Statement of Comprehensive Income and Financial Position - Case Study Example

Table of Contents Table of Contents 1 1.Statement of comprehensive income 2 2. Statements of Financial Position 3 3. Statement of Changes in Equity 6 Notes to financial statements 7 Note 1: Statement of significant accounting policies 7 Note 2: Revenue AASB101, Paragraph 97&112 (c) 10 Note 3: Other income AASB 101 paragraph 98(c) &112 (c) 11 Note 4: Analysis of expenses by function AASB 101 para99, 103,104 11 Note 5: Additional information AASB 101 Paragraph 104 15 Note 6 16 Note 7: Trade and Other Receivables AASB Paragraph 78 (b) &112 (c) 16 Note 8: Property, Plant and Equipment AASB 101, paragraph 78 (a) 16 Note 9: Intangible Assets AASB 138, Paragraph 118&119 (a) 17 Note 10: Trade and other payables AASB 101, Paragraph 72 17 Note 11: Provision AASB 101, Paragraph 78(d) & 112 (c) 18 Current $ 18 Note 12: General reserve AASB 101, Paragraph 106 (b) 19 Note 13: Share capital AASB 101, Paragraph 106 (b) 19 Note 14: Retained earnings 20 Note 15: Auditors’ Remuneration AASB 101, Paragraph 138.1 (a) & (b) 21 Note 16: Contingent Liability AASB 101, Paragraph 137 22 Note 17: Dividend AASB, Paragraph 37 22 Note 18: Subsequent events AASB 110, Paragraph 21 23 Director’s declaration 24 Director’s Report 25 Susan Wright James White Janet Cameroon 26 Independent Auditor’s Report 27 References: 29 1. Statement of comprehensive income Notes 2013 2012 Revenue Note 2 $208,700,300 XXX Other Income Note 3 29,750,000 XXX Gross Profit 171,050,100 XXX Expenses excluding Finance Costs Note 4 (130,405,700) XXX Finance Cost Note 5 (2,094,300) XXX Profit before Income Tax 38,550,100 XXX Income Tax Expense (11,565,030) XXX Profit for the period 26,985,070 XXX Other comprehensive income - - Total Comprehensive Income for the year 26,985,070 XXX 2. Statements of Financial Position ASSETS Notes 2013 2012 Current Assets Cash and cash equivalents Note 6 - XXX Trade and other receivables Note 7 $37,449,700 XXX Inventories 25,600,800 XXX Total Current assets 63,050,500 XXX Non Current Assets Property, plant and equipment Note 8 71,481,500 XXX Motor vehicle 1,690,000 XXX Other Intangible assets Note 9 7,200,300 XXX Total non-current assets 80,371,800 XXX Total Assets 143,422,300 XXX LIABILITIES Current Liability Trade and other payables Note 10 31,330,800 XXX Tax payable 11,565,030 XXX Bank overdraft 980,000 XXX Provision Note 11 6,175,000 XXX Total Current Liabilities 50,050,830 XXX Non- Current Liabilities Loan (Big bank) 12,000,000 XXX Provision Note 11 2,325,000 XXX Total non-current liabilities 14,325,000 XXX Total Liabilities 64,375,830 XXX Net Assets 80,046,470 XXX Equity General Reserve Note 12 12,000,000 XXX Share capital Note 13 18,760,000 XXX Retained Earnings Note 14 49,286,470 XXX 80,046,470 XXX 3. Statement of Changes in Equity Share capital General reserve Retained earnings Total equity Balance at 1st July 2012 15,960,000 10,800,000 28,411,400 55,171,400 Bonus share issue 2,800,000 -2,800,000 - - Total comprehensive income - - 26,985,070 26,985,070 Dividends declared and paid - - -1,910,000 - 1,910,000 Transfer to general reserve - 4,000,000 - 4,000,000 - Balance at 30th June 2013 18,760,000 8,000,000 49,486,470 80,046,470 Notes to financial statements Note 1: Statement of significant accounting policies a) Corporate formation Pioneer International Limited (the company) is mainly involved in the manufacture and distribution of various retail goods. The company has worn various awards within the manufacturing industry including the manufacturer of the year award for the year 2012 as well as the most innovative company award for 2013. The company owns two manufacturing plant in Sydney and Melbourne. The company’s shares are traded on the Australian stock Exchange. The company’s financial statements for the year ended 30 June 2013 were approved and authorized for issue by the board on 29th August 2013. b) Basis of operation The currency presented on the company’s financial report is in Australian dollars. The tangible and intangible assets in the financial statements are prepared on the basis of historical cost minus the depreciation or aromatization thereof. The assets include Buildings, furniture