The Role of The Continuous Disclosure Framework

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Added on 2019-11-20

The Role of The Continuous Disclosure Framework

Added on 2019-11-20

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1The Role of the Continuous Disclosure Framework

The Role of The Continuous Disclosure Framework_1

2ContentsIntroduction................................................................................................................................3Part 1..........................................................................................................................................3Part II..........................................................................................................................................5Importance of Continuous Reporting Regime...........................................................................5Conclusion................................................................................................................................10References................................................................................................................................11

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3IntroductionThe present report aims to demonstrate the importance and significance of continuousdisclosure framework developed by the ASX. In this regard, the report will emphasize on thecurrent financial position of Surfstitch Ltd through analyzing and evaluating its annualreports. Also, it depicts the necessity of implementing a continuous reporting regime fordisclosure entities. Part 1Surfstitch (SRF), an online surfing retailing company has recorded huge profit andgrowth in the year 2015 but profit begin to fall in the year 2016 as analyzed from its annualreports. The massive growth recorded by the company in the year 2015 was due to itsacquisition strategy with total revenue approximately to about $144m. However, the annualreport of the year 2016 has revealed that its revenue growth has been decreased significantlyas compared to that in the year 2015. The company had recorded a net loss after tax to about$154.7m due to failure in its aggressive acquisition strategy and its desire for increase in itsrevenue without paying much emphasis on the profitability. In year 2015, company has acquired many subsidiaries that raise the amount ofgoodwill and it has impacted the cash position a lot. During the financial year 2015, companyhas acquired subsidiaries such as SurfStitch Holdings Pty Limited, SurfStitch Pty Limited,SurfStitch (Europe) Limited, SurfStitch USA, Inc., Surfdome Shop Limited, MagicseaweedLimited, Metcentral Limited and some other. All these subsidiaries are marked as cashgenerating units and at the time of acquisition of these subsidiaries goodwill has comes intoexistence. Below chart shows the goodwill left after the deduction of impairment loss fromeach CGU. Amount of Goodwill for CGU at the end of FY 2015

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4Amount in thousand dollarsSurfStitch Pty Limited$ 24,432.00SurfStitch Europe Pty LimitedSurfdome Shop Limited$ 30,557.00SurfStitch USA, Inc.$ 9,866.00Magicseaweed Limited$ 6,997.00Rollingyouth Pty Ltd$ 1,980.00$ 73,832.00There has been great change in cash and cash equivalents due to acquisitions carriedout by the company in year 2015. A sum total of 58633 thousand dollars has been used foracquisition of subsidiaries. Company has raised the cash through issues of shares capital ofamount 125,693 thousand dollars. Company has shown the impairment loss of 88,999 thousand dollars in the profit andloss statement and it is due to write of complete goodwill amount that company hasrecognised in previous year. The impairment in goodwill occurs due to huge reduction incarrying value of CGU. The selling and distribution expense has increased from 44683thousand dollars in year 2015 to 101268 thousand dollars in year 2016. After completeanalysis of the company performance in current period and previous it is highlyrecommended to the clients to hold the shares for two years and give the company chance torise again and earns the substantial profits.

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