acct11059 – ass#2 – step 3 · web viewacct11059 – ass#2 – step 3. due date: monday, 13...

ACCT11059 CQUniversity Ashleigh Clark

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ACCT11059 – ASS#2 – Step 3

2019

Ashleigh Clark – Student 12108081Assignment Stage 2 (ASS#2): Restated Financial Statements & Ratios

Due date: Monday, 13 May 2019, 11AM


Step 3: Restating Financial Statements

Boy oh boy did was I on a rollercoaster with this step! When sitting down on Sunday night to plan out my week worth of study, I thought, ‘Oh yeah, restating my firm’s financial statements. That’ll be easy. I’ll only allocate an hour for that.’ I was soon to learn out later that week that I would be up until the early hours of the morning in tears, pulling my hair out, trying to restate my firm’s financial statements. The tears part might be an exaggeration, but I was very close!

Statement of Movements in Equity

This one was and probably always will be my worst enemy. I clicked on Maria Tyler’s video, linked the Opening Balance and Profit for the Year then came to a road block. I didn’t have any other comprehensive income! Now, from what I could gather, you needed this in order to restate. I started to panic and stress. What was I going to do now? I’d heard that this was the easiest statement to restate which made me even more nervous for what was about to come but nonetheless I ventured onto the statement of financial position and I would come back to the statement of movements in equity.

Once I had finished my other two statements (even though the income statement wasn’t balancing) I came back to try and tackle this statement again. Not to my surprise, I still couldn’t figure out the comprehensive income so I asked a previous year student (who I work with) if she experienced her firm not having any comprehensive income and I posted on the Facebook page asking if anyone could help me (these can be seen in the section, ‘Discussions with others’). After getting help from my fellow peers I could easily restate the statement of movements in equity and I finally could see why everyone was saying it was the easiest statement to restate!

Statement of Financial Position

I found this statement to be the easiest out of them all which gave me a bit of confidence as it was technically, my first statement I had restated. Probably the hardest part I found, was deciding where each item was going to go. Was it going to go to the operating activities pile or the financial activities pile?

Please note that for all screenshots taken, these were taken only from the 2018 Annual Report as the items are the same for 2016 and 2017 Annual reports.

Operating activities

Cash and cash equivalents: I decided to allocate 1% of the cash as an operating activity, suggested by Martin in Chapter 4. This is because the cash out of my operating revenue was relatively high (but below 20%) for the past four years. I

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worked this out by dividing the cash by the revenue. After the getting the percentage of cash in the operating revenue, I divided 0.01 by the revenue.

Trade and other receivables: Naturally, trade and other receivables are operating activities.

Other assets: In the financial statement’s footnotes, it showed that Credit Corp Group’s other assets are prepayments and inventory. I assumed these to be for the operation of the firm.

Property, plant, and equipment: Naturally, property, plant, and equipment are operating activities.

Deferred tax assets: Naturally, deferred tax assets are operating activities.

Intangible assets: Naturally, intangible assets are operating activities.

Trade and other payables: Just like trade and other receivables, payables have to do with the operation of a firm so, natural, this is an operating activity.

Current tax liabilities: Naturally, current tax liabilities are operating activities.

Provisions: In the financial statement’s footnotes, it said that Credit Corp Group’s provisions included employee benefits and lease provisions. This was considered an operating activity as the firm needs employees to operate and the leases were for office spaces.

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Financial activities

Cash and cash equivalents: I decided to allocate the rest of the cash to financial activities. To do this, I took away the amount I had allocated to operating activities from the total cash.

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Consumer loans receivables: Naturally, loans are a financial activity.

Purchased debt ledgers: I had no idea what this item was, so I checked the financial statement’s footnotes. The explanation of PDL’s made no sense to me so, I took to trusty old Google and did a bit of research. It showed me that Credit Corp Group buys the purchased debt ledgers of other companies or organisations and then manages the collection of that debt. This made more sense to me. I allocated them to the financial activities pile.

