Mubadala Financial Statement - Assignment Example

Running Head: Мubаdаlа Finаnсiаl Stаtеmеnt Аnаlysis Student’s Name Subject Professor University/Institution Location Date Мubаdаlа Finаnсiаl Stаtеmеnt Аnаlysis Consolidated statement of comprehensive income Decrease in fair value of investment proprieties (net) This is the market price of the investment properties (McNair, 2013). In this case it is the decrease in the market price of investment properties. Calculation = {(105,141) - (959,867)}/ 959,867 = -854726/959,867 = -0.8905 = -89.08% The percentage is bad. The fair value of the investment properties is decreasing at a very high rate and this is a huge loss to the company.The investment assets have lost value by 89.08 percent and this is a very huge and material decrease in fair value. Recommendation Hedge the investment properties as Choi & Meek (2011) recommends. Impairment losses on property, plant and equipment This is the loss in which the market value of the property, plant and equipment falls below their carrying amounts, it is not recoverable (Schroeder et al., 2011). As such, the market value of the property, plant and equipment is less than their book value. The impairment loss is the decrease in the cash flow generated by the assets. In essence, this is the amount by which the carrying amount of the property, plant and equipment exceeds the recoverable amount. Calculation = {(585,361)–(652,958)}/ 652,958 = -67597 /652,958 = -0.1035 = -10.35% The percentage is good although it indicates thatthe impairment loss of the property, plant and equipment decreased by a small percentage. The percentage means that the property, plant and equipment have impairment loss decrease of 10.35 percent as compared to the previous financial period of 2011. This is a good indication and the company should continue to harness effectiveness in management of the property, plant and equipment to prevent the impairment loss. Recommendation Dispose the property, plant and equipment and purchase new ones. Impairment losses on equity accounted investees This is the decrease in the market value of equity accounted investees. It is the loss of market value of the equity accounted investees. Essentially, the impairment loss is the amount by which the carrying amount of the equity accounted investees exceeds the recoverable amount. Calculation = {(0 –(471,984)} / 471,984 = -471,984/ 471,984 = -1 The percentage is bad. Equity accounted investees had no impairment loss the previous period; however, they had an impairment loss of 471,984 representing a one hundred percent impairment loss. Recommendation Repurchase the investees before the impairment los is deteriorates much and reinvest in other equity accounted investees. Impairment losses on intangible assets This is the amount of loss or decrease in the market value of the intangible assets below their carrying amount. It is the amount by which the carrying amount of the intangible assets surpasses their recoverable amount (Chambers, 2006). Calculation = {(194,209)–(29,207)}/ 29,207 = 165002/29,207 = 5.6494 times Or = 564.94% The ration is bad. The percentage indicates that the intangible assets impairment loss increased by 5.6 times or 564.94 percent. The intangible assets lost value at a very high rate;this is material and has considerable effects to the statement of financial position of the company. Recommendation Provide for impairment loss and amortization of the intangible assets. Profit/ (loss) before net finance expense and taxes This is the amount of decrease or increase in net finance expense and taxes. Calculation = {236,053 - (3,903,647)}/ 3,903,647 = 4139700/3,903,647 = 1.0605 times or = 106.05% The ratio is very good, the profit or loss before the net finance expense and taxes increased considerably from loss of 3.9 million to a profit of 236,053. This is a good indication of improved financial management. The ratio means that there was an increase of 106.05 percent from loss to profit. Recommendation Decrease the interest bearing borrowings Share of movements in translation reserve of equity accounted investees This is the increase or decrease in the translation reserve of equity accounted investees Calculation = {(48,117) - (268,586)}/ 268,586 = -220469/-268,586 = 0.8209 = 82.09% The ratio is good. The share of movements in translation reserve of equity accounted investees increased considerably. There was an increase of 82.09 percent. Recommendation Hedge the translation reserve (Beatty & Weber, 2006). Other comprehensive income/ (loss) for the year net of income tax This represents amounts, decrease or increase, from activities of the company. Calculation = {985,667 - (907,041)}/ 907,041 = 1892708/907,041 = 2.0867 = 208.67% The percentage is very good. The other comprehensive income or loss for the year net of income tax recorded a 208.67 percent increase. For the year 2011, it was a comprehensive loss but the company recorded massive increase in come to record a comprehensive income. Recommendation Invest in several income generating activities Total comprehensive income/ (loss) for the year This is the total earnings of the company for the year 2012, it represents the amount of earnings net of expenses and tax that the company was able to generate throughout the year. Calculation = {1,118,077 (5,430,453)}/ 5,430,453 =6548530/5,430,453 = 1.2059 = 120.59% This is a very good percentage. There was a massive increase in total comprehensive income by 120.59 percent. It was total loss in year 2011 but the company recorded an income in 2012. Recommendation Increase efficiency in operations as a way of cost cutting measure, this would increase income Consolidated statement of financial position Equity Additional shareholder contributions This is the extra equity contributions made by the shareholders of the company. It represents supplementary owner’s