WRITTEN REPORT- INDIVIDUAL ASSESSMENT| transparency of the .

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Executive Summary

 The report is conducted as to study the financial reports of two organisations, identify the areas of financial activities of the companies and analyse them. The financial reports of the two companies reveal the financial activities of the previous year and uncover the position and status of the company in terms of their income so as to attract more prospective investors to invest in their companies. It provides details to the investors as well as the creditors regarding the companies. The report aims to present the financial records of Estia Health and Mayne Pharma pertaining to its financial position and performance. This report reveals the areas of financial reporting of the concerned companies which are required to be enhanced and revised on the basis of the amendments made in the standards of accounting in Australia.

WRITTEN REPORT- INDIVIDUAL ASSESSMENT

Table of Contents

 

Introduction

Financial report is presented as to disclose the process undertaken by organisations and includes financial information and activities of the organisation. The financial information which is the summary of the accounting data provides important information for the stakeholders. The stakeholders include investors, government regulators and even consumers. It includes the performance of the company within a certain specified period of time. It is even included in the annual report of the company which is made public. The financial report is generated to serve the purpose of making effective decisions that concerns the strategies and objectives of the company. In this report, the financial report of Estia Health and Mayne Pharma are generated to critically analyse it and the subsequent theories used by the company as to develop the report as per the conceptual framework with respect to accounting.

Background of the companies

The companies that are taken into consideration for the report are namely Estia Health and Mayne Pharma. Estia health is a leading company in Australia providing care for the aged (Estiahealth.com.au, 2018). The company is engaged in providing health care at levels which may be high or low in a personalised manner. Mayne Pharma is expertise in drug delivery to generic as well as branded pharmaceuticals (Maynepharma.com, 2018).It also provides for pharmaceutical services as per contracts.

Relevance of accounting theories on general purpose financial statement

A financial statement for general purpose is issued by the organisations (Mayne Pharma and Estia Health) throughout the year that helps the creditors as well as the investors for decision making. The financial statement includes statement of equity of owners and retained earnings, cash flows, balance sheets and so on (Muda et al. 2018, p. 1200).

Implying the accounting theories in the financial statement for general purpose helps develop a statement which enhances the decision making process of the business organisation and its related economy (DeFusco et al. 2015, p. 122). The accounting theories are operated on the basic four type’s assumptions which are entity, going concern, monetary unit and periodicity assumptions. The theories of accounting are to be developed to present transparency in case of accounting disclosures (Weygandt et al. 2015, p.134). This helps the investors to readily access the financial information of Mayne Pharma and Estia Health. This helps understand the underlying economics and information like price levels, market depths as well as the financial reports which are audited.

Obligations of the conceptual framework of accounting

The conceptual framework related to accounting evaluates the accounting practices of finance which are currently undertaken by the organisations (Accountingtools.com, 2017). It should emphasise and allow developing a new way to practice accounting. The conceptual framework is such that it must disclose the situation related to the finances of Mayne Pharma and Estia Health. This helps to assists investors in estimating the performance and value of the organisations. The conceptual framework should further disclose the predictive cash flows of the organisations in the future. In fact, it should disclose information about the investment positions of the companies and also the results of those investments in concern. The information to be provided is basically the profits of those investments in the company that will help investors decide the cash flows that can occur in the future. The disclosure should not include any false information by the organisations (Accaglobal.com, 2018).

