Accounting Principles for A2 Milk and Bellamy’s Australia Ltd

Running head: ACCOUNTING PRINCIPLES
Accounting Principles
Name of the Student
Name of the University
Author’s Note

ACCOUNTING PRINCIPLES1
Table of Contents
Industry and Company Overview..............................................................................................2
Industry..................................................................................................................................2
Company................................................................................................................................2
Cash............................................................................................................................................3
Receivable..................................................................................................................................3
Inventory....................................................................................................................................4
Property, Plant and Equipment (PPE)........................................................................................5
Current Liabilities......................................................................................................................6
Non-Current Liabilities..............................................................................................................6
Shareholder’s Equity..................................................................................................................7
Auditor’s Letter..........................................................................................................................7
Statement of Cash Flows............................................................................................................8
Ratio Analysis............................................................................................................................8
Overall Analysis.......................................................................................................................11
References................................................................................................................................12

ACCOUNTING PRINCIPLES2
Industry and Company Overview
Industry
A2 Milk Company Pty Ltd – A2 Milk Company Pvt Ltd (A2 Milk) operates in the
Australian dairy industry. Australia is considered as a small producer of milk, but the
Australian dairy industry is responsible for being the third largest dairy exporter since the
country exports 50% of their production. Australian dairy industry has a gross value of $4
billion and it is Australia’s third largest rural industry. The main produced dairy product in
this industry are milk, milk powder, butter, yogurt and cheese (pwc.com.au 2019).
Bellamy’s Australia Ltd – Bellamy’s Australia Ltd operates in the food and beverage
industry of Australia which is considered as the largest manufacturing sector of Australia.
This industry is a key employer and is the fastest growing manufacturing employer of
regional Australia. In the current years, total amount of revenue from this industry is
US$1,443 million. The Australian food and beverage industry is the major user of the
country’s agricultural products. The main manufacturing products of this industry are meats,
beverages, dairy products, fruits and vegetables, sugar, bakery products, seafood, pet food,
confectionary, flour and cereal products and others (statista.com 2019).
Company
A2 Milk Company Pty Ltd – The main aim of A2 Milk is in producing their customers with
high quality as well as superior brand of dairy products that will contain the A2 protein.
There are two types of protein in the conventional cow’s milk which are A2 protein and A1
protein. The milk of A2 Milk is different because it is free of A1 protein. Three major
strategies of the company are to develop a product portfolio of branded and nutritious
products, to invest in the attractive market and to extend their expertise in A2 protein. A2
Milk has all the capabilities to take the advantage of the major macro-consumer trends which
are growth demand of the consumers in health and wellness products, safety of food,
attribution and naturalness and key growth in middle class in Asia. A2 Milk has three major
markets which yields the majority portion of revenue for the firm; they are United States and
United Kingdom with a revenue of 32.4 million, Australia and New Zealand with a revenue
of 656.6 million and China and other Asia with a revenue of $233.6 million. The ability of
A2 Milk to make A1 protein free milk provides the company with the major competitive
advantage (thea2milkcompany.com 2019).

ACCOUNTING PRINCIPLES3
Bellamy’s Australia Ltd – Bellamy’s Australia Ltd is considered as a leading Australian
food and beverage company and it is the parent company of Bellamy’s Organic. More
specifically, Bellamy’s Australia is regarded as a major company for infant nutrition in the
markets of Australia and China. The company did not perform well in the financial year of
2017. However, the adopted plan of the company for the year 2018 has provided positive
tangible result in the area of growth in revenue, profitability, balance sheet and cash flows. In
the current years, Bellamy’s Australia has brought certain changes in their business model for
overcoming the difficulties; such as consolidation of sales and distribution channels,
diversification of ingredient procurement, optimization of manufacturing and production
decision, investments in the areas of marketing and branding, improvements in investment,
control and provenance and initiation of crucial future growth engines. The main strategic
focus of the company is perusing long-term premium brand strategy where growth in volume
is targeted for the expansion of the business over the five years. However, the main focus of
Bellamy’s Australia has been the development of the core businesses in Australia to the full
potential (investors.bellamysorganic.com.au 2019).
Cash
1. Cash and cash equivalent can be found in two statements; they are statement of
financial position or balance sheet and statement of cash flows.
2. A2 Milk has cash and cash equivalent of $340,455,000 in 2018, $121,020,000 in 2017
and $69,361,000 in 2016. Bellamy’s Australia has $87,634,000 in 2018, $17,479,000
in 2017 and $32,295,000 in 2016 as cash and cash equivalent.
3. The cash and cash equivalent of A2 Milk has increased in 2018 from 2017; and the
same situation can be seen in case of Bellamy’s Australia since the cash and cash
equivalent has increased in 2018 from 2017.
Receivable
1. A2 Milk has the receivables of trade receivable, impairment allowance and other
receivables. The types of receivable in Bellamy’s Australia are trade receivables, loss
allowance provision and other receivable.
2. A2 Milk does not have any allowance for uncollectible accounts. In case of Bellamy’s
Australia, $116,000 and $100,000 are the loss allowance provision in 2018 and 2017
respectively. Bellamy’s Australia call this as ‘Loss Allowance Provision’. This
information can be found under Note 8 of the financial statements of the firm.