and office equipment, machinery and delivery vehicles c) Statement of compliance The financial report is composed of the general purpose financial report which incorporates statements of financial position, statement of comprehensive income, statement of changes in equity, notes to the financial statements and director’s declaration. According to the corporations act, the preparation of the statements is in compliance to the Australian accounting standards and with those of IFRS (AASB 101, Paragraph 15). The financial reports present a true and fair view of the company’s affairs and the user can rely on them for decision making purposes. d) Summary of significant accounting policies I Property, Plant and Equipment Buildings, furniture and office equipment, machinery and delivery vehicles are held at cost net of depreciation. Lands are recorded at historical cost. II Intangible assets Intangible assets consist of the company’s trademark. The trade mark includes the word “Pioneer” with a logo of a shining torch. The trademark is a core part of our marketing strategy (Commonwealth of Australia, 2011). The trademark is a brand equity which has a marketing effect on the consumer and is recognized as an intangible asset in the financial statement. III Inventories Inventories are recognized at lower of cost and net realizable value. The inventory is estimated based on the selling price minus estimated cost of completion and estimated marketing costs. IV Trade and other receivables The trade receivables consist of account receivables. The account receivables are carried at amortized cost which is the allocation of cost over time less the value of the trade receivables. The allocation of cost is the allowance for doubtful debts, V Cash and cash equivalents Cash and cash equivalents are assets which are conveniently changeable into cash and are included in the current assets in the statement of financial position. VI Provisions Provisions are recognized when they meet the recognition criteria of present legal obligation arising from past events with probable outflow of resources embodying economic benefit. i) Warranty The entity provides for warranty cost when the product or service is sold based on theoretical warranty data. ii) Annual leave The entity provides for annual leave cost when the employees leave their position within the financial year. IV Employee benefits Employers provide employee benefits in addition to their normal wages. Annual leave is paid leave that is granted to employees annually. The company’s annual leave policy is that employees will have a 21 days paid annual leave in a year. VII Trade and other payables The trade and other payables are recorded in their amortized cost. They comprise of unearned revenues, account payables and dividend payable. Unearned revenues are deemed paid after the service or goods have been delivered. VIII Revenue Revenue comprises of income arising from the company’s ordinary activities. i) Sale of goods This is payment by buyers for goods minus the costs incurred in making delivery ii) Dividends Dividend revenue is recognized on the shareholder’s right when payment has been received iii) Interest This is revenue gained from the carrying amount of the financial assets times the interest rate provided by the bank. X Income tax Statutory tax imposed by the government is 30% and is calculated based on the earning before tax. XII Earnings per share The earning per share is calculated based on net income minus dividends on preferred stock divided by average outstanding shares. The earnings per share is the allocated profit on each common share issued. Note 2: Revenue AASB101, Paragraph 97&112 (c) The company’s revenue included the following items; Sales revenue, Service revenue and commission revenue. Revenue 2013 2012 $ $ Sales revenue 110,700,000 XXX Service revenue 73,800, 000 XXX Commission revenue 24,200,300 XXX Total revenue 208,700,300 XXX Note 3: Other income AASB 101 paragraph 98(c) &112 (c) The company’s other income included proceeds from ale of land and proceeds from sale of an item of machinery Other income 2012 2013 $ $ Proceeds from sale of land 21,500,000 XXX Proceeds from sale of machinery 8,250,000 