ACCOUNTING IN ORGANIZATION & SOCIETY

UNDERSTANDING FINANCIAL REPORTS

Course code ACCT2105- Accounting in

Organization & Society

Campus RMIT University Vietnam, Saigon

Group 6- Team 3 Nguyen Le Thien Quynh- s3777295

Student name & ID Nguyen Thanh Thuy- s3768873
Pham Ngoc Huyen Tran- s3777194
Luong Quoc Hao- s3777320

Lecturer Mr Justin S

Word count 1195

Date of submission 23 August 2019

(Emtype Foundry 2016)

(Bega n.d)

I. Task 1
A. INCOME STATEMENT

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 The income statement is one of the company’s major financial statements,
which provides for the stakeholders information about revenues, expenses, gains
and losses, but not showing cash receipts nor cash disbursement (Harold
Averkamp, n.d).
Similarly, according to Bega Cheese annual report, the total comprehensive
income of the firm decreases significantly by $110,948 when compared with the
previous year.
● This happened because in 2018, Bega lost sales on infant nutritional assets,
which in 2017 these sales help the company to generate about $177,833.
● Additionally, the expenses, including distribution, marketing, occupancy,
and administration, were raising approximately twofold than the prior
year. This means the business must control their spending to improve the
income in the long-term.
Meanwhile, on Qantas Airways annual report, the statutory profit of the business
experience a slight growth in 2018.
● The differences between earnings arise because while the revenue was
accelerating gradually, the expenditure costs remain constant. This shows
that Qantas has managed its production cost-effectively and efficiently.

B. BALANCE SHEET
In the annual report, the balance sheet is an integral part. It reveals the
financial status of the business and shows the company’s assets, liabilities, equity
at a specific point of time (Adam H, 2019).
For Bega Cheese,
● The total non-current assets 2018 has increased greatly compared to 2017.
Most of this increase is concentrated in intangible assets such as goodwill
or copyright in the past 1 year.
● The current asset is focus on inventories, this is a manufacturing firm so
the materials are stored in stock to be ready for the company’s production
process.
● The total non-current liabilities of Bega Cheese 2018 increased
significantly compared to 2017. That difference comes from deferred tax
liabilities and borrowings.Therefore, the company has more responsibility
to pay deferred tax liabilities within 12 months.
For Qantas Airways, the differences between 2018 and 2017 is not as big as Bega
Cheese.

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 ● This is a merchandising firm so the current asset focus on cash and cash
equivalent. Trading with customers has brought a lot of cash and cash
equivalent to the company.
● There is a highlight that total current assets ($3,712M) are a lot less than
total current liabilities ($7,596M). The company will face many risks if
they have to pay current liabilities in a short term.
● The current liabilities mainly located in revenue received in advance. That
means Qantas Airways received money in advance of earning it.
Furthermore, in Qantas Airways, owner’s equity focus on issued capital, it means
the owners and shareholders have contributed a lot of capital to Qantas Airways
in 2018. For Bega Cheese, equity focus on retained earnings. That means profits
have been retained for reinvestment.

C. THE STATEMENT OF CASH FLOWS

The statement of cash flows demonstrates how the business used its money and
from where the business gained its cash.

Based on Bega Cheese annual report, cash and cash equivalents had raised
significantly in 2017, however, at the end of 2018, it dramatically decreased by
20 times. For the following reasons:
● Cash flows from investing activities:
❖ Spent the most amount of money on paying for acquisition of Bega
Foods (cost includes goodwill and fair value of identifiable net
assets acquired)
❖ Taxes payable when selling nutritional assets to babies.
● The net cash inflows from both financing and operating activities are
lower than the outflow of net cash used in investing activities.

Whilst in the annual report of Qantas Airways, cash and cash equivalents tend
to decrease from 2017 to 2018 but not significantly. Due to the causes after:
● Although the net cash inflow from operating activities is higher the net
cash outflow from both financing and investing activities, the company
spent more cash on investing and financing activities than the previous
year.

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 ● In investing activities: the cost for paying property, plant and equipment
and intangible assets increased than last year.
● In financing activities:
❖ The outflow of cash to pay for share buy-back increased
❖ The repayments of borrowings are also raised

D. THE STATEMENT OF CHANGES IN EQUITY

Last but not least, the statement of changes in equity is not considered as a
fundamental section, but a common task of the annual financial report. It helps
the stakeholders figure out the change in the shareholder’s equity throughout a
reporting period and the movement in share capital reserves (Heather 2018).

● According to the Qantas annual report, it is clear to see that the total
amount of Reserves and Retained Earnings have increased remarkably in
2018. It is believed that the money is kept for reinvesting in the business
and help cover future losses.
● Moreover, in 2018, Qantas Airways has paid $1,046M for total
contributions by and distributions to owners, which was much higher than
the past year.
● Comparing with Bega Cheese, in spite of the huge decline in profit, the
total equity has still increased moderately. It happened because the Bega
Cheese has spent the share-based payments relating to incentives to CEO
and executive team.

