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General Purpose Financial Reporting By Corporations

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Question:

Analysis of Tabcorp Business Strategy and Highlights?

 

Answer:

Introduction

General Purpose Financial Reporting by Corporations refers to financial reporting by organizations that meet informational requirements of their users who are not in position to command the accounting process and standard (Knezevic, Djuric and Dmitrovic, 2012). It involves reporting financial information to meet need of common users specifically, satisfactory and other financial need. Financial statements should provide accountability, compliance, financial position, financing and investing of a corporation. Financial reports provide financial information to several stakeholders. They include employees, investors, creditors, government and management. Financial reporting helps stakeholders make informed decisions (Nagar and Petacchi, 2016).

The following report analysis financial statements and auditor’s report of Tabcorp Business for the year ending 30th June 2016 financial year. The report will outline the relevance of the financial report information to financial stakeholders of Tabcorp Corporation.

 

TAB Corporation Limited Overview

Tabcorp Limited is a public listed company in Australian Stock Exchange that is involved in gaming, wagering and Keno operations. The company is a leading gaming, Keno and wagering business in providing gaming products and services in the World. The Company was founded in 1994 and has its headquarters in Melbourne in Australia. Tabcorp led by Paula Dwyer as the Chairperson and David Attenborough as the CEO of the Company (Tabcorp.com.au, 2017).

The Company products include; wagering, media, gaming and Keno. Wagering has an average of 1.2 customers per year with two largest pools one in Victoria and other in NSW in Australia. 30% of the wagering customer access the services through internet, phones and pay TV. Keno has an average of 1.3milion customers per year in Australia. This product has 2739 avenues in Australia. Gaming has an average of 1.2 customers who use electronic gaming machines. The company operates 1303 electronic gaming machines in clubs around Australia. The Tabcorp Limited media has three pay TV channels that are watched by 2.235 homes in Australia. The media records over 83000 races around the world. The media also operates a radio station. The company has 3000 employees.

Tabcorp is trade in Australian Stock Exchange (ASX) as TAH. The company had 2188.7 million revenues for the year. This was a 1.5% increase from 2015 financial year.

Tabcorp Business Strategy and Highlights

Tabcorp operations are based on mission to support all it shareholders, community and customers. The company focuses on achieving commercial success by championing sustainability in the ways the company conducts games (Crawford , 2013). Tabcorp was able to implement the following strategies in 2016 financial year;

The company was able to secure Victorian thoroughbred media rights for five.

  • There was completion of ACTTAB integration
  • NSW Keno permit was extended to 2050
  • The company was able to respond to Federal Government about illegal wagering.
  • The company was able to establish Sun Bets in UK that are online based.
  • The Sky thoroughbred central was updated to High definition broadcasting.
  • The company was able to invest in technological platforms.

The business has the following strategic priorities in 2017 financial year;

  • Tabcorp aims at launching Sun Bet in United Kingdom
  • Launching Keno digital solutions and having a new game format.
  • Driving TGS events performances and expand them
  • Attaining 14% returns on capital invested.
  • Ensuring high level regulatory compliance in their business

The Tabcorp business strategy is focused to improving it delivery of its products. The company is strategizing on expansion to increase the number of products of offered to customers (Easton, 2016). The company is also focusing on investing on technology to improve products delivery especially for online products.

 

Analysis of Tabcorp Financial Performance Results

The following section analysis the financila performance of the Tabcorp for 2016 fiancnail year. This involves analysisng  the balance sheet, income statement and cash flow fianaial statements of the the vcomapny for the year ending on 30th june 2016 (Accountingtools.com, 2017).

Analysis of Tabcorp Assets, Liabilities and Equity

The company has a tottal assts of AU$ 3302.8 Million in 2016FY that is lower compared to AU$ 3384.0 Million. There was an increase in non current assets to AU$ 3106.7 M for 2016 from 2015FY tht ws AU 3087.8 M.

The Company had a total liabilities of AU 1614.7 for 2016FY lower compared to 2015 Fy that was AU 1693.9.

The company has a net assets of AU$ 1688.1M for 2016 FY compared AU$ 1690.1M.

Tabcorp had a toatl equity of AU$ 1688.1M for 2016 FY. This was lower comapred to AU$ 1690.1M for 2015 FY.   

The Tabcorp Limited assets balance with the company’s liabilities and owner’s equity.

