BLUESCOPE STEEL
Purpose of this report is to analyze an annual report of a company which is listed on Australian Securities Exchange and to research on the nature of its disclosure documents and how they practicing accounting standards.
I have chosen to analyze the 2011 annual report of BlueScope Steel Ltd.BlueScope Steel is a leading supplier of premium metallic coated and painted steel building products, and one of the world’s largest manufacturers of pre-engineered steel buildings. It is a company limited by shares incorporated in Australia whose shares are publicly traded on Australian Securities Exchange. The registered office of the company is located on Level11, 120 Collins Street, Melbourne Victoria. The modern BlueScope Steel Limited has evolved from the coming together of three pioneer companies in the Australian steel industry (The Broken Hill Proprietary Company Limited, John Lysate (Australia) Pty Ltd and Australian Iron & Steel Limited). BlueScope Steel Limited (formerly known as BHP Steel) was listed on the Australian Stock Exchange on 15 July 2002. Since the public listing, BlueScope Steel has expanded further in to Asia with the development of new plants in China, Indonesia, Thailand and Vietnam. At present, the business operates in 17 countries around the world with about 18,000 employees. The company adopted its new name of BlueScope Steel in November 2003.
Firstly Ill develop a list of disclosures in the report and will identify whether they are mandatory or voluntary. Also there will be an analysis of how the company complies with its related AASBs (Australian Accounting Standard Broad).
Section 295 of the Corporations Act 2011 states a number of mandatory disclosure requirements as to be included in the annual report.
According to Corporations Act 2001, Contents of a annual financial report are:-
(1) The.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_report”>financial report for a.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_year”>financial year consists of:
§ The .austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_statements”>financial statements for the year
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash flows
§ The notes to the.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_statements”>financial.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_statements”>statements
Disclosures required by.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1363.html#the_regulations”>the.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1363.html#the_regulations”>regulations
Notes required by the.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#accounting_standard”>accounting.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#accounting_standard”>standards
Any other.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#information”>information necessary to give a true and fair view
§ The .austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director”>directors’ declaration about the statements and notes.
(2) Annual Directors Report
(3) Auditors Report
.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s295.html”>http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s295.html
Ive compared above model with BlueScope Steels annual disclosure index to identify each disclosure as mandatory or voluntary.
Table of contents in BlueScope steel annual report 2011: –
§ Directors Report (Mandatory)
Director’s Report is a mandatory disclosure, which must be disclosed to the public as an important source of public information. Principle activities, Significant changes in state of affairs, Matters subsequent to the year ended 30 June 2011, Likely developments and expected result, Group review, Review and results of operations, Dividends and Underlying earnings are some of the important information that board of directors at BlueScope disclose to the public.
§ Directors Biographies (Voluntary)
This is a non-mandatory report, which reveals the composition of director board and particulars of each directors skills, experiences, expertise and special responsibilities.
§ Remuneration Summary – Unaudited (Voluntary)
Remuneration summary is a voluntary disclosure, which mentions about the key remuneration decisions taken by board of directors during the year. This section also highlights about BlueScope share holding policy.
BlueScopes approach to remuneration strategy is to support the delivery of long-term shareholder returns and to ensure executive rewards reflect achievements during the year. As a company undergoing structural change, it is important that the remuneration practices enable the Company to retain and motivate its executive talent in a different business environment.
§ Remuneration Report – Audited (Mandatory)
According to section 300 of Corporations Act, its compulsory that the.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director”>directors’ report for a.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_year”>financial.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#financial_year”>year must include details of:
(a) Dividends or distributions paid to.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#member”>members during the year
(b) Dividends or distributions recommended or declared for payment to.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#member”>members, but not paid, during the year
(c) The name of each.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s761a.html#person”>person who has been a.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director”>director of the.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#company”>company,.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1276.html#registered”>registered scheme or.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#disclosing_entity”>disclosing entity at any time during or since the end of the year and the period for which they were a.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director”>director
The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2011. The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. This Remuneration Report forms part of the Directors Report.
Structure of this report
1. Remuneration and Organization Committee?
2. Non-Executive Directors Remuneration?
3. Remuneration Policies and Structure?
4. Relationship between Company Performance and Remuneration
5. Specific Remuneration Details
Superannuation?
