ACCTT11081 – Introductory Financial Accounting

Assignment One: Step Three - Six

Chrystal Gerard 12097784

Life by the Numbers with Chrys

STEP 3The company I was assigned for this unit is called Geberit. At first I was thinking ‘who is this

company?” and after doing a bit of research I have found them to be very interesting. Founded in

Switzerland in 1874 by Caspar Melchior

Albert Gerbert (1850-1909) as a

plumbing business, it has since grown

and progressed to providing world

class sanitary technology and

bathroom ceramics on an international

scale. Their key markets are focused in

the European sector but they also have

suppliers in other countries, including Australia. The opening of the first plumbing business

(Geberit, 2019)

Their main company webpage details that of the 29 production facilities, 6 of these are based in

overseas markets. Whilst their head office is based in Switzerland, they employ around 12,000

employees worldwide. In 1999 the company was listed on the Swiss Stock Exchange (SIX) and has

been included in the Swiss Market Index (SMI) since 2012 (Geberit AG, 2019).

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So what do they actually do? They are a capital goods supplier; designing and producing bathroom

goods, ceramics, sanitary facilities (showers, toilets etc.) and plumbing design such as valves and

wastewater management techniques. I found it really interesting that in both their annual reports

and on their website they heavily promote their goals of increasing technology and being a leader in

their field, as well as being environmentally and socially responsible.

Their market is interesting as it is focussed at both individual people as well as investors and trade

sectors and wholesalers. In their annual report they list their current key market focus as being to

build upon their influence in Germany, Switzerland and Austria. They have identified the current

market slump in SIX and cite this is a key issue they are attempting to address by improving

marketing, design and development, and coordination of warehousing and transportation

techniques.

Key points I have noted down whilst reading the annual report:

In the last three years annual report the earnings per share and dividends per share and

increased each year. This starts to make me think that they must have been making a profit

for this to have occurred in these years.

Since they specifically state a general number of employees in both their website and

reports they have steadily employed 11,600-11,700 employees on an international basis

within this time also. Considering the expansion and takeover of company Sanitec in 2015 it

will be interesting to see how this affects they profit or loss turnover. Upon examining the

2016 Financials it was clear to see that this acquisition of Sanitec was a well-planned

strategic move; not only did they take over a competitor, but they also still managed to turn

a profit from a total CI in 2015 of being 268.2 MCHF to 512.6 MCHF in 2016. I compared

these figures to that of Katrina Frederickson, as in her company introduction on her blog she

commented on the expansion and acquisition of her company Galaxy Entertainment Group.

They also managed to turn a significant revenue profit after expansion. Clearly both of these

companies have well thought out these purchases before acquisition.

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Galaxy Entertainment Group Revenue 2014-2018

Geberit Revenue 2015-2016

In 2017 they had less investments in Capital but more free cash flow; this could be from the

closure and sale of ceramic plants in France. Also within this year they experienced an

increase in assets and investment which I found contradictory given they had also closed an

operating plant.

On a side note, I do note that the most part of their senior management/leadership team

are male oriented. I am not sure if this is a ‘norm’ in European countries, or if it is a belief

integrated into the company psyche.

Their annual reports are stated in ‘MCHF’. At first I had no clue what this actually meant but

after searching and checking out the Swiss Stock Exchange I established CHF to mean Swiss

Francs and a fellow student Stuart Hentschke commented on my blog:

‘I noticed that Geberit displays results in mchf, which I didn’t understand.

The notes in section 1 was listed that “The term “MCHF” in these

consolidated financial statements refers to millions of Swiss francs.” This

now makes sense’. ‘

This really helped me to understand also!

