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Running Head: Financial Accounting Management

Financial Accounting Management

Author Note
The Annual report selected of company Amaysim for year 2018.

Table of Contents

1. Task 1: Analysis of Expenses 2

a) Classification of expenses 2
b) Reasons why different methods of classification 2
of expenses used
2. Task 2 : Accounting policy 3

Research on AASB 108/IAS 8 for accounting policies

Issues related to AASB 108/IAS 8 for accounting standard

3. Task 3 : Notes to the 2018 Financial Statements 4

a) Cost of plant, properties and equipment 4

b) Depreciable Amount 5

c) Depreciation Period 5

d) Depreciation Method 6

e) Revaluation 6

f) Impairment 6

4. References 7
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Task 1: Analysis of Expenses

a) Classification of expenses

On page No. 60 of the attached annual report of company Amaysim the consolidated

statement of comprehensive income is shown. The format of an income statement used

by the company is by nature. Here the income statement in which format is by nature the

expenses are classified or disclosed according to the nature of the expenses like

employee expenses, depreciation expenses, marketing expenses etc.. Company is

following the same format in its consolidated statement of comprehensive income.

Basically this method for disclosing expenses is used in the single step income statement

and used because of its simplicity. One of the drawback using this method is that we can’t

able to calculate gross profit in this income statement.

b) Reasons why different methods of classification of expenses used

The expenses in the income statement is classified in two different formats one is by

nature and other is by function. There are various objectives behind using the different

types of classification. Like the small companies mostly uses the by nature classification

of income statement due to its simplicity and easiness in understanding and making its

also known single step income statement. This statement basically helps us to find the

total cost and how the total cost is aggregated and used to value the work in process .On

other hand large companies use the by function format of the income statement. Basically

this format of income statement used to sorting expenses and making a presentation of

expenses for accounting purpose, in which mainly the expenses are aggregated

according to the departments in the company and then reports as administrative or selling
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expenses. Through this method we can see various types of profit in the income

statement such as operating profit and gross profit which is not represented in by nature

format of income statement.

Task 2: Accounting Policy

Research on AASB 108/IAS 8 for accounting policies, Change in accounting

estimates and errors

Under this AASB 108 accounting standard every company required to disclose it

accounting policies this is followed by those companies which are required to prepare the

financial statements according to the AASB 108/IAS 8 for accounting standard or the

company who publish general purpose financial statements for all entities for which

reporting is required.

This standard applies on the financial reporting on or after 1 Jan 2005.

Issues related to AASB 108/IAS 8 for accounting standard

As per the annual report of the company reports below issues or errors which are to be

reported under AASB 108/IAS 8 for accounting standard:

1) The recognized current tax receivable of $3.204 million which is related to the tax

paid in year FY2018 and net deferred tax liability of $3.030 million is related to that

of temporary difference as of 30 June 2018. It’s mentioned on page no. 67 of

annual report.

2) The company has $3.030 of deferred tax liability which is related to the temporary

difference. This point is mentioned on page no. 70 of annual report.

3) In the current year, the company decided to move towards the adoption of

AASB115 and to implement the changes related to the change in accounting

process The Company estimates that there will be the impact of change on

consolidated balance sheet on retained earnings. Due to the new adoption there

is increase in the retained earnings of $12.2 million before tax.

The accounting policies followed by the company are explained under notes to the

consolidated financial statements section of annual report on page 64 as point 1

“Summary of significant accounting policies”. The company follows Australian Accounting

Standards for preparing the financial statements. The company is registered under Term

-1 profit oriented organizations. I had not found any issues or errors in estimating and

adjustments in the annual report and also the company had not reported any issue or

errors or any corrections related to the adjustments.

Task 3: Notes to the 2018 Financial Statements

a. Cost of plant, properties and equipment

The cost of Property, plant and equipment is taken from the balance sheet section of the

annual report on page no. 61. The total amount of property, plant and equipment is $4.412

million. The depreciation of this fixed assets are shown on page no. 86 of annual report

under notes to financial statements section point no. 15 as “Property, plant and

equipment”. The total depreciation charged on property, plant and equipment is $1.585

million, under the notes the total depreciation is bifurcated under different types of assets

and also the depreciation charged under those assets are given. Depreciation method

used for deprecating assets is the straight line method to allocate their cost over their
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estimated useful life. Gains and losses on disposals are determined by comparing

proceeds with carrying amount. These are included in profit or loss.

b. Depreciable Amount

As per the notes to financial statement point 4 expenses on page no. 76 total amount of

depreciation, amortisation and impairment is $26.640 million in 2018 which is bifurcated

into Depreciation amounting $1.585 million, Amortisation amounting $21.607 million and

Impairment amounting to $3.448 million there is large increase in amortization from

previous year 2017.

The bifurcation of these amounts are given in note 15 and note 16 of financial statements.

c. Depreciable Period

Depreciation period of the assets are used as per the accounting standards and the table

of depreciable life of an assets is given in annual report on page 67. Also the useful lives

and residual values of the assets are reviewed at end of each accounting period and

adjusted if necessary. The depreciable period of the assets is de=pends on the type of

asset it is as we can see in table given in page no.67 of the annual report the depreciation

life of different assets it basically useful life or the service life of an asset like furniture and

fittings have life of 8 years, Leased plant and equipment has life of 4 year, Office

equipment has life of 4 years too likewise other have also different life according the

accounting standards. These lives are reviewed during the end of each accounting period

to look over the proper allocation of depreciation.

d. Depreciation Method

Depreciation method used for deprecating assets is the straight line method to allocate

their cost over their estimated useful life. Under this method asset loose same amount

during its whole service life. Straight line method is not most common method used by

most of the companies this method usually used by the small companies around the

industry. Use of this method is low in companies as it deducts less depreciation in the

beginning life of assets as compare to other methods. Companies Gains and losses on

disposals are determined by comparing proceeds with carrying amount.

e. Revaluation

As per the information provided in annual report there is no revaluation of assets in the

current year and in previous year too.

f. Impairment

Amortization and impairment of assets are done to the intangible assets only. Under the

notes of financial statement notes on page 87 and note 16 as “Intangible assets”. The

bifurcation of amortization and impairment is shown under notes. Impairment is done to

Goodwill and Software development intangible assets and amortization. The company

has five types of intangible assets as per the bifurcation given in annual report on page

no. 67 as Goodwill, Trademarks/brands, Customer lists, Distributor relationships and

Software development. The company has Amortization amounting $21.607 million and

Impairment amounting to $3.448 million of which of around $16 million of Amortization is

fall under Software development and Customer contracts mentioned under point 16 on

page no.87.
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References

AmaysimLtd.(2018) AnnualReport2018. Availableat: https://investor.amaysim.com.au/irm/content/fi

nancial-reports1.aspx?RID=376 (Accessed: 30 May 2018).

AASB108. ACompiledAASB108(Jan2015). Availableat: https://www.aasb.gov.au/admin/file/content

105/c9/AASB108_07-04_COMPjan15_07-15.pdf

AASB Accounting Standards. Presentation of Financial Statements – AASB. Available at:

https://www.aasb.gov.au/admin/file/.../c9/AASB101_07-04_COMPsep05_01-06.pdf