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Question: Discuss About The Stakeholders Quality Assurance In Education? Answer: Introduction BHP Billiton is a pioneer in the field of commodities and has maintained a strong position in the market owing to the performance. It has maintained A rating and that is due to the performance. The main aim of the report is to shed light on the performance of the company and to highlight the accounting policies followed by the company. The report assesses the accounting policies and evaluates the accounting policies. Further, the accounting strategies are discussed along with the quality of disclosure. The red flag is highlighted whereby the flouts or deficiency of the organization is highlighted. It ends up with the discussion of the conceptual framework. Evaluation of accounting policies and estimates In relation to BHP Billiton, it can be seen that the preparation of financial statements requires its management to make estimates, judgments, and assumptions that can influence a number of liabilities, income, expenses, and assets. The group has recognized the following accounting policies wherein significant estimates or assumptions can be made, and where the actual outcomes may vary from such estimates under distinct scenarios, thereby materially influencing the financial position as a whole. In relation to inventories, the same is valued at net realizable value or cost (BHP Billiton, 2015). Further, such costs are ascertained on the basis of average costs. Its major rivals Rio Tinto also utilize this same inventory accounting policy. It also values its inventories at lower of net realizable value or cost heavily on a weighted cost basis. Secondly, in relation to the depreciation accounting policy of the company, it can be seen that the carrying values of BHPs property, plant, and equipment are depreciated to their estimated remaining value over the residual value of leftover concerned specific assets. Such estimates of useful lives and residual values are evaluated annually and any variation is taken into consideration for ascertaining the remaining charges of depreciation. To compare BHPs depreciation policy within its industry, it can be seen that Rio Tinto also depreciates its PPE over their remaining life or useful life and there is no other substitute methodology in relation to the same. Besides, such residual values and useful lives for the material assets of Rio have assessed annually and changes (if any) are depicted prospectively. In addition, the major categories of PPE of both companies are depreciated on a unit of production or a straight-line basis by using their respective estimated lives. In relation to the amortization of goodwill, it can be seen from the financials of BHP Billiton that goodwill is viewed in business combination wherein the company expands an interest in such business combination over their respective fair values. Moreover, in relation to the business combination of BHP Billiton, goodwill is believed to have an indefinite lifetime and hence, cannot be amortized (BHP Billiton, 2015). Further, the goodwill of the company is evaluated annually for a possible impairment. Similarly, in contrast to this, the goodwill of Rio Tinto is also annually examined for impairment or more frequently if alterations or events in circumstances signify a potential impairment. Further, in relation to the estimation of reserves, both companies undertake the same by relying on the information offered by competent persons as management under the Australian Code for Reporting of Exploration Results. Therefore, all these accounting policies and estimates of BHP possess a flexibility to give proper details regarding their affairs and the users can extract relevant information from the same to make decisions. Besides, the company believes that it is able to mold its policies and estimates based on market fluctuations and user requirements as a whole (Landsman et. al, 2011). This assures the fact that the company is not concealing material facts from its annual reports and therefore, the strategies are not hideous in nature. However, there are some questionable items witnessed in the financial statements of the company. It can be seen that the gross profit of the company has been constantly declining from 2012 until the year 2016. This shows that the company is not performing well even though it portrays that its affairs are unmatchable. Besides, the company has not depicted any gain from the sale of assets in the past years, which is not true because, in 2014, the company has sold its pinto valley operations that must have fetched some gain. This means that the company is only trying to sell such business parts to improve its EBITDA amounts. Evaluation of accounting quality Previously accounting was well defined as a non-political subject, however, with the due passage of time; it has become political in nature. Moreover, various pressure influences the accounting standard environment. The figures that are provided by the accountant have a strong bearing on the economic aspect. Therefore, the rules of accounting have a bearing on the human behavior. The message conveyed by the BHP report stresses that annual report can make or break the expectations of the investor and thereby have the power to influence innumerable. It is the nature of the interested parties to have a track of the safety of the financial score. Therefore, the process is determined as political in nature. As per Horngreen (2013), the accounting standard setting can be said to be a product comprising of