What is the Financial Accounting ?
Financial accounting helps to keep the financial transactions in more organised format. It not only consists the recording of transitions, it also includes the preparation of financial statements and publishing such information in standard formats. Annual reports of a company are prepared based on such statements and hence, these statements play an essential role in annual reports. The annual report is important for every company as business communicates to all its stakeholders through its annual reports. Annual reports present the financial soundness of a company. It compares the past business performance of the company with the current year performance. Future goals and long term plans of a company are also highlighted in the annual report of the company (Loughran, 2011). There are certain rules of accounting which need to be followed while recording as well as presenting the transaction. These rules are emerged to provide uniformity in the format of financial reporting so that the manipulation of accounts can be restricted. In order to read the whole report one need to be familiar with the accounting terms and have knowledge of the subject. Annual reports serve the purpose of all the stakeholders of a business. Every company is expected to follow the accounting concepts and guidelines issued by the authorities like GAAP, IFRS and IASB while keeping and publishing their business transactions (Lunt, 2009).
This project involves the study of Annual Report of Ramsay Health Ltd for 2016. Ramsay Health is a listed company which is listed on the Australian Securities Exchange (ASX). In addition to this, the methodology and concepts followed by the Ramsay Healthcare Ltd. While preparing, its annual reports has been discussed in detail.
RHC limited covers the Weight of 0.93% with a Market cap of 14,123,500,000. RHC Ltd (Ramsay Health Ltd., 2016) established by the Paul Ramsay and which is now covered in the top five privately hospital operators in the Globe. RHC has a main goal on providing the quality and safety of highest standards. The philosophy, beliefs or ideology “People Caring for People” and its operating its business accordingly (Ramsay Health Ltd., 2016).
Ramsay Health Care provides a wide range of health care needs which includes the highly complex surgery to normal surgery procedures, rehabilitation and psychiatric care. Ramsay health has approximately 25,000 beds, and employs more than 60,000 workforces in five countries and tackle about 3 million sick person or sufferer each year. At Present, RHC is an international hospital circle or group operating and owning a complete range of healthcare facilities covering Australia, Malaysia, Indonesia, France and the United Kingdom. Despite the differences of these marketplaces, the Company has manifest that it has the capability, flexibility, management expertise, and cultural awareness to operate and manage successfully within an extensive range of international healthcare structure. Ramsay Health in private hospital operations is a market leader in both Australia and France (Ramsay Health Ltd., 2016).
Latest in History of Ramsay: - In 2015 there was approval by shareholders in the merger of Ramsay Santé and Générale de Santé was confirmed between both the groups. In December 2015, the newly merged organization take receipt of a further nine healthcare entity in Lille bringing the total figure of hospitals in the group to 110 and the total digit of facilities which includes treatment centres to 124
Solution:
The Going Concern Concept of Accounting is important as it presents the fair position to shareholders about the financial soundness and stability of the business, which will influence price of price, as the financial statements are prepared and executed on the assumption that the entity will continue to exist for a longer period (Needles, 2008).
Example: Depreciation is calculated by RHC Ltd., on a Straight-Line basis which is calculated over the assumed useful life of the asset on Building and integral plant – 40 to 60 Years. Using the going concern assumption, it is presumed that the business will carry on with its operations and so the asset will generate economic interest throughout its full years in use.
The accrual concept in accounting presents a better image of a company's or earnings profits during the financial period. The reason is that the income statement or Profit and loss account incorporated under the accrual basis, will help to report and summarized the revenues which are actually earned by the company in an accounting period also the expenses incurred to earn those revenues (Albrecht and Stice, 2010).
Example: In Schedule of Trade and Other Payable, accrued expenses are being used to escalate the accuracy, correctness and perfection of the financial statements, so that the expenses get more closely associates with those revenues which they are related. Similarly, there were various provisions and receivable which shows that revenue earned must be harmonized, against the expenditure incurred in earning it.
