Prepare complex corporate financial reports

Assessment 1

Task 1

pyramid consolidated statement of financial position as at 31 march 2012

workings (figures in brackets are in $000)

Assets

non current assets

propert, pant and equipment (38100 + 28500 + 3000 fair 69,000

value - 600 depreciation

goodwill (wi) 7,400

investments - associate (wii) 6,600

investments - fair value equity investments 2,800 9,400

85,800

current assets

inventory (13900 + 10400 + 1500 GIT - 500 URP willI) 25,300

12,500

2,700 40,500

total assets 126,300

equity and liabilities

equity attributable to owners of the parent

equity shares of $1 each 25,000

reserves

share premium 17,600

retained earning (w iv) 36,380 53,980

Non - controlling interest (W v) 78,980

total equity 8,480

87,460

Non current liablities

11% loan notes (12000 + 4000 + 2500 intra - group) 13,500

Deferred tax (4500 +1000) 5,500 19,000

current liabilities

Deferred consideration (6400 + 640 unwinding of 7,040

discount w (vi)

other current liabilities (9500 + 5000 + 1500 GIT - 3200 12,800 19,840
intra group w III)

total equity and liabilities 126,300

• goodwill in squeare

controlling interest 0 0

share exchange 24,000

Deferred consideration (10000 x 6,400

80% x 0.88/1.1)

Non - controlling interest 7,000

(10000 x 20% x 3.50)

37,000

Equity shares 10,000

Pre - acquisition reserves 18,000

Fair value adjustments plant 3,000

fair value adjustments - (1,000) (30,000)

unrecorded deferred tax

good will arising on acquisition 7,400

• carrying amount of cube at 31 march 2012

$0.00

cost $6,000.00

share post - acquisition profit (2000 x 30%) $600.00

$6,600.00

• reconciliation of current accounts

pyramid Square

$0.00 $0.00

current account balances per $4400.00 $1700.00

question to eliminate

goods in transit (GIT) $1500.00

cash in transit (CIT) (balance ($1200.00)

required to reconcile)
$3200.00 $3200.00

The goods in transit sale of $1.5 million includes unrealised profit (URP) of $500.000
(1500x150/150)
• consolidated retained earnings

$0.00

pyramids retained earnings (16200 + 14000) $30200.00

squares post - acquisition profit (7400 see below x $5920.00

80%)

cubes post - acquisition profit (2000 x 30%) $600.00

interest on deferred consideration (6400 x 10%) ($640.00)

URP in inventory ($500.00)

Gain on equity investments (2800 - 2000) $800.00

$36380.00

• The adjusted post - acquisition profits of square are:

$0.00

As reported $8,000.00

Additional depreciation on plant (3000/5 years) ($600.00)

$7,400.00

• Non - controlling interest

$0.00

fair value on acquisition $7,000.00

post acquisition profit (7400 x 20%) $1,480.00

$8,480.00

Task 2

Fresco - statement of comprehensive income for the year ended 30 june 2012

$0.00

Revenue $350,000.00

cost of sales $311,000.00

Gross profit $39,000.00

Distribution costs -$16,100.00

Adminsitrative expenses (26900 + 3000 re fraud) -$29,900.00

finance costs (300+2300) -$2,600.00

loss before tax -$9,600.00

income tax relief (2400 + 200 - 800) $1,800.00

loss for the year -$7,800.00

other comprehensive income

revaluation of lease property $4,000.00

total comprensive losses -$3,800.00

Fresco - statement of changes in equity for the year ended 30 june 2012

share capital share premium revaluation retained total equity

reserve earnings
$0.00 $0.00 $0.00 $0.00 $0.00

Balances at 1 $45,000.00 $5,000.00 $51,000.00 $55,100.00

july 2011

prior period -$1,000.00 -$1,000.00

adjustment
(refraud)

restated $4,100.00
balance

rights share $9,000.00 $4,500.00 $13,500.00

issue (see
below)

total $4,000.00 -$7,800.00 -$3,800.00

comprehensiv
e losses

transfer to -$500.00 $500.00

retained
earnings

Balances at 30 $54,000.00 $9,500.00 $3,500.00 $3,200.00 $63,800.00

june 2012

The rights issue was 18 million shares (45000/50 cents each x 1/5) at 75 cents = 13.5
million. this equates to the balance on the suspence account. this shouldd be recorded as
$9 million equity shares (18000x50 cents) and $4.5 million share premium (18000x(75
cents - 50 cents)

the discovery of the fraud represents an error part of which is a prior period adjustment ($1
million)
2. fresco - statement of financial position as at 30 june 2012

Assets $0.00 $0.00

Non current assets $62700.00

Property, plant and equipment

Current assets

Inventory $25200.00

Rade receivables (28500 - 4000 $24500.00

refraud)

current tax refund $2400.00 $52100.00

total assets $114800.00

equity and liabilities

equity equity shares of 50 cents $54000.00

each

reserves

share premium $9500.00

revaluation $3500.00

retained earnings -$3200.00 $9800.00

$63800.00

Non current liabilities

finance lease obligation $15230.00

deferred tax $3000.00 $18230.00

current liablities

trade payables $27300.00

finance lease obligation $4070.00

Bank overdraf $1400.00 $32770.00

total equity and liabilities $114800.00

Assessment 2

Add Deduct total

original profit for the year $53,400.00

Damaged inventory $1,540.00

loan interest $1,440.00

insurance $3,000.00
Depreciation $4,500.00

$4,500.00 $5,980.00 $1,480.00

$51,920.00

Francis

correct statement of financial position at 31/12/2014

Assets $0.00 $0.00

Non current assets

buildings at valuation $254,000.00

office equipment at book value $74,500.00

motor vehicles at book value $45,000.00

$373,500.00

current assets

inventory $64,060.00

trade receivables $14,800.00

cash and cash equitvalents $14,200.00 $93,060.00

total assets $466,560.00

capital and liabilities

capital at 1 jan 2014 $348,200.00

amended profit for year $51,920.00

non current liability

6% loan repayable 2012 $24,000.00

current liabilities

trade payables $38,000.00

other payables (1440 +3000) $4,440.00 $42,440.00

$466,560.00

Part c
1. Trade creditors (suppliers)
Need to know the organisations ability to pay its debts and continue to suppy.

