Financial Accounting

Topic

Financial Accounting Assignment (BlueScope Steel Limited)

Instructions

“The definition of liabilities is comprehensive in its coverage: indeed, some would argue that it is too comprehensive in that it makes no attempt to distinguish between liabilities and commitments, as it includes obligations arising from firm contracts where neither the entity nor the counter party has honoured its promises.”

Australian Accounting Research Foundation (AARF), 1998, Measurement in Financial Accounting, Accounting Theory Monograph, AARF, Melbourne, p. 36.  With reference to the above statement:

  1. Describe what you understand by the term liabilities and how they are measured.  Provide examples from your selected annual report.
  2. Discuss liabilities and the problems of measurement in the context of the present IASB framework. Refer to specific AASB/IASB standards.
  3. Evaluate the categorization and treatment of liabilities in the annual report. Provide examples from your selected annual report.
  4. Comment on the relationship between the measurement of liabilities and decision useful information with examples from your selected annual report.

Download a 2016 annual report for a listed company (in the top one hundred) on the Australian Securities Exchange (ASX) website. Groups are not allowed to do the same company and should discuss their selection with their tutor prior to commencing their research assignment (Banks are not allowed as they have particular reporting requirements).

Answer preview

This paper provides a detailed analysis of major issues associated with the financial reporting of liabilities. The primary objective of the paper is to examine the definition of liabilities, problems of measurement in the context of AASB/IASB standards, categorization and treatment of liabilities, and the relationship between liability measurement approach and decision useful information.  The conceptual analysis is supported by a real financial reporting from BlueScope Steel Limited. First, this paper evaluates the definition of liabilities as provided in literature and different accounting frameworks, and examines the consistence of major characteristics as presented. As such, the definition of liabilities seems to require a broader approach. The examination of how liabilities are treated in financial accounting implies a review of the framework and approach to measurement that if executed in recognition and measurement of liabilities, would provide a clear representation of a firm’s liabilities.

Word count: 3215