Sterihealth 2012 Annual Reports - Disclosure and Performance - Assignment Example

STERIHEALTH 2012 ANNUAL REPORTS: DISCLOSURE AND PERFORMANCE By (Student’s Name) Professor’s Name Course Name Due Date + City STERIHEALTH 2012 ANNUAL REPORTS: DISCLOSURE AND PERFORMANCE Equity Analysis: Question No. 1 Contribution Equity; The value for the contributed capital remains constant for both periods, which is, $AUD 52,404,000 for both periods; 2011 and 2012(Sterihealth.Com 2012). This figure does not change because the Company has not been authorized to increase its share capital base in respect to its shares probably because it has not been listed in the stock exchange market where the activity of both buying and selling of a company’s stock price is conducted. Basically, there is no movement of stocks in respect to stock exchanges (Sterihealth.Com 2012). In mere terms, contributed equity in a company’s financial resource structure is brought about whenever the aforementioned company embarks on raising its asset-base structure through potential selling or in other circumstances exchange of its underlying common stock. In the event that this happens it is safe to indicate that additional capital resource is recognized in the balance sheet as well as depicted as an asset in relation to a liability created. In our case, the Company’s contributed equity is established as consisting of merely common form of stock and through the notes provided it is made clear that these common stocks are not authorized. Thus, it means that the firm has been limited in terms of the number of shares which it can issue to the public. In some cases, it is noted that companies require their own shares in order to enhance the future of its other permissible programs as contemplation of reducing future dividends to be paid, provide immediate assistance to the existing compensation programs as well as in eliminating any possible hostile business environment. Revaluation Reserve: The revaluation reserve as an item of equity for the firm also remains unaffected over the two financial periods. The value for the aforementioned item stands at $ AUD 140,000(Sterihealth.Com 2012). In its nature, revaluation reserve is established whenever it is figured out that the immediate value of an asset has appreciated in its value as compared to the previous value it held in the balance sheet. This subsequent increase in the value of the asset is affected as an increase in the amount of shareholder’s resource funds contributed (Sterihealth.Com 2012). However, it is quite notable to comprehend to the assumption that not all increases in respect to assets are affected as additional to the revaluation reserve given the fact that numerous facets are considered before the decision is sealed. For instance, it is crucial that the historical background concerning an asset is performed in order to establish whether or not it has been impaired before the effect is made good. With respect to the accounting principle of fair value, it is encouraged that firms revalue their respective assets in case it is established that there exists a material distinction between the immediate present market values of the asset under consideration as well as the worth it carries in the case that it has been affected in the balance sheet. Moving forward, it is advised that such fixed assets as land and other fixed investments be determined through revaluation procedure given the fact that they possess a current market value which exists as well as their immediate fair value can be computed effectively. Notwithstanding, the increase which has been realized in the case of asset revaluation is never considered to be a profit since it is not affected as profits and thus be posted in the P &L Account. On the other hand, there might arise a case where the difference between the current market value of an asset has decreased significantly to the worth stated in the balance sheet. In this case, the situation is referred to as the revaluation deficit. Another important feature to note about revaluation lies in the fact that it cannot be distributable but may be utilized for the purpose of changing the current status of the organization so that the process of re-organizing capital fund is conducted effectively and efficiently. Cash-flow Hedge Reserve: There is negative depiction of this accounting equity item. The figure changes from null in 2011 to a loss of about $ AUD 197,000 in 2012(Sterihealth.Com 2012). In its stipulations, the accounting item; cash-flow hedge is utilized whenever it is established that the objectives of a firm have been affected to include elimination of possible disclosures which might be brought about by the changes in the cash flow of a certain financial-based asset or in other cases liability in respect to changes experienced by such risk environment as interest risks which are pioneered in a floating charge debt item (Sterihealth.Com 2012). In the IAS 39, it is provided that the volatility which is being witnessed from constant utilization of immediate derivatives is affected in the Profit and Loss Account. In our case, Sterihealth Limited has engaged in adopting a unique cash flow hedge accounting process in order to contain the situations which might arise out of the foreign exchange currency coverage. Thus, it is safe to assume that the firm involved its operations into foreign-based activities that may be perceived as having an immediate effect in the presentation as well as the disclosure of the equity section of the financial position of the firm at hand(Sterihealth.Com 2012). Accumulated Losses: