Discuss about the Financial Reporting of ANZ Bank.
Financial reporting is one of the major aspects that one has to construct in order to understand the financial position of any organization. This paper has been constructed to report that is to the forwarded to the CEO of ANZ Bank in order to understand the main issues regarding the allegation of the bank to set interest rates on the commercial and business loans so that the bank benefits out of it. ASIC, the regulator of the financial market who act to protect the interest of investors has seen this action as a breach of lending and therefore was fined a penalty for their actions (Erb and Pelger 2015). The report will answer the all the issues that are related to this incident thereby helping the CEO to gain knowledge about the final outcome.
This section of deals with how the commercial and business loans are shown in the financial statement of ANZ Bank. This statement is in compliance with the Section B4.4.1 of Section 4.4, which explains the reclassification of financial assets. This section asks the entities to reclassify the financial assets if the entity alters their business model for handling the financial assets. Section B4.4.1 (a) reveals that a body is a portfolio of the commercial loans that it holds on to sell in the short term. It is seen that the unit requires to acquire an organization that handles the commercial loans and has a business framework that controls the loans so that contractual cash flows can be obtained (Birt et al. 2014). The commercial loan portfolio is not for sale and the portfolio is now handled together with the commercial loans that have been gathered and everyone of the them are stored in order to collect the contractual cash flows.
It is seen that with respect to ANZ Bank, it is seen that they are record the commercial loans by keeping in line with the AASB 9 so that the report becomes true and fair and becomes easy for individuals to understand. The commercial loans are recorded in the asset side of the balance sheet of the annual report of ANZ Bank and are included in the net loans and advances.
This question tries to answer that whether ANZ requires to report the the allegations given out by ASIC with respect to the Bank Bill Swap Rate in the financial statement of the annual report of 2016. It is seen that it is essential for ANZ Bank to report the allegations that have been published by ASIC regarding them. It is seen that as Bank Bill Swap Rate is associated with the financial statement, therefore any allegations made by ASIC requires to be reported in the financial statement. The process of reporting involves associating with AASB 9 Section B3.2.16 (a) which illustrates the implementation of the de recognition principles of the Standard (www.shareholder.anz.com 2017). This section explains the agreements of repurchase and the securities lending. It is seen that if an asset that is financial in nature is sold with a contract to repurchase it at a price that will be fixed or at a selling price with addition to the lender’s return or it the asset is loaned with a contract to return as the transferor keeps the substantially then the overall reward and risks of the ownership (Laswad and Redmayne 2015). It is seen that if the transferee gains the power to pledge or sell the asset, then reclassification is done by the transferor regarding the asset in their report of the financial condition, for instance as a asset that is loaned or receivables that are repurchased.
It is seen that a superior cash management regulations and policies that can make sure that a financial institution has cash on hand to invest in the working capital that are the major reasons that has an impact on the assets in the balance sheet. The various components of the cash management policy that have an impact on the value of the financial assets are inclusive of the accounts receivable collection and cash reserves. It is seen that the cash reserves raise the value of the cash that is kept in bank accounts. This makes sure that the liquidity is maintained high and the firm can pay their bills when the cash in hand falls due to fall in the revenue of sales (Mardini, Crawford and Power 2015). On the contrary, efficient collection of accounts receivable process try to reduce the time, which it takes to gather the money that is owed to the financial institution. In the balance sheet, it looks like a fall in the account receivables amount and a rise in the cash in hand.
Internal control is one of the major factors that have the ability to have an impact on the value of the inventory and cash on the balance sheet. It is seen that internal controls is accumulation of the procedures and policies constructed to protect the assets of the business by deterring intrinsic frauds and thefts. The controls that are ineffective raise the risk that staff fraud and theft will reduce the value of the cash and the inventory within the balance sheet.
This section of the paper deals with the payment of the penalty that has been levied on ANZ Bank due to their fraudulent activity with respect to granting of commercial loans. The question that is under consideration is respect to the recording and reporting of the payment of the fine in the financial statement of ANZ Bank. This question is line with AASB 137 and this query is answered in the refunds policy of the organizations. With respect to the scenario, it is seen that a provision is identified for the appropriate forecasting of the costs of the refunds that are seen in the paragraphs 10 that explains constructive obligations and paragraphs 14, 15 and 17. These are the paragraphs that explain about the refund policy that is used by ANZ for payment of the fine.
