Step 1: - vkn1983.files.wordpress.com · Web viewThis step of the assignment is to read chapter 4 ‘Analysing Financial Statements’ of the study guide and to write down my ideas,

Student Name: Vicki NewellStudent ID: S0269051

Course Code: ACCT11059Lecturer: Martin Turner

Using Accounting for Decision Making

Assignment Stage 2: Restated Financial Statements

Due: Monday 11th May 2015

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ContentsStep 1:...................................................................................................................................................2

Chapter 4.......................................................................................................................................3

Step 2:...................................................................................................................................................5

Commentary..................................................................................................................................5

Step 3:.................................................................................................................................................13

Step 4: Student Feedback....................................................................................................................15

Peer Feedback Sheet –....................................................................................................................15

Appendix A – Computershare Financial Statements 2014...................................................................17

Comprehensive Income...................................................................................................................17

Financial Position.............................................................................................................................19

Changes in Equity............................................................................................................................20

Cash Flow Statement.......................................................................................................................21

Appendix B – Computershare Financial Statement 2013....................................................................22





Appendix C – Computershare Financial Statements 2012-2011..........................................................26





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Step 1:

This step of the assignment is to read chapter 4 ‘Analysing Financial Statements’ of the study guide

and to write down my ideas, reflections, and reactions to the reading.

Chapter 4

The author starts off by trying to explain equity investments in firms, and in doing so refers to fish

markets. I am not sure I understand the relevance of this. I understand that we are dealing with

people’s expectations and that a fish market what you see is what you get. I am not sure that the

example of the fish market has really worked for me and I am left feeling a bit confused. I felt that

reading on and excluding the reference to the fish market made it a bit clearer.

I felt the the G.K Chesterons point on that if we understand the past we are more likely to be able to

predict the further very powerful. How can we predict what might happen if we do not know and

understand what has previously happened. The possibly of what may happen in the future would be

too broad if we do not have some understanding of the past.

I understand the author’s reasons in why we would restart a firm’s financial statement and how this

can help paint a clearer picture of a firm depending on the audience. By separating the financial and

operational aspects of the business then we can provide the information more clearly to the

audience depending who they are. I thought that this was necessary to clear up as I must admit I did

wonder what was the point of re-entering the information into the spreadsheet in a different order. I

do feel that once I do this I will better understand the aspects of the statements as the first

assignment probably didn’t help and explain what I was entering. This step will now make me

understand what all of the sections are and I will have a better knowledge of these statements.

Free cash flow is a little confusing to me as I am not sure if this is the amount of cash the firm is left

after they have invested in their operations? The author is right that first sight this does not all make

much sense, This is now my third sighting and it still is not making sense. I understand that for a

company to spend money on their operations should then bring in a return, depending on what they

are spending this on and how much they are spending. You have to spend money to make money.

Ok I think I now understand free cash flow once the author explains this as transfer and not the

creation of money, which makes more sense to me. It’s the transfer of value within a firm and not

what the firm will create in value.

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I agree that looking at the table 4-1 it looks like that both companies are preforming the same based

on their operating income (OI). Based on the table 4-2 I would prefer to own King Enterprise as once

you take the net investment from the operating income they have a higher cash flow. Can we just

reduce net investment? If it could be that simple then all companies would have a high cash flow.

Just the work economic puts me off reading; I don’t know why I find this so confusing. The first

paragraph of this section has just rattled my brain, which I must admit is not all that difficult. The

words um and what come to mind, maybe some other words that cannot be written also. I am not

sure I understand what capital is, apart from that it’s never free and cannot be used again. I do like

that reference of similarities of capital to our lives as it can only go one the one journey, now I just

need to understand what capital is.

Operating and financial activates threw me at first, I needed to get feedback from other students

and Martin to help clear up what these were being described as for this assignment. I know that

operations what the company does to make the money, but to know how to distinguish what this is

in the financial statements was not so easy.

