ACC510 Financial Reporting Assignment Sample
Here’s the best sample of ACC510 Financial Reporting Assignment, written by the expert.
Introduction
The main purpose of this assignment is to highlight the financial statement of the Australian publicly listed company i.e., AGL Limited. It provides electricity and gas products for the residential and commercial purpose across different geographical areas such as Queenland, New South Wales, South Australia and so on (AGL Limited, 2018).
In concern to this, this study will analyze the financial statement of this AGL Limited Company. This study will also discuss the provisions and contingencies recording of the company. In addition to this, non-current assets of the company will also be determined. Overall, this report will provide the deep understanding regarding the financial recording and statement of AGL Limited.
Discussion
Disclosure of Provisions and contingencies of the AGL Company
In the views of Kulikova et al. (2015), the provisions is the amount that is keep aside for fulfilling the past obligations or to deal with the probable and uncertainties. Moreover, contingency is considered as an uncertainty that is likely to occur in the future.
From the AGL Limited, it is identified that company provide the provision of Bad and Doubtful debts as labour and contractors service costs decreased by $ 17 million due to targeted operating cost saving initiatives and restricting to leverage synergies across the energy market business. This is give rise to the reason of provision of Bad and Doubtful debts.
Other than that, there is a provision of employees benefit is also created. It includes the provision of car parking, expatriate benefits and fringe benefits tax (FBT) on all benefits, where applicable. FBT included is in respect of the FBT year ended 31 March 2017. I
n regards to contingencies, AGL Limited has disclosed the contingencies entries. If it is a case of loss contingency then it is recorded on the balance sheet and footnotes on the financial statements.
Recognition criteria and measurement issues with provision or contingencies
Provision is occurred with the past events and to deal with the future uncertainties, the provisions are recognised (Ingle et al. 2015). However, amount is the way to recognise the provision. Companies is used different methods or techniques to measures the provisions such as cash flow and then it decides that how much money they need to keep for dealing with the probable.
Besides that, there is an issues arise in the form that excessive provision make an effect on the dividends as company high focus on the provision result in less distribution of dividends. It affects the morale of employees.
Arguments for and against the recorded contingency in the company
There is an issue that arise in the form that companies are more use the provisions and ignored the dividends and retain earning. This affects the organisation as employees are demoralise. So, the excessive focus on the provisions only helps in dealing with the future uncertainties.
In favour to provision, Kulikova et al. (2016) depicted that provision is the best statement that helps in dealing the contingencies as with the provision company can extract some amount for the future uncertainties.
This is assist in handling the company future losses. Based on this study, it can be stated that Provision has both positive and negative aspects so company needs to make balance while extracting the provisions.
Leases
AGL limited has taken office and some equipment of the office as a lease (AGL, 2018). This lease agreement contains a non-cancellable commitment, in which, the company pays an amount for minimum rental as an operating lease. In order to maximise operational efficiencies and minimise the cost, this lease contract is very necessary where one to five year lease agreements have been signed by the company.
The firm also uses the buildings as commercial sublease to effectively operate the business. As per the financial report, it is also identified that if the leased property provides an unavoidable cost or does not offer economic benefits then the property leases are measured by the firm as onerous. As per the financial lease, the firm has right to use the asset for amortization and its cost will be recognised as operating expenses and interest expense.
Classification and presentation of leased items
According to the financial report of AGL limited, it is defined that the firm only taken the different offices as lease (AGL Super Saver Limited, 2018). The expenses of leased offices are managed by different business unites such as central management, retail energy, merchant energy, upstream and some expenses are not allocated, so that are divided as per the uses.
The cost of the lease is an unavoidable cost of the business which is a major part of the business where the economic benefits can be reduced. In order to increase the economic profits, the firm has to make a provision for lease amount. The presentation of the lease items are recorded in the financial statement in the different things like revenue, expense and depreciation (Kulikova et al., 2016). The lease is a financial cost as well as operating expense, so it is identified that AGL limited considers it in the income statement as an expenses.
The financial statement also shows the leased items as lease revenue in the part of ‘other revenue and income’. Moreover, the financial statement also includes the leasehold property depreciation in the depreciation and operating lease rental expense is also considered as another discloser.
Reclassifying of the leased item
The financial report of AGL limited also provides some items that are on lease. These items may need to reclassify such as sale of leased financial assets or provide it as rent. The reclassifying of the leased item is necessary to provide effective outcomes (Kong et al., 2014). The need of the reclassifying may necessary to identify the original outcomes where the firm can get profit and loss.
Non-current assets from the financial statements of the company
Property, plant and machinery, resources are some non-current assets of the AGL Limited Company (AGL Limited, 2017). The non-current assets are calculated through straight line depreciation method which helps in calculating the depreciation of the asset.
Alternative Valuation Method
In regards to calculate the above mention non-current asset, the double declining method is suitable alternative solution as a valuation method. This alternative method is common method which company uses to account the expenses of a fixed asset (Ingle et al., 2015).
The formula is as follows:-
Depreciation= 2* straight line depreciation percent* book value at the beginning of the accounting period.
Book Value= Cost of the asset – accumulated depreciation
Thus, this alternative valuation method can be used by the AGL Limited Company for calculating the non-current asset value (Ingle et al. 2015).
Conclusion
From the above discussion, it can be concluded easily that AGL Limited Company uses different and essential provisions and contingencies such as bad and doubtful debts, employee benefit provisions. At the same time, company also addresses the contingencies which treat amount as a provision in order to deal with the possibility.
In addition to this, company also involved in generating the electricity and gas and also helps in providing their products and services to residential and commercial purpose too. This company uses straight line depreciation method for measuring the value of the assets. With the help of this company also evaluated the real value of the assets.
Moreover, there are various non-current assets such as property, plant & equipment and resources of the AGL Limited Company. Further, this above study also analyzed that AGL Limited Company has disclosed all financial and required information properly because it describes the detail in a clear manner.
This financial data disclosure provides guideline to investors or stakeholders properly in order to attract them to make investment efficiently. Thus, the proper disclosure of data highly supports the adding value to the company. It result in increasing profits and decrease losses.
References
AGL Super Saver Limited. (2018) AGL Super Saver. Retrieved from: https://www.agl.com.au/ (Accessed at, 10th May 2018)
AGL. (2018) AGL 2017 Annual Report. Retrieved from: https://www.agl.com.au/-/media/agl/about-agl/documents/media-center/asx-and-media-releases/2017/170825-agl-207-annual-report-asx.pdf?la=en&hash=E27FEABC8A8FE5B618ACCF0966A70D6628B29950 (Accessed at, 10th May 2018)
Ingle, W.K., Willis, C. and Fritz, J., 2015. Collective bargaining agreement provisions in the wake of Ohio teacher evaluation system legislation. Educational Policy, 29(1), pp.18-50.
Kong, D.T., Dirks, K.T. and Ferrin, D.L., 2014. Interpersonal trust within negotiations: Meta-analytic evidence, critical contingencies, and directions for future research. Academy of Management Journal, 57(5), pp.1235-1255.
Kulikova, L.I., Akhmedzyanova, F.N. and Ivanovskaya, A.V., 2016. Ways of assets value misstatement that companies use when making financial statements. International Business Management, 10(24), pp.5705-5709.
Kulikova, L.I., Garyncev, A.G. and Goshunova, A.V., 2015. Doubtful debts allowance develoment: Stages and methods of calculation. Mediterranean Journal of Social Sciences, 6(1 S3), p.448.
________________________________________________________________________________
Know more about UniqueSubmission’s other writing services:
