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ACC706 Accounting Report Assignment Help
General Purpose Financial reporting is the most vital financial documents for a Corporation. This includes a Balance Sheet, Income Statement, Statement of owner’s equity and statement of cash flow statement and another financial document as may be required. These financial statements are guided by the accounting framework and accounting standards and principles framed by the requisite government authority. These are framed with a view to provide a common platform for these reports and to provide consistency in the accounting framework of all the corporations. AGL Energy Corporation is one of the top 100 listed corporations of ASX. This company deals in the generating energy sources through thermal, wind power, natural gas, hydroelectricity etc. and therefore is the backbone of the country. In the report, there will be a detailed analysis of the financial reports of the Organization
Analysing Accounts of AFL Energy
The General Purpose Financial reporting includes use of various accounting standards and set principles and conventions. The financial reporting of the AGL Energy which primarily includes the Statement of financial position, Statement of Profit & Loss account, Statement of Cash Flow and other financial documents. AGL energy has followed the entire requisite accounting framework in the preparation of the above mentioned documents (Cristina, 2011).
Some of the Accounting Standards followed by the Organization are as follows-
Concise Financial Report
The report has been made according to the standard and all the disclosure has been made appropriately
The Organization presented the segment information in the following segments such as
Impairment of Assets
The company has recognized that natural gas assets will no longer be a core part of the Organization and disposed of the plant.
The Current and Future amounts of the assets and liabilities of the Company are figured according to the standard.
The organization has followed the requisite accounting standard in analyzing the revenue earning of the Company.
$11,150 million revenue has been earned by the Organization through the sales of goods and services.
Earnings Per Share
The Organization has distributed about 60.5 cent per share to its shareholders, which shows the sound wealth of the group.
Analysis of Board of Directors Report
Director has presented its views in the Director’s report and has concluded that last year was a very strong financial year for the Organization and some great decisions were taken for the betterment of the Organization. The Organization is experiencing a strong Balance sheet and strong Cash flow Statements presents enough funds available for the Organization Structure. The Company has been able to pay returns to its shareholders and achieved its entire strategic plan. The Divestment target of $1 million in non-performing assets are planned for the 2017 financial year and around $ 691 were already executed in the financial year 2016 (Ikpefan & Akande, 2012).
The directors directed their focus over the Renewable Energy Target (RET) and directing their efforts in seeking the Government various approval for channeling the renewable energy and lessening the role of non-renewable sources of energy. The company has taken important measures for the growth and survival such as Divestment of Non-core assets, disposal of an interest in certain subsidiaries, restructuring of the organization, the shift towards non-renewable sources of energy etc (Ikpefan & Akande, 2012).
Remuneration Report (part of Directors Report)
The Remuneration report is also an integral part of the Director’s report. This report gives complete information regarding the remuneration of the Key Managerial Personnel of the Organization. This report also relates with the remuneration principles of Key Management Personnel (Marrett & Worthington, 2011).
In the report of the financial year 2016, Mr. Jackson was made a permanent appointment for the role of Executive General Manager. This report also changed the assessment of the KMP definition, it tells that MD/CEO, CFO and heads of three major segments (Energy markets, Group Operations, and New energy). Others are not included in the KMP definition (Marrett & Worthington, 2011).
Auditor Report Analysis
The Independent Auditors of the AGL Energy has critically analyzed all the financial documents of the Organization and has presented important evaluation in the report. The report gives an unmodified opinion about the key audit matters. Key audit matters are the matters which are critical or significance for the accounting period (Marrett & Worthington, 2011).
Critical review of the Auditor Report
The Concise financial report does not contain all the disclosures regarding the Australian Accounting Standards. The financial report does not contain all the events that occurred after the formation of the Auditor’s report.
Around $1,032 million revenue of the sales of the electricity and gas between the period of last meter reading and reporting date, were unbilled. Therefore, key control management has been undertaken to evaluate the pricing and other assumptions for the sale (IFAC, 2012).
The key analysis of the Property, plant, and equipment, tangible assets including goodwill etc were undertaken to know the recoverable amount of the same assets and to judge the amount present in the financial statements.
The Impairment of assets (which mainly includes the Natural Gas assets) which was valued at $795 million before tax and $640 million after tax was re-valued.
The Electricity hedging contract with the counterparties for providing energy sources till 2036 is subject to cancellation on certain terms by the counterparties, therefore the future analysis of the contract in respect of the ongoing viability of the project and proper valuation of the contract for the remaining period to know the correct valuation of the contract (Elton, et. al., 2013).
The fraud related to AGL Energy related with the Email Scam of the company. In this scam, Emails on the name of AGL energy comes on the AGL’s customers which asks them to click on certain link and provide certain financial and personal information of the customers. Basically the Email contains malicious software which accesses the content of the customer and makes use wrong of the details of the customers. This fraud has created a wrong impact of the company over its customers (Unegbu, 2014).
The AGL personnel have taken varied important measures in protecting their customers from defrauding. It has stopped sending any sort of Emails and guided its customers not to trust any emails from the company side and not follow any sort of instructions of the Emails (Unegbu, 2014).
Impact of the Fraud
The Fraud has affected the reputation and goodwill of the business and therefore the Personnel of the AGL energy have put in best of their effort in safeguarding their AGL Customers as well as Non-AGL Customers from any fraudulent activity (Unegbu, 2014).
Critical Review of Annual Report
After analysing the Complete Annual Report of 2016 of AGL Energy, the following can be the critical aspects of the report, which are quite evident, from the Financial Report-
The Company has prepared the concise financial reports according to the Accounting Standard AASB 1039 and full disclosures are presented in the financial statements. All the amounts are presented in the Australian Dollars only. But certain disclosures omit which leads to lack of proper accounting framework (Quinn, 2014).
Contract of Electricity with other counterparties to provide energy sources till 2036 is subject to cancellation on the terms of Counterparties, no contingency has been prepared in case of middle cancellation of the contract, which can lead to losses in the future. Therefore proper contingency must be done in order to protect itself.
The Company has sold its various products and services without proper billing for a certain period, which has resulted in wrong assumptions of the Revenue earning (Quinn, 2014).
The disposal of the 100 % interest from the Macarthur Wind Farm Pty Ltd and MWF Finance Pty Ltd provides a wrong impact in the market regarding the reputation and liquidity position of the Organization. This shows the lack of liquidity in the Company’s hand (Mande, 2014).
The Segment has been divided on the basis of the manner of the sale of the products and services, which is a good way of distribution of revenues, namely
Energy Markets: includes sells of electricity, natural gas and other energy-related products for the consumer purposes.
Group operations: It includes the power generation, including all sorts of generation of electricity i.e. hydro, wind, solar etc. This also includes natural gas extraction and gas storage operations (Mande, 2014).
New Energy: this segment focuses on the new sources of energy in the market of Australia.
This segment includes equity investment in various companies such as Actew AGL Retail partnership, Solar Analytics Pty Ltd. etc (Barthel, 2014).
Comparison with Australian Accounting Standard
The Accounting framework used by the Company is the Australian Accounting Standards and other Accounting principles and conventions established by the requisite Government officials-
As per Accounting Standard AASB 1039 of Concise financial reports, the organization needs to make full disclosures regarding the Segmentations, revenue etc. but there are certain things which are not fully disclosed by the Organization, therefore leads to improper use of the accounting standards.
As per Accounting Standard AASB 116 of Property, plant and equipment, the proper valuation of the assets must be undertaken considering all the assumptions and significant judgements regarding the future economic benefits from the assets in order to make proper financial judgement (Barthel, 2014).
According to Accounting Standard AASB 134 of interim financial reporting, the proper financial reports must be prepared in the middle of the financial year so as to make an eye over the changing financial position of the Company.
Suggestions for Improving the Financial Reporting
Though the Company has followed all the Accounting policies and regulations in the preparation of the Accounting reporting, still some drawbacks remain therefore few recommendations are given as below-
The Company needs to adhere to the Australian Accounting Standard 1039 of concise financial Reports and needs to make all the full disclosure regarding the accounting management and material transactions of the Company (Barthel, 2014).
The Organization has spent a huge amount of $ 18 million in 2015 regarding the restructuring cost and has planned for about $ 60 million for the year 2016, therefore the cost must be judicially executed and maximum benefit must be achieved from the restructuring (Barthel, 2014).
Proper adherence of the Accounting framework in case of Impairment of Assets and divestment of the Assets of the Organization.
The Assumptions and judgement of the Key assets regarding the future economic benefits from the assets must be clearly analysed so as to make appropriate future decisions.
The company needs to seriously focus on the ample opportunities of the renewable sources of Energy and take the necessary permissions from the Government officials directing lessening the trend of non-renewable sources of energy and increasing the renewable sources of energy such as wind, thermal etc (Barthel, 2014).
The company needs to set a Provision aside for any contingency or withdrawal of the Electricity hedging contract with the other parties. As the contract contain terms of cancellation by the other parties therefore for the safer side the company needs to create provision for the Contract.
With the thorough analysis of the Financial Reporting of the AGL Energy, it can be concluded that currently the financial position of the business marketing is quite strong and there are ample of future opportunities in the Energy sector. The Divestment plans of Natural Gas Assets will reduce instability in the Organization and the focus would be drawn on the other important sector. The Focus will be shifted to Renewable Sources of Energy, which have ample of opportunities in the future. It has also disposed of its 100 %interest from Macarthur Wind Farm Pty Ltd and MWF Finance Pty Ltd, as a part of its strategic plan, this has helped in earning an amount of $ 532 million to the company which can be further expended in the other strategic plans of the Organization. The company has also managed to distribute Dividend to its shareholders, and earned a good market value and goodwill, through this step. The Company is disposing of its investment in certain subsidiaries and focusing on the expansion of various Renewable sources of energy in order to capture the Market of the Australia. Overall it can be said, that Company is implementing best of its strategic plans for its long term growth and survival.
Barthel, L., 2014, Prevalence of Accounting Theory in Top-Ranked Undergraduate Accounting Programs, Journal of Accounting and Finance vol. 14(4), pp 135-140
Cristina, N. 2011, "A NEW APROACH OF CONCEPTUAL FRAMEWORK FOR GENERAL PURPOSE FINANCIAL REPORTING BY PUBLIC SECTOR ENTITIES", Annals of the University of Oradea: Economic Science,vol. 20, no. 2, pp. 603-609.
Elton, E.J., Gruber, M.J., & Blake, C.R., 2013, The Performance of Separate Accounts and Collective Investment Trusts, Review of Finance Advance Access