With respect to the current scenario, it is seen that payment of fine is a constructive obligation of the as the bank is obligated for the payment of the fine as they have been found guilty of their activities (Henderson et al. 2015). It is seen that constructive obligations is derived from the activities of an organization where with the help of the constructed trends of the precious practices with the help of the founded policies and the adequately relevant present report, the bank has revealed that other parties that will acknowledge various accountabilities and as an outcome the party has established a suitable expectation on the section of the of those parties who will give out the responsibilities. Therefore, these payments are recorded in the balance sheet as the contingent liabilities.
This question deals with the reporting of the overdraft in the annual report of ANZ Bank in the year of 2015 and 2016. The report will be published only after the investigation of the ASIC is over. With respect to the scenario that is under consideration, it is seen that this is in compliance with AASB 107. Section 8 of AASB 107 explains the cash and the cash equivalents with respect to the overdraft reporting of the firm. It is seen that borrowings are considered as financial activities. Conversely there are few countries the bank overdrafts that are repayable on the demand creates an intrinsic part of the cash management of the business unit. In this situation, the bank overdrafts are inclusive as part of the cash and cash equivalents. A feature of such arrangements of banking is that the balance of the bank often varies from being positive to overdrawn (Barth 2013). The overdraft is shown as a liability in the balance sheet and it is posted separately from the other liabilities as it can be offset with the remaining cash balance of ANZ. Therefore, it can be said that in the annual report of 2016 the overdraft will be shown and as the penalty is levied in the year 2016, no actions will be taken in the annual report of 2015.
This question is in relevance to the appropriate treatment to write off the bad loans in the account of ANZ Bank in the financial statement of their annual report. This problem is in line with AASB 1032 Section 1 of the accounting policies. The financial report has been prepared with regards to AASB and other requirements relevant to reporting. The accounting policies implemented are stable with respect to the similar financial year.
The financial statement has been constructed on the accrual basis of accounting by making use of the historical cost accounting exclusive of areas where it is indicated. The carrying value of all the assets that are non-current are evaluated according to the reporting date to make sure that they do not surpass their amounts that are recoverable. The amount that is recoverable is discovered as the net amount that is predicted to be recovered from the cash flows rising from the sustainable use and the subsequent asset disposal of the asset or a collection of assets.
The advances and the loans are identified at the recoverable value after analysing the required provisions required for impairment. The impairment of the loan is identified when there is a certain amount of doubt that the entire principal and the interest value can be gathered with respect to the loan agreement terms (www.aasb.gov.au 2017). Te impairment is analysed by particular recognition with relation to the individual amounts by forecasting the predicted losses in accordance to the loan portfolios where relevant recognition is illogical.
It is seen that the bad debts are written off whenever they are recognised. If there is a provision for impairment is discovered in relation to the loan, write offs for the bad debts are created against the provision. If there is no previous provision for impairment has been discovered then bad debt write offs of the bad debts are identified as expenses in the profit or loss account. It is therefore, seen that ANZ Bank with relation to the accounting standard will even recognise the bad debt write off to be an expense in the profit or loss account as they did not create a provision earlier.
This question discusses about the impact of the probable defaults on financial performance and position of the years to come for ANZ Bank. It is seen that there are various impact on the potential defaults and it is seen that these defaults have an impact on the revenue of the bank. The operational activities of the firm even get affected due to potential defaults. The potential defaults even have an impact on the liquidity and the credit management of the firm. Therefore, these factors can be taken into consideration so that the improvement in the financial performance can be accomplished. The maintenance of a risk management technique can be helpful for the upliftment of the financial performance.
The analysis of the paper reveals the impact of breach of act by ANZ Bank with respect to the business loans. The paper even discovers that AGIC identifies this mistake and fines a penalty that requires to be paid by the bank. The posting of the various transactions in the financial report and sending them to the CEO is the main aim of the study. The paper identifies that all the transactions are posted with respect to the various AASB accounting standard that is helpful for free and fair preparation of the report that will help individuals to understand the report.
Anon, 2017. [online] Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB9_12-14.pdf> [Accessed 17 May 2017].
Anon, 2017. [online] Available at: <https://www.shareholder.anz.com/sites/default/files/2016_corporate_sustainability_report.pdf> [Accessed 17 May 2017].
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