I found it thought-provoking how each company’s annual reports are set out with a similar design

(marketing material, statements from CEOS, financials, and notes) yet each are still slightly different

in their set out. For example, Geberit have their Comprehensive financials in the middle of the report

and yet have a Balance Sheet and separate Income Statement at the back. I am not sure why this is,

possibly a breakdown for a subsidiary company? This is very different to Harvey Norman’s Financials

I studied in 11059. Stuart commented in our email discussion that he also found his financials to be

laid out differently between his company GKN and his previous company Incitec Pivot:

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“When I compared this to my company Incitec Pivot from ACCT11059, I

found they were presented differently as Incitec Pivot combined their

income statement and statement of comprehensive income and called

them Consolidated Statement of Profit or Loss and Other Comprehensive

Income.”

I can see why Maria stressed in the videos the importance of getting to know your individual

companies Financials!

One thing I struggled to find for Geberit Group was independent interviews about their organisation.

They have a dedicated YouTube channel and supply Video’s and downloadable materials on their

website. But many YouTube clips I found were not in English unfortunately! They do have lots of

promotional materials and clips showing demonstrations in trade shows and interviews with

designers.

Being an external student it can be somewhat difficult to connect with other students to discuss and

compare companies. I have found that I have commented on blogs and the owners haven’t

responded and so next reached out on the Facebook site. This is how I started email discussion with

Stuart. And whilst our companies are significantly different, it was helpful to get other people’s

understandings (for example the currency) to gain a deeper understanding yourself. I had

commented to Stuart that I was apprehensive about the currency change as in 11059 I was lucky

enough to have a company in AUD. Looking at Katarina’s financials (specifically the revenue for the

periods of expansion) was good as I was also able to compare this to a time of acquisition for Geberit

Group.

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STEP 4Originally when I looked at this step I thought this would be great! I will do 3-6 months and get a

really good idea about out finances….until I downloaded the statements for these periods. Yep,

no….5 accounts for an extended period would take way too long to code like this! So I decided to

stick to November 2019, sticking closely as possible to accurate transactions to get an idea of where

our money was going.

I definitely underestimated just how long this was going to take me to complete, it is amazing just

how much easier it is using a computerised software when you have multiple transactions to code!

This cash basis task is so similar to what I do at work (data entry from source documents such as

bank statements and coding), that developing and using a chart of accounts was not a new

experience for me. Although, the one thing I am not sure if I have done correctly is the internal

transfers between accounts. I have tried to ensure that I have coded the transfer to the same

account so they effectively negate each other out, as this is what I would do at work. We have a

specific code set up in clients’ chart of accounts for these types of transactions (either a 0999 or

0998 code); this way you can code all internal transfers to this account and they will effectively

cancel each other out and you can ensure that you have coded it correctly and to keep track of

multiple transfers such as this.

Personally I doubt I will keep doing this task, I really don’t have the time to sit down each month

and complete coding in this manner, it would be far easier on a computerised program. I was

however able to compare this to my forecasted budget that I do try to keep on top of every couple

of months so that no large bills arrive unexpectedly (such as registration and rates payments), and

identify which areas in which we were spending the most money each month.

I used the example chart of accounts in the assessment as a starting point and but wanted to tailor

it to the information that I wanted to actually know, which is exactly what you would do for each

client, depending on their business. I stuck to Revenue as 1, Expenses as 2, Assets as 3, Liabilities as

4, Equity as 5 as this is the same layout we use at work which is familiar to me.

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I specifically chose to keep the general living

expenses code as I knew this would be a big

spending area for us. I kept most of the

expenses to aspects that I knew would be

consistent so I could identify potential areas

in which I could aim at possibly reducing in

the future. I knew we had a lot of liabilities

(even though most are relatively small) but

recording them in this way really hit home

and I will definitely have to eliminate a few!

Potentially I could break down the general

living expenses code and car expenses to

show exactly where and what money was

being spent on. I could also split out the

interest paid into the separate liability

accounts to get a clearer understanding as to

what this is costing on a monthly, semi-

annual and annual basis. It would be

interesting to redo this next year when our

son begins school as this would lower day

care fees significantly.

