GrainCorp Annual Report Analysis: Stakeholders, Environment, And Financials

1.Discussthe stakeholders of the annual report of the listed company that has been assigned to you.  Specifically, define the stakeholder to whom this report is being written, discuss the reason for their interest and the general type of information they need for decision-making. 

2.Write a report addressed to the stakeholder you identified in part 1.  This is to be in formal report format as you would provide to your client, the stakeholder identified in part 1.  You are required to address each of the following in your report:

a.Determine your objective/purpose for writing the report and include this in the introduction.

b.Provide a summary of the environment in which your company operates at the time of the financial statements and its direction into the future.  Explain how this is useful in analysing the company’s financial reports for the stakeholder identified in part 1.

Provide examples, be specific and relate your comments to the company you are examining and the stakeholder.  For example, a stakeholder in an iron ore mining company may be interested in prospective international demand for iron ore.

c.Consider the four major financial statements for the period ended 2015 and 2016.  Discuss the specific items in the financial statements that are important in assessing the performance and position of the company with particular reference to the areas covered in modules 1-7 of the 7154AFE Financial Reporting course.  Be specific and provide evidence from the financial statements.

Why did you identify these particular areas?  Why are these important for the company? Why is this stakeholder interested in them? How do they assist in their decision-making?

d.Discuss the accounting policies that are used for any items that have attracted your attention in the financial statements particularly those noted in b.  Discuss any accounting policies that have changed during the year, the reasons for the change and the effect of the change on the financial statements of your company.

e.Examine the remaining notes to the financial statements with particular reference to those areas covered in this course and use these to elaborate on any matters or amounts that have come to your attention in your discussion in part b and c.  Discuss any information contained in the notes that assists in your analysis and explain how it assists in your analysis. 

f.Although financial statements are not designed to show market value of the company they do provide valuable information to stakeholders to assist in estimating that value. Discuss,with reference to the conceptual framework, as to how the annual report of the company you have analysed achieve this.

g.Provide a conclusion and recommendation to the stakeholder to whom you are reporting.  Link this to your discussion in a.

Stakeholders

GrainCorp is a pioneer in the field of food ingredients and a company that is engaged in agribusiness. It contains a business model that is well established and spreads across three major activities that are the supply chain, origination, and processing. It has its prime aim to focus on three major grains that are wheat, barley, and canola because a comparative advantage is gained and even technical expertise. The operation spreads in Australia, Asia, Europe, North America, etc.  The mission of the company is to evolve as a leader in food ingredients and agribusiness thereby it helps in the creation of value by joining consumers with the producers.  The main aim of the report is to shed light on the policies of GrainCorp. In short, a detailed analysis is presented for the environment in which the company operates and the utility of the financial report for the stakeholder.  Further, various items of the financial statements are evaluated and the manner in which they affect the stakeholder will be discussed (GrainCorp, 2016).  Apart from this, the notes that form a part of the financial statement will be discussed followed by the reference to the conceptual framework.

The stakeholders who are interested in the annual report of Grain Corporation are shareholders, suppliers, customers, employees, managers, etc.  The annual report is drafted considering the above-mentioned stakeholders and this aids in their decision-making process.  The stakeholders are interested in the annual report because they are able to make a proper decision regarding the future course of activities. Shareholders are able to get updated information and it helps in the investment making ability, the suppliers are able to know about the condition of the company and will deliver the raw materials accordingly while the employees and managers are able to ascertain the solidity of the company which in turn indicates the certainty of their job (Deegan, 2011). 

GrainCorp operates in an environment that is highly strategic, operational, and dynamic.  Numerous initiatives were implemented in the year. The entire operations of the company were done considering the customers. Hence, the major focus remained on the customers and to enhance the competitive ability it stressed on the process of streamlined so that the operations can be enhanced and can be cost effective (GrainCorp, 2016). An apt example is that of Project Regeneration where GrainCorp committed to enhancing the rail skills of the Storage and Logistics in Australia.  Further, the installation of paperless sample stands at various sites has helped the customers in the reduction of the load-time when it comes to delivery of the grain. It is an apt example of the manner in which the organization has innovated so that the stakeholder that is the customer service is a top notch. Moreover, it has even helped the society that is another stakeholder group. The impact on the environment lessened due to such steps. Further, it has even looked after the workplace that is the employees and the managers. The notion of the Big 5, Gorilla in the place of work is utilized to propagate the notion of safety, safety from the hazard, and questioning to safeguard the employees from any imminent danger. Due to an embedded culture of safety, the company has made strong strides that are, it has made rapid progress in the goal of Zero Harm that is even termed as Safe for Life.   The work environment is highly safeguarded due to the implementation of various programs and that adheres to health and safety. The program aligns to the areas of strong health and propagates the method of safety. 

