Qualitative Characteristics of BHP Group Financial Statements
Question
Task: Write a report in analyzing the qualitative characteristics of BHP Group financial statements.
Answer
INTRODUCTION
In this study, BHP Group financial statements are considered to analyze the qualitative characteristics of financial information. The fundamental feature of financialdata as specified in theoreticalconstruction of IASB (International Accounting Standard Board) 2010 as well as Financial Accounting Standard Board 2010 are essential for establishment of standard and are expected to be implemented by companies at the time of making accounting decision, in specifically at the time of selection and alteration of the policy. In this aspect, the present study contains fundamental along with specific provisions applied relating to BHP Group financial statements and other information.
MAIN BODY
Overview of the company
BHP Group Ltd is part of prominent public companies of the Australia, founded in the year 1885 (BHP 2020). Headquarter of the company was situated at Melbourne, Australia. It is engaged in extraction, proceeding and development of minerals, gas, oil, copper, and coal. The cited organization runs through four divisions such as Coal, Petroleum, Iron Ore, and Copper. The products of the company are sold across the world such as United States, Singapore, and others. The main objective of the BHP Group Ltd is to bring the utilities as well as individuals in the together manner to create a better world. Company is achieving this objective by the way of possessing available opportunities, prominent stocks and superb assets, to build value for a long term, and major returns.
Overview about topic
The efficacy of the accounting or recording financial data is considered as one of the major issues among the professionals, regulators, as well as other users of the financial data. Further, events in the recent time scenario of corporatemisconducts such as Enron, WorldCom and some others have retained significant doubt on the excellence of financial statement flowing in the corporatesurroundings and their capability to satisfy the expectations and requirement of individuals. In order to improvisation fairness of financial information, the IASB issued specific framework for financial reporting. In the cited framework features which are essential for financial reporting has been defined (Plakhtiy, 2016).
Qualitative characteristics of the BHP Group financial statements does have vital role as they creates it easier for the management of the company as well as investors to apply financial statement of the organization for the decision making purpose (Pankratova, Gorelova, and Pankratov, 2019). Concerning this, qualitativecharacteristic of the BHP Group financial statements isbifurcated in sub parts i.e. fundamental qualitative characteristics and enhancing qualitative characteristics.
Fundamental Qualitative Characteristics
Relevance:Relevant information should be capable in creation of distinguish with respect to decision taken by the users. In this aspect, relevance can be stated as connection of BHP Group financial statementswith economic decision. Otherwise, information would not be meaningful. Further, financial information is considered as relevant only of it contains forecasted figure as well as actual value. Predictive value supports the users of the financial information regarding anticipation of the future results (Kruglyak, and Shvyreva, 2018). On the other side, confirmatory value supports the users to assess and assure prior predictions. Apart from this, materiality is also considered asperspective of relevance, which is dependent on nature of organization. It suggests that, there may be possibility that, what is important to an organization may not be significant or material to other entity. Information is considered as significant in case it is capable to have impact on the decision making capability of the users.
Faithful Representation: It is another qualitative feature of the BHP Group financial statements. In this aspect, entire information reflected in the financial information should demonstrate what reasons to reflect are. In other words, it can be asserted that, it must represent what actually are exists and what happened in the real manner, as the case may be. Concerning this, a financial information considered as faithful representation, it they contains there characteristics, namely, completeness, neutrality, and free from error. Completeness takes place, when financial statement contains full reporting of all essential data, neutrality means fairness and free from prejudice and free from mistakes and fraud suggest that, there should not be any inaccuracies and omission (Mbobo, and Ekpo, 2016).
What are the enhancing QualitativeCharacteristics of BHP Group financial statements?
Comparability: In this aspect, comparability of financial information supports the users with respect to comparison within the company and across the companies. If the evaluation is made within the company, then data or figures are compared from the one financial year to other financial year. For instance, profit is comparison between year 2020, 2019, and 2020. On the contrary comparison with exterior to the company supports in analysis of similarity and differences among the distinct companies (Al-dmour, Abbod, and Al-dmour, 2017). Along with this, comparability is the extent to which accounting policies and standards are consistently implemented from one period to another. BHP Group financial statements are comparable of the consistent accounting policy and standard implemented across every accounting period.
Verifiability: Concerning this, verifiability of financial information supports to give assurance to users that information is represented by entity in faithful manner. BHP Group financial statements facilitated by proof and unbiased individuals could check them to observe whether the information given by the entity is faithful (Manko, 2019). In other words, it can be said that, information is provable or confirmable if it could be audited by the independent auditor. Timeliness: Timeliness means offering data to management for making decision in timely manner, which is capable of influencing the decision making capability. The financial information should not be delayed in significant manner or else it would be of no value.
Understandability: In this aspect, understandability needs financial information must be in understandable form or coherent to users with adequate knowledge of economic functions and business. To be understandable, it is required that, information must be represented in clear and summarizing manner. For creation of simple and understandable report company should not exclude comprehensive items (AL-Shatnawi, 2017).
