Anayse the Accounting Policy of Cleanaway Waste Management.
Accounting analysis is considered as one of the aspects of accounting as accounting analysis helps the accounting managers in many ways. It can be seen that accounting analysis provides significant assistance to the financial managers in the decision-making process (Li 2015). Apart from this, with the help of accounting analysis, financial managers of the companies can determine various accountants aspects like the liquidity position of the companies, stability of the company along with the profitability of the company. On the other hand, investors of the companies can get valuable financial information from the accounting analysis of various financial aspects (Shevchuk 2013).
Identification of Accounting Policy of Cleanaway Waste Management (CWM)
The amount disclosed as revenue is represented in the fair value that includes environmental levies but it excludes goods and service taxes paid. Revenues from the sales of goods are considered when the risk and ownership of the goods are passed to the buyers (cleanaway.com.au 2017). In case of repairs and maintenance, there is a requirement for overhauling the plan and equipment of the company on a regular basis and the cost is considered as expenses. CWM recognizes the expenses at the time of their occurrence. In case of the income tax, tax is payable on the taxable income of the current financial years and tax is calculated based on current tax laws (cleanaway.com.au 2017). As per the accounting policy, CWM assesses the value of financial assets on a regular basis in order to determine whether there is any impairment or not. At the time of transactions, foreign currency is translated at the foreign exchange rate. Cash and cash equivalent consists of cash at bank, short-term deposits and balance of petty cash. Debtors are provided with a time of 30 days for due settlement (cleanaway.com.au 2017). The basis of valuation of the company’s inventory is lower cost and net realizable value. The derivative instruments of CWM are valued based on fair value. Plant and equipment of the company is measured at cost after the deduction of accumulated depreciation and impairment cost. Depreciation is charged on the fixed assets based on the straight-line method (cleanaway.com.au 2017).
The above table shows the expected useful lifetime of the fixed assets of the company.
Goodwill is considered as the intangible assets and it is allocated to cash-generating basis. CWM pays all of its trade and other payable within 45 days. All the long-term borrowings of the company are recognized based on the fair value method (cleanaway.com.au 2017). All the provisions of the company are shown in the consolidated balance sheet of the company. The major components of the company’s wages and salaries are wages and salaries, on-costs employee benefits, long service leave, short-term incentives, share based payments and others. It can be said that CWM values the different financial instruments like share derivatives and non-financial assets on the fair value basis (cleanaway.com.au 2017). These are the major accounting policies of the company.
Access Accounting Flexibility
From the financial statements of CWM, it can be seen that the company has adopted the AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality policy. In addition, the company has also adopted the policy of Corporation Act 2001. Thus, it can be seen that CWM has adopted a flexible accounting policy that allows the company to measure all the financial assets on the correct manner (cleanaway.com.au 2017). All these policies provide flexibility to the accounting of the company.
Evaluation of Accounting Strategy
From the above discussion, it can be seen that there is an alignment of the accounting strategies of the overall strategies of the company in order to achieve the objectives. The lower cost valuation of inventories provides the company with accurate inventory valuation. On the other hand, one can judge the actual value of the fixed assets as they are revalued on a regular basis (Brigham and Ehrhardt 2013). Overall, the fair value process to measure the values provides the correct value different assets and liabilities of the company. Accuracy can be seen in the depreciation process as depreciation is charged on straight-line basis. CWM also follows the principles of prudence. For this reason, CWM records all the expenses at the time of their occurrence and records the incomes when the company gets them. Thus, it can be said that the overall accounting strategy of CWM is effective as well as efficient (Healy and Palepu 2012).
Quality of Disclosure
CWM has a strong commitment to comply with various obligations regarding disclosures under the Australian Securities Exchange (ASX) listed rules and regulations. For this reason, the company has adopted a policy called ‘Continuous Disclosure Policy’. According to this policy, Directors, executives and all the employees of the company need to comply with the disclosure obligations of the company according to ASX listed rules and the principles of Corporation Act 2001 (cleanaway.com.au 2017).
Identification of Potential Red Flags
It can be seen that the company has adopted some new accounting policies in many of the accounting areas. However, it can be seen that CWM has been using some accounting policies over many years. This is an area of concern for the company as it can pose some kind of threats in near future. However, this aspects does not have any effect on the current financial report of the company (Higgins 2012).
Undo any Accounting Distortion
Based on the analysis, it can be seen that there is not any accounting distortion in the financial reports of the company.
Based on the above discussion it can be seen that CWM has adopted effective accounting policies in different accounting aspects. The recording of revenue is an effective process. On the other hand, the expenses are recognized at the time of their occurrence. The adoption of fair value method provides accuracy to the whole accounting system. It has also been seen that CWM has an effective policy regarding the disclosure policy. CWM had adopted the policy of Corporation Act 2001 and AASB 2015-3 for financial reporting. Thus, it can be said that the accounting and other policies of the company are effective and efficient.
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