Adelaide Brighton Produces Clinker

Question: Discuss about the Adelaide Brighton Produces Clinker. Answer: Introduction: The report aims to contrast two organisations, which are listed in the Australian Stock Exchange (ASX). The purpose is to check whether the organisations conform to the user needs in relation to the financial reports, which have been prescribed in the conceptual framework of accounting. In addition, the report further depicts the way that conceptual framework including prudence shows the differences in corporate reporting. Therefore, the two organisations that have been selected to fit the purpose of this study include Adelaide Brighton and ABM Resources NL. In addition, the reporting needs imposed on the accountants of the two organisations and those charged with corporate governance have been briefly enumerated. The scope of the study comprises of extracts from the annual reports of the two selected organisations and their conformance to the standard requirements of AASB. Henceforth, the report illustrates valid reasons for the compliance of the reporting needs, according to the guidelines of AASB. This has been conducted with the help of the extracts in relation to the notes of the financial statements and in the report of the Director. Adelaide Brighton is one of the leading organisations in Australia, which deals with lime, cement and dry blended products. In other words, the organisation is primarily engaged with the production process and product supplies required to develop and construct the infrastructure and utilise the same for processing of minerals throughout the Australian market. Adelaide Brighton is an ASX listed firm under SP/ASX 100 and the firm has an employee base of around 1,400 in different states and territories of Australia. In addition, the company is involved in encouraging and nurturing diversity, which is highly suited to ensure the interests of the shareholders (Adbri.com.au 2016). ABM Resources NL is an exploration firm, which has fostering numerous gold discoveries in the northern province of Australia. The firm is listed under SP 500/ASX with an employee base of around 1,000. The firm is committed to the programs if regional exploration throughout its widespread holdings (Adbri.com.au 2016). Analysis of Adelaide Brighton and ABM Resources NL: Compliance of the annual reports with the conceptual framework and AASB standard requirements The executive remuneration policy has been selected as the main factor with conformance to the annual reports with the conceptual framework and AASB requirements. The above-mentioned policy has been enumerated briefly in the context of the two chosen organisations: Adelaide Brighton: It has been observed from the annual report of the organisation that the executive remuneration comprises of 25% of awarded STI, which is transferred directly to the shares if Adelaide Brighton. 50% of the shares are deferred in two years, while the remaining shares are deferred in three years. The appointment of the CEO remuneration is developed on a part of short-term incentive and long-term incentive. In 2015, the distribution of remuneration, as per equity share for long-term incentives, has been 33.5%. However, in the year 2016, 33.5% distribution is associated with equity shares and 8.5% is associated with the short-tem incentives. The remaining incentives received on the part of the executive are associated directly with cash. The same is applicable for the key management personnel of the organisation. The diagrammatic illustration, as represented in the annual report, has depicted the increasing trend of the cash share and equity remuneration (Refer to Appendices, Appendix 1) . According to the financial performance disclosure in the report of remuneration summary of the directors, the strong financial position is associated with the company remuneration. In addition, the directors report of Adelaide Brighton depicts that the value of NPAT has risen by $35.2 million or an increase of 20.4% in 2014. According to the report of summary remuneration, the revenue of the organisation has increased by $75.3 billion. Along with this, the EBIT of the organisation has increased by $51.1 million with a percentage increase of 20.6%. The cash proceeds realised from the land sale have amounted to $47.9 million in 2015, which has generated NPAT of $34.9 million (Refer to Appendices, Appendix 2). ABM Resources NL: The executive remuneration of the members of the organisation is directly associated with both shares and profits. It has been observed that performance measurement ascertaining the compensation received on the part of the CEO is a combination of the cash shares. The main difference with Adelaide Brighton in relation to the executive compensation reporting has been observed in the percent distribution of the incentive allocation. The executive directors, key management personnel and staffs are provided with a fixed salary base and benefits. The net revenue of the organisation has declined considerably to $392,368 in 2015 from $4,948,009 in 2014. However, it has increased significantly to $36,149,624 in 2016. In addition, the organisation makes limited long-term benefits to the executive directors and key management personnel of the organisation. However, the percentage of remuneration distribution in the form of detailed breakdown has not been presented in the annual report of the organisation. In this regard, Carey, Potter and Tanewski (2014) advocated that the percentage of equity and cash distribution of remuneration is required to be depicted in the annual report to ensure transparency in the accounting policies of an organisation. The detailed presentation of the remuneration of ABM Resources NL has been presented in Appendices (Refer to Appendix 3 and Appendix 4). Conformance to remuneration disclosure in accordance with the AASB guidelines: According to the guidelines of AASB 1046, the organisations are required to disclose the remuneration structure of all the individual directors. In addition, a minimum of five executives need to be presented in terms of the economic enterprise at the time of preparing the financial report (Aasb.gov.au 2016). In addition, it is to be borne in mind that the executives and directors need to be treated as mutually exclusive individuals. From the remuneration report of Adelaide Brighton, the organisation has conformed to the AASB 1046 guidelines by disclosing the remuneration structure of five executives associated with the economic entity. The names of the organisational directors have been presented in Appendices (Refer to Appendix 5). On the other hand, ABM Resources NL has Prudence with the AASB benefits and guidelines Adelaide Brighton: In accordance with the notes to the consolidated financial statements depicted in the annual report of Adelaide