The Conceptual Framework of Accounting - Corporate Governance

Question: Discuss about the Accounting Research, Practice, and Financial. Answer: Introduction: Within the basic premises and concepts that General Purpose Financial Reporting, the report will prepare a comprehensive report based on the effectiveness of the business of BHP Billiton to address the related business obligations of the conceptual framework of accounting. The financial reporting plays the vital role for discussing the financial disclosure (Weil, Schipper and Francis 2013). It further discusses the financial situation of the firm which assists investors in predicting the performance of BHP Billiton. The summary report, thus, will include data extracted from the General Purpose Financial Report of BHP Billiton, containing details like Conceptual Framework, Corporate Governance, Legitimacy, Code of Ethics and Corporate Social Responsibility Conceptual Framework: A Conceptual Framework is all about the system of ideas and objectives based on which the organization develops the consistent set of standards that provides the framework for setting the standards for accounting (Macve 2015). The rule and standards, functions and limits of the financial accounting followed by BHP Billiton is critically addressed the financial obligations in this section. BHP Billiton Plc, the leading Energy resource company prepared their financial reports related to the requirements of the Australian Corporations Act 2001. Following the accounting framework, the company has incorporated Australian Accounting Standards, corresponding with International Financial Reporting Standards. It is believed that standards followed by the organization help stakeholders in the development of the globally accepted standards (Bhpbilliton.com. 2016). While the financial statements are evaluated in the basis of principles of the historical costs except for derivative financial instruments and several other financial assets which are carried at fair value. The policies of accounting have consistently followed by BHP Billiton aligning with the prior years accounting presented. Corporate Governance: Corporate Governance essentially includes the balancing interests of BHP Billitons stakeholders which the company is directed and controlled (Bhpbilliton.com. 2016). In other words, the company has a governance framework that goes beyond an interest in governance for the firms individual sake or the requirement to comply with regulatory requirements. According to Weil, Schipper and Francis (2013), the good governance is all about handling responsibilities of management for executive and is entrenched throughout the organization. Thus, the company believes in long term value creation based on high quality governance. To adopt the best governance standards in Australia, the company is operated as the leading position of the energy sector. Diagram 1: The Governance Structure of BHP Billiton (Source: Bhpbilliton.com. 2016) The above diagram describes the framework for the governance at BHP Billiton (Bhpbilliton.com. 2016). The diagrams clearly demonstrate the interaction between the shareholders and the Board, discussing how the Committee of the board structure facilitates the relationship between the CEO and the board (Bhpbilliton.com. 2016). This has explained the delegation flow related to the shareholders. The company has healthy processes in place for the smooth delegation flows through the Board and its committees to the CEO and the GMC into the firm. Furthermore, the management has maintained an upwards flows for discussing the accountability from the authority of the organization to shareholders. There are several scenarios of the business portfolio has been incorporated in the corporate governance report for assessing the performance of the company. For instance, the corporate planning cycle include assumptions around currencies, prices of commodities, the rate of taxes, the price of commodities, tax rates and the price of carbon and ranges for a several number of risks and the price of carbon and ranges for the several of risks the group basis (Bhpbilliton.com. 2016) . Moreover, this gives the detailed idea about the global growth, trade levels, situations of geopolitics of Australia, climate change and technology. BHP Billiton has followed the diversified asset portfolio management for dealing all these scenarios and strategies of the company. The Charter is the key to the framework of BHP Billiton. The charter addresses the purpose, strategies and values of the business and provides guidelines how the business would be successful. The company, in this scenario, develops a culture which supports high values and standards, the potential integrity on the basis of personal and corporate by showing respects for others. The board uses the formal and informal communication channels for the global shareholders of the company (Schneider and Schmidpeter 2012). Thus, the company has followed a regular proactive engagement process with shareholders and investors representative organizations takes place in Australia, the United States, South Africa and the United Kingdom. The company discusses the comprehensive governance issues along with the broad strategy of the Group. Generally, the company has established a good relationship with governance managers, fund managers and the advisers of governance for managing the governance issues faced by the company. In this way, the company has followed a strong charter values, including the value of sustainability and managed to develop good interaction with stakeholders and plan for the future. Legitimacy: According to Lanis and Richardson (2012), legitimacy is all about the perception and assumption that all actions are desirable, proper or appropriate within certain socially constructed system of values, norms beliefs and definitions. In other words, it is the hypothetical social contract between the reporting entity and the society in which it operates (Barth 2015). In the case of the BHP Billion, the organization has maintained its accountability while the preparation of the financial statement followed by the international financial reporting standards. In the financial statement of 2015, the company has declared US$7.3 billion to governments worldwide (Bhpbilliton.com. 2016). By investing more than US$225 million in local communities across the world on projects that include improving access to education and healthcare, BHP Billiton has established social contracts with their reporting stakeholders (Bhpbilliton.com. 2016). While preparing the financial statements, the company has taken followed proper estimation and assumptions that affect the reported accounts of liabilities and assets. The statements further disclosed the contingent liabilities at the specified date of the statement of the financial along with the declaration of the revenue and expenses during the period presented therein. By mentioning the nature of these assumptions and conditions in their notes of the financial statements, BHP Billiton has clearly disclosed their values, norms and beliefs in their reporting of General Accounting Financial