Critically evaluate whether the decision of Vale’s management to make a provision of US$ 1 billion was ‘good’ for the users (financial and non-financial users) of the financial accounts. Include in your evaluation, references from relevant accounting regulation (both standards and the conceptual framework) and an ethical evaluation of the impact of this decision.

please just answer question number 2 the word limit for it is
just 500 words but it is fin to writ around 300 words the sace
study relate to Corporate Accounting unit. the book required
or you can use it as reference is:

Loftus, J., Leo, K., Daniliuc, S., Boys, N., Luke, B., Ang, H., & Byrnes, K. (2020). Financial reporting in Australia (3rd ed.). Milton: John Wiley & Sons Australia.

CORPORATE ACCOUNTING

  • Please read the unit outline for general guidance.
  • Only use a Word document or compatible application using the file extension (.doc or

docx). Please do not copy texts as figures.

  • This is a report document. The basic report format is cover page, table of content, page

numbers and headings.

  • Referencing style is APA format which includes the reference list, citation, etc.
  • Discussion question requires you to provide evidence that support your arguments

o Primary sources of evidence: journal articles, accounting standards and other regulatory documents.

o Secondary sources of evidence: reports, websites, your experience.

Note that we encourage the use of at least one primary source. The secondary sources are complementary to your arguments.

Question 1 (15 marks)

BHP Billiton and its partner Vale do Rio Doce (‘Vale’) have a joint venture in Brazil called Samarco. Each company owns 50% of the mine (Samarco). Samarco was set up to explore for minerals in Brumadinho, Minas Gerais, Brazil. During this exploration, a dam collapsed and killed more than 300 people in 2015 (Timm-Garcia, Darlington, & Castelli, 2021; Herbert, 2021). Assume since the collapse, this joint venture has paid US$ 2 billion in total, distributing in 2016 (US$ 300 million), 2017 (US$ 1.2 billion), and 2018 (US$ 500 million). On 4 February 2021, Vale agreed to pay US$7 billion in compensation after many years of negotiation with the Brazilian authorities. In addition, Vale provisioned an amount of US$1 billion in compensation to be paid in the financial year ending in 2021. Assume managers of Vale discussed the amount of the provision with their accounting departments and a consulting firm that you work for during early 2022. The consulting firm and the accountants believed that the amount of US$ 1 billion was not conservative, suggesting rather, that a provision of US$ 7.5 billion should be made. The managers decided for the ‘good of our shareholders, that they we will make a provision of US$ 1 billion’.

Required:

Critically evaluate whether the decision of Vale’s management to make a provision of US$ 1 billion was ‘good’ for the users (financial and non-financial users) of the financial accounts. Include in your evaluation, references from relevant accounting regulation (both standards and the conceptual framework) and an ethical evaluation of the impact of this decision.

REFERENCE

Herbert, W. (2021, 14 February). Brazilian mining’s disaster: The Brumadinho Dam collapse two years on. Bright Green. Retrieved from https://bright-green.org/2021/02/14/brazilian-minings-disaster-the-brumadinho- dam-collapse-two-years-on/

Timm-Garcia, J., Darlington, S., & Castelli, A. (2021, February, 5). Vale will pay nearly $7 billion over Brazilian dam collapse that killed 270 people. CNN Business. Retrieved from https://edition.cnn.com/2021/02/05/business/brazil-vale-brumadinho-settlement-intl-hnk/index.html

Youtube videos on the disaster

  • https://www.youtube.com/watch?v=SRAHIUrA_SI&t
  • https://www.youtube.com/watch?v=F5hsNj6u-mA
  • https://www.youtube.com/watch?v=k0PWRiEWMTY
  • https://www.youtube.com/watch?v=3vxoHDnRKfo
  • https://www.youtube.com/watch?v=CkwJup28l2Q
    Note this is a discussion question. The word-limit for this question is 1,000 words.
CriterionWeight
Appropriate use of literature (minimum 2)30%
Relevant use of evidence to support your arguments30%
Concise and clear conclusion15%
Appropriate use of referencing style5%

Question 2 (10 marks)

In 2021, Vale do Rio Doce Ltd. had a financial crisis which forced them to make drastic decisions to reduce their operating costs. Vale owned a machine which was important for generating income. However, BHP Billiton could not find a similar machine on the market. Due to their strong relationship, Vale do Rio Doce Ltd. decided to lease their machine to BHP Billiton. On 30 June 2022, BHP Billiton Ltd. leased the machine from Vale do Rio Doce Ltd. The finance lease agreement contained the following provisions:

Lease term4 years
            Annual rental payment, in advance on 30 June each year (starting at 30/06/2022)$43,400
Estimated useful life of asset5 years
Estimated residual value of machine at end of lease term$12,000
Residual value guarantee by lessee$9,000
Interest rate implicit in the lease9%

The lease is cancellable, but only with the permission from the lessor. Included in the annual rental payment is an amount of $1,340 to cover the costs of maintenance and insurance paid for by the lessor. BHP Billiton Ltd. intends to return the machine to the Vale do Rio Doce Ltd.

Required:

  1. Calculate the lease liability and the right-to-use asset.
  2. Prepare the lease schedules for the lessee.
  3. Prepare the journal entries of the lessee on 30 June 2023.
  4. Assume that during this lease agreement, Vale do Rio Doce Ltd. has reduced profit

by $150,000. Critically evaluate whether the decision to lease this machine was good for Vale do Rio Doce Ltd. In your evaluation, consider the meaning of the ‘strong relationship’ and the impact on financial and non-financial users. (5 marks)

Note this is a discussion question. The word-limit for this question is 500 words.

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