2. Providers of finance to the business (eg banks)

need to know that business can pay interest / repay loans/ grant finance

3. trade unions
Need to know financial situation as a means of discussing working conditions and pay/ job
security

4. financial analysts (eg stockbrokers)

need information to help advise clients

5. Government and its agencies

Interested in allocation of resources also to provide a basis for national statistics (ATO) for
taxation purposes

6. the public
Need information regarding jobs and may be local suppliers

7. trade receivables (customers)

interest in continuity of business for supply of goods / services

8. competitors
To compare to their own business

9. potential investors
Need to know whether the investment is worthwhile

10. auditors
need to examine the accounts
Assessment 3

1. what are the principles of double - entry bookkeeping?

1. the accounting principle of double entry is one of the main underlying principles of
modern day accounting and must be used to verify data that is collected for
complex financial reports.
equation assets: Assets = liabilities + equity

every transaction that is recorded in a receipt system must satisfy that equation.
2. Discuss the process of consolidation and conversion
• consolidation is the process of combing the financial data from multiple entities that all
fall under the one parent company for financial reporting and general financial
management requirements
• conversion: conversion is the process of converting any foreign currencies into
Australian dollars in order for consolidating for financial reporting and general financial
management requirements.
• conversion and consolidation procedures may include:
• consolidation of a wholly and partially owned subsidiaries
• consolidation of controlled entities
• purchase of the business by company
3. accounting standards and business taxation requirements may include what?
1. accounting standards included:
1. Australian Accounting Standards
2. Australian Accounting Standards Board
3. Generally Accepted Accounting Principles

2. business taxation requirements include:

1. reporting periods
2. depreciation
3. presentation of financial information in a manner that is suitable for taxation
reporting

4. what are the different types of shares?

1. voting shares
2. preferred shares
3. common shares
4. partially paid shares
5. identify partially owned subsides an decontrolled entities of the organisation.
5. for reporting purposes what is an entity: companies
6. what is accounting treatment: is the accounting method and management of a
particular aspect of the organisations finances. Depending on the circumstances these
treatments and methods may change an therefore it is essential to ensure that the
correct treatment is selected for the entity type
7. list six typical taxable transactions
• Allowable deductions
• capital gains
• financial adjustements such as:
• write - offs
• revaluations
• income
 • payments
• purchases
• superannuation payments

8. discuss disclosure requirements: is a statutory requirements which pertains to the legal

requirement of organisations to disclose any and information that may influence or
change the way that the financial information is interpreted or the value and security of
the organisation determined.
9. how is a cash flow statement organised: cash flows will need to be taken into
consideration when determining options for long term finance as it will be necessary to
project if the organisation will be in a position to make payments on the finance as
required. A cash flow statement is a very important financial document for all
businesses which will allow for effective planning and decision making within the
business.

10. what are significant issues in statements, and what might the include?: significant
issues are those that may cause a risk or performance issue to the organisation or its
shareholders. there are a range of significant issues that must be identified in order to
ensure that the organisations can report and manage these issues appropriately
1. company liquidation
2. company restructuring
3. cost structures
4. errors and anomalies
5. liquidity
6. losses and returns
7. profitability
8. statutory obligations.

11. what types of implications ma be caused by significant issues?

1. disruption to cash flow
2. inability to purchase resources required for operations maintenance
3. production problems
4. damage to the organisation image
5. loss of employees
6. loss of customers
7. statutory non- compliance

12. define the following account terms:

1. accruals accounting: when using the accruals accounting system the revenue or
income that is received by the organisation will be recorded as they are earn rather
than at the actual time that the cash was received.
2. consolidation: is the process of combing the financial data from multiple entities that
all fall under the one parent company for financial reporting and general financial
management requirements
3. conversion: conversion is the process of converting any foreign currencies into
Australian dollars in order for consolidating for financial reporting and general
financial management requirements.
4. depreciation: is determined based on the taxable life of the asset, it will be
necessary to ensure that the life of the asset is determined using australian taxation
standards an that the amount of depreciation is in line with the value of the asset an
the original cost price of that asset. depreciation must be calculated according to
AABS standards and taxation requirements.
 5. equity method: is an accounting treatment in which the initial investment made by
the parent company into the joint venture will be recorded at the cost of that actual
investment. this will then be adjusted to demonstrate the actual performance of the
venture.

initial investment +/- organisations share of profit oarless - distribution

received = reportable investment in the join venture
6. financial systems controls: refers to the control and compliance measures that are
places on the financial systems internally that ensure the reliability and integrity of
the financial systems within an organisations.

7. financial year reports: these are comprehensive reports that demonstrate a range of
factors about the organisations financial position, performance and management
over the last year.

8. joint venture: is a contractual business agreement where two or more parties are
both involved financially in a combined project or business
9. subsidiary entities: a partially owned subsidiary is an entity that has other owners
but is also partially owned by the parent organisation in order to be classified as a
subsidiary entity, the parent organisation will need to own the controlling amount of
voting stock within the subsidiary entity, subsidiary entities may have other owners
but 50% of the controlling stock will be owned by the parent company.