I am not a massive chocolate eater, but the reference to Kinder Surprises did help understand it

more, as the toy is the operational and what you really want, not the chocolate which is the

financial. Although it would depend on the person as they may rather the chocolate not the toy, is

this the same for financial and operational?

I didn’t find the chart in figure 4-1 over useful, maybe that’s why I found it all so difficult or maybe I

just don’t understand it which is the problem.

My company has other comprehensive income in the equity statement as referred to by the author.

Why is this not the case for all companies? Should there be more of a standard way? Looking at

Ryman Healthcare’s statement it was a fair bit different to my companies.

Slow and frustrating are words used by the author when describing what restating financial

statements are like, that’s an understatement for me. I wonder if other students found this as

difficult as I am trying to do this.

I was not sure where to find if the level of cash is low depending on the level of activity, I understand

what to do if its high, but how do I know if its high. What do I compare to?

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The income statement, I really don’t like this one. This was by far the hardest to restate, especially

the allocation of tax which the author does warn in this chapter. I was lucky that my company is

Australian so that I knew the tax rate, however the author does advise what to look up to find this. I

looked this up anyway just to see the differences in countries and if they change yearly.

So profitability will vary considerably, the reference to the supermarket and car dealer was very

clear in the difference. At a supermarket you have people contently coming and going, so your

margins will be smaller as you will have more sales, as a car salesman may only have 1 sale for the

day, therefore their margin needs to be higher to account for this. Is that what the author is saying?

The breaking into bits I could relate to, I always feel I need to break stuff down before I can fully

understand it. I think that’s why reading these chapters are hard as it’s all too much information for

me at once and I don’t feel it’s broken down as I am just reading over it. I need to read, stop, trying

and take it in and then start again. Even then it’s still not sinking in.

Accounting drivers is a blur to me when reading this. I don’t even know what I think right now to put

it down on paper. I enjoyed the next section on profitability and profit margins though and this was

much clearer for me to understand.

Overall I found this chapter a brain overload, I have read this a few times and I think all the different

calculations have just confused me more. I hope that I am able to complete restating my financial

statements and that I do this correctly.

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Step 2:

This step involves restating my firm’s financial statements. This will be presented in an excel

spreadsheet. This will also include commentary on any issues that I faced when restating the

financial statements along with discussions with other students.

Commentary

I found that this section the hardest and struggled a lot when doing this. I engaged with other

students online and also Martin Turner who were all very helpful. I have not been exposed to

financial statements before this course and had not thought about the operational and financial

sides to these statements so there was much to learn for me.

I first started with the equity statement which in Maria’s lecture was explained as straight forward

and can often be just copy and paste so when I started look at this and felt utterly confused it was

very upsetting. I felt as though I was the only one who could not understand this and if I cannot do

the equity statement then how am I to do the comprehensive income statement which is the

hardest. So I decided to ask for help so I emailed Martin our lecturer for assistance. He asked that I

post my question in Moodle for other students to see and comment on also. Below is the first to my

many questions that posted in Moodle:

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Tenille Da Rin Perette was the first to respond to my question who I would like to say was a great

help throughout this assignment and I am very thankful for. Tenille offered some great advice and

insight and made me ask some questions to better understand the difference between Operational

and Financial.

My response to Tenille:

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Tenille responded back to me to provide advice on making notes to further explain my decisions

which I thought was a great idea and had already started doing this.

My response to Tenille:

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Kailee Jephcott was another student who was extremely helpful and took the time to respond to my

questions. She encouraged me to look at my footnotes which helped me understand what my ideas

related to.

My response to Kailee:

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Martin also responded to my question which I found the most helpful. He really cleared up what

financial was for me by adding banks into this, it was like a light bulb moment for me.

He also brought my attention to cash flow and was this actually cash flow hedged which it was and I

am not sure why I only had cash flow in my first assignment. He gave a great explanation of what

cash flow hedges are and when they are financial or operational. After looking at my firm’s footnotes

it said that the group uses interest rate derivatives to manage interest rate exposure; therefore I put

this under financial.