Analysis of Tabcorp Incomes, Expenses and Profit

Tabcorp received AU$ 2188.7M for 2016 financial year that was above AU$ 255.5M for 2015 financial year. The company earned other come that amounted to AU$ 4.4 M for 206 financial years. This was contrary to 2015 financial year where the company incurred AU$ 3.7M. The total comprehensive income for TABCORP Limited for 2016 financial year was AU$ 175.4M. This amount was a decrease compared to AU$ 338M for 2015 financial year.  

Tabcorp Limited incurred expenses amounting to AU$ 1912.1 for 2016 financial year. This was higher compared to AU$ 1815.9M for 2015 financial years. These expenses where advertising and promotion, property costs, communication and technological costs, government and taxes, depreciation and amortization, employment costs and other costs.

Tabcorp net profits for 206 financial years were AU$ 169.7 M lower compared to AU$ 334.5M for 2015 financial year. The company’s profits before tax and financial costs were AU$ 301M and AU$334.6M for 2016 and 2015 financial years respectively.

Analysis of Tabcorp Cash Flows

The cash flow statement shows the total inflows and outflows in Tabcorp business for a specified fianncial year.

The company’s net cash inflows from operating activities were AU$ 401.1M for 2016FY compared to AU$ 399.7M for 2015FY. This inflow refers to cash from the company offering it products to its customers. The net cash flow usd in investing activities amounted to AU$ 173M  for 2016FY that is less  compared to AU$ 231.7M for 205FY. The cash flows from financialing activities for Tabcorp amounted to AU$262.1M for 2016FY higher compared to AU$ 134.8M cash outflow for financialnf activites  for 2015FY. 

Tabcorp cash at the end of the year was AU$ 126M for 2016FY. This amount was lower compared to AU$ 160M for 2015 FY.

 

Remuneration analysis

Tabcorp uses it remunaeration report to disclose the remuneration policy and other arrangement for directors, senior managements and executives. This is in accordance with the corporate Act 2001. The remuneratiion philosophy in the Company is to motivate, attact and retain employees who are of high calibre.

The remuneration framework of the Tabcorp is  mix of fixed and variable compensation. The fixed remuneration contains thcompensation reflecting responsibilities, skills, experience and knowledge. Variable remunesation reflects compensation as a result of short term incentives (STI) and long term incentives (LTI) attained as a result of acheivement to performance goals and return to shareholders equity. The Tabcorp remuneration structure is linked to profit by ensuring that compensation is based on the financial measures like profits and return to investiments.The remuneration framework enhances the culture in Tabcorp that is customer oriented, digital initiative, employees engangement and compliance optimization. The framework is aimed at increasing performance of the company to ensure high returns to investiments.

Key Issues in the financial report

The Tabcorp recognizes revenue to extent that economical benefits will probable flow to the business. The wagering revenue is recorded as the residual value from customer after deducting return turnover. Media revenue is recorded as income from subscription and advertising. This revenue is recognized when the serve is rendered to the customer. Keno revenues are recognized after deducting the return to customer (residual value). The gaming revenue is recognized when services are rendered.

Financial income of Tabcorp is recognized by application of effective interest rate method.

Operating lease rentals of the company are recognized on straight-line basis in the income statement over the lease term.

Expenses in Tabcorp are recognized when an expense is incurred that is recorded as a financial cost.

Interest bearing liabilities: The Company recognizes interest-bearing liabilities at fair value deducted all transaction costs. The foreign currency liabilities are accounted at amortized cost. These entries manipulate the profits that the company presents in the income statement.

Amortization: The Company records licenses and permits are stated cost minus accumulated amortization.

Depreciation: The Company uses straight basis to calculate depreciation over the useful life of the asset.

Plant, property and equipments are recognized and recorded at a cost less depreciations (accumulated). For assets under operating lease incentives, asset is recorded and amortized using straight-line basis. Depreciation in the company is review every financial year to be adjusted accordingly and ensure it reflect the true value of the asset.

Receivables: Trade debts in Tabcorp are accounted and recognized at original invoice minus allowance for amount deemed uncollectable. Other receivables in the company are from fixed term loans that earn the company interest. These receivables have are entered in financial statements as amortized cost. The increase in receivables recognized in the income statement increases but not recognized once they are impaired. 

Bad debts allowance or impairment recognized once the company has objective evidence that the debts have no probability collectability. Bad debts are written off from the financial statements once they are identified.  