actions that are political in nature like the logic that is flawless or findings of an empirical nature. This can be cited due to the fact that social decision is defined by the standards. As a matter of fact, standards levy pressure on restrictions and hence needs to be accepted by the parties those are affected. Acceptance can be in the nature of voluntary or both. Getting acceptance can be said to be a complex process that needs marketing skills in the political arena (Harrison Colle, 2010). The regulation of disclosure can be described as the result of the political game or pressure that resides between the managers and the standard-setter. In every period a status quo is present that stress upon the standard of the past period. The standard-setter develops a new proposal for a regulation and the managers are able to take a decision strategically whether to deny the proposal (Bence Nadine, 2007). When a huge denial is faced it leads to failure of the proposal. Hence, the standard setter loses the grab over the agenda and the selection of the new regulation is done by the approval that is maximized over the status quo. The main result that can be garnered from BHP is that the political accountability does not always produce a standard-setter towards the maximization of the welfare regulations. When the organization selects any option or chooses a particular disclosure it influences the ones who are interested in the organization. Accounting choices can provide better exposure to the organization and hence, this will help the related parties and the stakeholders to get a better view of the organization (Leisyte Westerheijden, 2014). Selection of the correct policies leads to strong decision-making. Disclosures enable various parties to know about the strategy and the line of action of the company thereby leading to a better grasp of the matter. Identification of key accounting policies The major risk that arises from the operations of the Group consists of market, liquidity and credit risk. Such risks are present in the normal course of business and the Group carries on the operations in tune with the portfolio risk management strategy. The main aim of the strategy is to cushion the financial target of the group while safeguarding the financial security and flexibility by taking benefit of the process of diversification that is given by the scale, diversity, and flexibility of the operations of the group. Market risk The movement of the activities of the group makes it vulnerable to the risk that is consisted in interest rates, foreign currencies and prices of the commodities. As per the strategy, the group seeks to attain financing costs, the impact of the currency and the prices of the commodity that happens at index basis. Such a strategy or plan gives way to the difference in earnings that is measured as per CFaR structure. Activity Risk management process Mitigation of risk Hedging for the aim of reduction of risk or capital projects should be executed to cushion the strategic aims. The transactions that are having approved mandates should be executed Hedging (economic) sales, operation costs, etc Measurement and reporting of the exposure that is present in the customer commodity contract. Hedging derivatives should be executed so that an alignment is attained with the exposure of the group. The transaction should be done with financial instruments to snap value from the market that is perceived over other valuations. Exposure should be managed within VaR and stop loss limit. Transactions that are approved must be executed. The accounting policies are in tune with the goals of the organization and consistent with the previous year performance. The recognition of revenue is done when the title passes. When it comes to the concept of sales then the sale agreement provides a better view and the title moves on the date of the bill of lading (BHP Billiton, 2015). For various sales when the delivery of the goods is done then the title passes and revenue is taken into consideration. The accounting policies consist of the consolidation of BHP Billiton Limited, BHP Billiton Plc, and other subsidiaries. Evaluation of accounting flexibility The major drivers of profit for the company are its mineral servers and other extracts that corresponds to its majority of inventory. Furthermore, it can also be witnessed from the financial statements of the company that its inventory value can be easily altered by the company professionals for the benefit of the management, thereby offering them accounting flexibility as a whole. Furthermore, since the value of the companys reserves is also measured in terms of net realizable value per unit, an estimate of the market value of the ultimate product depicts some kind of flexibility in the valuation of inventories. In simple words, this accounting flexibility is easily open for distortion because this can influence the statement of income of the company by decreasing its expenses and depicting increased amounts of EBITDA that can easily influence or misguide the investors. Therefore, the managers have higher chances of manipulating such accounting strategy to misguide the investors and gain benefits from the same (BHP Billiton, 2015). On a whole, it is important that such flexibility must be minimized to a greater extent as possible because investors do not want to be fooled because of such flexibility and suffer losses as a whole. Evaluation of accounting strategy The accounting policies followed by the BHP are in compliance with the UK companies Act 2006 and other applicable UK Generally