• Internal Code :
  • Subject Code : ACC 20013
  • University : Swinburne University of Technology
  • Subject Name : Accounting and Finance

Evaluation of Financial Statements

Table of Contents

Executive Summary.

Introduction.

Background.

Wisetech Global Ltd.

Crown Resorts Ltd.

Axsesstoday Limited.

Evaluation.

References.

Executive Summary

Quintessentially accounting and financial reporting have become an essential norm in all enterprises across the globe. Moreover, the overall performance of a company and its financial health has become a primary concern to its stakeholders, investors, government, and the public. As a result, the need for preparing an annual financial report of a firm is inevitable. This is because the stakeholders can only keep tabs with the operations of a company, plan and assess its progress through the financial reports.

Therefore, this study sought to identify some of the disclosures of changes in the accounting estimates within various firms, the accounting policies adopted, and how errors are handled. The companies evaluated are Crown Resorts ltd, Wisetech Global ltd and Axsesstoday Ltd were considered in this analysis. Furthermore, it was realized that all the firms prepared their financial reports annually according to chapter 2M of the Corporation Act. Also, all the basic contents of financial reports were included meaning that the statements were a true and fair reflection of how the firms operated.

Introduction

Despite the frequent evolutions in the accounting standards, firms are expected to update themselves and operate within the amended sections. According to the Australian tax rule, the financial year of a company starts from the first of July to the thirtieth of June. Also, the International Financial Reporting Standards have been adopted by companies to uphold the transparency of their financial information with the shareholders. According to the Corporation Act 2001, all financial statements must be prepared on an annual basis and display the characteristics of materiality, aggregation, fair presentation, and accrual basis with no offsetting. Correspondingly, the evaluation of the financial statements of the three firms purposed to identify if all principles of financial reporting are met and also how they treated events after financial reports were made.

The financial statements typically have footnotes at the end which offer a detailed summary of the main policies of accounting adhered to by the department of accounting. The summary can either be at the beginning of the footnotes or within and as necessary they are all guided by the IFRS or GAAP principles. These accounting frameworks maintain that a company has to disclose its critical policies, their appropriateness, and how effective they are to the financial position of the firm (Li & Wang, 2017).

The reason behind the disclosure of the accounting policies it to make it clear in case the firm is operating using policies that are not in line with its industry. Through perusing the accounting policies the shareholders and investors get a clear picture of the possible effects of the accounting policies adopted to the financial results and position of a company. The accounting policy summary highlights the intangible assets, types of liabilities, capitalized costs, valuation of the inventory, receivables, and the recognition of revenue.

Again, the firms evaluated in this paper are listed on ASX. Moreover, for a firm to be listed on ASX it must meet the admission requirements in terms of structure, size, number of shareholders, and free float. The firm must have non-affiliated shareholders of up to 300 with holdings worth A$2,000 each, and a minimum of 20% free float (Nadeem et al. 2017).

Background

Wisetech Global Ltd

Wisetech Global Ltd is a public company which was founded by Richard White. The firm has its head office in Alexandria, New South Wales with over 1,800 employees around the world. It is listed in the Australian Securities Exchange (ASX) under the WTC code. The core business of this company is to provide software solutions to the logistics industry (WiseTech, 2018). It innovates, sells, and implements software solutions that make it possible for the logistics service providers to transport and store data as well as goods. Its cargo technology entails an integrated software used by the logistics industry to make certain that their clients conduct transactions related to logistics and their operations managed on a database. Wisetech Global Ltd is responsible for the operation of the data centers which are delivered in the form of cargos through the cloud and the services can also be accessed by the clients. The customers of WiseTech vary from multinational firms to small and middle-sized enterprises.