XXX Total other income 29,750,000 XXX Note 4: Analysis of expenses by function AASB 101 para99, 103,104 The company’s expenses excluding finance costs include selling and distribution expenses, administrative expenses and miscellaneous expenses. Analysis of expenses by function $ Revenue 208,700,300 Cost of sales 67,400,200 Gross profit 141,300,100 Other Income 29,750,000 Distribution cost 2,300,000 Administrative expenses 120,520,450 Other expenses 9,679,550 Profit before tax 38,550,100 Selling and distribution expenses 2013 2012 $ $ Cost of sales 67,400,200 XXX Depreciation –Vehicle 210,250 XXX Delivery expenses 2,300,000 XXX Warranty expense 2,540, 000 XXX Total 72,450,450 XXX Warranty expense is calculated as shown below; Miscellaneous expense 2013 2012 $ $ Office supplies 1,710,000 XXX Retirement present 400 Other 7,969,150 XXX Total 9,679,550 XXX Finance cost 2013 2012 $ $ Interest expense 814,300 XXX Doubtful debt expense 1,280,000 XXX Total 2,094,300 XXX NB// Finance expense is composed of interest expense (loan interest and bank overdraft interest) and doubtful debt expense. Warranties $ Balance as at 2012 5,640,000 Warranty expenses 2,540,000 Balance 2013 3,100,000 Administrative expense 2013 2012 $ $ General operating expense 18,900,200 XXX Depreciation –Buildings 1,600,000 XXX Depreciation-Furniture and office Equipment 520,000 XXX Depreciation-machinery 3,860,000 XXX Depreciation –Delivery vehicles 210,250 XXX Payment to Auditors 1,230,000 XXX Legal expense 3,700,000 XXX Annual leave expenses 4,900,000 XXX Wages 37,600,000 XXX Salaries 14,900,000 XXX Carrying amount of equipment & Land 33,100,000 XXX Total 120,520,450 XXX Note 5: Additional information AASB 101 Paragraph 104 According to AASB101 Paragraph 104, additional information will include depreciation and amortization expense as well as employee benefits expense. Depreciation and amortization 2013 2012 $ $ Depreciation –Furniture and office equipment 520,000 XXX Depreciation –Building 1,600,000 XXX Depreciation –Machinery 3,860,000 XXX Depreciation –Delivery vehicles 210,250 XXX Total 6,190,250 XXX Employee benefits expense 2013 2012 $ $ Wages 37,600,000 XXX Salaries 14,900,000 XXX Annual leave expense 4,900,000 XXX Total 57,400,000 XXX Note 6 Cash and cash equivalents The company did not have any cash at bank though it had acquired a bank overdraft of $980,000. Note 7: Trade and Other Receivables AASB Paragraph 78 (b) &112 (c) 2013 2012 $ $ Accounts receivable 34,500,200 XXX Less allowance for doubtful debt (1,400,500) XXX Add accrued commission revenue 4,350,000 XXX Total 37,449,700 XXX Note 8: Property, Plant and Equipment AASB 101, paragraph 78 (a) These include property, plant and equipment, land, buildings, office fittings and motor vehicles. 2013 2012 $ $ Machinery 32,800,200 XXX Land 9,600,400 XXX Buildings 24,700,900 XXX Delivery vehicles 1,690,000 XXX Furniture and office equipment 4,380,000 XXX Total 73,171,500 XXX Note 9: Intangible Assets AASB 138, Paragraph 118&119 (a) AASB 138 paragraph 118 requires disclosures of each class of intangibles. Paragraph 119 (a) requires separate disclosure of brand names. Trademark is included in other intangible assets. In this case trademark amounted to $7,200,300. Note 10: Trade and other payables AASB 101, Paragraph 72 2013 2012 $ $ Unearned revenue 7,430,000 XXX Accounts payable 22,700,800 XXX Dividend payable 1,200,000 XXX Total 31,330,800 XXX Note 11: Provision AASB 101, Paragraph 78(d) & 112 (c) Current $ Annual leave 5,400,000 Warranties 775,000 Total 6,175,000 Non-current $ Warranties 2,325,000 According to AASB 137 paragraph 84, the entity should disclose carrying amounts at the beginning and at the end of the period, additional provision and the amount of the provision used during the period Provision Annual leave Warranties Legal case Total Beginning balance 6,730,000 5,640,000 10,000,000 22,370,000 Additional provisions 3,570,000 - - 3,570,000 Amount used 4,900,000 2,540,000 10,000,000 17,440,000 Closing balance 5,400,000 3,100,000 0 8,500,000 Note 12: General reserve AASB 101, Paragraph 106 (b) 2013 2012 $ $ Balance as at 1 July 2012 10,800,000 XXX Bonus share issue 2,800,000 XXX Transfer from retained earnings 4,000,000 XXX