Business Corporates Report Business Report

Question: You need to do an essay (covering the materials in your class notes) - considering accounting, conceptual framework (prudence) and a critical analysis of the existing system and what is working, perhaps why the system is not operating at optimum level - consideration of the role that executive remuneration (eg bonus) may be a contributing factor but also more detailed discussion of other reasons also. Please do this by referencing corporate reports of company(s) of your choice to demonstrate your understanding. Answer: Introduction: Caltex- a company associated with oil and lubricants is the largest retailer and transport fuel suppliers have petroleum branches all over the world. The corporation was started in the year 1936 as a joint venture between the company of Texas and the standard oil company of California. It sources and refines around 61 million barrels of crude oil in a year and supplies almost Australias transport fuel (2014). As per the Australian Securities Exchange Caltex is the only marketing and oil refining company. As per the reports up to March 2015, half of the Caltex was owned by the Australian shareholders and the rest by the Chevron. It operates the largest retail network of oil in Australia. By August 2012, it has two petroleum refineries in Australia. The company has both managerial and non-managerial heads. Generally, the company basically focuses on executive directors rather than non-managerial directors. The part given to the executive directors is to run and direct the company effic iently (Gibbs 2014). This study investigates about the position of non-executive directors of the company. In the given case after analyzing the annual report of the company we came to know that the company needs to present an audited report to meet the certain queries of the public. Analysis of Remuneration Report of the company: Before giving any decision let us understand the meaning of Directors Report. It is made in order to get an idea about the companys financial position, its structural capacity and so on. In the present case after analyzing the directors report from companys annual report 2015 we got an idea about companys market position. We can see that company has made certain changes in his management during the year. The remuneration structure of the directors is cited below: As per companys policy non-executive directors are entitled to get remuneration with an increase of 3% during the year. After summarizing the balance sheet of the company we can get a basic idea about companys turnover during the year. As per the given data we can easily see that the companys market position according to balance sheet is not good in comparison to last year balance sheet. The investment made in joint ventures shows a huge downfall of 15,715 thousands of dollars. It does not create a good impact on companys goodwill. But if we look through the income statement we can see that the company has a good provision to meet with the net loss in their joint venture during the year in comparison to past year. Earlier the company had a negative balance but now it has a positive balance of 1,326 thousands of dollars. If we compare both the reports we can get a brief idea that the company is trying to obtain profit in order to receive bonus payment which is not beneficial for the c ompany in the long run. Issues regarding Remuneration: According to the law the company can increase the remuneration of its director up to 11% after passing a resolution in the meeting. This amount does not include non-executive directors. In case of non-executive directors the company is necessary to pay an amount which cannot exceed 3% of the net profit. In this case the company has increased the required percentage according to the guidelines as prescribed by the board. The company can give further benefits to the non-executive directors based on their effort and time given to the company. Non-Executive directors have an increased role in the company so proper attention is needed to be paid towards them otherwise they can lead to weaker governance by advancing their self interest ahead of companys interests. While comparing the financial statements of the company we can assume that non-directors of the company have created some kind of self-interest because of this reason the financial statement is not matching. As per Australian Acc ounting Board the company has to make certain disclosures in their cash flow statement. In the given case the company has disclosed all the relevant disclosures in their statement, all the necessary details of cash outflow and inflow have been mentioned by the company in a relevant manner. So, it can be said that non-executive directors are not damaging the companys control in the market. Consolidation of the records as per GPFR method: It should be noted that a form of differential financial reporting has been integrated under the Australian Accounting Standards as a body in Reporting concept. A reporting entity should be prepared for General Purpose Financial Report, which complies with the AAS. On the other hand, non-covering business organizations must prepare the Special Purpose Financial Report, which is in less observance with the Australian Accounting Standard. There are quite a lot of companies, which depends on the Australian Accounting Standard so that it can evaluate the future significance of profitability under the reporting concept within the aspects of AAS. To facilitate the profitability of a business entity a changeover has been made which covers the differential aspects of reporting framework in accordance with the GPFRs (Deegan 2013). It is noteworthy to denote that the makers of financial statements and their accountants should constantly assess whether the current fiscal reporting structure is appropriate and if essential may take required steps to guarantee gentle operation of business entity. GPFRs are intended to meet the needs of the users who are not in the desired point to control the financial report modified to meet up the needs of the users. Consolidation of Inventory: Inventory means goods or material which a company holds with the purpose of resale in the next year. It takes into consideration the carrying cost of the material, valuation of inventory, forecasting of demand and inventory, and so on. The reason behind keeping an inventory is to manage scale of economies, uncertainties and seasonal demand. Demand and supply keeps on changing so the company needs to keep a track record of the stocks to meet the proper demand. As in the given case the company has an opening balance of 14,574 thousands of dollars for the year 2016. After looking the other annualized report the company has a good stock to meet its demand during the year in case of crisis. The company has not overvalued or undervalued its stock to ascertain extra profit. So, it can be said that the act of the company is as per the law. Hence, the company is not trying to create any false profit. Consolidation of Accounts receivable: An important framework denotes that the companies record their accounts receivable in the financial statement, which is based on the sales record. It should be noted that overstating the accounts receivable might straightforwardly inflate the dimension of a company balance sheet. According to the Australian Accounting Standards Boards, companies usually report their assets at their actual cost but they re-examine and make necessary arrangements over time based on an assets changing fair market value (Kang and Gray 2013). Accounts receivable are recorded