Despite having a solid organic growth in the technology platform the firm has also acquired twenty-two more logistics businesses. Acquisition of those entities is more likely to boost its functionality hence offer a stronger base for its growth Additionally, SaaS Transportation Inc, works as its subsidiary, in terms of providing solutions concerning the management of transport instead of truckload shipping. Besides, the firm offers an interoperable solution through messages which give room for the suppliers and clients to share information either from application to application or business to business managed transfer of files. WiseTech Global Ltd also offers a technical library that offers information related to the compliance of border and customs regulations (WiseTech, 2018). Apart from selling the software it also takes part in the training and maintenance services to its customers. WiseTech has a dividend reinvestment plan whereby all shareholders who are eligible are given an opportunity to reinvest all or part of their dividends to gain more shares of the firm.

Crown Resorts Ltd

Crown Resorts Limited is a locally owned public entity that is listed in the Australian Securities Exchange under the CWN code. This firm has its headquarter in Southbank Victoria with around 18,000 employees across all its branches. Crown has its operations in the Bahamas, U.K., U.S., and Australia which deal with the gaming and entertainment sectors. The main business and investments of this firm are aligned to the field of resorts (Crown Resorts, 2018). It operates several integrated resorts such as the Crown Melbourne Entertainment Complex, Crown Aspinalls casino along with the Crown Perth Entertainment Complex. Notably, Crown Melbourne is a high-class resort, which also entails hotels, a casino, function rooms, shopping centers, restaurants, and entertainment facilities. Likewise, the Crown Perth is also made up of a convention center, casino, international hotels, and food and beverage outlets. Besides its main branches, it has investments in the Nobu restaurant, DGN games LLC, Chill gaming, and Jersey limited.

Currently, the portfolio of Crown entails valuable tourism assets in Australia due to its continuous investments in the region. Crown Melbourne is one of the leading integrated resorts in Australia which has been granted a license of operating 2, 628 gaming machines as well as 540 gaming tables. Some of the major goals of the firm involve upgrading Crown digital such that online social gaming and wagering can be available to its clients. Secondly, they aim at developing a solution to how its Queensbridge project will be financed and lastly deliver its Sydney project promptly. By the thirtieth of June 2018, Crown reported a net profit of $386.8Million after taxation which was a significant milestone in its business operations (Crown Resort, 2018). The commitment of the firm in terms of the provision of skills-based and leadership pieces of training has enabled it to win twice the Gold winner for Tourism Education and Training.

Axsesstoday Limited

Axsesstoday is a growing firm in Australia that has focused on the provision of finance to both small and medium-sized businesses. It finances enterprises for essential equipment in almost all sectors ranging from transport, hospitality, technology, and other crucial business equipment such as solar panels and technology equipment. In addition, they offer funds to eligible clients for research and development. In September 2018, the board of directors of the firm announced that the firm was likely to halt its trading activities but instead it went into a voluntary suspension (Axsesstoday, 2018). This was due to the discovery of breaches in its syndicated facility agreement. For a larger part of 2018, the firm has been in voluntary suspension as it tried to work with its lenders to amend certain issues and also be offered waivers in the lending agreements. The process of reviewing has engaged a granular analysis that will make sure that all the previous breaches are identified and rectified in the subsequent operations of the firm.

After the review process, Axsesstoday along with its auditors found it essential to reinstate its 2018 financial statements because the breaches of the lending had been identified. Currently, the interpretation of the lending agreements has taken a revised and conservative approach. The breaches identified included the re-measurement of borrowings, classification of borrowings as current liabilities, recognition of a provision against unreconciled receivables differences, and the discontinuation of hedge accounting on the swaps related to bank loan interest rates (Axsesstoday, 2018). Correspondingly the tax effect of all those items led to the adjustment in the deferred liabilities in tax, the current tax receivables, and the income tax expenses. However, it is vital for the short term capital management plan to ensure that there is enough equity capital that will back up the firm and recapitalize its financial statement.

