You work for a mining entity which is about to commence exploration in a remote area of the Northern Territory. You have been asked to assist the mining entity to manage its stakeholders to ensure the exploration permit is approved and there is no negative publicity associated with the operation. You are to identify the various stakeholders the mining entity needs to consider and identify the issues each might be concerned with. In your answer you should identify whether these issues are potentially costs or benefits to the organisation.

A company has a copper mine in South Africa. It purchased the mining rights ten years ago for $20 million and has been operating the mine for the past ten years. It is estimated that there are about 8 million tons of copper in the mine. Because of a fall in world copper prices, the company has closed the mine indefinitely. At current world copper prices, the mine is uneconomic because the costs involved in extracting the copper are greater than the selling price. As the mine is in a remote and unpopulated areas there is no alternate use and it would not be able to be sold. If copper prices rise by more than 25 per cent, the company has stated that the mine would be reopened. In the foreseeable future (next 10 years or so) it is estimated there is a 20% probability that copper prices will rise sufficiently for extraction to be profitable.

Explain whether this mine would meet the definition and recognition criteria of an asset, applying the principles in:

the Conceptual Framework

the Proposed Framework.

Bonus plans are used to reduce agency problems that exist between managers and shareholders. Discuss two (2) of these problems specific to the relationship between shareholders and managers and identify how bonus plans can be used to reduce the agency problems you have identified. In your answer you should provide examples of specific components that should be added to a bonus contract to address the issues identified.