Theoretical and philosophical approaches to accounting in Tabcorp

Tabcorp follows the accounting assumptions and approaches in preparing their financial reports. The financuial statements are prepared in accrued basis and assumptions that that the company is perpetual. The double entry rule has been followed and the balancing figure for the balance sheet is AU$ 3,302.8M. The accounts have also followed the accounting theoretical accounts classifications. The company has the following groups; current assets, noncurrent assets, current liabilities, noncurrent liabilities and owners equity. The financial statements have also prepared a consolidated financial report for the Tabcorp Group Holding.

Analysis of Tabcorp FRS compliance with a requirements of Conceptual Framework

Tabcorp is owned by shareholders whose shares are listed and traded in Australian Securities. The Company operates the main company in Australia and subsiaries arounfd the globe. The financial reports represent the fiancnial trascations and performance of the company together with it it susbsidiaries (Hribar, 2016). Therefore , the financil statements are prepared for the group as Tabcorp Holding Limited. The company financial year/ accounting year starts in 1st July and ends on 30th June. The financila reports of Tabcorp Limited are authorised by Directors.

The Company finaicila reports followed the general purposefianancial reports in several ways; first, the company fiannicial statements were prepared in accordence with Corporation Act 2001 of Australian Accounting Standards. These standards are issued by the Australian Accounting Standards Board. The financila reports are alos preapered in accordance with other mandotary requirements in Austrlai. Secondly, the financila reports of Tabcorp complies with the International Financing Standards. These standards are issued by international Accounting Standards Boards. Third, the Tabcorpfinancial reports are presnted in terms of Australian dollars that are rounded to the nearest hundred thousand. This is in accordance with th ASIC Corporationinstruments.Lastly the financial statements of Tabcorp have been prepared in the historical basis.The only element not recorded in historical basis are derivatives fianncila intruments which have been recorded infair value.

The Tabcorp applies the accounting policies consistently in all it group when preparing finanicla reports. The company ensures that all financial informations have been disclosed so as to provide decision making information to all it stakeholders.

Auditors report

The Tabcorp Holding Limited is audited by Ernst & Young Auditors. The independent auditor’s report shows that Tabcorp Holding prepares it financial statements in accordance with the Corporation Act of 2001. The financial reports represents the true and fair state of the financial position of the Company.

 

Conclusion

From the financial analysis of the Tabcorp Holding Limited, it shows that the comapy follows the general purpose financial reporting conceptual frameworks. The company aims to present it financial reports content and format in a more meaniful way to finanicla information stakerholders. This means that the company is committed to providing it finaiclia information users with easy to understand financila reports so that they can make informed decision.

Suggestions

From the analysis in this report, I suggest the following;

The company should include more previus years finaincial year finaicla perormance for users to see the compay’s trend. The company should include atleast four past fiancila information while presenting the current fiancial report.

The company should also provide finaincla ratios of the company and their interpretations  for  common users to make more informed decisions.

 

References

Crawford Camiciottoli, B. (2013). Oral financial reporting: A rhetorical analysis of earnings calls. FINANCIAL REPORTING, (4), pp.15-34.

Easton, P. (2016). Financial Reporting: An Enterprise Operations Perspective. Journal of Financial Reporting, 1(1), pp.143-151.

Accountingtools.com. (2017). General purpose financial statements - Questions & Answers - AccountingTools. [online] Available at: https://www.accountingtools.com/questions-and-answers/general-purpose-financial-statements.html [Accessed 29 Apr. 2017].

Hribar, P. (2016). Commentary On: Do Compustat Financial Statement Data Articulate?. Journal of Financial Reporting, 1(1), pp.61-63.

Knezevic, S., Djuric, D. and Dmitrovic, V. (2012). General Financial Reporting and Special – Purpose Reports of Banks. Management - Journal for theory and practice of management, 17(62), pp.51-64.

Nagar, V. and Petacchi, P. (2016). A Model of Aggregate Reporting Quality. Journal of Financial Reporting, 1(2), pp.1-19.

Tabcorp.com.au. (2017). Tabcorp - Who We Are. [online] Available at: https://www.tabcorp.com.au/who-we-are [Accessed 29 Apr. 2017].

Tabcorp Holdings LTD. v. Treasurer of VictoriaCase No. S CI 2013 2464, S CI 2013 2703, 2013 VSC 324; BC201310331 (Supreme Court of Victoria, Commercial and Equity Division, Commercial Court; 24 June 2013). (2013). Gaming Law Review and Economics, 17(9), pp.662-669

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