contributions. Calculation = (120,315,476 - 92,068,476)/ 92,068,476 = 28247000/92,068,476 = 0.3068 = 30.68% The percentage is good. The shareholders increased their contributions to the company by 30.68 percent from 2011 to 2012. This increased the shareholders equity. Recommendation Consolidate the equity of the companies Government grants These are donations, allowances or endowments provided by government to the company. There is no change for government grants, it remained constant. Recommendation Seek more grants from the government. Total equity attributable to the owner of the group This is the aggregate claim of the owner of the group. Calculation = (134,006,716 - 103,140,271)/ 103,140,271 = 30866445/103,140,271 = 0.2993 = 29.93% The percentage is good. It indicates that there was 29.93 percent increase in the total equity attributable to the owner of the group. This is a positive sign of growth of the company. Recommendation Inject more funds for making more investments Non-controlling interests This is the minority shareholder in the company; the non-controlling interest owns just a small stake in the group. Calculation = (1,958,814 - 3,234,605)/ 3,234,605 = -1275791/ 3,234,605 = -0.3944 = -39.44% The percentage is good. It indicates that the holding company bought part of the non-controlling interest and therefore reduced it. The non-controlling interest reduced by 39.44 percent, this is a considerable decrease. Recommendation Buy out the non-controlling interest so that to have full control of the group. Total equity This is the whole owners funds invested in the group. Calculation = (135,965,530 - 106,374,876)/ 106,374,876 = 29590654 /106,374,876 = 0.2782 = 27.82% The percent is good. The total equity of the company increased by 27.82 percent, considering that the company recorded increase in many aspects of the equity components, this is expected. Recommendation Decrease liabilities and increase equity. Non-Current liabilities Interest bearing borrowings These are financial obligations that the company has borrowed at a cost the cost is interest and thus interest bearing finances. Calculation = (35,506,202 - 38,124,157)/ 38,124,157 = -2617955/38,124,157 = -0.0687 =-6.87% The percent is good. It indicates that the company reduced interest bearing borrowings by 6.87 percent. This is a good move by the company. The reduction of the interest bearing borrowings is by repayment of the borrowings throughout the year. Recommendation Repay off the borrowings and avoid adding more borrowings. Government grants These are donations, allowances or endowments provided by government to the company. Calculation = (1,950,427 - 2,062,052)/ 2,062,052 = -111625/2,062,052 = -0.0541 = -5.41 The percent is bad. There was a reduction of the government grant. The government reduced grants to the company; this may make the company not able to finance some of its operations due to reduction of the government grants. Recommendation Seek for more grants Obligation under finance lease These are the financial c commitments for the use of certain assets from other providers. It is long term lease of assets by the group. Calculation = (1,353,871 - 1,373,380)/ 1,373,380 = -19509/1,373,380 = -0.0142 = -1.42% The percent is good. It indicates that there was a slight decrease of the company obligations under finance lease. The company reduced its obligations concerning its finance lease and this is a good financial management. Recommendation Purchase its own assets and stop leasing; this is advantageous sin the long run. Deferred tax liabilities These are the delayed tax obligations that the group has not yet paid. Calculation = (1,354,280 - 1,583,311)/ 1,583,311 = -229031/1,583,311 = -0.1447 = -14.47% The percent is good. Tit indicates that the company reduced its deferred tax liabilities by 14.47 percent. Recommendation Pay off the delayed tax liabilities Financial liabilities at fair value This is the estimated market price of the financial liabilities. Calculation = (1,613,458 - 1,397,061)/ 1,397,061 = 216397/1,397,061 = 216397/1,397,061 = 0.1549 =15.49% The percent is bad. The company increased its financial liabilities at fair value; this increases the obligations that the company has to meet as it increases liabilities. Recommendation Repay the financial liabilities, record the financial liabilities at book value and not fair value. Other liabilities These are other obligations that the company has to meet. Calculation = (2,388,171 - 2,261,474)/ 2,261,474 = 126697/2,261,474 = 0.0560 = 5.6% The percent is bad. Other liabilities increased by 5.6 percent thereby increasing the company's obligations. Recommendation Repay off all the other liabilities in order to decreasing the gearing level of the companies. Total non-current liabilities These are the long term obligations that the company has to meet. = (44,166,409 - 46,801,435)/ 46,801,435 = -2635026/46,801,435 = -0.0563 = -5.63% The percent is very good. It indicates that the company was able to reduce the total noncurrent liabilities by 5.63 percent. Recommendation To improve gearing, the company should use fewer amounts of noncurrent liabilities and instead increase equity. As such, it should meet the noncurrent liabilities and avoid adding more unless it is necessary and unavoidable to borrow. References Beatty, A & Weber, J (2006). Accounting discretion in fair value estimates: An examination of Chambers, D (2006). Is goodwill impairment accounting under SFAS 142 an improvement over systematic amortization of goodwill. Available at SSRN 953649. Choi, F. D., & Meek, G. K. (2011). International accounting.Pearson Higher Ed. McNair, F. M., Olds, P. R., & Milam, E. E. (2013). Fundamental financial accounting concepts.McGraw-Hill Irwin. Schroeder, R. G., Clark, M. W., &Cathey, J. M. (2011). Financial accounting theory and analysis: text and cases. John Wiley and Sons. Read More