Evaluation

Accounting policies refer to the specific principles that a firm uses when preparing its financial statements. The main principles of accounting include the revenue recognition principle, matching principle, historical cost principle, objectivity principle, and the full disclosure principle. The revenue recognition principle focuses on the revenue recognized in the financial statement. The matching principle stipulated that the expenses incurred in a financial year ought to be matched with the revenues thus adjustments have to be made. The historical cost principle states that if no payments are made during the acquisition of an asset, then it should not be recorded as an asset. The objectivity principle is concerned with the verification of data, it states that all transactions which are recorded must have enough supporting evidence. Lastly, the full disclosure principle maintains that financial statements ought to convey all the necessary information without concealing anything.

 In relation to the accounting policies and principles, all three firms have adhered to the stipulated guidelines. From the financial statements, it is clear that information related to revenues is shared, the expenses incurred by the firms, and adjustments are also indicated. To be specific, the financial statement of Crown has adopted all the accounting policies because there is a signature of its executive chairman, there are footnotes at the end of the financial statement which elaborates on the policies adopted and there is a balance in terms of income and expenses. Besides, the adjustments made in the financial statement have been well explained. WiseTech Global ltd, on the other hand, also has abided by the accounting policies and there is a match in terms of incomes and expenses, revenue is well stipulated, and adjustments are also explained. Besides, it also explains the calculation of the earnings per share, dividends, intangible assets, and the current and deferred taxes.

Lastly, Axsesstoday ltd has presented verifiable information in terms of what they encountered during that financial year, explanations are made and adjustments also are done to ensure that there is a match of both sides of the financial statement. This implies that all the aforementioned policies have been adopted by the three firms.

The disclosure of changes in the accounting policies and estimates is only visible in the financial statement of Axsesstoday Ltd. The reason for the disclosure is also explained as required by the Corporation Act of 2001. The firm had issues due to the breach of the syndicated facility agreement. The breaches were identified and this leads to the adjustment of the financial statements. By making the information known to the investors and shareholders through the financial statement is an adherence to the policies of accounting. Additionally, any errors identified in the financial statements were resolved through adjustment this was done so to ensure that the matching principle is observed.

The events after the reporting period were treated differently in all the financial statements. WiseTech Global ltd through its directors declared a fully franked final dividend of 1.65 cents per share which was to be recognized in the next financial statement. After the reporting period of Axsesstoday, they focus on working on the short term capital management to make sure that the firm raises additional equity. It also gives an assurance of future communication concerning its progress in the market. Lastly, Crown stated its intention of undertaking a new on market share buy-back of around $400 million shares. A review of the recommendations made from the financial statements was also done. The role of materiality when preparing the financial statements is to ensure that the financial information that is likely to impact the decisions made by the investors is captured.

The information offered in the financial statements presents critical data concerning the financial health of a firm. Thus, making the financial statements an essential part of the decision-making process of shareholders and prospective investors on whether they should finance the firm or take part in its expansion projects. Besides, it also looks into the marketing decisions thereby offering information about the operations of the firm that offer an excellent return on investment. According to the team, they agree with the policies and estimates adopted, along with the treatment of errors and events after the reporting period as undertaken by the firms under evaluation. Ultimately, the information provided strengthens the usefulness of the financial statements because the presented data can affect the decisions of its users. 

References

Axsesstoday. ASX Announcements & Media Release.2018. Retrieved from https://axsesstodaylimited.com.au/assets/site/Reissued-Financial-Statements-and-Update.pdf

Corporations Act 2001. Retrieved from www.comlaw.gov.au

Crown Resort. Annual Report.2018. Retrieved from https://www.crownresorts.com.au/CrownResorts/files/81/817f60e1-b1ef-46e4-b687-7b60140c0578.pdf

Li, S., Sougiannis, T., and Wang, I.L., 2017. Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future Earnings and Cash Flows,(April 2017).

Nadeem, M., Zaman, R., and Saleem, I., 2017. Boardroom gender diversity and corporate sustainability practices: Evidence from Australian Securities Exchange-listed firms. Journal of Cleaner Production, 149, pp.874-885.

WiseTech Global Limited. 2018. Retrieved from https://www.asx.com.au/asxpdf/20180822/pdf/43xjzgd35kdqbg.pdf

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