I was actually surprised to find that we came out with a profit in November (certainly didn’t feel like

it), especially give we drove 440 kms to Perth and back and did some Christmas shopping whilst we

were there! Most of this trip was coded to the expenses- other account as it isn’t a regular habit to

spend this money. I did have a slight panic attack when I saw the interest pad expense tough, until I

realised this includes the interest on our mortgage account!

It has been useful doing this activity, I have always wondered what my own accounts look would

like it entered and coded out. Or expenses for the month made up of 77.56% of our income and we

had 22.44% of overall income left over as profit. We were lucky last month that we sold an item

and this contributed to 20% of our monthly income, without this income boost we still would have

made a profit but it would have been significantly lower.

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We pay items such as Income Protection, House Insurance and Car Insurance on a monthly basis; if

we were to pay this annually it would be effective to use the accrual method over the cash method

as you would be able to spread the cost over a 12 month period. The same applies to items such as

Car Registration (which ironically I paid in December), cash accounting would account for these

expenses when cash changes hands/is received, in this case when you pay the bill. Whereas the

accrual method would allow you to account for an expense in one period and pay for it in another.

So if you were to receive an account in June, you could account for it in that financial year but

actually pay for it in the next. It also applies to revenues received, if someone is to earn profits in

June but not receive the money until July they are able to use the accrual method to claim in the

previous financial year. This potentially could improve your profit or lower your loss depending on

the needs of the business.

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STEP 5The Balance sheet in this step was relatively easy to complete. I made sure to complete step

balances along the side of the table to ensure that my checks were totalling those on the heading

totals (assets and liabilities) and that the fundamental accounting equation balanced correctly,

ASSETS = LIABILITIES + EQUITY. I was lucky as on this statement there was only one line in equity

‘Cumulative translation adjustments’ that was a negative balance.

Geberit’s income statements were slightly different to that of Wesfarmers in Maria’s videos and

really required me to really understand how they were being presented. Rather than being in

brackets demonstrating a negative value Geberit’s are set out as positive figures and I really had to

ensure that I understood what items were representing. For example the below is a snapshot of

some of the expenses in the Consolidated Income Statements, you can see that figures are not

represented as negative amounts but they are clearly expenses.

So just as in 11059, I went through and classified each item as a revenue or expense and if I was not

sure I turned to the notes section to gain clarification.

I also made sure that each section totalled the heading and subheading totals as this was a little

more difficult to complete! I really struggled to get the difference between the debit and credit

columns to balance to the profit as shown in the Consolidated Statements of Comprehensive

Income. I had noticed on the facebook page that some other students had also had difficulty with

this so I read what both other students had suggested and Maria’s comments and was able to

establish that I had put things in the wrong column. This was because unlike the expenses in the

top section of the Income Statements the Consolidated did have negative represented figures.

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At first because these figures were represented as a negative I initially thought they must go in the

credit column, but once I really took a closer look I realised my mistake. I can see how having these

checks such as the balances being represented in different statements as being vital to

understanding how the financial statements work together to create a picture of the business

finances.

Linking was easily enough accomplished, and the total was out by the correct amount of 551.2.

Using the video that Maria had provided helped me to ensure that my checks were being complete

and that, this was in fact, correct for this stage of the process. On revision you can see that the

figures in the other comprehensive income have already been accounted for in the Statement of

Changes in Equity, and we were in fact counting them again in the trial balance. I did have a little

difficulty in deducting the other CI figures as whilst shown below the sections for reserves (green)

and cumulative translation adjustments (yellow) were clear in the Equity section I was unsure

regarding the left over figure of 14.8 (Red).

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So, after delving into the notes to the financial statements I was unable to clearly find where the

Pension Fund was closed off to. But the level of detail in the notes explained that a company needs

to have a set amount of money set aside per employee to cover the pension fund. Therefore I have

attributed this to ‘Reserves’ for the time being.

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STEP 6Peer Feedback - TBA

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