Balance as at 30 June 2013 12,000,000 XXX Note 13: Share capital AASB 101, Paragraph 106 (b) 2013 2012 $ $ Balance as at 1 July 2012 15,960,000 XXX Bonus share issue 2,800,000 XXX Balance as at 30 June 2013 18,760,000 XXX The information below relates to the total number of shares issued Date Amount Par value Total $ $ July 1998 8,000,000 1.10 7,988,000 January 2002 3,000,000 2.40 7, 172,000 December 2012 (a) 1,000,000 2.80 2, 800,000 Total 12,000,000 6.3 18,760,000 (a) Section 254A (1a) authorizes a common business practice for companies to issue bonus shares to their members. Note 14: Retained earnings $ Balance as at 1 July 2012 28,411,400 Total comprehensive income 26,985,070 Dividends declared and paid (1,910,000) Transfers to general reserve (4,000,000) Balance as at 3 0 June 2013 48,286,470 Dividend declared and paid 1,910,000 Final dividend 1,200,000 Total dividend 3,110,000 Note 15: Auditors’ Remuneration AASB 101, Paragraph 138.1 (a) & (b) An entity shall disclose the amounts paid to the auditor of the entity for an audit or a review of the financial statements of the entity. In addition, the entity shall disclose separately regarding non-audit services; the nature and the amount of each service provided by the auditors. Payment to the Auditors 2011 2010 $ $ Auditing service: Audit 840,000 XXX Non audit service: Tax advice 390,000 XXX Total 1,230,000 XXX Note 16: Contingent Liability AASB 101, Paragraph 137 On 4 July 2013, the company was advised by its lawyers that it was being sued by one of its suppliers. In February 2013 the supplier attempted to deliver some inventory to the company. However the company inspected the inventory and found that the inventory did not meet the requirements that the company had specified and refused to accept the inventory (the inventory was returned to the supplier). The supplier is claiming that this was a special order by the company, that the inventory met the requirements specified by the company, and that the company is therefore required to accept the inventory and pay for the suppliers costs of producing and delivering the inventory of $12,000,000. Legal advice e has indicated that there is a 40% probability that the company will be liable to pay the costs to the supplier as the inventory was not produced exactly in accordance with the company’s specifications. The case is expected to be decided in court in December 2013. Note 17: Dividend AASB, Paragraph 37 2013 Date Cents per share Total Amount Date of payment 1/3/2013 Interim dividend 4 480,000 XXX 29/6/2013 Final 10 1,200,000 XXX Total 14 1,680,000 XXX 2012 Date 2/7/2012 Final Dividend 12 1,430,000 1/9/2012 Total 12 1,430,000 1/9/2012 Note 18: Subsequent events AASB 110, Paragraph 21 a) On the 10 August 2013 the directors issued a prospectus for a new share issue for 3 million ordinary shares at an issue price of $3.00, payable in full on application. Applications were required to be received by 1 November 2013 and shares were to be issued on 4 November 2013. b) On 28 September 2013, the directors decided that to reduce costs, a number of the company’s activities/ processes would be outsourced to contractors who operated overseas (in counties where labor costs were significantly less). The initial activity to be outsourced would be payroll processing and it was anticipated that this would occur in December 2013. This was expected to reduce administrative costs by 4% in the year ending 30 June 2014 and by 7% in the future years. Further activities /processes would be considered for outsourcing depending on the success of the initial outsourcing of payroll processing. Director’s declaration The Directors of Pioneer International Limited make the following declaration: a) The financial statements and notes to the statements have been prepared in compliance with the International Financial Reporting Standards b) The financial statements and notes to the statements have been prepared in compliance with the Accounting Standards applicable in Australia. c) The financial statements and notes to the statements of Pioneer International limited give a true and fair view of the Company’s financial position and its performance for the year ended 30 June 2013. d) The