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Analysis of Accounting Framework: Bluescope Steel Limited

Written Report – individual assessment  

Purpose: This assessment is designed to reinforce the subject content and develop students’ skills and application of knowledge of the subject content to business situations. This assessment relates to learning outcomes a, b and 

 Topic: This assignment covers the in-depth theoretical concepts with some practical accounting task application based on the topics from the subject.  

Task Details: This assignment requires a consideration of accounting theory concepts with critical analysis with application to General Purpose Financial Reporting by corporations. Students are required to prepare a comprehensive report directed to an Australian ASX Top 100 listed corporation detailing a critical analysis of the effectiveness of the corporation to meet the obligations of the conceptual framework of accounting.  



The Summary Report: should include data extracted from the General Purpose Financial Report relevant to the material analysed. 


Australian Accounting Standards


The report intends to throw light on the deep analysis of the accounting framework, which has been used by Bluescope Steel Limited (BSL) and which is directed by Australian Accounting Standards Board. The report would highlight all the details of the accounting statements by discussing the general purpose accounting statements revealed by the company. Then a comprehensive discussion would be made on how the accounts like contingent liabilities, inventory, leases, depreciation and the tangible assets are handled by the company. The analysis done would take into consideration the annual report of the company for the year 2017 and this is available on the website of the company.


BSL Limited is a renowned global company in the steel industry. The company is well known for its premium steel products (coated and painted). The company holds great strengths in engineering of steel buildings in some of the important markets and holds leadership position in building and construction markets. The company holds distinctive capabilities in some of the markets like North America and China while North Star BlueScope Steel plant is the leader in terms of performance in the US delivering consistent financial performance and attractive ROI. Value creation is the focus of the company with financial strength as the core pillar of its strategy resulting in credible growth plans and strong position of company’s balance sheet.

General Purpose Financial Statements

The GPFS are released for a special purpose as they help in disclosing the fimbriation about financial prospects of the company and are in this way very important to the investors and to the other stakeholders ("Australian Accounting Standards Board (AASB) - Home", 2018). They tell the information about the financial performance of the company, financial apposition and the cash flows, which have been used by the entity. They also highlight any of the changes, which take place in the component of the financial statements and highlights the reason behind these changes. This way they said the users of the information to identify the weaknesses and the strengths of the concern and also make various judgments about the solvency and liquidity position of the company.

BSL has mentioned in the report that the company’s financial report has been prepared by following the Australian Accounting standards, International Financial Reporting Standards and as per Corporations Act 2001. They have presented all the information at their historical cost leaving derivatives, which have been done at fair value. They have presented their report in US dollars as this currency is considered as the standard currency for the purpose of the reporting. It is also the predominant currency keeping in mind the Group ‘s global presence ("Australia", 2018).

Conceptual Framework

The Conceptual framework is the system of the objectives and ideas which has led to the creation of consistent standards and rules. They help in understanding the purposes and the goals of the financial reporting and what must be done to achieve the goals. So, overall they help the concern in selecting the transactions, circumstances and tenets which have to be accounted for and then how they must be reported and summarized.

The conceptual framework used at BSL is as follows and this can be understood by the declaration made by the director. The financial statements and notes of the company as well as the group have been executed in accordance with the Corporations Act 2001. The same also comply with Australian Accounting Standards and Corporations Regulations 2001. Additionally, the financial report complies with IASB-issued IFRS (Annual Reports 2017).

Remuneration report

Remuneration report is the report, which tells about the payments, which are made to the people who are working at the organization. The remuneration may include the base salary along with the other economic benefits or bonuses which are paid to the official when they are serving the organization.

A typical remuneration package at BSL consists of fixed pay and incentives. Incentives can either be short-term or long-term. The company believes that the remuneration of executives is the key to retention of key talent. The traditional remuneration structure of the company had some shortcomings that are taken seriously and a new structure is defined focused on reducing the impact of business cycles, controlling and maintaining the cost, management of debt and integrity of balance sheet and growing the business and delivering required rate of return on invested capital and targets of cash flow. Thus, some key changes were introduced in the remuneration framework during 2016-2017 that was well supported by the shareholders (Annual Reports 2017). The new remuneration plan comprise of greater level of share ownership aiming at better alignment of executive and shareholder interest. Under the new incentive plan, performance measures are continued as sustainable long term earning, reduced volatility in performance of business and continues management. They have designed the new pay design so that it could be made more simple, strong and transparent. They through this remuneration report have tried to align the interest of both the shareholders and that of the management working for the organization. This has been specially designed keeping in mind that they’re present all over the world. They have described in new detail the new pay design, which it started in the year 2017 only.

Critical analysis


The depreciation means in the value of the assets and the ways in which depreciation is done tells about the future economic benefits, which the concerns are expecting from these. The concerns may make use for different methods of depreciating the assets (Tayurskaya, 2015). Some of the methods may be diminishing method, straight line method and the last one is the units of production method. In straight line the same amount is charged to the assets over its useful life. In diminishing balance method, the decreasing value for depreciation is charged (Dobie, 2016). The units of production method make us of the charge on the expected use of the assets.