Accepted Accounting practices. It needs to be noted that the norms for accounting policies are the same as that of the peer and the competitor. The historical cost convention is into practice and that is followed, as well as applied on a regular basis (BHP Billiton, 2015). Earnings management happen when the manager uses their judgment in the process of financial reporting and to structure the transactions so that financial reports can be altered to mislead the stakeholders regarding the economic performance that is underlying to affect the outcome that is reported. Therefore, managers should provide greater incentives when it comes to the process of management of earnings as it will lead to better practices and any negative influence in the reporting can be avoided. As per the annual report of BHP, it can be noted that the policies and estimates are used on a consistent basis. There is no deflection of the policies as compared to the previous years. The rationale for doing so is that consistent policies help in structuring the reporting process. Moreover, the organization that follows a consistent approach has strong performance and stakeholders are able to get a better view of the organization (Nobes Parker, 2010). It is seen from the BHP policies that the transaction adheres to the policies and regulations framed by the accounting bodies. Hence, the transactions are not structured to provide result rather it adheres to the policies of the accounting bodies. For example, the cash dividend paid by BHP Billiton Limited is in tune to the equivalent cash dividend by BHP Billiton Plc in regard to the share of BHP Billiton Plc (Xi Holly, 2016). Assessment of the disclosure quality It can be seen from the financial statements of the company that Generally Accepted Accounting Principles have been properly adhered to by the company. Besides, KPMG Australia has also given their unqualified opinion upon the consolidated financial statements of BHP Billiton. In addition, it can also be witnessed that there is no departure and the financial figures correctly reflect the true position and performance of the company (Lai et. al, 2013). Furthermore, in relation to proper details regarding the businesses of the company, the company in Note 1 to its financial statements has undertaken proper and adequate segment reporting. Besides, underlying EBIT that is the major financial measures, which can be utilized to supervise the financial performance of the companys overall strategy, is also disclosed under such segment reporting. Moreover, such business and group level information are disclosed by the company on a statutory basis based on the International Financial Reporting Standards 8 (Operating Segments) requirements (BHP Billiton, 2015). The management also believes that the information provided through segments can play a key role in offering meaningful signs of the underlying performance of the companys assets. Therefore, in relation to segment disclosure, the company has provided appropriate and relevant details that can assist a user in taking proper decisions. Besides, the company in segment reporting section and other financial statements also disclose various footnotes as well. Such footnotes assist in providing more brief details about the disclosures so that more meaningful decisions can be made. The financial statements of the company have efficiently disclosed all major accounting policies adopted by it and the same is effectively depicted with the help of footnotes (BHP Billiton, 2015). Hence, both segment disclosures and footnotes are adequate in nature that has assisted the company in enhancing its reporting quality. Besides, other seg ments of the performance of the company are also properly disclosed with the help of footnotes and segments. Considering the above-mentioned explanations and analysis, it can be said that BHP Billitons disclosure strategy is adequate in nature and it does not lag behind when it comes to the provision of proper information to assist the stakeholders in decision-making. Moreover, the methods of GAAP principles undertaken by the company also plays a key role in reflecting its key measures of success that serves as the most significant concern for determining the ability of the company. On a whole, all the accounting policies are consistently disclosed in the financials of the company and these are surely compatible in comparison to its current performance (Hanlon et. al, 2014). However, the identification of red flags may come up as a genuine concern for the users and therefore, corrective actions can be taken to mitigate such issues and steps must be taken to minimize accounting flexibility to the managers so that they do not take undue advantage of the same. Potential Red Flags The shares of BHP Billiton plunged to a seven-year low on account of falling prices of commodity and the impact of the Brazil dam disaster. The shares dropped 5.64% on the ASX to $21.42 that is the lowest since the happening of the global financial crisis as it was announced that the iron ore output might be reduced owing to the disaster. The gross profit of the company saw a decline from 2012 to 2016. This indicates that the company did not perform as per its potential. Further, the major lacuna or the red flag can be witnessed from the fact that it did not project any gain from the assets sale in the past years. This is one of the gray areas because the company sold the operations of the pinto valley that would have provided profits. However, no projection was made. This means that BHP tried to enhance the amount of EBIDTA (Lai et. al, 2013). Further, BHP enhanced its production and profits without taking strengthening the dam walls that were built to combat lesser waste volume (Farrer, 2015). The company completely failed to take a decision in this regard whereby a technical report issues in 2013 highlighted that the dam was not stable. The nature of BHP triggers many tax obligations that include corporation tax, royalties other resources and taxes of production based. The cross-border feature of the group leads to high complexities that are linked to the international transfer pricing (Farrer, 2015). The tax legislation even creates complexities that are highly specialized in nature and needs high-quality judgment that quantifies the provision or contingent liabilities. Compliance with the requirements of conceptual framework It can be seen from the annual reports of BHP Billiton that the company has effectively adhered to the Australian Accounting Standards within its framework and it has complied with other qualitative characteristics of a conceptual framework to enhance the quality of its financial information. Moreover, compliance with the requirements of the conceptual framework has assisted the company in sustaining a strong position in the market despite the prevalence of strong competitors in the market such as Rio Tinto. In relation to materiality aspects, the company has adequately addressed the same by providing material information to the users of financial statements so that they are able to make proper decisions. Besides, in order to address such aspect, the company has efficiently complied with the ASX Corporate Governance Principles and Recommendations within its framework. It also gives due consideration towards the provision of both financial and non-financial information as it believes that such details can allow users to make appropriate investment decisions (Hanlon et. al, 2014). Furthermore, in relation to faithful representation, it can be seen that the directors of the company ensure compliance with section 295A of the Corporations Act 2001 that they have disclosed every information truly and fairly. This means that based on the statement of directors, the financial information of the company presents a true and fair view of its operations. In relation to the fulfillment of relevance c oncept, the company has yet again adhered to the same by providing information associated with its greenhouse gas emissions that can altogether even influence its financial figures in a negative way. This assures the fact that the company gives due consideration towards the provision of information that even though can negatively affect its financials (Goodwin et. al, 2008). Further, for the compliance of reliability characteristic of the conceptual framework, the company has fulfilled the same by providing information that it is fully and entirely able to pay off all its debts in the future (as and when they become payable or due). With such assurance, investors can surely rely upon the financial figures of the company and thereafter, make relevant investment decisions from the same. The recent revision in the conceptual framework in order to address disparities in corporate reporting has also been taken into account by the company to enhance their reporting quality (Gibson, 2010). This recent revision is called the prudence concept of financial reporting. Nevertheless, in relation to BHP Billiton, it can be seen from its financial statements that its impairment events result in the write-down of the assets carrying value (Lapsley, 2012). The reason why this can be regarded as prudent in nature can be attributed to the fact that these can exceed the allotment of expenses of a non-current asset over its useful life. This plays a key role in highlighting various uncertainties related to future outcomes, thereby serving as a significant instrument or tool in attaining neutrality. On a whole, after analyzing these explanations, it can be easily stated that BHP Billiton is fully compliant with the requirements of the conceptual framework and it can, in turn, assist in enhancing its reporting quality and maximizing goodwill as a whole. Conclusion As per the discussion and the nature of activities of BHP Billiton it can be commented that the company follows the regulations and that the compliance is intact. The Group has effectively followed the conceptual framework and the regulations framed by the accounting bodies. The accounting strategy is in tune with the alignment of the performance of the organization. However, certain red flag is observed in the normal course of business by BHP that should have avoided as such activities deteriorate the performance and the goodwill. Owing to such activity, the shares of BHP plunged to a seven-year low. Overall, the company has high fundamentals that are evident by the performance and the trends in the past. References Bence, D Nadine, F (2012). The International Accounting Standards Boards Search for a General Purpose Accounting Model. Accessed September 23, 2017 from https://business.curtin.edu.au/files/bence-fry.pdf BHP Billiton. (2015). BHP Billiton Annual Report and accounts 2015. Accessed September 23, 2017 from https://www.bhpbilliton.com/~/media/bhp/documents/investors/annualreports/2015/bhpbillitonannualreport2015.pdf Brealey, R., Myers, S. Allen, F. (2011). Principles of corporate finance. New York: McGraw-Hill/Irwin. Connelley, Tripodi (2012) Aspects of leadership, Ethics, law and Spirituality, Marines Corps University Press Deegan, C. 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