Environment in which the company operates

GrainCorp is dedicated to the creation of a working environment that is vital to the success of the business. Moreover, it helps in looking after the customers. Therefore, the company is engaged in the creation of a workforce that is strong and can retain employees. It helps in nurturing leadership. GrainCorp operates in an environment that is focussed on retention of employees and strengthens the skills of leadership skills in the competitive environment. As per the company, it is important that a culture of effective leadership is utmost essential to realize the potential and back ups the skills to provide customer value. A standard model of leadership was established that supports the development of leadership and various new programs were brought into action that is LEAD – launch Elevate, Accelerate and Discover.  Further, GrainCorp is destined to ensure that the employees are engaged and developed so that the customers, shareholders and the society get the bets result. The reward, as well as recognition program influences the employee, enhances the value of the share.

GrainCorp understands the role of community and hence provides special emphasis to the community. It provides a positive contribution to the communities. The presence of GrainCorp Community Fund is a glaring example of the role of the company in providing financial assistance to the organization that helps the local communities. Every year, the company donates huge sums to many initiatives through the GrainCorp Community Fund. The creation of various other funds such as Murrayville Recreation Reserve, Waaia Football Netball Club helps the society at large.  

In the financial statements, there are various items that need to be considered to project the performance of the company.  The stakeholders refer to these items that help in the process of decision making.  The first specific item that is considered by the stakeholders is the net income earned by the company and reflected in the income statements. it projects the profit or loss earned by the company (Gibson, 2012).  It is vital from the perspective of the company and even the stakeholders.  The profit for the year projects a marginal decline. However, the profit position or net income of the company is high that indicates a string command over the expenses. Hence, it boasts about the superiority of the company (Davies & Crawford, 2012).  When the profit is high, the stakeholders are interested as it will create long-term value.

The EPS is described as the net income per share and ascertain the earnings in terms of net income on shares that are outstanding.  It can be described as the amount that can be fetched by each stock if the profits are allocated to the shares. In short, it projects how profitable is the company when it comes to the point of the shareholder. A higher EPS is always preferred as it projects profitability. The EPS of the company has decreased marginally as compared to 2015 (GrainCorp, 2016). However, an EPS of 13.5 cents is justifiable and hence projects the strong position of the company.

Working environment

It is one of the vital areas that concern the shareholders and even the company. It is due to the fact that shareholders always want to invest in the company that has strong liquidity and in a condition to discharge the obligations. From the table it is indicated that the company is in a strong position as it greater than 1:1 and hence the company has sufficient assets to meet the liabilities (Brigs, 2013).

This will aid their decision-making process and go by the ratio the stakeholders will be interested in this company as the ratio is favorable.

Payment of dividend indicates the profitability of the company and compensating the investors for putting their hard owned money. Payment of dividend indicates that the company looks after the interest of the stakeholders (Brealey et. al, 2014).  The company has paid dividend continuously that is in 2014 and 2015. Hence, this will have a positive impact on the stakeholders particularly the investors as they will be satisfied with the step of the company. This will certainly have a positive bearing on the stakeholders and aid in the process of decision-making.  

The financial report adheres to the Standards of Australian Accounting and is a general purpose financial report. The application of accounting policies has been done in a consistent manner that pertains to all the period and has a vital role to play in the presentation of the financial statement of the group. The report is prepared on a going concern basis.

Dividend

The recognition of dividend is done as revenue when the right to receive payment is developed.

Cash and cash equivalence contains cash on hand, deposits on a call with the financial institutions and other instruments of short term nature with maturities more than three months and can be easily convertible into cash (Leo, 2011). The overdrafts are shown within the borrowings in the current liabilities and appear in the consolidated statement.

The basic earnings per share are computed by dividing the attributable profit to holders of equity debarring any costs of servicing equity rather than the ordinary shares that are divided by the weighted number of outstanding shares that is adjusted for the bonus elements in ordinary shares that are issued during the year (GrainCorp, 2016).

Grain Corp has adopted all the new, revised and amended Accounting standards and various other interpretations that are issued by the Board of Australian Accounting that are essential for the reporting that pertains to the current period.  Those accounting standards or interpretations that are not essential are not adopted.  There are various accounting standards and interpretations that were published are not compulsory for the reporting period and are not adopted by the Group (Horngren, 2013). 