BSL is making use of the straight line for depreciating or amortizing their assets. For the purpose of lease improvements and finance leases, the depreciated value is calculated by utilizing the shorter leader term. They start recognizing the assets when they are available for use and then they also make assumptions about the useful life and that about the residual value, which they expect to receive on the assets. Further, property, plant and equipment is derecognized once it is sold or disposed or in case the use of any such asset is not expected to bring any economic benefit in future. 


These are the assets which are held for being sold and they also act as material which helps in the production process. So overall the inventories may be made of any components like the finished goods, work in progress, those which are resale and many other which are held by the corporation. Inventories are measured at net realizable value and at lower cost and this is estimated at the selling prices. Net realizable values are estimated based on the consideration made for the inventory is held for (Meeks & Swann, 2009).

At BSL, the inventory is valued at the lower of cost and net realisable value. The inventory refers to raw materials, work in progress as well as finished goods. The cost refers to a combination of direct costs (materials and labor) and a reasonable allocation of variable and fixed overhead expenditure. The basis used for allocation is the normal operating capacity. Costs are assigned to inventory on the basis of weighted average costs. Net realisable value refers to the estimated selling price in normal course of business, after adjustment for selling costs.

Example of InventoryContingent liabilities

These are liabilities which may or may not accrue to the firm in the future. This arises due to some past action of the concern and the amount of such liabilities can just be estimated and can’t be determined with sufficient reliability. As per Accounting standards the information pertaining to the contingent liabilities must be disclosed on time so that the investors can make their decisions in time. This also increases the level of trust which the employees have on the organization disclosure policies.

BSL has a contingent liability with regard to guarantees for different state workers compensation authorities; which are for the purpose of self-insurance. Additionally, the company has contingent liabilities in relation to joint ventures:

  •  TBSL has imported goods under the Government of India's EPCG scheme at the concessional rates of duty with an obligation to fulfill the specified exports. The contingent liability in this respect amounts to $2.8M.
  • A land rental dispute with the Jharkhand Government impacts the rental costs of Tata BlueScope Steel Limited (TBSL). The contingent liability in this respect amounts to $5.2M.
  • TBSL has done and submitted tax computations (direct and indirect) but these have not been agreed by the authorities. The potential amendments can lead to liability of up to $5.6M (basis 50% share of TBSL).

The group also has contingent liabilities in relation to outstanding legal matters ($3.8M) and guarantees ($93.0M). 


Lease as per accounting standards is a contract which gives the right so that the assets may be used for a fixed time frame. This also throws light on the single lease accounting model and this needs that the recognition of the lease must be for a period of 12 months or more till it has less value. Then more detailed specifications about the leases are covered under AASB 117 which states that the leases have to be classified as operating and financial leases. Operating leases helps in using the assets but doesn’t talk about the transfer of ownership of assets (Lin & Graham, 2017). In financial leases the leasing company buys the assets and then rents it to them for usage.

BSL also has properly mentioned their operating and financial leases. Operating leases are those which are related to the leased rental and land properties. These have varying teams and the rights of renewal. The rent payments in this are fixed but they contain the clauses of the inflation escalation.

Finance leases which are recorded are about leased plant and equipment. Even at the end, some of the leases the Group may have an option to purchase the assets. None of the finance or operating leases puts restrictions in the leasing or financing activities.


As per Accounting Standards, there are no fixed rules for the payment of dividends. But AASB states that the corporations must state about the dividend declared by them on the balance sheet. They also need to tell whether the dividend is paid or are yet to be paid by them. AASB has Laos stated that the concern smut discloses their dividend payment policy. The inserts and the dividends must be shown separately as the treatment of tax on them differs. It is required by the Standards that the dividend policy must follow the set guidelines and the dividend policy must at the same time must be easily verified and understood by the people ("The Global Financial Crisis, Family Control, and Dividend Policy", 2015).

BSL has stated in detail about the dividend payments made by it to the shareholders and have clearly classified the dividend payments as unfranked dividends, final franked dividends. They make the direct payment to the accounts of the shareholders. They have also offered their shareholders an opportunity to get the dividend payments in US Dollars by giving information to the shareholders.

Dividends policy of AASBConclusion

This way after all the discussion it becomes quite clear to the readers that to what extent the company BSL Limited has been successful in following the guidelines which have been issued by the Australian Accounting Standards. After deeply analyzing all the five accounts it has been evident that the company to a great extent follows the guidelines but need to improve the mentioning of leases in the financial statements. The leasing standards have changed recently and this has not been implemented by the concern in proper manner. They have followed the AASB in most of the respects and have used them in many of their accounts. They must try to disclose the financial statement in the most relevant, faithful, timely and reliable manner.

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