the annual report users to assess and evaluate the current performance with the historical performance. Users might question whether they should be believing on the authenticity of the information provided by the company? The answer to the question is a yes because the company had hired an independent auditor who had declared that the company has followed all the rules and regulations and recorded the amounts perfectly.


It can be concluded from the above analysis that qualitative characteristics play an important role in the decision-making purpose, not only for the management but also for the users of the financial statements such as the investors and the creditors. An organization uses the qualitative characteristics mechanism to determine the quality of financial reporting in terms of disclosures, transparency, and efficacy. Additionally, it can be concluded that the primary focus of the company is on the inclusion of features such as comparatively, understandability, timeliness, reliable disclosures, and relevance in the financial statements. From the analysis of the financial statement of the BHP group, it can be concluded that all the features are adequately represented in its financial statements.


Abed, I.A., Hussin, N., Ali, M.A., Haddad, H., Shehadeh, M. and Hasan, E.F., 2022. Creative Accounting Determinants and Financial Reporting Quality: Systematic Literature Review. Risks, 10(4), p.76. https://www.mdpi.com/2227-9091/10/4/76/pdf

Bhp. 2022. [online] Available at: <https://www.bhp.com/investors/annual-reporting/annual-report-2021> [Accessed 7 June 2022]. https://www.bhp.com/investors/annual-reporting/annual-report-2021

bhp.com. 2022. [online] Available at: <https://www.bhp.com/-/media/documents/investors/annual-reports/2021/210914_bhpannualreport2021.pdf?sc_lang=en&hash=15F0B58BC27ADFA860F0BE29B61E199D> [Accessed 7 June 2022].

Frank, E.O., 2020. An assessment of the conceptual linkages between the qualitative characteristics of useful financial information and ethical behavior within informal institutions. Ekonomski horizonti, 22(2), pp.137-148. http://scindeks-clanci.ceon.rs/data/pdf/1450-863X/2020/1450-863X2002145F.pdf

Innayatulloh, M.R. and Siswantoro, D., 2019. The effect of budget management quality and internal audit to financial statement quality in the ministries and agencies. Jurnal Akuntansi dan Bisnis, 19(2), pp.218-228. https://pdfs.semanticscholar.org/2ca7/ca1f5775976e4a722de0e9c69eae087b4722.pdf

Rathnayake Mudiyanselage, S.B., 2020. Measuring financial reporting quality: an approach based on qualitative characteristics. https://ir.canterbury.ac.nz/bitstream/handle/10092/101683/Rathnayake%20Mudiyanselage%2C%20Saman%20Bandara_Final%20PhD%20Thesis.pdf?sequence=3


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