Critical Analysis

Estia Health is limited by shares which are in Australia. It is a for-profit limited company and its shares are traded on the exchange of Australian Securities. The financial report had been prepared in accordance with the standards of the Australian Boards dealing with accounting standards and as per the Corporations Act 2001. It is based on historical cost but the investment properties and the derivative instruments of finance are at fair value. It is expressed in Australian Dollars and rounded off to nearest thousands. The current liability of the company has increased by $766,352,000. The financial report complies with the standard set by IFRS and issued by IASB. The company is found to follow the new interpretations of AASB.  The new interpretations in accounting that are implemented are those of accounting policies and related to the disclosures. As per the amendments to the accounting policies of 108 by AASB, the company has significantly changed its policies of accounting.  Since the 112 Income taxes of AASB states that the intangible assets cannot be amortised with time which is indefinite therefore the company chose to recover the carrying amount through sales. The group has also adopted a policy to calculate deferred taxes from intangible assets of indefinite life. This has also increased the rate of balances which are reported previously. The financial statement that is consolidated are on the basis of the financial reports of the company and are exposed as concerned to the rights of involving the investee in the returns (Gigler et al. 2014, p.367). The company is entitled to control an investee in case the investee is under its power, has right to have invariable returns by its involvement and has the power on the investee. The company assesses the power of its investees by including arrangements of the contracts with investee’s vote holders, rising from contractual arrangements and voting rights of the company. In such cases, the company even opts for reassessing the issues. The information regarding the assets, income, expenses and liabilities are mentioned in the profit or loss statements (Bonsall IV et al. 2017, p.350). It is even analysed that the company acquires a business by assessing its financial assets, liabilities which are appropriate for the designated terms as per the contract, its terms and economic circumstances. In case the fair value is measured to be in excess then the company again assesses the liabilities and all of the assets acquired (Ndofor et al. 2015, p.1700). If the fair value still exceeds then the aggregate is transferred and gain is taken as profit or loss. The goodwill is acquired from the date of acquisition and benefits are expected in combination (Higgins et al.2015, p. 450). In case the goodwill is allocated to the cash generated unit in which a part is disposed of then goodwill is measured on the disposed of as well as the remaining unit. The assets, as well as the liabilities, are based on the classification being classified or non-classified. Estia Health Limited is completely an Australian entity thus it implements the legislation of tax consolidation of June 2013. It has included the net GST and the payables under receivable in the financial statement. Cash flows are included in cash flow statement and GST of cash flow has been classified as operating cash flow. Borrowing costs are the interest as well as costs incurred for borrowing funds. The carrying amount is decreased by using account of allowance and the profit or loss statement is recognised. All the liabilities of finances are rated at fair value and borrowings or payables is directed as transaction cost as attributes. When the liability is discharged or cancelled or even expired then in such cases then it is derecognised. Provisions are discounted using the current rate of pre-tax. In case of discounting the increase in provisions is the financial cost. The fair value of all assets and liabilities are mentioned in the financial statement. In times when the fair value cannot be measured for the quoted price then the valuation techniques are used which consists of the DCF model. The changes to the assumptions of the factors of the model affect the fair value which is reported. Thus it shows the financial reported generated for Estia Health approves of the transparency of disclosures on the basis of which the report is prepared. This helps the investors, creditors, as well as the prospective investors, get a deep insight into the investment position of Estia Health.

Mayne Pharma is a company domiciled in Australia with its shares traded on the Australian Exchange. Hence it is found that it follows the standards of Australian Boards of accounting. Mayne has adopted the amendments of AASB 2016 which is being effective from January 2018. The amendment in the accounting policies meets the narrow situations to meet the obligations of the organisation. I am found that the Group has been subjected to various borrowings which were expressed in US dollars which were pushed into fixed interests. It showed the outstanding rates of borrowing. The company uses the substantial data available appropriate for the circumstances to measure the fair value by the use of observed inputs to the maximum and even minimised the use of inputs that are unobserved.  The accounting policies that are adopted by the company are adopted for taxation is required to be provided with judgements from the managers regarding deferred taxes. Assumptions on future profits which are taxable are dependent on capital management and future taxes. Research costs are considered. The expenses on researchers, individual projects which are in the developmental phase are considered as intangible assets. When the carrying amount of the balance sheets exceeds the level of the recoverable amount that is estimated it is considered as the impaired asset of the company (Nobes, 2014, p.145). The company uses the net value of the present. The company has even revised its accounting policies and interpreted it according to the Australian Standards. The company has so far not seen any improvements in the financial sector due to the revision that is the impact is yet not visible in the financial statements.

Recommendations

The recommendations for the changes in the financial reports of the two companies which are Mayne Pharma and Estia Health are based on the accounting standards of Australia. The recommendations are provided after undergoing a process of a thorough study of the financial reports generated by the companies. In case of the financial report of the Estia health and Mayne Pharma, it is recommended that the director takes the responsibility to create a fair and justified report which is in accordance with the accounting standards of the Australian Board and avoid anything that is apparently fraudulent or erratic.