II. Task 2
Question 1: Describe the principle activities of the company.

Bega Cheese is proud as a dairy co-operative Australian company, which was

founded in 1899. Their principal activity was to receive, process, manufacture
and distribute natural cheddar cheese to retailers and food markets both in
Australia and overseas. Around 20% of Bega’s product is exported globally to 50
nations. Furthermore, Bega offers a wide selection of cheese to serve all-ages
consumers, from vintage, light, blocks, cubes, and kid strings cheeses.

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Question 2: According to the report, what is the objective of the
remuneration committee ?

As reported by Bega Cheese annual report, the remuneration committee’s

targets are to advise, make suggestions to the Board on any changes of the
composition within the business, and to ensure that the organization operates
efficiently. More specifically, it has consistent human resources policies and
practices that enable the Group to attract, motivate, retain skilled and potential
individuals to meet business short and long-term needs, as well as maximize
shareholder value.

Question 3: How is inventory measured? Identify the note (number) that

deals with this.

According to Fundamental Analysis, inventory is measured by raw materials,

work in progress and stores, finished goods (Andriy, 2018). Moreover, the
standard set is that inventory is measured at the lower cost and net realisable
value (NRV). Equivalently, with Bega Cheese company, inventories also measured
by this way and located on current asset in the balance sheet. Because inventories
can be converted into cash within 12 months or less.
In the below pictures from the annual report of Bega Cheese, the 10 is the
inventories note number.

(Bega Cheese annual report 2018)

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Question 4: Who is the Chairman of the Board of Directors? Explain the
roles and responsibilities of the Board of Directors as described in the
annual report.

Barry Irvin is the Chairman of the Board of Directors. The roles of the Board of
Directors are expanding and developing the market channels in Australia and
around the world. They aim to serve customers with competitively priced and
guarantee the high quality of dairy products. His management performances
has significantly helped the company to cope with short-term challenges in
business and ensure to meet the business values with the strong efforts and
proper leadership policies.

Question 5: Name the Audit partnership responsible for performing the

audit of the company. Explain why the auditor must declare their
independence, and also explain why the financial statements must be
audited by an external party.

According to the report, Bega Cheese Audit partnership is

PricewaterhouseCoopers. As stated by the Australian Securities and Investment
Commission (ASIC), the independence requirements are the most important and
are located with some legislation and principles ( Australian Securities and
Investment Commission 2014). In addition, the auditors should declare
independence so they can give an unbiased, honest and fair view of the
financial position of the client company. Another point is the financial
statements must be audited by an external party because several reasons like
government compliance, credibility, process improvement, etc.

IV. Reference list

Adam, H 2019, ‘Balance sheet’, Investopedia, viewed August 23 2019,

<https://www.investopedia.com/terms/b/balancesheet.asp>.

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Andriy, B 2018, ‘How do you analyze inventory on the balance sheet’,
Fundamental Analysis, viewed 19 August 2019,
<https://www.investopedia.com/ask/answers/042715/how-do-you-analyze-
inventory-balance-sheet.asp>

Australian Securities and Investment Commission 2014, Auditor independence

and audit quality, Australian Securities and Investment Commission, viewed 18
August 2019, <https://asic.gov.au/regulatory-resources/financial-reporting-and-
audit/auditors/auditor-independence-and-audit-quality/>.

Bega Cheese 2018, Annual report 2018, company report, Bega Cheese, viewed
23 August 2019,
<http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BGA_201
8.pdf?fbclid=IwAR111vMm1Pyt9oJaY3RqqjbNbFDhrufgOnPOfpxBP56fMsw0fwy
MMN5xQts>

Bega, n.d. Photograph, viewed 23 August 2019,<http://international-

center.net/index.php/bega>

Emtype Foundry 2016, Qantas Airways 2016 rebrand, photograph, viewed 23

August 2019, <https://fontsinuse.com/uses/15452/qantas-airways-2016-
rebrand>.

Harold Averkamp n.d, Income Statement (Explanation), viewed 23 August 2019,

<https://www.accountingcoach.com/income-statement/explanation>

Heather, S 2018, ‘Definition of a Statement of Changes in Equity’, Biz fluent, 18

October, viewed 18 August 2019, <https://bizfluent.com/facts-6345933-
definition-statement-changes-equity.html>
Qantas Airways 2018, Annual report 2018, company report, Qantas Airways,
viewed 23 August 2019,
<https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEP
jF1tpgyw/file/annual-reports/2018-Annual-Report-
ASX.pdf?fbclid=IwAR1TZo0D3hxycxFCR63jYr3u9jIVzzNB0HkXGqsE5p3vh6o-
cN0qASDnwkU>

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