Available for sale financial assets were another one that I was confused with and which Martin

explained to me by referring to my company’s footnotes. This clearly painted the picture for me and

put these under financial.

The income tax for the equity spreadsheet I am still not sure about. I put this in both operational and

financial by referring to the example assignment. In Martins response below with regards to

Exchange differences on translation of foreign operations was to see what response other students

had for this.

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Martin Stephenson responded to the question regarding exchange differences on translation of

foreign operations, which he seemed to be having the same thoughts as myself in relation to this.

My response to Martin:

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After receiving all this help and advice from other students I wanted to be able to help others,

however I was not overly confident that I would be able to assist being that I was not confident in my

own progress. I read other posts, however there were not a lot on Moodle like there was the first

assignment, which scared me in thinking that I was the only one confused about this assignment, or

maybe other students had not yet started.

Kirsty Holmes posted her spreadsheet to get some feedback as she was feeling lost so I had a look at

this in hope that I could offer some advice. I could not offer much, she seemed to be on the right

track and her spreadsheet looked more accurate than what I had done. The only advice I could offer

was her equity statement as I could not see a heading for operation or financial or both if required.

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Step 3:

This step involves identifying three products and services that Computershare offer and

estimating/guessing their selling price and variable costs with comments on the contribution

margins.

The three services that I have identified that my firm provide are the below:

Services

Selling

Price

Variable

Cost

Contribution

Margin

Rapid Cross-Border

Settlements $500 $400 $100

Depositary Receipts $20,000 $4,000 $16,000

Custody Services $10,000 $2,500 $7,500

* Contribution Margin (CM) = Sales (S) - Variable Costs (VC)

The contribution margin for each of these three products varies in amount, which would be due to

the difference in the variable costs compared to the selling price. Some productions may have high

than average variable costs with not so high selling price, which therefore would mean the

contribution margin would be less. Variable costs will vary with activity as Martin notes in Chapter 6

of the study guide. Although difference services will provide different contribution margins it is

important to have a number of different services and not just the ones with the higher contribution

margin as not all services will appeal to all people, therefore you would be narrow your market.

A main resource constraint for Computershare would be technology as they rely a lot on this with

their online products and services. If this goes down or is not working efficiently it can lead to

disgruntled customer and possibly even loss of customers. The cost to the company would increase

due to the time that their services would not be available and then the cost to fix the systems.

Industry competition will always be a factor for companies with market constraints and they will

need to continue to improve and compete against their main competitors. They will need to work at

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maintaining their staff as new staff as a large amount of money goes in to hiring and training of new

staff.

Based on these constraints, when the company is deciding on which products and services to sell or

how much they may want to think of their selling prices and consider their variable costs to ensure

that they are not breaking even. They would want to make sure they have high level technology and

backup systems to insure that system failure does not affect their customers.

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Step 4: Student Feedback

This section involves providing feedback to other students and receiving feedback on our draft Assignment. We were put into groups for this assignment which I was allocated group 79.

Peer Feedback Sheet –

My Comments

Step 1

KCQs

Step 2

Restated Statement of Changes in Equity

Balance Sheet

Income Statement

Commentary and discussions with others

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Step 3

Identify three products /services

Estimate selling price, variable cost & CMs

Commentary – CMs

Constraints – Identify and commentary

Overall ASS#1

References

Computershare 2014, ‘Annual Report 2014’, viewed 19th April 2015 < http://www.computershare.com/News/Annual%20Report%202014.pdf>

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Appendix A – Computershare Financial Statements 2014

Comprehensive Income

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19



Financial Position

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21



Changes in Equity

22



Cash Flow Statement

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Appendix B – Computershare Financial Statement 2013


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Financial Position

25



Changes in Equity

26



Cash Flow Statement

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Appendix C – Computershare Financial Statements 2012-2011


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Financial Position

29



Changes in Equity

30



Cash Flow Statement

31

Documents

Step 1: - vkn1983.files.wordpress.com · Web viewThis step of the assignment is to read chapter 4 ‘Analysing Financial Statements’ of the study guide and to write down my ideas,