financial statements and notes to the statements have been prepared in accordance to the Corporations act 2001. e) In the director’s opinion, there are reasonable grounds to believe that Pioneer International Limited will be able to pay its debts when they become due and payable; and f) The directors have given the declarations required under section 295 A of the corporation’s act 2001 for the year ended 30 June 2013. For and on behalf of the board, Susan Wright James White Janet Cameron Chairperson Executive Director Executive director Director’s Report The following is the directors’ report on the entity of Pioneer International Limited for the year ended 30 June 2013 pursuant to the board’s resolution. Principal Activity The company’s principal activity during the financial year was the manufacture and sale of various retail goods. There are no significant changes expected during the year. Financial Performance The company’s net profit for the year was $26,985,070. The profit was realized after deducting income tax of $11,565,030. The Company’s overall financial position is presented on page 3 of the report. Dividends The dividends paid during the year are as follows: Dividend Date declared Date paid Dividend per share Total dividend Interim dividend for the year ended 30th June 2013 1/3/2013 XXX 4 Cents $480,000 Final dividend for the year ended 30 June 2013 29/6/2011 XXX 10 cents $1,200,000 On 1st September 2012, the company paid a dividend of $1,430,000 which had been declared on 2nd July 2012 from retained earnings. Significant changes in the state of affairs There were no significant changes in the company’s state of affairs during the financial year ended 30th June 2013. Events occurring after the end of the financial year The director’s are not aware of any matter or circumstance that has arisen since the year end that may significantly affect the Company’s operation’s in future. However, the board has noted the subsequent events that may have a significant effect on the company’s finances in the Notes to the statements. Details of Director’s and Executives There has not been any significant5 change to the Company’s directors during the financial year. The following are the company’s directors: Chairman -Susan Wright Executive Directors - James White & Janet Cameroon This report was prepared on 20th August 2013 and signed in accordance to a resolution of the board: Susan Wright James White Janet Cameroon Independent Auditor’s Report To the general meeting of shareholders of Pioneer International limited We have audited the financial statements set out on page 2-17 which form part of the annual report and accounts 2013 of Pioneer International Limited for the year ended 30 June 2013, which comprise statement of comprehensive income, statement of financial position, statement of changes in equity and notes to the financial statements which comprise of a summary of significant accounting policies and other explanatory information. As the company’s auditors, we declare to the best of our knowledge and belief, There has not been any contraventions of: i) The auditors’ independence requirements according to corporations Act 2001 in relation to the audit and ii) Any applicable code of professional conduct in relation to the audit. It is our opinion that: 1. The annual report of Pioneer International Ltd has been prepared in accordance with the Corporation’s Act 2001, including: a) Compliance with Accounting Standards in Australia b) The financial statements give a true and fair view of the financial position of Pioneer International Ltd as at 30 June 2013 and of the company’s performance for the year ended 30 June 2013. 2. The company has a) Availed to us all information and explanations and accorded us the assistance needed for the conduct of the audit. b) Kept and availed financial records in a manner sufficient to enable the preparation and audit of the annual financial report. c) Maintained other records and registered in accordance to the Corporations Act 2001. Downright Johnson References: Unilever limited, Unilever Annual report 2012 Woolworths, Woolworths Annual report 2012 CPA (2011), Accounting Handbook 2011, Pearson, Australia. Read More