Discuss about the Woodside Petroleum Objectives of GPFR.
Based on the current corporate scenario, adherence to the objectives of GPFR and compliance with conceptual framework of accounting is vital to thrive in the market. This is because it facilitates effective decision-making on the part of users, thereby enhancing the reputation and goodwill of companies. Moreover, adherence to conceptual framework also assists in enhancing qualitative characteristics like understandability, comparability, timeliness, etc (Seilber, 2015). This makes it clear that organizations who do not prioritize such steps may fail to survive in such competitive environment wherein interpretation of financial information in order to make decisions is vital in nature. This report will assist in evaluating the effectiveness of Woodside Petroleum in complying with requirements of GPFR and conceptual framework.
Woodside Petroleum has appropriately adhered to the objectives of GPFR and conceptual framework so that it can ensure that the stakeholders are provided enhanced and efficient financial information that can help them in making significant decisions. Furthermore, the company has also remained consistent it its approaches in order to account for the objectives of GPFR. For such purpose, the company has disclosed enhanced accessibility to its users to facilitate the prevalence of efficient information that can further help them in understanding the relevant characteristics and quality of financial reporting. Moreover, the policies and procedures of the company like dividend policy, Woodside’s reserves policy, etc are also disclosed to the users for the purpose of complying with the objectives of GPFR. In addition to this, the company has also provided significant information that can cause serious issues to its financial performance. Such details are disclosed in the risk section of the company’s annual report. The company has also disclosed relevant information about its strategic approaches for addressing its overall organizational purposes. All these factors highlight the fact that objectives of GPFR has been appropriately met by the company.
Even though GPFR may fail to offer all the necessary information required for decision-making and accounting purposes, yet the target audience can easily consider the information offered through such reports for making effective decisions in future. For instance, the provision of sustainability or environmental performances of the company can assist stakeholders in determining whether social concerns have been adequately taken care or not. Furthermore, the information of risks that is disclosed in the risk section of the company can be taken into account by the investors, lenders, and creditors for their own needs (Conceptual Framework, 2016). Nevertheless, the information disclosed by Woodside Petroleum in relation to its alterations in financial resources and claims except those attained from creditors and investors so that future and past capability of the company in managing its cash flows can be determined by the target audience for their own requirements (Douma & Hein, 2013).
In relation to Woodside Petroleum, the company has effectively satisfied the recognition criteria of various elements in its financial statements. It has recognized all vital elements in its financial statements that sheds light on its accuracy in reporting.
· Revenue
Woodside Petroleum has recognized its revenue and measured it at their fair value of obtained consideration to such extent that it becomes feasible that financial benefits are flowed to the company. Further, the revenue from sale of manufactured hydrocarbons is also recognized when potential rewards and risks of ownership gets passed to the consumers (Hemmer & Labro, 2008). In addition, such revenue is recognized based on the company’s interest of working in the producing field (Hill, 2014). Moreover, revenue from pay or take contracts are recognized in earnings when such product has been withdrawn by customers and recorded as unearned income in the alternate situation.
·Current assets and liabilities
The current liabilities and assets of Woodside Petroleum are measured at their expected amounts to be attained from or paid to taxation agencies. Further, deferred liabilities and assets are measured at their rates of expected tax that must be applied in the tenure wherein such liability is required to be settled or asset is needed to be realised (Woodside Petroleum, 2016).
·Gas and oil properties
Gas and oil properties of the company are reflected at cost minus impairment expenses and accumulated depreciation. Such properties comprise of initial expenses to construct, acquire, complete, or install infrastructure and production facilities like platforms and pipelines (Woodside Petroleum, 2016).
·Borrowings
In addition to this, the group has also recognized borrowings at their respective fair values minus transaction expenses. Such borrowings are carried at amortized expenses and any variation betwixt the received proceeds and redemption value is also recognized in the statement of income through usage of effective interest method (Woodside Petroleum, 2016).
·Trade and receivables
Woodside Petroleum has also recognized its trade and other receivables at their respective fair values and subsequently measured them at amortized expense minus an allowance for uncollectible figures.
· Inventories
In relation to inventories, the company has valued the same at lower of cost and total realizable amount. (Woodside Petroleum, 2016)
·Provisions
When it comes to provisions, Woodside Petroleum has recognized the same when it has a current obligation whether constructive or legal as an outcome of past events (Woodside Petroleum, 2016).
·Operating lease payments
In relation to payments associated with operating leases, the Group has recognized the same as an expense in its income statement on a straight-line method over the term of lease. Besides, incentives that are associated with such leases are also recognized by the company in its income statement as a part of net lease expense (Woodside Petroleum, 2016). All these recognitions of major elements in the financial report clearly shed light on the fact that Woodside Petroleum has effectively met the recognition criteria for financial reporting.