There were certain revisions to the group and applies to the current accounting period.  The key areas for change happened in the case of

• Goodwill impairment and other assets

The group ascertains annually whether goodwill and other intangible assets have suffered any impairment that is tune to the accounting policies. The amount that is to be recovered from cash generating units has been ascertained resting on the higher of the fair value minus cost to sell and utilization value (GrainCorp, 2016).

• Income taxes

Community

The group adheres to the taxation policy of Australia and other places where the operations are carried on. The tax estimation of the liabilities is done resting on the understanding of the tax law that pertains to the jurisdiction (GrainCorp, 2016). When the result is different from the recorded amount, the difference influences the current, as well as tax assets of deferred nature in the determining period.

As per the notes to the financial statement, it is seen that the board declared a final dividend of 3.5 cents on every share that relates to the period 2016 that accumulates the dividend to 11 cents per share. Thereby, the payout ratio reached 48% and is in tune with the policy of the company that is 40-60% (GrainCorp, 2016 GrainCorp, 2016). Hence, this is an effective new in tune to the stakeholders. It provides a strong indication that the company works at full efficiency (Fields, 2011).

Provided on page 82 of the annual report that the basic, as well as diluted earnings per share,  is computed by dividing the year’s profit with the average number of shares in weighted over the year.

Further, the notes to the financial statements provide a clear knowledge of the measurement of the revenue. From the notes, it is clarified that the amount that appears as revenue are excluding returns, trade allowances and duties. Another important appears is that of recognition where it is provided that a financial asset is measured at fair value plus, when in the case of a financial asset not at fair value through profit or loss (GrainCorp, 2016). The transaction cost that is linked to financial assets is done at fair value.

The above disclosures are important as it helps in providing a balanced view to the stakeholder. Proper disclosure is always the need of the hour and helps the stakeholder to take a proper decision.

The conceptual framework is a statement that comprises of the function of the financial statements that is contained in the framework document. It enhances the soundness of the process of standard-setting, provides consistent assistance towards the development of the future standards (Choi  & Meek, 2011). The stakeholders are benefitted through the framework as they can interpret the information in a better fashion and provide a proper understanding of the values on which they are done (Libby et. al, 2011). The Framework is involved with the GPFR that includes the financial statements. The annual report of the company is prepared by adhering to the GPFR and this implies the statements are prepared, as well as presented to provide information to the stakeholders (Guerard, 2013). The financial statements are the major source of information to the stakeholders and the conceptual framework helps in providing relevant information that meets the needs of the users (Albrecht et. al, 2011). The presentation of financial statements is in tune to the framework and has helped the stakeholders to derive the value.

As per the report, it can be ascertained that Grain Corporation has effectively used the resources and the company is running profitably. Further, it is indicated that the company is in a strong position to reach further heights and is positive news for the entire stakeholder community. The progress of the company is a clear indication that the stakeholders will get a paramount advantage. Shareholders, suppliers, customers, employees, managers, society all will be benefitted by the progress of the company. The shareholders will get benefit in terms of returns while suppliers and customers in terms of good quality products. The employees and managers will have job security because of the present scenario and operation boats of a strong performance. The society will get the advantage as the company is heavily engaged in corporate social responsibility as indicated in the sustainability report.

References

Albrecht, W, Stice, E & Stice, J. (2011).  Financial accounting. Mason, OH: Thomson/South-Western.

Brealey, R, Myers, S. & Allen, F. (2014). Principles of corporate finance. New York: McGraw-Hill/Irwin.

Brigs, A.  (2013). Financial reporting & analysis. Mason, Ohio: South-Western.

Choi, R.D. & Meek, G.K. (2011). International accounting. Pearson.

Davies, T & Crawford, I. (2012).  Financial accounting. Harlow, England: Pearson.

Deegan, C. M., (2011).  In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill

Fields, E. (2011). The essentials of finance and accounting for nonfinancial managers, New York: American Management Association.

Gibson, C. (2012). Financial statement analysis. Mason, Ohio: South-Western.

Graham, J. and Smart, S. (2012)  Introduction to corporate finance. Australia: South-Western Cengage Learning.

GrainCorp. (2016). GrainCorp Annual Report and accounts 2016. Retrieved May 10, 2017 from https://www.google.co.in/search?q=grain+corp+annual+rpeort&oq=grain+corp+annual+rpeort&aqs=chrome..69i57j0l5.10281j0j4&sourceid=chrome&ie=UTF-8

Guerard, J. (2013). Introduction to financial forecasting in investment analysis. New York, NY: Springer.

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Leo, K. J. (2011). Company Accounting, Boston:McGraw Hill

Libby, R., Libby, P. & Short, D. (2011)   Financial accounting. New York: McGraw-Hill