Example: In Cash Flow Statement, there is a Repayment of finance lease (under cash flow from Financing Activates) which means the asset is acquired by the RHC Ltd. under lease agreement without the shifting of legal title or agreement at the end of the lease period. Such a lease may, in subject matter, be called as a finance lease if for instance the lease term is significantly for complete useful tenure of the asset or the lease agreement authorize the lessee to purchase or buy the asset at the termination of the lease term at a very nominal or minimal price and it is very probably that such alternative will be exercised or executed by the lessee in the given state of affairs (Warren, Reeve and Duchac, 2011).
Measurement is the procedure of defining the monetary amounts or figures at which the financial statements elements are to be acknowledged and carried on the statement of financial position and income statement (Albrecht, Stice and Stice, 2007). This includes the selection or choosing of the particular method of measurement. There are a number of problems which can be identified in the present AASB/IASB Standards and conceptual framework. These are as follows: -
The Audited Balance sheet of RHC Limited for the financial year 2015-2016, is prepared and presented in such a manner that above problems can be resolved and deleted, so that there is compliance with the Revised Conceptual Framework of International Accounting Standard Board (IASB). For Example: -
iii. The Annual Report recognises upgrade to those quantification or measurements in the declaration of any changes in equity, as a shift of wealth in the middle of classes of equity claim.
vii. The asset, liability, income and expenses recognised providently represent the significance of the transaction from which they have entered into the financial statement. . Hence, in general, rights or obligations occurring from the identical source are scattered only if the resulting information is further useful and the benefits overshoot the costs (Stickney, Weil and Francis, 2009).
viii. There are Key Estimates and Assumptions in Notes to Accounts to maintain the clarity and readability among the stakeholders.
Financial reports represent the organisation performance during the reporting period in words and numbers which are designed as per the requirement of the corporate law. It would be Sufficient (adequate or complete disclosure of all required information), Impartial (unprejudiced from bias) and free from error (no miscalculation, error and omissions). The Board of Directors or the Management will have the objective to increase the ultimate wealth of the shareholders with all due governmental and non-governmental compliances (Kimmel, Weygandt and Kieso, 2010).
Hence, it is required to acknowledge the description along with the explanation and quantification on the beginning of the financial position statement, supported by-
Albrecht, W. A. Stice, A.K. and Stice, J. D. 2007. Financial Accounting. Mason: Cengage Learning.
Albrecht, W., and Stice, E. 2010. Financial Accounting. Mason: Cengage Learning.
Everett, R.E., Johnson, D. R., and Madden. B. W. 2012. Financial Accounting for School Administrators. London: R&L Education.
Gabriel, S.J. 2010. Financial Accounting. 2010. Tata McGraw-Hill Education.
(Jones, 2014)Jones, M.J. 2014. Financial Accounting. Wiley.
Kimmel, P.D., Weygandt, J.J., and Kieso, D. K. 2010. Financial Accounting: Tools for Business Decision Making. New York: John Wiley & Sons.
Loughran, M. 2011. Financial Accounting For Dummies. John Wiley & Sons.
Lunt, H. 2009. Fundamentals of Financial Accounting. Mason: Elsevier.
Needles, B. E. 2008. Marian Powers Financial Accounting. Mason: Cengage Learning.
Ramsay Health Ltd. 2016. [Online]. Available at: https://www.ramsayhealth.com/common/emag/rhc/annualreport2016/pubData/source/RHC-Annual-Report-2016.pdf [Accessed on: 27 April, 2017].
Stickney, C. P., Weil, R. L., and Francis, J.2009. Financial Accounting: An Introduction to Concepts, Methods and Uses. Mason: Cengage Learning.
Stolowy, H., and Lebas, M. 2006. Financial Accounting and Reporting: A Global Perspective. Mason: Cengage Learning EMEA.
Warren, C. S., Reeve, J. M., and Duchac, J. 2011. Financial Accounting. Mason: Cengage Learning.
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Weygandt, J. J., Kieso, D. E., and Kimmel, P.D. 2010. Financial Accounting: IFRS. John Wiley & Sons.
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