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ACCM4600 Accounting Theory And Contemporary Issues

tag 0 Download 0 Pages / 0 Words tag 18-06-2022
  • Course Code: ACCM4600
  • University: Kaplan Business School
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  • Country: Australia

Answer:

Introduction

The main purpose of the assignment is to analyze the factors that drive culture of the business organization and mechanisms. The current segment emphasis upon considerate the procedure that direct towards main direction for the Australian Listed Company named as Medibank Pvt Ltd. Medibank Private Limited is one of the nationwide private health insurer that is operated in Australia (Medibank 2017). The vision of Medibank Private Limited is to occupy the topmost position in healthcare sector and be a trusted partner in whole of life health as well as wellness. The main purpose of Medibank Private Limited is to provide better health facilities to Australians.

Examination of Remuneration Report of Medibank Pvt Ltd 

Concern with remuneration

Board Committee Members of Medibank Private Limited had set up the Remuneration Committee known as People Policy Committee (Lev, B. and Gu, F., 2016). This particular Committee had been set for custody it at a typical stage as well as composed of Group Remuneration after checking the possibility and performance relationship. In that case, People Policy Committee accumulates with the given necessities as present in the ASX recommendations. In the auditor report on remuneration, the Board of Directors prepares and presents the compensation report in agreement with Section 30A of the Corporate Act for the year 2001. Furthermore, audit report is ready in agreement with Australian Auditing principles.

The remuneration report has been available for the year 2016 where it shows unsatisfactory presentation of Medibank Private Limited as well as relates the results on Executives as well as Employee Remuneration. Addition to that, performance of Medibank Private Limited depends upon the major financial metrics that underpins the overall arrangement of compensation. In this exacting remuneration report, it shows 0.1% increase previous to net profit after tax in association with previous year (Kravet, T.D., 2014). On the other hand, the report shows 0.7% reject in the earnings per share than the earlier year. In this way, Management of Medibank Private Limited majorly links the pay structure of the business organization. Medibank Private Limited has no provision in case of short-term incentives.

There are number of awards that are presented in association with historical financial presentation and the historical retention rights. From the remuneration of Medibank Private Limited, it is easy to understand the structure and governance of remuneration for the private insurer health care company (Kim, J.B., Liu, X. and Zheng, L., 2012). Remuneration account of Medibank Private Limited portrays the corporation failed in assembly the temporary inducement plan. In addition, this has happened for showing the presentation entry of 4% growth of net profit after tax after comparing it with preceding year. Medibank Private Limited aims at supporting the results that turns out to be providing potential value to its stakeholders. Furthermore, the company asses the remuneration structure where it offer strong foundation for working under flexible conditions. Medibank Private Limited will be replicating the alternative strategies in a way to attract retention of talent staff members. Medibank Private Limited Board and Senior Executive Group take into consideration long-term association that aligns with the potential shareholders in the most appropriate way.

Short-term decision-making 

As mentioned in the standard IFRS 8, it explains the operating segments that are used for identification of attributes that is based upon the internal reporting in association with components of the Group. Addition to that, Chief Operating Officer of Medibank Private Limited involve in decision-making process on matters relating to resource allocation to the segment in a way to assess the proper sources of information. It can be understood from the presentation of Group Executives who will work under operating segments and internal reporting segments (Kaplan, R.S. and Atkinson, A.A., 2015).

Conceptual Framework 

As rightly put forward by Deegan (2013), conceptual framework is one of the framework that mainly explains the objectives of financial reporting as it is qualitative in form. Addition to that, the conceptual framework mainly aims at defining, measuring and recognizing the different elements used for financial declarations as mentioned under the capital acquisition. From the framework, it is understood that general purpose of financial reporting provides financial information to the users, lenders and creditors for involving in decision-making process (Ifrs.org. 2016).

AASB issues like Lease Accounting

As mentioned AASB, it reveals the fact about lease accounting as it is arranged as well as accounted in the financial declaration of Medibank Private Limited. Addition to that, the interpretation can be made from the lease arrangement where it fulfils with the arrangement of specified assets (Henderson et al. 2015). Furthermore, the arrangement helps in conveying the right use of assets. The judgment that is made is actually exercised over assessment of existing supplier arrangements as present in lease accounting. In addition, there are several issues present where the standard actually fails to use the given assets that fulfill the supply obligations and Group enforcement. It is because of the standard that enforce stringest quality standards depending upon the sourced goods and no control over the asset usage. It is the purchase figure that is overpriced with each individual order and no control over the physical access to the supplier assets (Medibank 2017).

General Purpose of Financial Reports for users in making financial decisions in agreement with AASB Framework 

Inventory 

There is no inventory for Medibank Private Limited as the company deals with health insurance. There is no mention of inventory in the current assets as noted from the annual report of the health insurer company (Medibank 2017).

Accounts Receivable 

 

Figure: Accounts Receivable of Medibank Private Limited

(Source: Medibank 2017)

Premium revenue is recognized on a straight line basis for a given period of insurance cover where it is measured at a fair value of the receivables (Medibank 2017). From the above figure extracted from annual report, it is understood that trade receivables increases from the year 2015 to 2016. In the year 2015, trade receivables recognized is 301.2 and 313.1 in the year 2016. The increase in trade receivables is a positive aspect where the company has the ability to meet short-term obligations in the upcoming financial year.

PPE

 

Figure: Property, Plant and Equipment of Medibank Private Limited

(Source: Medibank 2017)

From the above figure that is extracted from the annual report of Medibank Private Limited, it is noted that there is decrease in PPE intangibles from 2015 to 2016 (Medibank 2017). In the year 2015, PPE for Medibank Private Limited was 106.1 and 93.3 in the year 2016. This decrease in PPE intangibles reveals that they the company need to purchase more fixed assets in the u[coming financial year. Trade payables as well as other financial liabilities majorly originate from the financing assets that are used during the ongoing operations like PPE and investment in working capital.

Liabilities 

 

Figure: Total Liabilities of Medibank Private Limited

(Source: Medibank 2017)

The liabilities are measured at present value of expected future payments through use of projected unit credit method. In other words, the obligations are presented as current liabilities where the consolidated financial statement of the financial position indicate when the Group does have any unconditional right for deferring settlement for at least 12 months after the reporting date (Medibank 2017).

Leases 

From the annual report of Medibank Private Limited, it is noted that the company use finance leases for treatment purpose where the contracts mentions about the lease obligations. Finance leases help at the time of risk transfer as well as rewards aligning with the ownership to lessee (Medibank 2017).

Intangible Assets 

The methods used by Medibank Private Limited are straight-line methods on current basis during the financial times. Medibank Private Limited published information that represent useful life of Property, Plant and Equipment intangibles that are between 2.5 years to 10 years (Medibank 2017).

Contingent Legal Liabilities 

On 16th June 2016, the Australian Competition and Consumer Commission issued certain proceedings in the Federal Court of Australia against Medibank Private Limited (Medibank 2017). This particular standard alleged that Medibank Private Limited engages in misleading as well as deceptive conduct as it engage in making false representations and liable for misleading the public. This company engages in unconscionable conduct by failing for notifying members of changes to contractual arrangements with a number of hospital diagnostic service providers. After that, a trail has been set for commencing the activities next on 14th of March 2017. Furthermore, Medibank Private Limited denies the allegations and will be defending the claim. In one of the event, it was declared that the Group has potential liabilities that include pecuniary penalties. It is because of the preliminary nature of the proceedings that makes the outcome uncertain to certain extent (Harrison, J.S. and Van der Laan Smith, J., 2015).

Taxation

Income tax expenses in the year 2016 include a one-off tax benefit worth of $23.2 million because of the change in tax position for previous periods that is endorsed by the Australian Taxation Office for the year 2015. This mainly results in taking into consideration the unclaimed tax deduction that is being allowed to some extent.

Figure: Taxation Services of Medibank Private Limited

(Source: Medibank 2017)

Medibank Private Limited was successful in having a change in tax position for previous periods by the Australian Taxation Office in the year 2015 that results in a previous unclaimed tax deduction of $23.2 million that is being allowed. This particular deduction had been record in the current financial year (2016) (Medibank 2017).