presentation. Codes of ethics: The code of Business conduct of BHP Billiton is based on the Charters value of the company. According to Islam (2015), the Code demonstrates the commitment towards practicing the ethical business activities and accomplishes or exceeds applicable legal requirements. In other words, the code of ethics needs to be practiced by BHP Billiton for maintaining the business consistency in terms of operations, finances and social responsibilities. This will help to create loyalty and trust with the stakeholders (Union 2014). The charter reflects the Group Level Documents, Standards, and procedures which are application throughout the company. The code of business conduct helps the company to perform in daily work and assists employees to practically applies the values developed by the charter of the company. By following the laws and regulations of those countries in which the company operates, BHP Billion is committed towards upholding certain standards at the level of international and guidelines. For instance, the company has followed principles of the United Nations Global Compact, the United Nations Universal Declaration of Human Rights and the Voluntary Principles on Securities and Human Rights. However, it is a debatable fact the code of conduct of the business cannot determine every law of the business. As far as the business code of conducts is concerned, all the entities of the company are controlled and committed towards adhering to the Code, regardless of location and role. Furthermore, an associated non-controlled joint ventures and minority interests are also adopted the same principles and standards. Chart 1: Path of Business Code of Conduct of BHP Billion (Source: Bhpbilliton.com. 2016) BHP Billiton has fully committed to working with integrity and practicing with the relevant business code of conduct obviously to restrict engaging the unethical behaviors at the workplace. For instance, the business code has applied for addressing the differences exist due to local norms, customs, rules and regulations, while setting the higher standards of the behavior. By following this, the company has imporoved code of practices and regulatory compliance over the time period. During 1997, BHP published the guideline to conduct the business which described the basic principles for the conduct of the business. This has increased the level of confidence while conducting the business. Since the years, the Global Ethical Panel of the company has played a significant role in advising on ethical dimensions of issues of the business. For instance, the panel has given advises to the internal members from BHPs businesses and legal, Risk and Human Resource Functions (Weil, Schipper and Fra ncis, 2013). In the recent times, BHP Billiton is mainly associated with prohibits any form of punishments, disciplinary, or retaliatory action which have been taken against anyone for raising or helping to address the related concerns while conducting the business. The compliance functions, on the other hand, supports all activities with the concerned Collection Manager along with the team of expert anti-corruption, trade and competition lawyers who are taking responsibilities to the Risk and Committee of the board (Bhpbilliton.com. 2016). In this way, the company is raising their business concerns through Ethics Point. Now all queries about the interpretations and application of the code of the business will be treated seriously and considerable in a timely manner. Corporate Social Responsibility: Sustainability is the core business essence of the corporate strategies of BHP Billiton. The company has ensured integrated safety, health, environmental, social and economic aspects into their decision making process. The corporate social responsibilities are mainly concerned for managing risks within the company to ensure safety and healthy aspects into their business (Navi 2012). As per the records of the Sustainability report of 2015, BHP Billiton has maintained their commitments to provide the energy and resources required for economic development and growth. Initially, the company is committed for maintaining safety measures for their people. To prevent the work place injuries and fatalities, the company commits to make workplace safer than ever. On the other hand, the company has maintained their responsibilities towards contributing to the social and economic development of host communities. BHP Billiton has largely contributed towards the generation of the opportunities for employment, the development of facilities and infrastructure and in relation to the purchase of local services and goods. In FY2015, BHP Billiton made US$7.3 billion in payments to governments (Bhpbilliton.com. 2016). The company has also increased their voluntary commitments and invested US$225million in community programs. Under the policy of the Corporate Social Responsibilities the company has identified several risks. Under the policy of the Zero Tolerance, the company has accomplished the several requirements which are as follows: Category Requirement Child Labor BHP Billiton is committed not to hire people who are not accomplishing their compulsory education. As per community concerns, the minimum age into employment shall be considered not below than 15 years of age. Inhuman treatment of employees This company is committed towards maintaining an environment that treats all employees with dignity and respect. All this aspects have taken by the company seriously to prevent threat of violence, abuse or sexual exploitation and any other psychological harassments and so on Compulsory labor engagement BHP Billiton is against for involuntary or forced labor engagement Healthy and safety of Workplace The company has proposed requirement for the suppliers to ensure the provisions of safety and healthy working facilities and contingency plans. To follow this requirement, the company has provided training for taking measures related to employee health and safety. For this reason, the company is also maintained HSC Group level documents and recorded the following data accordingly. World Heritage sites and IUCN Protected Areas The company does not sourced their materials from World Heritage listed sites or International Union for Conservation of Nature Protected Areas. Table 1: Requirements of CSR Requirements of BHP Billiton (Source: Bhpbilliton.com. 2016) Conclusion: By addressing subjects like conceptual framework, corporate governance, legitimacy, code of ethics and CSR, this report can be easily concluded that BHP Billiton has maintained rules, regulations and standards as per the General Purpose Financial Reporting Standards to increase the accounting effectiveness within the organization. References: Barth, M.E., 2015. Financial Accounting Research, Practice, and Financial Accountability.Abacus,51(4), pp.499-510. Bhpbilliton.com. 2016.BHP Billiton | A leading global resources company. [online] Available at: https://www.bhpbilliton.com/ [Accessed 26 Aug. 2016]. Edwards, J.R., 2013.A History of Financial Accounting (RLE Accounting)(Vol. 29). Routledge. 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