 

Recommendations	Explanation
Stating objectives as well as strategies	The objectives are to be stated and the financial strategies specifying them have to be mentioned which will help the external group to predict the earning capacity or power of the company in the future.
2. Segment reporting	A diversified information specific to the divided segments is to be provided to help investors have a detailed data concerning earning capacity as well as the financial positions of the companies (Dumay, 2016, p.170). Even the foreign operations have to be included which may be the net profits, sales and the operating expenses.
3. Inflation-effects	Effects of the inflation phase have to be incorporated in the financial statements. The possible models to be followed in such cases are required to be mentioned in the financial report.
4. Disclosures	Details of accounting are to be disclosed. The disclosures are to be made as to increase or improve the quality of the report generated.

Table 1: Recommendation

(Source: Created by Learner)

Conclusion

The report has presented a detailed analysis of the financial reports of the two companies namely Estia Health and Mayne Pharma. The reports generated by the companies are in accordance with the international standards of accounting which are issued by the Australian board of accounting. It is because both the companies are domiciled in Australia and has shares which are traded on the Australian Exchange. Hence the companies are recognised as to present financial reports that resonate with the standards of accounting prevalent in Australia. It is genuinely required of both the companies which are Estia Health and Mayne Pharma to present reports which include all the current details with regards to the financial position of the company. The annual report of both the companies includes the consolidated statements of finances of the two companies. This provides a comprehensive report about the company’s activities as well as achievements as to assure the investors of the goodwill of participating in the investment in the companies. Thus these two companies provide compliances for transparency of the disclosed information.

References

•  Accaglobal.com (2018)IASB’S CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
• Accountingtools.com (2017) AccountingTools Available at: https://www.accountingtools.com/articles/2017/5/10/financial-statements [Accessed on 20 March 2018]
• Available at: http://www.accaglobal.com/in/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/iasb-conceptual-framework-financial-reporting.html [Accessed on 20 March 2018]
• Bonsall IV, S.B., Leone, A.J., Miller, B.P. and Rennekamp, K., (2017). A plain English measure of financial reporting readability. Journal of Accounting and Economics, 63(2-3), pp.329-357.
• DeFusco, R.A., McLeavey, D.W., Pinto, J.E., Anson, M.J. and Runkle, D.E., (2015). Quantitative investment analysis. USA: John Wiley & Sons.
• Dumay, J., 2016. A critical reflection on the future of intellectual capital: from reporting to disclosure. Journal of Intellectual capital, 17(1), pp.168-184.
• Estiahealth.com.au(2018)  Reports and Presentations Available at http://www.estiahealth.com.au/investor-centre/reports-and-presentations [Accessed on 20 March 2018]
• Gigler, F., Kanodia, C., Sapra, H. and Venugopalan, R., (2014). How frequent financial reporting can cause managerial short‐termism: An analysis of the costs and benefits of increasing reporting frequency. Journal of Accounting Research, 52(2), pp.357-387.
• Higgins, C., Milne, M.J. and Van Gramberg, B., 2015. The uptake of sustainability reporting in Australia. Journal of Business Ethics, 129(2), pp.445-468.
• Maynepharma.com (2018)Results & Reports Available at: https://www.maynepharma.com/ [Accessed on 20 March 2018]
• Muda, I., Harahap, A.H., Ginting, S., Maksum, A. and Abubakar, E., (2018), March. Factors of quality of financial report of local government in Indonesia. In IOP Conference Series: Earth and Environmental Science (Vol. 126, No. 1, pp. 1200-1220). United States: IOP Publishing.
• Ndofor, H.A., Wesley, C. and Priem, R.L., (2015). Providing CEOs with opportunities to cheat: The effects of complexity-based information asymmetries on financial reporting fraud. Journal of Management, 41(6), pp.1774-1797.
• Nobes, C., (2014). International Classification of Financial Reporting 3e.  Abingdon: Routledge.
• Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., (2015). Financial & managerial accounting. USA: John Wiley & Sons.

1. Appendices
2. Appendix 1
3. Image 1: Financial performance of Mayne Pharma of 2017
4. (Source: Maynepharma.com, 2018)
5. Appendix 2
6.  Image 2: Financial position of Mayne Pharma in 2017
7. (Source: Maynepharma.com, 2018)
8. Appendix 3
9.  Image 3: Financial position of Estia Health in 201

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