Transfer Pricing 

Medibank Private Limited has concerned in transfer pricing and had been compiled with SARS necessities and all the given dealings are continued through arm length.

Prudence 

As rightly put forward by Deegan (2012), Prudence is a concept that means conservatism principle as well as accounting principles that is carried out by a specified accountant. They record liabilities as well as expenses at the time of realization. In other words, this concept is required by the accountants who remain cautious towards adopting any accounting principle as well as estimation made in the income assets that is either overstated or understated of entity for a specified period of time.

Conceptual Framework 

As stated by Bonin (2013), during the preparation of financial statement, there are several uncertainties that are identified due to collectivity of doubtful receivables and useful like of fixed assets like PPE. In that case, the identified uncertainties bring out corporate disclosures after exercising prudence concept especially for conceptual framework. Furthermore, the concept Prudence reveals inclusive of degree of caution that is used for exercising over the judgment at uncertainty levels.

Process for updating conceptual framework 

It is necessary for updating or developing conceptual framework as it is important where IASB removes the references from the fundamental concepts of Prudence. In other words, updating will help in explaining the prudence exclusion as well as several aspects for gaining proper understanding of faithful representation in alignment to Prudence concept (Bebbington, J., Unerman, J. and O'Dwyer, B., 2014).

Benefits and limitation of fiscal coverage

One of the benefits of financial reporting deals with the prudence conception as it represent the theoretical structure that brings high level of consistency of information and neutrality of actions as and when required. In that case, after the prohibitive attributes and deliberative misstated figures, it can be easily presented in the conceptual framework (Ballwieser et al. 2012).

One of the limitations of financial reporting is biasness that largely affects financial performance in upcoming years (Aasb.gov.au. 2016).

Conclusion 

From the above analysis, it is understood that there are various items analyzed from the notes to financial statement as presented in the annual report of Medibank Private Limited for the year 2016. The company disclosure policies compiles with the Corporation Act 2001 as per the ASX Listing rules. The company follows the disclosure policies so that they promote the level of confidence of various investors in regard with integrity and securities at the same time. The company strongly advocates in providing sustainable private health system that aims at delivering value, affordability as well as transparency in the most appropriate way.

Reference List 

Aasb.gov.au. 2016. Australian Accounting Standards Board AASB - Home. [online] Available at: http://www.aasb.gov.au [Accessed 9 Sep. 2016].

Ballwieser, W., Bamberg, G., Beckmann, M.J., Bester, H., Blickle, M., Ewert, R., Feichtinger, G., Firchau, V., Fricke, F., Funke, H. and Gaynor, M., 2012. Agency theory, information, and incentives. Springer Science & Business Media.

Bebbington, J., Unerman, J. and O'Dwyer, B., 2014. Sustainability accounting and accountability. Routledge.

Bonin, H., 2013. Generational accounting: theory and application. Springer Science & Business Media.

Deegan, C., 2012. Australian financial accounting. McGraw-Hill Education Australia.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Harrison, J.S. and Van der Laan Smith, J., 2015. Responsible accounting for stakeholders. Journal of Management Studies, 52(7), pp.935-960.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Ifrs.org. 2016. IFRS - Home. [online] Available at: http://www.ifrs.org [Accessed 9 Sep. 2016].

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Kim, J.B., Liu, X. and Zheng, L., 2012. The impact of mandatory IFRS adoption on audit fees: Theory and evidence. The Accounting Review, 87(6), pp.2061-2094.

Kravet, T.D., 2014. Accounting conservatism and Managerial risk-taking: corporate acquisitions. Journal of Accounting and Economics, 57(2), pp.218-240.

Lev, B. and Gu, F., 2016. The End of Accounting and the Path Forward for Investors and Managers. John Wiley & Sons.

Medibank. (2017). Australia's Leading Health Insurance Provider | Medibank. [online] Available at: http://www.medibank.com.au/ [Accessed 24 Apr. 2017].

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