Discuss about the International Accounting And Transnational Decision.
The main purpose of this assignment is to analyze the financial statements of a company. The company which is selected for this assignment is Coca Cola Amatil ltd. The financial statement of the business is to be analyzed to identify which industry the company belongs to and also reflect the activities which are carried out by the business. The assignment will also be discussing various elements of the financial statement of Coca Cola Amatil.
Nature of the Company
Coca-Cola Amatil is a non-alcoholic beverage company which is engaged in the production and distribution of non-alcoholic beverages. The company operates in Asia-Pacific region and operates in six countries like Australia, New Zealand, Indonesia, New Guinea, Fiji and Samao. The company belongs to beverage Industry which provides a wide range of products which are non-alcoholic (Annual Reports – Coca Cola Amatil., 2018).
The company originates and is listed in Australia’s stock exchange (ASX). The company’s origin dates back to 1904 when the company was a part of British Tobacco. Later on, in 1972, the company was listed in Australian Stock Exchange. The primary focus of the company was soft drinks and snack foods back in 1972. Nowadays the company is regarded as a leading brand which provides a range of soft drink beverages for the customers and the products which are offered by the business is considered to be popular among the customers. The headquarters of the company is situated in North Sydney, New South Wales which is sin Australia. The company uses Australian Dollar for all the transaction which the company engages. The maximum numbers of shares of Coca Cola Amatil Company is acquired and hold by Coca Cola Company. Coca Cola Company holds a majority of shares of Coca Cola Amatil ltd which makes at least 29.37% of the shares of the company (Annual Reports – Coca Cola Amatil., 2018). The company is quite different from Coca Cola Ltd and is brand partner of Coca Cola Amatil.
The concept of Consolidation refers to a situation when one or more companies which are of similar nature combine together for the purpose of earning more revenues or surviving the market trends or for taking better advantage of the opportunity (Biondi & Zambon, 2013). The company follows the strategy of preparing financial statement following consolidation principle wherein all the income and expenses which are earned by the whole group is shown in the financial statement of the company (Gray, 2014). The principles which are followed by the business for the purpose of consolidation of the financial statement of the business are basic fundamental principles which are going concern as the existence of the company is realistic as the company is performing well in terms of financial estimates. The basic principle of accrual basis is also followed by the business as is evident from the income statement of the company (Needles, Powers & Crosson, 2013).
The presentation currency or the currency which is used for the preparation of the financial statements of the company is shown to be Australian Dollars ($). The reason for this is because the parent or the headquarters of the Coca Cola Amatil is situated in Australia and thus the financial statements are prepared following the same currency.
Composition of the Equity of Coca Cola Amatil
As per the financial statement of the company, the equity structure of the company is shown in the statement of changes in equity of the business. The total equity figure which is shown in the Balance sheet of the company for the year 2017 is $ 1880.3 million which has reduced from the previous years which was $ 2274.2 million. The reason for the decrease in the equity of the business is due to Buyback of shares which the company has undertaken during the year 2017 (Serghiescu & V?idean, 2014). The amount of share capital which the company buyback is shown in the statement of changes in equity which is shown as $ 351.2 million. Equity can be defined as the capital which is accumulated by the business from issue of shares of the business. The equity which is shown in the balance sheet of the company comprises of share capital which is shown to be $ 1920.5 million, treasury shares, reserves and accumulated losses. Another component which is shown in the Balance sheet of the business is non-controlling interest which is $ 331.4 million (Annual Reports – Coca Cola Amatil., 2018).
The company has fully paid up shares which are shown in the notes to accounts of the company as 723,999,699 shares. The reserves which are recorded in the balance sheet of the company is shown in the notes to accounts of the business to be made up of Currency changes, Credit risks, Time value of options traded by the company and deferred tax effect. The movement in the reserves is due to the above mention items which are shown in the notes to accounts part of the financial statements (Cañibano, 2017). The retained earnings of the company which is shown in the financial statements of the company as $ 357.6.
Market Share Price of Coca Cola Amatil
As per the data which is provided in financial statements, the equity shares are valued as per the market price of the shares on the last date of the financial year. The market value of the equity shares of the business is shown to be 8.19 per shares. The market share prices are taken to be the basis for estimating the market value of shares of the business. It is a normal policy of the business that the share price of the company reflects the most current value in terms of market value of shares. The increase of the market price of the shares shows that the company is growing and is improving as per market trends. In addition to this, the rise in the price of shares is also a financial indicator which depicts that the business is developing and growing. The investor’s decision whether to invest in the company’s shares depends greatly on the market value of the shares of the business. The market value of shares of the company also shows that the reputation of the company in financial markets and among the investors of the business.
Reasons for Change in the Market Share Price
The market share price of the company is shown to be 8.07 per share for the month of January 2018. The share price of the shares has fallen from the end of the financial year price which was shown to 8.19 per share. There can be various reasons for the fall in the share price of the company which can be attributed to activities of the company (Piercy, 2016). The factors which affect the market share price of the business may also be related to global factors. The role of competitors, market factors, taste and preference of the shareholders of the business also determines the share price of the business.