BlueScope Steel operates superannuation funds in Australia, New Zealand and North America for its employees. In these locations there is a combination of defined benefit and defined contribution type plans. The defined benefit schemes are closed to new members. Contributions are also made to other international retirement benefit plans for employees outside of Australia, New Zealand and North America.
.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s300.html”>http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s300.html
As per the act, BlueScope steel discloses its remuneration report with information about; Remuneration and organization committee, Non executive directors remuneration, Remuneration policy and structure, Relationship between company performance and remuneration, etc.
§ Corporate Governance Statement (Voluntary)
This is a voluntary disclosure to reflect BlueScope steels compliance with ASX corporate governance principles and recommendations.
§ Statement of Comprehensive Income (Mandatory)
One of the mainmandatory reporting requirements. Also referred to as Profit and Loss statement. Reports on a company’s income, expenses, and profits over a period of time.Statement of Comprehensive Income provides information on the operation of the entity including sale and the various expenses incurred during the financial period.
§ Statement of Financial Position (Mandatory)
Mandatory report, which can also be referred as balance sheet illustrates.wikipedia.org/wiki/Asset” title=”Asset”>assets, .wikipedia.org/wiki/Legal_liability” title=”Legal liability”>liabilities, and.wikipedia.org/wiki/Ownership_equity” title=”Ownership equity”>ownership equity of a company at a given point in time.
§ Statement of Changes in Equity (Mandatory)
Mandatory disclosure, which explains the changes of the company’s equity throughout the reporting period.
§ Statement of Cash flows (Mandatory)
Mandatory report, which gives a measure of total cash flows from all operating, financial and investing events of entity for a financial year.
§ Notes to the Consolidated Financial Statements (Mandatory)
Gives a summary on basis of preparation of concise financial report and some important corporate information. Additional notes added to the end of the.wikipedia.org/wiki/Financial_statement” title=”Financial statement”>financial statements to supplement the reader with more information to understand financial statements.
§ Directors Declaration (Mandatory)
A mandatory disclosure declaring by directors of the company mentioning their opinions, reasonable grounds to believe that the entity.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s601raa.html#will”>will be able to pay its debts as and when they become due, payable and etc. In BlueScopes directors declaration has signed by chairman, G.J.Kraehe and Managing director P.F.O.Malley.
§ Independent Auditors Report to the Members (Mandatory)
BlueScopes annual reports has audited by Ernst and Young auditors and have come to an opinion of that the Remuneration report the entity complies with section 300 of Corporations Act 2011.
§ Shareholder Information (Voluntary)
This is a voluntary report. Contains information about share distribution schedule, twenty largest registered shareholders and voting rights for ordinary shareholders.
§ Corporate Directory (Voluntary)
Voluntary disclosure with a list of executive and non-executive directors. Also gives information about entitys registered office, auditor information and share registrar.
DIVIDENDS
BlueScope Steel paid a fully franked dividend for the year ended 30 June 2010 of 5 cents per share in October 2010 and a fully franked interim dividend of 2 cents per share in April 2011 to its shareholders.
In view of the financial performance of the Company in the second half of the year ended 30 June 2011 the Directors determined not to pay a final dividend for the year ended 30 June 2011.
Further Fixed Cost Reductions
In 2011, the Company has been able to achieve a further $38 million in fixed cost reductions, whilst successfully maintaining the cumulative savings of $696 million ($340 million in permanent savings and $356 million in temporary savings), based on FY2008 base levels.
Cost reductions remain an ongoing focus for the business and we expect further improvements, once the BANZ restructure and the implementation of todays announcement are completed.
CORPORATE GOVERNANCE STATEMENT
As a global organization with businesses operating in many countries, the BlueScope Steel Group must comply with a range of legal, regulatory and governance requirements.
The Board places great importance on the proper governance of the Group.
The Board operates in accordance with a set of corporate governance principles that take into account relevant best practice recommendations. These include the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council.
The Company complies with each of the recommendations in the ASX Principles and Recommendations. A summary of BlueScope Steel’s compliance with the recommendations follows, including details of specific disclosures required by a recommendation.