The accumulated losses as an equity item of the firm tend to decrease further into the unfavorable position. The loss is established at $ AUD 2,526,000 in 2011 which then drops to $AUD 5,307,000 in 2012(Sterihealth.Com 2012). This significant decrease in the value of the Accumulated losses is taken to mean that the item; total recognized income and expense tend to decrease over a substantial period of time. This drop of the value is significant enough not to allow a substantial change in the balances brought forward from the previous accounting period (Sterihealth.Com 2012). Accumulated losses are defined to be losses which have brought forward from previous financial periods of any given firm in order to counterbalance the effects of future revenue of the firm mentioned as above. It should be noted that firms are obliged by the IAS to depict losses in the item; retained earnings as accumulated losses in the resultant financial position statement promptly. Usually, it is established that the accumulated losses established are showcased as accounting notes to the fundamental existing retained earnings account. The values depicted with these accumulated losses are usually compared to the existing contributed equity accounts. On a positive note, the IAS requires that firms involved with operational activities enjoy a subsequent amount of reduction in the amount of taxes to be paid for the exact number of years which the loss was posted by the firm. Discussion Section: In order to fully comprehend the different items of the equity section of the firm’s balance sheet, I assumed into numerous levels of discussions in order to ascertain on the items as well as familiarize myself with different equity items present in the accounting of these equities. On that note, I took my discussion to the various levels possible. First, I participated in the discussion of the annual reports of the companies which my colleagues were assigned given the fact that they were completely different. Also, I took to inquire about the matter from one of my relatives who happens to work as a senior accounting in of the firms though in a different sector. I learnt that equity items are dependent on the activities of the firm are unique to each and every firm. There were firms which lacked one item and assumed another different one. For instance, in my Company the share capital was only allowed to the common stock which did not possess movement authorization while in others especially those listed in the stock exchange were divided into ordinary stock capital and common stock capital. Others had long-term debts as their respective equity items. Thus, it is safe to indicate that I learnt a lot from the discussions I held with others especially I learnt newer accounting matter. Question No 2: The firm’s present tax expense (2012) stands at $AUD 1,212,000(Sterihealth.Com 2012). The Company’s tax rate= 30 % Accounting Income times tax rate = $AUD 4,227,000 * 30 % = $ AUD 1,268,100(Sterihealth.Com 2012). The income tax expense disclosed at the firm’s income statement is not equal with the computation provided. The income tax expense is recorded at a $ AUD 56,000 difference value: (1,268,100-1,212,000) (Sterihealth.Com 2012). In my opinion the figure is not the same as the one stated at the income statement given the fact that the Company had a larger accumulation of losses in the present financial period and since the accounting item should be deducted from the taxable income it is the probable cause for the lower tax expense paid by the firm altogether. According to the notes provided the computation of income tax expense is first calculated from the current tax expense whose value stands at $ AUD 1,732,000 which is added to an item referred to as the overprovision in respect of current tax of prior years which stands at a negative value of $ AUD 372,000 which is also lessened to an item depicted as “change in recognized temporary differences which stands at a negative value of about $ AUD 148,000(Sterihealth.Com 2012). Adding all the aforementioned figures translates to an income tax expense of $AUD 1,212,000(Sterihealth.Com 2012). This computation comes out a bit complicated so that my understanding is limited to these items which are lessened to the current tax expense to bring about the key figure of the income tax expense. It should be noted that as compared to the figures calculated by some of my friends there income tax expense was conforming to the amount derived after computing accounting income times the tax rate in Australia which stands at 30 %. Notably, the figure keeps on changing from one company especially because of their immediate locations as well as their respective revenue performance which are translated to taxable income altogether. After examining the income tax expense for Sterihealth Limited, I have managed to comprehend to the fact that there are certain peculiar items which are considered in the course of computing the item before its finally posted as deductible items at the expense section of the underlying income statement of the firm at hand. I have managed to understand to the fact different firms have their unique manner of computing tax expenses. For instance, while other firms omit the item concerned with recognizing the temporary differences arising out of deferred tax expense others include it wholly so that the effect is felt extensively throughout the computation process altogether. Reference List Sterihealth.Com. (2012). Investors Relation: 2012 Annual Report, Retrieved on 11th December 2012 from http://www.sterihealth.com.au/ Read More