ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

ASSESSMENT 2

Zoe Andersen

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Step 3 – Restating Financial Statements:

When I came to restate my firm’s financial statements, I was not too worried, because in the previous assignment I found Maria Tyler’s videos extremely helpful. The aspect I was most concerned with, was whether this step would help me connect with understanding my firm’s business and economic realities. I am struggling quite a bit with the definitions and acronyms involved in this subject, so I find myself a little slower when completing the tasks and reading the chapters. None the less, I ignored what I believed were my faults and did my best to complete this step.

Firstly, I would just like to say that Maria Tyler’s videos are so incredibly helpful for this step of the assignment. She explains things in great detail and give examples that help you figure out what to do.

Statement of Changes in Equity:

Restating the SOCIE was a relatively quick process for me. I began linking immediately and within no time I was finished. My company did not have an overly big list of items and thus, I believe this is why it did not take long. However, my SOCIE was quite differently laid out to Maria’s, so some concern did arise as I thought maybe I should change how mine is set out. The more I thought about changing it around, the more I realised that Martin did mention that all our financial statements are going to be different to others. Therefore, I thought best to leave it as it is, and see if any of my peers will have feedback for me about it.

Balance Sheet:

Hearing Maria say at the beginning of the video that restating the balance sheet is another easy process, was fantastic to hear. The most difficult part for me was categorising items in Operating (O) and Financial (F) activities. I do believe I got a little too caught up in worrying I would put them into the wrong category. I realise now that this is my first accounting subject and I just need to focus on doing what I can, as I am still learning.

ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

Maria mentions checking your firm’s footnotes for items where you are unsure whether they are O or F. It can differ between firms and this is why this step is essential. ‘Derivative financial instruments’ was an item where I checked the footnotes and also Googled for more information. At first, I was thinking it related to financial activities, but as I read the entire footnote, my mind changed and decided on operating. The last paragraph, discussing that it

consists of materials and services, means that it is most likely affecting activities within the company (p. 52).

As I sorted the remaining items into O and F, I found myself extremely stuck on ‘Loans to joint venture entities’. I was confused as loans to joint ventures would firstly appear as F, but I also thought with the other information contained in the footnotes, it could be classed as O. I eventually decided I would post in the Facebook group, and hope that someone was working on their assignment over the Easter long weekend. I received a comment back from Paul Feasey quite quickly, followed by Karen Howard and Breeze Taylor later that day. It was great to have people help out and give their opinion. I think it helped me realise I had an idea of which answer I was leaning towards; but I needed that support and reassurance.

ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

Now the allocation of cash to O and F was a struggle for myself, as I am not the best when it comes to percentages. I followed along with Maria as she worked out what percentage of cash would be O and F. What first worried me was that Maria got percentages between 0.5-1% and said this makes things easy for her. So, when I was calculating mine, you can see

how I freaked out a little bit. My percentages ranged from 9% to 21%! I thought I had done something wrong maybe and was not sure what to do. Luckily for me, my brother was home for the Easter long weekend and university break. He is currently studying a Bachelor of Mathematics and thus, I knew his mind would be able to work out whether my percentages were correct. Sure enough, he said, “yeah, that seems right” and continued to help me understand the mathematics behind what I was doing. Anyway, I was very thankful to have him at home while I was restating my financials, as he is the one who saves the day again later with the income statement.

After finishing restating the balance sheet, one part I enjoyed was the totals. Particularly, working out Net Operating Assets (NOA), as it helped me to understand the equation. It is easy to read about how to calculate your NOA, but when you have to sum the total on excel yourself, I feel that it helps you to connect with your firm.

Income Statement:

Well, I remember reading that restating our firm’s financials was going to be challenging, and it definitely lived up to that expectation. I found this step incredibly long and difficult, spending hours staring at my screen, not understanding what I had done wrong. I found myself posting to the Facebook group again, as I became stuck on categorising ‘Loss on sale of investment’ and ‘Share of equity accounted investment’ into O and F. Once again, Paul Feasey was kind enough to privatively message me his thoughts. I think this communication is great for support. I always found myself thinking that I have an idea of which category the item goes into; however, I believe it is awesome to have others input to reassure yourself.

ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

I finally finished restating my income statement, and even managed to get through the tax section. Yay! I then came to the final step, my ‘Total Comprehensive Income’, and guess what? It did not match my original financials. I actually yelled “No!” and “Why!” out loud because I could not believe it. I guess this is why Martin said we will become frustrated? I then carried out Maria’s checks. I checked each cell to ensure it was linked correctly across, that the sums were correct, and finally that all items were accounted for in O and F. I found one item I had missed, yet my final total was still incorrect. My brother was kind enough to offer to take a look while I had to work. He has used excel many more times than I have over the years and this proves to be helpful for this assignment. Now, my brother had no idea what the assignment task was, or why I was splitting items into O and F, he merely looked at the numbers. He discovered that if ‘Gross profit’ was taken out of the equation, the total CI would match the origianl. I looked at my financials and wondered why I had included ‘gross profit’ as operating income. Evidently, in my first statement, it is listed and appears as an item, but I soon realised that it is actually a total. I am not sure why I made this mistake, but it appears that this is easy to do! At last, my totals finally matched my original total CI. Or so I thought…

The 2017 total was $1 different to the original. How was this possible?! It is such a small amount that I was sure I must have imputed a number incorrectly in my original statement. I rechecked my links, sums, items, and also double checked I had imputed the correct amounts from my printed out financial statements. I then found the ‘profit/loss before income tax’ total in my original financials was $1 different to Atlas’s financial statements. I again double checked all the amounts and was baffled on where I had gone wrong. I was starting to go a little crazy trying to work it out. Once again, I asked my brother if his math wiz of a brain could figure it out. As I was talking away about what the issue was and that I had checked everything, so how could it be wrong. He was looking at Atlas Pearl’s financial statement that I had printed out, and said, “This is wrong”. Basically, he added up all the items in the original Income Statement and figured out that Atlas Pearls had calculated their answer incorrectly. I am still quite amazed that he can add enormous numbers up in his head. After all this, it was actually Atlas Pearls who had made the original mistake. It was also partly my fault because I didn’t use a sum for the total CI in my original financials…none the less, it was the biggest relief to figure this out, and finally be done with restating. Woohoo!

Atlas Pearls Financial Statement (their mistake in 2017):

You can see the correct total in my restated financial statements that is attached separately.

Concluding Thoughts:

This step was without doubt a challenging one. I believe the hard part is to not get overwhelmed when you get stuck or make a mistake. Many others are in the same boat and

ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

this can be easily forgotten. I believe the videos were most helpful during this task, I find it easier to follow along this way. Restating your firm’s financial statements is not a difficult task, merely frustrating at different aspects because every company is not the same. I feel it is important to reach out for help and not feel ashamed because you are. Everyone is very supportive in the Facebook group and you will feel better after you post a question. Although interaction between peers is a scary part of this subject to me, I am glad I overcame my fears and reached out for help.

One part about this step I found difficult was helping others. I found that when people posted for assistance, I did not feel I had the knowledge or the time to help. Sometimes you can become consumed by your own tasks that needs completing and focus on that first. I also feel I do not believe in my own knowledge enough, and this needs to change. On a Saturday night, Kayla Cantoni posted in the Facebook group for help. I read the post and saw no one had commented. I believed that I had the correct answer, however, was also nervous about posting and it being incorrect. I am proud of myself for overcoming my self-doubt and commenting a reply. I instantly felt so much better after doing it and even had other peers like my comment showing that they agreed. I should have helped someone sooner!

Overall, this step in the assessment was not as scary as first initially thought in my step 1 KCQs. It has given me the chance to work harder and believe in myself. I believe viewing the restated financials makes it all a little clearer now, and hopefully as this assessment progresses, I will connect further with my firm’s business and economic realities.

ACCT11059 – Accounting, Learning & Online Communication Zoe Andersen

Step 4 – Providing Feedback: