Business and Operating Activities of Computershare Limited - Term Paper Example

Student Name: Tutor: Title: Computershare Limited Course: Executive Summary Computershare Limited has a long history of providing consultancy services in both capital market and technology industry. This report gives a breakdown of some of the important revelation as obtained from its annual report for the year ended 31st June 2014. It is important for any company to provide an annual report that details its activities throughout the financial year for the consumption of the public, shareholders and other interested stakeholders. The introduction provides a brief description of the company and creates the foundation for the rest of report by setting the tone. The first part deals with business and operating activities, finances and financial performance. The nature of the industry in which the company operates in has been described. Other disclosures and carrying amounts of intangible assets, property, land and equipment, leased assets and liabilities have been disclosed and discussed. The authenticity of the audit report and how it is qualified by an external auditor has been discussed. Voluntary disclosures and their relevance have also been discussed in this report. PricewaterhouseCoopers is the appointed external auditor who certified the audit report as adhering to Corporation Act 2001. The report concludes with a summary and a recap of the important points about the annual report and the company’s operations. The references list provides the sources that were consulted in the preparation of the report. Introduction Computershare Limited was established in 1978 in Melbourne Australia and it has actively participated in the global and Australian markets. The company is accredited with befitting success in regulatory transformation in the improvement of the investor servicing standards as well as best practices. The company is committed to open market structures and service excellence shared throughout its group of affiliate companies and partnerships. Since its formation, the company has entered into other markets globally and it is presently in over 20 countries across the globe. Computershare Limited is a reputable company that has a long history in consultancy services. This report provides important aspects about the company that were disclosed in its 30th June 2014 annual report (Cooper, Funnell & Lee, 2012). The report discusses the core business of the company, the dynamics in the industry, financial performance indicators, accounting policies used, treatment of intangible assets, voluntary disclosures, the auditor, and qualification of the audit report. The company operates in a very volatile environment that requires constant adapting to new trends and turbulence in the market. Core business of the Computershare Limited Computershare Ltd us a stock transfer company based in Australia that offers stock transfer, corporate trust, as well as employee share plan services in various countries including the USA, United Kingdom, Ireland, New Zealand, Asia, Hong Kong, South Africa, Germany, Denmark, Channels Islands, and Canada. Computershare basically offers stock registration as well as transfer services to companies that are listed on the stock market. The company further provides technology services with regard to investor services to shareholders, stock exchanges, together with employee share plan management (Dagwell, Wines & Lambert, 2011). Computershare Ltd further operates The Deposit Service. The investors’ services offered by the company include logistics of company meetings, register maintenance, payments as well as full contact center, and online services. The plan services provided by the company comprise of management and administration of share and option plans of employees. The communication services that the company boasts of providing include intelligent mailing, laser imaging, Scanning as well as the communication delivery services. The business services comprise of bankruptcy administration, voucher administration, corporate trust, deposit protection, and utility back office services (Carnegie, 2014). The stakeholders’ relationship management services offered by the company comprise of investor communication, investor analysis, as well as management information services. The company further offers software that specializes in employee plans, share registry, and financial services. Computershare Limited Industry The Australia and global capital market that Computershare Ltd operates in is very challenging and requires strategies that hedge the company against any risks. The technology service and capital market are in a volatile industry that entails many dynamics that shape the trends in the market. Whatever was profitable two years ago becomes risky five years later. Computershare Ltd has affiliate companies that carryout service in different countries and experience varying economic conditions (Stewart, 2012). The capital market was adversely affected during the 2007/08 Global Economic Crisis. The strategic growth objective of Computershare Ltd Company has been to provide new opportunities as well as efficiencies for companies to engage, attract and manage their dynamic stakeholder base despite where they are located in the world. The businesses that the company deals with require high level of integrity and expertise to gain trust and ensure consistency. Computershare Limited is a force to reckon with the consultancy service industry, technology service industry, and capital market industry. D.F. King which is an affiliate of Computershare Ltd has played a major role domestically and internationally in cross-border acquisitions and bankruptcy reorganizations. CST Ownership Intelligence offers clients with valued capital markets consulting, credit market intelligence and regulatory compliance certification. Consequently, the company deals in the rapidly evolving industry that requires keenness and formidable strategic plan that is flexible (Parker, R.H. 2013). The industry that the company works in is very competitive and demanding. Upgrading of systems and approach to issues is required from time to time. The company is operating in a business environment that is very volatile that requires shrewdness and resilience. Computershare Limited is operating in a growing industry that has many competitors from other players like TATA Consultancy services, CMC Europe, Capco Company, Capital market consultants, Greenwich Associates, McKinsey & Company, and Genpact. The company’s funding The company has both external and internal sources of funding. The company raised money from issue of shares as well as operating activities. Interest bearing liabilities amounted to $ 1,433, 044,000 which would include loans from financial institutions. Interest bearing notes were also issued in order to raise money for the company. The financial structure of the company consists of owners’ equity and borrowed capital. Total equity that includes revenue from issue of shares was $1,267,212. The owners’ equity consists of contributed equity, reserves, and retained earnings. The company requires borrowed capital to carry out investing and financing activities. It is important for the company to have external capital from financial institutions to finance its expansion (Chau & Gray 2002). Key elements of financial performance reported Cash flow from operating activities in the consolidated cash flow statement show that the net cash flow from operating activities rose from $334,040,000 in 2013 to $409,298,000 in 2014. This shows that there was more money coming into the business. Proceeds emanating from the sale of businesses and subsidiaries (net of cash disposed) rose from $10,434,000 in 2013 to $23,244,000 in 2014. The net investing cash flows also went up from $103,933 in 2013 to $111,895,000 in 2014. The company invested more in 2014. Net financing cash flow rose from $215,023,000 in 2013 to $262,905,000 in 2014. This shows that the company invested more money in other venture that is involved in. the cash at the end of the year rose from $454,353,000 in 2013 to 509,151,000 in 2014. The elements of financial performance highlight the success of the company in various areas. The company has shown the success it has achieved in various regions in the past accounting period with regard to market share and acquisitions. Statutory earning per share grew by 60.1% supported by operating performance. Any event reported after the reporting date There are companies with unrecognized tax losses as at the reporting date. The companies in the consolidated entity had about unrecognized tax losses amount to $57.0 million. There are other acquisition in Hong Kong and issue of share that have not been reported in the current annual report as at the reporting date. Any changes in accounting policies disclosed in the Annual report The annual report shows some changes to accounting policy. The changes resulting from the revised accounting standards that became operational for the annual reporting period starting from 1 July 2013 are listed. These changes include principles of consolidation, fair value measurement, disclosure requirements, accounting employee benefits, and offsetting financial assets. AASB 10 was given out to replace control and consolidation in AASB 127. Under AASB 11 joint arrangements’ investments are classified as either joint venture or joint operations depending on the contractual obligations and rights each investor has, as opposed to the legal structure of the joint arrangement (Cooper, Funnell & Lee, 2012). Released in September 2011, AASB 13 explains how fair value is measured in enhancing fair value disclosures. The company policy reflects the counterparty credit risk after amendment. AASB 12 replaced AASB 10 with regard to disclosures although it did not affect the completed financial period. AASB 119 stipulated changes to accounting for defined benefit plans. Carrying amount of Property, Plant and equipment at the reporting date The carrying amount of property, plant and equipment was $176,173,000 at the reporting date after deducting accumulated depreciation of $302,720,000. Carrying amount = (478,893,000-302,720,000) =&176,173,000 Accounting policies relating to Property, Plant and Equipment According to AASB 116 the cost of property, plant, and equipment is recognized as an asset when its future economic benefits associated with it as well as the cost of the item can be measured reliably. In the annual report, property, land and equipment are quoted at historical costs after deducting depreciation. The frequency of revaluations is based on changes in the fair values of items of property, plant and equipment that are being revalued. In the case the fair value of the asset is different from its carrying amount; there is need for a further revaluation to be carried out. The value of the adjusted accumulated depreciation form part of the decrease or increase in the carrying amount that is accounted for (Previts & Wolnizer, 2011). The depreciation charge for every period has to be recognized as loss or profit unless it has been included in the carrying amount of another asset. For Computershare Ltd property, land and equipment are quoted at historical costs less depreciation. The amounts are regularly reviewed after some changes. Intangible assets reported by the company: composition and relevance Goodwill is one of the intangible assets reported in the annual report of the company. Each cash generating unit stands for the internal management structure of the Group. Goodwill is assigned to cash generating units with the aim of testing impairment (Carnegie, 2014). Other intangible assets include acquired intangible assets, and mortgage servicing rights. Goodwill is very relevant because it contributes to customer loyalty and even growing the market share of the business since people can trust is operations. Acquired intangible assets and mortgage servicing rights are important in the operations of the business particularly in transfers and consultancy. Accounting Policies relating to Intangible Assets Goodwill that is purchased is not amortized. Goodwill is annually tested for impairment, or frequently if changes or events in circumstances show that they might be impaired, and it is normally carried at cost deducting the impairment losses that accumulated. Losses and gains on any disposal of an entity comprise of the carrying amount of goodwill associated to the entity that has been sold (Dagwell, Wines & Lambert, 2011). Amortization for acquired intangible assets is calculated by the use of a straight-line method in order to allocate the value over their estimated useful lives from one to fifteen years. Mortgage serving rights are carried at their fair value deducting accumulated amortization as well as impaired losses. Mortgage servicing rights that have been obtained from ongoing operations are carried at cost deducting accumulated amortization as well as impairment losses. Impairment to Assets and the amount There is impairment to assets that has been disclosed in this report. Accumulated amortization and impairment was $343,183,000 that reduced intangible assets from $2, 617,823,000 to $2,274,640,000 ($2, 617,823,000-$343,183,000 = $2,274,640,000). Values of leased assets and liabilities (2) The value of leased asset: Land 11,379,000 Building, freehold and leasehold 20,423,000 Plant and equipment owned and leased 5,945,000 Total 37,747,000 The notes explain that the carrying amount of the assets is a lessee under a finance lease. Two Voluntary disclosures made by the company (3) A voluntary disclosure is the act of a company providing information beyond the requirements ad stipulated in the accounting standards. The information targets users who can use it to make informed decisions about investing in the company and any other decision. Voluntary disclosures assist investors to make wise capital allocation decision (Ho & Wong, 2001). Voluntary disclosures further avert cases of conflicts of interest. Companies cannot comprise their competitive advantage through voluntary disclosures. The gender diversity statistics disclosure is one of the voluntary disclosures that are provided by the company in the annual report voluntarily. This disclosure shows the male and female respective percentage in the senior and subordinate positions. The data is important in showing how the company is dealing with the gender issues through allowing women to serve in senior positions in the company. A company that is sensitive to the needs of both sexes is likely to attract competitive and highly qualified personnel that understand that they cannot be discriminated upon owing to their gender (Eng & Mak, 2003). The data support the diversity policy held by the company. Another voluntary disclosure item is the corporate responsibility activities. The company has enumerated the various activities it has engaged in to boost its image in the society. Some of these activities include Green IT, Green office challenge, eTree, and change a life. In the Change a Life initiative, the company has donated funds to support dome of the impoverished people across the world. Food security initiative in Kenya targets 14,200 members. Some of the projects are in Sri Lanka and Ghana among other countries. The company has also provided information on the market share growth in various markets and further projected what is going to do in the coming year. There is shareholder information that is also provided in the annual report of Computershare Ltd. Auditor of the company and where the Audit report is qualified PricewaterhouseCoopers are the auditors of the company. The board of directors with the powers vested in them issued for use the annual report to any interested party. The Board is fully satisfied that the offering of non-audit services by PricewaterhouseCoopers did not compromise in anyway the auditor independence requirement as spelt out in the Corporation Act 2001. The audit report is qualified by the Christopher Lewis, partner from PricewaterhouseCoopers, who the report carries his signature on the behalf of the auditing firm. Summary and Conclusion Computershare Limited is a dynamic and vibrant company that is spreading steadily to other countries having its presence is about twenty countries. The company has shown it has what it takes to operate in consultancy, capital market, technology services, and stakeholder administration. The annual financial report reveals the various treatment and disclosures that the company has done to various items including liabilities, assets and equity. The various disclosures are important to shareholders and other stakeholders to make informed decisions about their future relationship with Computershare Limited. The company is operating in a volatile environment that needs quick adaptability. Important decisions and disclosures have been made in the annual report that shapes the direction of the future of the company. The import revelations in the annual report give the government, suppliers, creditors, and customers an opportunity to see the financial position of the company and make important decisions. The service industry requires high quality delivery and memorable customer experience in order to attract more customers. Goodwill as an intangible asset is very significant to Computershare Limited since it provides consultancy services. Trust and honest is very important to their clients. Proper financial representation is important for the good of the company and various stakeholders. References Carnegie, G., 2014, Pastoral Accounting in Colonial Australia: A Case Study of Unregulated Accounting, Routledge, London. Chau G.K. & Gray S.J., 2002. Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore, The International Journal of Accounting 37 (2002), 247-265. Cooper, K., Funnell, W., & Lee, J. 2012, Public Sector Accounting and Accountability in Australia, UNSW Press, Victoria. Dagwell, R., Wines, G., & Lambert, C. 2011, Corporate Accounting in Australia, Pearson Higher Education AU, Melbourne. Ho S.S.M. & Wong K.S., 2001. A study of the relationship between corporate governance structures and the extent of voluntary disclosure, Journal of International Accounting, Audit & Taxation 10 (2001), 139-156. Eng, L.L. & Mak Y.T., 2003, Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy 22 (2003), 325-345. Parker, R.H. 2013, Accounting in Australia (RLE Accounting): Historical Essays, Routledge, London. Previts, G.J. & Wolnizer, P. W. 2011, A Global History of Accounting, Financial Reporting and Public Policy: Asia and Oceania, Emerald Group Publishing, Canberra. Stewart, J. 2012, Contemporary Issues in Sustainability Accounting, Assurance and Reporting, Emerald Group Publishing, Sydney. Read More