Borrowings: Naturally, borrowings are a financial activity.

After allocating each item, I started to restate. I found Maria’s video really helpful as she explained everything in detail and it was easy to follow. She didn’t go too fast and she didn’t go too slow. I remember my accounting teacher from school would always go so slow and I would lose interest really quickly.

Income Statement

The Income Statement – the hardest statement to restate. To start off with, I allocated the items to either the operating or financial activity pile again.

Operating activities

Revenue: Naturally, revenue is an operating activity.

Employee benefits expense: Naturally, employee benefits expense is an operating activity.

Depreciation and amortisation expense: Naturally, depreciation and amortisation expense is an operating activity.

Office facility expense: Naturally, office facility expense is an operating activity.

Collection expenses: Naturally, collection expenses are an operating activity.

Marketing expenses: Naturally, marketing expenses is an operating activity.

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Other expenses: I checked Credit Corp Group’s financial statement footnotes for 2016, 2017, and 2018 and found that there were no notes on what the other expenses actually were. So, I took Maria Tyler’s advice and allocated them to the operating activities pile.

Income tax expense: Income tax expense is a split between operating and financial activities, however it was all allocated to operating and then in the restating, it was portioned out to the financial activities.

Financial activities

Finance income: Naturally, finance income is a financial activity.

Finance costs: Naturally, finance costs are a financial activity.

Consumer loan loss provision expense: I looked at the financial statement footnotes for 2016, 2017, and 2018 and there was no explanation as to what this expense was. So, I took to Google. I found that a consumer loan loss provision expense is, ‘an expense set aside as an allowance for uncollected loans and loan payments. This provision is used to cover a number of factors associated with potential loan losses, including bad loans, customer defaults, and renegotiated terms of a loan that incur lower than previously estimated payments.’ As this was an expense for loans, I took this to be a financial activity.

Income tax expense: The income tax expense for the financing activity aspect is calculated in a number of steps. First, I had to sum up all my financing activities (as listed above) which was the NFI before tax. Then the tax benefit had to be calculated by multiplying the NFI before tax by the company tax rate (30%). Essentially this is the financing income tax expense, however, the reversal had to be done for mathematical reasons (put a (-) in front of the figure to change it back to a positive figure)

I struggled with grasping the concept of the tax benefit. I understood where all the figures were coming from, but I couldn’t understand why we had to do the reversal in order to change the figure from a negative to a positive. The thing though, that I struggled most with, was the comprehensive income. I sat for hours wondering why I wasn’t getting the figures to balance. I did know that it was because I still couldn’t work out why I didn’t have any comprehensive income.

Obviously, I hadn’t formatted my original financial statements in a way in which I could easily read them as I had included profit for the year as my operating comprehensive income. This wasn’t correct as I worked out with assistance from fellow peers (this can be seen in the section, ‘Discussions with peers’). I had also made a calculation error with my net financial expenses after tax. When these two things were fixed, and I added a ‘0’ for each year for the total comprehensive income, the figures then balanced. When seeing these figures balanced, I was on a high point of my rollercoaster. It was like having déjà vu from my accounting classes

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in school when I would get a question right and see those two lines equalling each other; what a surreal moment!

Discussions with Others

As mentioned above, I spoke to previous and current students for assistance. Below is screenshots of the conversations.

Jemma Ahmann – Jemma is a student from a couple of years ago who is still currently doing her degree.

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Facebook Post – I resorted to the Facebook group to try and get some assistance from any current students. Paul replied and was very helpful.

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Paul Feasey – Paul is a current student taking ACCT11059.

I am so thankful for these two students for helping me however I am a bit disappointed in myself that I struggled to find the time to help others. This was mainly due to the fact that I’m a bit behind in my lectures and readings, and I had two assignments due the past week.

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acct11059 – ass#2 – step 3 · web viewacct11059 – ass#2 – step 3. due date: monday, 13...

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