Brighton, the contract revenues would fall under AASB 15 Revenue from Contracts with Customers. The prudence has been observed in terms of the replacement disclosures of the current AASB 118, which is involved with the product and service contracts along with AASB 111 involved with construction contracts and AASB 115. The major benefit includes minimising the risk associated with the control notion to realise at the time of product and service transfers to the customers. The diagrammatic representation of this disclosure of this disclosure has been presented in Appendices (Refer to Appendix 6). Therefore, Adelaide Brighton has complied effectively with the guidelines of AASB to assure the implementation of the same after January 1, 2018. In addition, the organisation has disclosed the current standard to cover up the leases according to AASB 117, which would be replaced by AASB 116. With the implementation of this standard, the major advantage would be the incorporation of a new accounting model, which has a single lessee for the realisation of assets and liabilities. These would include all leases having tenures of above one year (Humphrey, ODwyer and Unerman (2014). However, Henderson et al. (2015) argued that this could not be applied if the value of the underlying asset is low. In this case, the organisation has shown conformance to the AASB guidelines by ensuring the implementation of the standard after January 1, 2019. The disclosure has been presented in a diagrammatic view (Refer to Appendices, Appendix 7). ABM Resources NL: According to the annual report, the financial statements have been developed in compliance with the needs of the Corporations Act 2001 issued on the part of AASB. The disclosure provided under the obligation of retirement benefits has been valued under the guideline provided under AASB 119, which is related to employee retirement benefits. The prudence has been observed in relation to the disclosure of financial instruments of AASB 9. The major variation is observed in case of the data of application pertaining to standards of AASB 15 for the date of revenue recognition. In case of Adelaide Brighton, the rule would be applied after January 1, 2018, while for ABM Resources NL, the date is after July 1, 2018. In addition, the organisation has conformed to the AASB 15 lease guidelines by ensuring that the standard would be implemented after July 1, 2018. The major advantage would be seen in lessee terms, as they would be able to realise the liability of lease, which reflects the incorporation of right-of-use asset and future payments to be applied to the contracts (Carey, Potter and Tanewski 2014). In addition, another benefit would be further observed in information disclosures associated with the contract of leases and the interest expenses. Furthermore, it would enable segregation of liabilities with the financial operations, specifically for the leases having low value. The disclosure has been presented in the form of diagrammatic illustration (Refer to Appendices, Appendix 8). Tax disparity in disclosures Adelaide Brighton: As depicted out in the annual report of the organisation, it is clearly inherent that the operating income has been $298.6 million, while NPAT has been $207.9 billion. Although a detailed dissection of the report has been presented and observed to be identical; however the NPAT has been $207.8. Therefore, it could be adjudged as the overstatement in profit and loss account of the organisation (Guide 2013). ABM Resources NL: As per the income statement of the organisation, detailed segregation of the operating expenditures has been presented in the annual report. The loss before income tax and expense of the organisation has been found as $21,616759. In addition, the firm has disclosed its net income after tax accurately as $21,616,759 because the company has incurred loss. In this context, Kober, Lee and Ng (2012) stated that an organisation does not have to incur any tax payments, if it incurs net losses. Therefore, ABM Resources NL has not made any discrepancy in its reporting procedures. Leasing disclosures After evaluation of the annual report of the organisation, it has been found that the rights of lease have limited useful lives, which vary from two to twenty years. In order to amortise its intangible assets, the company uses the straight-line method. In addition, it has been observed that the financial lease of the organisation has been $0.7 million in 2015, while the non-current leases like long-term loans have been provided as $328.8 million along with sum of $329.5 million. Moreover, the organisation has made lease commitments of $1.7 million in 2016. ABM Resources NL: According to the annual report, the firm is not efficient enough to disclose its leasing amounts in terms of financial leases. The company has only disclosed its operating leases and it does not make utilisation of the straight-line method to depreciate or amortise its assets. It has been observed that the operating lease of ABM Resources NL has amounted to $35,496 in 2016, which has been $251,679 in 2015. This has been depicted in the form of a diagrammatic illustration (Refer to Appendices, Appendix 9). Conclusion: According to the criteria of remuneration disclosure, Adelaide Brighton has been highly efficient in depicting the distribution of cash and equity share of the company remuneration. On the other hand, ABM Resources NL needs to depict the cash apportionment and distribution of equity shares in an effective manner. According to the prudence with the guidelines of AASB, Adelaide Brighton needs to adopt AASB 15 Revenue from Contracts with Customers before January 1, 2018 for receiving the expected advantages. However, there is tax disparity in case of Adelaide Brighton in order to avoid overstatement of the financial reports of the organisation. Finally, in terms of leasing disclosures and disclosures related to intangible assets, Adelaide Brighton has been found to be more compliant in relation to the accounting framework of AASB. However, ABM Resources NL needs to disclose its financial leases in its annual report to maintain conformance to the previously-mentioned framework of account ing. References and Bibliographies: Aasb.gov.au. (2016). [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AASB1046_01-04.pdf [Accessed 7 Dec. 2016]. Abmresources.com.au. (2016).Company Overview ABM Resources. [online] Available at: https://www.abmresources.com.au/corporate/company-overview/ [Accessed 7 Dec. 2016]. Adbri.com.au. (2016).Adelaide Brighton produces clinker, cement, concrete and lime.. [online] Available at: https://adbri.com.au/aboutus [Accessed 7 Dec. 2016]. Carey, P., Potter, B. and Tanewski, G., 2014. AASB Research Report No. Carey, P., Potter, B. and Tanewski, G., 2014. 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