Debt Financing of the Business
As per the financial statements of the company, the company has borrowings which is shown in the balance sheet of the company. The figure which is depicted for borrowings in the balance sheet is $ 1929.5 which has reduced from the previous year estimates. The notes to account of the business shows that there are current borrowings which is shown in the current liabilities section of the balance sheet and the figure is $ 420.9 million. The borrowings of the business is made up of bank loans, bonds, unsecured debts and other debts as well (Begenau & Salomao, 2016). The notes to accounts also shows that a part of the non-current borrowings have been paid off by the business which resulted in the fall in the borrowings of the business. The debt capital is employed more in the capital structure of the business in comparison to equity capital which shows that the business is more dependent on debt capital in order to decide which areas or projects are to be financed (Yazdanfar & Öhman, 2015). It is quite natural for such a company to rely on more debt capital as the company is a growing business and use of debt capital in financing helps the business in most of the cases. The financial statement of the company makes it clear that the business employs both current borrowings and long-term borrowings in the business (Mersland & Urgeghe, 2013).
Deferred Tax Assets/ Liabilities
As per the financial statement of the company, the company has deferred tax liabilities which is shown in the balance sheet of the company as $ 283.8 million. In addition to this, the business also has current tax assets and liabilities which are also shown in the balance sheet of the company as $ 5.1 million and $ 27.6. The impact of such items affects the current tax expenses of the business. The current tax assets and liabilities can be used for set off and set on of income taxes which the business has to pay (Kasipillai & Mahenthiran, 2013). The deferred tax liabilities arise due to temporary differences in tax treatments which can also be used for set off. The deferred tax liabilities of the business has decrease from the previous year in which it was shown as $ 303.2 million (Laux, 2013). The current tax assets which are shown in the financial statements of the company have increased from 2016 estimate where it was $ 11.5 million and the current tax liabilities of the business has decreased from previous year which was $ 42 million in 2016. The tax liability of the business and also the income tax of the business which the business currently has to pay is shown in a consolidated form as per the financial statement of the company for the year 2017. The tax rate of the business is computed considering the tax rate which is applicable in Australia and the tax provision applicable in Australia (Chytis, 2015).
Fixed Assets Measurement
As per the financial statement of the company, the business used AASB 116 for valuation and measurement of fixed assets of the company. The fixed assets of the business comprise of property plants and equipment which is shown in the balance sheet of the company as $ 1864.8 million which has reduced from the previous year’s analysis (Al-Matari, Al-Swidi & Fadzil, 2014). There has been sale of property as per the cash flow statement of the company which is of the amount of $ 152.8 million and there has also been additions made to the property of the business of the amount $ 293.7 million. The business follows historical cost method for measuring the assets of the business and the company charges depreciation following straight line basis of depreciation as stated in the notes to accounts of the business. The financial statement also shows that the business follows general principles which are set out in the standard relating to impairment for the assets of the business (Bauer, 2014). The fixed assets of the company are reported in the non-current assets section of the balance sheet of the business.
Intangible Assets Measurement
As per the financial statement of the company, the intangible assets refer to the assets of the company which are not physically available to the business. The intangible assets of the business are shown as $ 1207.9 million as per the financial statement of the company which has decreased from the previous year’s estimate. The intangible assets of the company form a major part of the assets of the business but it is not greater than the asset value which is shown in the intangible assets of the business (Ivanov & Mayorova, 2015). The business uses tax basis to calculate the tax which is on the intangible assets of the business which have indefinite life. The business has a variety of intangible assets which are shown in the notes to accounts section of the financial statement of the company which includes intangible assets such as goodwill, brand name, patents of the business and software and different system which are used by the business in the production process (Arrighetti, Landini & Lasagni, 2014). The impairment test of the business shows any asset which shows any indication that the value of the asset is falling than impairment test is conducted to analyze the same and if proven to be true the asset value is to be decreased to present the value of the asset as fairly as possible. The notes to accounts section shows that the IBAs and goodwill of the business has been impaired in order to present the value of such items in the financial statement as fairly as possible.
Retained Earnings and Dividend Policy of the business
As per the financial statement of the company, the company has retained earnings which is shown as a part of the reserves of the business and the company has also paid a dividend of $ 345.6 million dividend during the year as per the cash flow statement of the business. The dividends are issued for the shareholders of the company as a share of the profit which the business has generated during the year. The company has also used buyback option of shares as the value of shares of the company has reduced during the year (Masum, 2014).
The financial statement of Coca Cola Amatil shows that the company has been developing and comparatively well as per the financial indicators of the business. In addition to this, the company has an appropriate amount of net profit generated and also declared dividend which shows that the company is meeting the needs of the shareholders which is a positive indicator of the business.
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