Based on above aspects, it can be said that, financial data is considered is meaningful when it is relevant and represented in faithful manner. The viability of financial data does enhances if it contains features of timeliness, verifiable, comparable, and understandable form. Analysisof qualitative characteristics of financial information in BHP Group Ltd
BHP Group Ltd represent its financial information in the annual statement is very well manner. It is given in the financial statement that it contains forward looking statement, consisting BHP Group financial statements with respect to trends in the prices of commodities, rates of currency exchange, demands, objectives, strategies, and some other aspects. One of the prominent features of financial statement is that, it must contain predictive as well as confirmatory values, and both are reflected in the financial statement of the BHP Group Ltd. Therefore, it can be said that, the annualaccounts of the cited company fulfills the requirement of relevance. Another feature of qualitative aspect is related with faithful representation (Kruglyak, and Shvyreva, 2017). In the present casescenario of the BHP Group, the financial statement of the company were audited by the independent audit entity, by which it can be said that, provided information is accurate and free from any material error and mistake. Further, financial information is presented only that information which is happened in the organization. In other words, it can be said that, BHP Group financial statements is represented in the faithful manner. Further, adequate and essential additional disclosure is also provided by the company in the annual statement. It is given that, disclosure is also intended to help shareholders as well as other stakeholders of the company to understand and analyze the consolidated annual accounts of the company prepared as per the International Financial Reporting Standards consisted in the annual reports (BHP Annual Report 2019. 2020). Along with this, auditedBHP Group financial statements reflects that, financial information given in the annual report does not have any material inaccuracy, and presented true and fair view of the company. On the basis of this, it could be stated that, BHP group satisfies the both elements of fundamental qualitative variants such as relevance, and reliable disclosures.
In the present case of BHP Group financial statements, it can be assessed that, company along with the present financial year, it is also provided information of previous financial year, so that, difference in the current financial year relative of earlier financial year can be compared and appropriate decision could be implemented (BHP Annual Report 2019. 2020). However, company does not provide any comparison exterior to the organization, such as comparison with its competitive entities; therefore, financial information assists towards comparison within the company only. Further, company is applying consistent accounting policies from one year to another. However, BHP group taken into account and approved changes in the accounting policy assisting due to application of the new accounting standard with respect to AASB 16, Leases. In accordance with annual reports of cited organization, it can be seen that, auditor of the company does not have issued any report on the annual accounts of the company that consists of adverse opinion, disclaimer of the opinion, as well as any qualified and modified opinion on the uncertainty, scope, and accounting principles of the company (BHP Annual Report 2019. 2020). Based on this, it can be said that, financial information of company is comparable within entity. Apart from this, BHP group also provided information in the timely manner. Timeliness is referred as how quickly information is provided to users of accounting information. This element is one of the significant aspects of the financial information as it competes with other data. It can be seen that, usually financial information is given by the company after closing of its accounting period, therefore in such case, users of the financial information may find it difficult to ascertain about the manner in which company is running its activities in present manner (Zheng, and Chen, 2017). In the given case scenario, BHP Group financial statements has provided information within appropriate time scale so that adequate decision can be taken relating to financial statement. Further, data and figures areprovided by the company in understandable manner, which could be evidences through suitable classification, characterization, and representation of the information. Since, the information is audited; therefore it supports to understand whether information is reflected by the entity in faithful manner.
CONCLUSION
On the basis of above aspects, it has been asserted that, qualitative characteristic plays an important role for decision making purpose. In this aspect, a company which uses the qualitativecharacteristic mechanism in determining quality financial reporting offers a direct and improved measure of quality and efficacy of financial reporting and disclosure. Overall, it can be concluded that, qualitative characteristics of the organization could be operationalized if the company give focus on these primary features, named as relevance, reliable disclosure, timeliness, understandability, and comparability. The financial data provideby the BHP GroBHP Group financial statements up contains all these features, which improvises quality of financial reporting.
REFERENCES
Al-dmour, A., Abbod, M.F. and Al-dmour, H.H., 2017.Qualitative Characteristics of financial reporting and non-financial business performance. BHP Group financial statementsInternational Journal of Corporate Finance and Accounting (IJCFA), 4(2), pp.1-22.
AL-Shatnawi, H.M., 2017.Measuring the Quality of the Interim Financial Reports Using the Qualitative Characteristics of the Accounting Information and its Effect on the Investment Decisions According to the¡° IAS 34¡±. International Journal of Economics and Finance, 9(5), pp.159-170.
BHP 2020.(Online). Available through
BHP Annual Report 2019. 2020. (Pdf). Available through
Kruglyak, Z.I. and Shvyreva, O.I., 2017. Developing the system of qualitative characteristics of financial information.International Accounting, 20(18), pp.1051-1065.