It can be seen from the annual report of Woodside Petroleum that the company has effectively exhibited fundamental qualitative characteristics into its reporting framework. Besides, this has allowed the company remain strong in its industry and the stakeholders are also offered proper guidance in their decision-making processes with the help of such compliance (Peteeren & Plenborg, 2012). In relation to materiality, the company has a guideline that allows it to determine the significance of information in association with the ASX principles (Cooper et. al, 2011). Furthermore, the material risks that can cause a major effect on the financial performance of the company are also disclosed by the company in its risk section, thereby satisfying the materiality criteria. Furthermore, the company has disclosed a section in its report wherein the directors have assured that the financial statements follow Section 295A of Corporations Act 2001 and the AAS respectively (Choi & Meek, 2011). With such disclosure, the company has adhered to faithful representation qualitative characteristic in its reporting.
Further, the company has agreed that disclosure of some information may cause an injury to its financials but still it has reported such information in order to make stakeholders rely upon the same and take valid decisions. This fulfils the reliability qualitative characteristic of financial reporting (Woodside Petroleum, 2016). The company has offered relevant information regarding its sustainability concerns that can allow stakeholders in making proper decisions, thereby fulfilling the relevance qualitative characteristic of corporate reporting.
Woodside Petroleum has taken due steps for providing relevant financial information to its stakeholders in a timely manner. For such purpose, the company has provided important details on its website too wherein stakeholders are offered information in due time. This ensures the fulfilment of timeliness qualitative characteristic of corporate reporting (Freeman & Alexander, 2013). Further, the performance summary of the company can be used by its stakeholders in understanding the fact whether it has progressed or not, thereby satisfying understandability as well (Tysiac, 2015). Moreover, such performance summary is also disclosed for the last year so that users can easily compare the past performance with that of the current performance and thereafter make proper decisions based on the same (Woodside Petroleum, 2016). Hence, the company has also adhered to the enhancing qualitative characteristics in its reporting approach.
Even though Woodside Petroleum has catered to the objectives of GPFR and conceptual framework, yet it has not disclosed non-financial measures in a proper way. Moreover, it must be taken into consideration that the usefulness of financial statements can be enhanced in the prevalence of both financial and non-financial measures (Peirson et. al, 2015). Besides, presence of non-financial measures can enhance the credibility of the organization on a larger scale because users can rely upon the information for making efficient decisions (Conceptual Framework, 2016). Therefore, it is recommended that both financial and non-financial measures must be present to enhance the meaningfulness and usefulness of corporate reporting.
Conclusion
Woodside Petroleum has accurately complied with the objectives of GPFR and requirements of conceptual framework of accounting. For such purpose, the company has fulfilled the requirements of both fundamental and enhancing qualitative characteristics in its reporting. Besides, it has also catered to the recognition criteria of various significant elements that can allow stakeholders rely upon the same and take proper decisions. Overall, the effectiveness of satisfying the obligations of a proper financial report has been looked after by the company that can allow it to sustain its position in the market.
References
Choi, R.D. and Meek, G.K., 2011. International accounting. Pearson .
Conceptual Framework 2016, Conceptual Framework Pronouncements. [online] Available from: <https://www.aasb.gov.au/Pronouncements/Conceptual-framework.aspx> [Accessed 20 April 2018]
Cooper, C, Coulson, A. and Taylor, P. (2011). Accounting for human rights: Doxic health and safety practices – The accounting lesson from ICL. Critical Perspectives on Accounting, 22(8), 738-758. Retrieved from https://pdfs.semanticscholar.org/29fe/f2147778ed83c4ee682b6e457a70b344a28a.pdf
Douma, S. and Hein, S. 2013. Economic Approaches to Organizations. London
Freeman, E. and Alexander, M. 2013. Stakeholder management and CSR: questions and answers. Oxford Press
Hemmer, T. and Labro, E 2008. On the optimal relation between the properties of managerial and financial reporting systems. Journal of Accounting Research, 46, pp. 1209–1240. Available through: https://www.scopus.com/record/display.uri?eid=2-s2.0-54249141091&origin=inward&txGid=85d117d174c0e27c36a27eeee1be7d6b [Accessed 18 April 2018]
Hill, L. B. (2014) Discussion of The role of revenue recognition in performance reporting. Accounting and Business Research. [online]. 44(4), 380-382. Available from: https://doi.org/10.1080/00014788.2014.897867
Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. (2015) Business Finance, 12th ed. North Ryde: McGraw-Hill Australia.
Petersen, C. and Plenborg, T. (2012) Financial statement analysis. Harlow, England: Financial Times/Prentice Hall.
Seilber J. (2015) FASB removes concept of extraordinary, retains guidance on unusual item [online]. Available from: https://www.pwc.com/us/en/cfodirect/assets/pdf/in-brief/us2015-01-fasb-extraordinary-unusual-items.pdf [Accessed 20 April 2018]
Tysiac K. (2015) No more extraordinary items: FASB simplifies GAAP [online]. Available from: https://www.journalofaccountancy.com/news/2015/jan/gaap-extraordinary-items-201511630.html [Accessed 20 April 2018]
Woodside Petroleum 2016, Woodside Petroleum Annual report & accounts 2016 [online]. Available from: https://www.woodside.com.au/Investors-Media/announcements/Documents/01.03.2017%20Annual%20Report%202016.pdf [Accessed 20 April 2018]
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