ü Lay solid foundations for management and oversight
ü Structure the Board to add value
ü Promote ethical and responsible decision-making
ü Safeguard integrity in financial reporting
ü Make timely and balanced disclosure
ü Respect the rights of shareholders
ü Recognize and manage risk
ü Remunerate fairly and responsibly
BlueScope Annual report states that the full finance report is based complies with Australian accounting standards issued by the Australian accounting standard board (AASB) and International financing reporting standards (IFRS) issued by the International accounting standards board (IASB). They also declare that the concise financial report has been prepared in accordance with Corporations Act 2011 and accounting standard 1039 (Financial reports). The figures of finance report have been rounded off to nearest hundred thousand dollars, according to the class order 96/100 issued by Australian securities and investment commission (ASIC).
As a part of this assignment, Ill be analyzing two accounting areas to clarify how this entity complies with their relevant AASBs; Property, plant and equipment (AASB 116), Intangible assets (AASB 138).
AASB 116 – Property, plant and equipment
The main requirements of AASB 116 are:
– Property, plant and equipment must initially be measured at its cost.
– Property, plant and equipment can be measured at either cost or fair value after initial measurement.
– Where property, plant and equipment is acquired at no or nominal cost by a not for profit entity, the cost is its fair value as at the date of acquisition.
– Revaluations are required to be performed at the same time for all property, plant and equipment in the same class.
– Revaluation increments or decrements relating to property, plant and equipment held by a not for profit entity can be offset against a revaluation reserve for a class of similar assets.
– Revaluation increments or decrements relating to property, plant and equipment held by a for-profit entity can be offset against a revaluation reserve for that asset, not against a class of assets.
– Property, plant and equipment shall be misrecognized on disposal or when no future economic benefits are expected from its use or disposal.
(.aasb.com.au/”>www.aasb.com.au)
When focusing on BlueScopes Statement of financial position, as at 30 June 2011, its clear that they have recognized Property, plant and equipment as a class of assets which possibly giving future economic benefits and their costs can be measured reliably. They have initially recognized Property, plant and equipment at its original cost on 2010 and then accounted with a lesser value on 2011, which can be assumed as a fair value. And theirimpairment losses have been recognised and reversed in the statement of comprehensive income in accordance with AASB 136.
E.g. Reversal of Impairment loss: – In March 2010, Packaging products recognised an impairment reversal for $5.6M against property, plant and equipment after securing a contract for the sale of previously impaired No.2 Temper Mill (Notes 6. Annual report 2011, BlueScope Steel Ltd)
Another important disclosure requirement in AASB116 is that thefinancial statements should reveal reconciliation for each class of property, plant and equipment of their carrying amounts at the beginning and end of the period showing the net exchange differences arising on the translation of the financial statements from the functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity. BlueScope Steel Ltd complies with this requirement by recognising Exchange differences on translation of foreign affairs as an expense for year 2011 and as an income for year 2010.
AASB 138 Intangible Assets
The Australian Accounting Standards Board developed AASB 138 Intangible Assets under section 334 of Corporations Act 2001 on 15 July 2004. This compiled version of AASB 138 applies to annual reporting periods beginning on or after 1 July 2009.
In general, an entity shall disclose the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets:
– Whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used
– The amortisation methods used for intangible assets with finite useful lives
– The gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period
– The line item(s) of the statement of comprehensive income in which any amortisation of intangible assets is included
– A reconciliation of the carrying amount at the beginning and end of the period.
(.aasb.com.au/”>www.aasb.com.au)
In BlueScopes statement of comprehensive income, they have recognized Depreciation and Amortization as a single item for the accounting period. They havent mentioned anything aboutamortisation methods used for intangible assets and about finite useful lives. Also theres no list of intangible items given on the statement of comprehensive income. It doesnt seem like the entity following much of AASB 138.
References:-
– www.bluescopesteel.com
– .aasb.com.au/”>www.aasb.com.au
– .austlii.edu.au/”>www.austlii.edu.au
– .bluescopesteel.com/index.html”>http://annualreport2011.bluescopesteel.com/index.html
– The wall street journal
– Deal Journal Australia.
– Australian Journal of Mechanical Engineering, Vol. 6, No. 2, 2008