in the form of current assets in the financial statement and hence, overemphasizing the receivable of accounts will result in unadjusted thus carrying an inflated value of the originally reported accounts receivable. It should be noted that the carrying value or the fair market value of outstanding accounts receivable is the sum of actually recorded accounts receivable deducted by the sum of incalculable or doubtful accounts. Any incalculable accounts receivable are unpaid obligations by consumers becomes a part of a write off expenses for the enterprise. However, it should be noted that not considering any uncollectible customers accounts, overstating accounts the accounts receivable would understate the bad debts operating expense of an organization. Hence, those bad debts expenses might have been reported under the companys income statement in the form of subtraction from revenue. Therefore, overstating the accounts receivable will indirectly overstate the net income of the company reported in the financial statement (Chua et al. 2012). When net income is near to retained earnings at the end of the financial period, retained earnings in the form of equity in the balance sheet is also overvalued. It is noteworthy to denote that companies have on few occasions have referred to the accounts receivable for calculation of cash flow statement. Nevertheless, business entities avoid having overvalued accounts receivable when they decide to write off those, which are deemed uncalculable. Consolidation of Transfer Pricing: Transfer pricing means a method to set off the price of goods and services in between the subsidiary company to its parent company. It is the tool to avoid tax avoidance in the company. As per the companys given data we can see that there is a huge difference in the tax structure of the company. If we look into the share of net profit of associated entities we can see that the company has more than three times the value from the previous year. To this we can say that the company has maintained a good track record with its associated entities but overall if we look into the total of tax expenses we can see that the company has a high percentage increase in the tax amount. This can burden the company of paying the amount out of its profit. In order to cut off the amount the company may not show the actual value of it profit or may represent wrong financial statement during the year. So, the company has to keep a track on the expenses to accumulate the profit during the year. The property plant and the equipment column are maintained as per the AASB norms by the company. The PPE analysis from the annual report clearly state that the company is able to maintain a sufficient amount of the net carrying amount in compared to the year 2014. The PPE amount for the year 2015 has been observed to be $ 2,602,865 and in the year 2014, it was only $ 2,363,672. In the cash flows from then investing activities of the company, it had been observed that Caltex Australia Limited was able to increase the Net proceeds from sale of property, plant and equipment (Hu et al. 2015). This increase was an amount from $ 25290 to $ 43095.The PPE of the companys composed of the various types of the components such as the inclusion of freehold land at cost and the Accumulated impairment losses. The property of the company also takes into the account the cost of the building at both cost and the various type of accumulated depreciation on the impairment of losses. In this section then company was seen an increase in the losses by an amount of 2% (Laing and Perrin 2014). Hence, the company needs to considerably improve the amount of the impairment on the losses. The PPE value also takes into account the various types of the cost related to the lease hold property both at the cost level and the accumulated amortization of the same. Hence, it can be observed that the company adheres to then various type of the guideline provided by the AASB conceptual framework. Under plant section of the company the company is observed to maintain the plant and the equipment both at cost and Accumulated depreciation and impairment losses (Yao et al al. 2013). Liabilities leases intangible assets notes look for evidence of any leasing Contingent legal liabilities where companies have had to pay out legal obligations due to issues From the liabilities and the leases analyses of the company, it can be stated that the company is observed to increase the leasehold property value from $ 74,762 in the year 2014 to $ 76,423 in the year 2015. The various type of the leased assets for the company are grouped under the PPE of them company (Chalmers et al. 2012). The intangibles of the company are seen to be decreased from an amount of $ 157,473 to $ 163,035. The intangibles of the company further states that the companys year endings intangibles was observed to be $ 779000 (Pawsey and Crase 2013). The intangible of the companys groups and the assets was further observed to $ 8101000 which represent the amount of the money paid to Scotts for the purpose of the customer relationship and meeting the criteria for then for the purpose of the various types of the trade requirements. In the statement showing the reconciliation of the net profit of the company it has been observed that the company is seen to be amortization of the various types the intangibles. The decrease in the intangible of the company is observed due to the impairment of the software by $12 million in the year 2015 (Russell 2014). Implementing Prudence Method: Prudence is a method where we cannot overestimate our revenues or underestimate our expenses. In other words it can be said that it is done only when we want to record the revenues which are certain and expenses which are probable. In case of Caltex after examining the given report we came to know that the company has tried to adopt this method so that they can ascertain the actual value of their assets and liabilities during the year. This method somehow becomes useful to them. Conclusion: After analyzing the whole annual report of the company we can conclude that the company has not adopted any wrongful means of business. Certain changes were made by the company during the year so that the company can earn the profit in the future. The company has maintained its goodwill by adopting all the fair means of business without harming any other entities. The market value of the company keeps on fluctuating during the year. If we compare the past historical records of the company we can easily get an idea about the fluctuating financial condition of the company. Not only the historical records if we look the sales figure of the company we can say that during the year company sales were affected by 0.7% in comparison to the last year which is not so high but can affect the companys profit margin. As per the data the company has a huge amount of RCOP during the year in comparison to the last five years record. So, somehow the company is trying to manage the situation and it is expected that the company will overcome the margin in the near future. It manages to promote the confidence of investors by ensuring them that the company is dealing in an informed market. They meet all the disclosures based on the listing rules of ASX. Reference list: Deegan, C., 2013.Financial accounting theory. McGraw-Hill Education Australia. Kang, H. and Gray, S.J., 2013. Segment reporting practices in Australia: Has IFRS 8 made a difference?.Australian Accounting Review,23(3), pp.232-243. Chua, Y.L., Cheong, C.S. and Gould, G., 2012. 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