Financial Analysis of Computer Shares Limited

This assignment conducts a financial analysis of Computer Shares Limited, including a review of the company's performance and investment recommendations. Relevant accounting theories and issues are also discussed.

Running head: ACCOUNTING THEORY AND ISSUES
Computer Shares Limited
Name of the Student:
Name of the University:
Author’s Note:

1COMPUTER SHARES LIMITED
Executive Summary
The aim of the assignment is to conduct a financial analysis on the Computer Shares Limited
Company and the relevant analysis of the company. The accounting policies followed by the
company and the relevant accounting framework followed were taken into account. The financial
analysis of the company included reviewing the performance of the company and the investment
recommendation for the same was given for Computer Shares Limited.
Historical value of the non-current asset of the company was applied while reporting the value of
non-current assets of the company.
The application of various assumptions in the various account heads of the financials of the
company was some of the crucial issues, which needs to be dealt. Companies should well abide
by the current rules and regulations and should present the financials of the company in the
prescribed format so that the same helps the investors of the company assess the financial
performance of the company.

2COMPUTER SHARES LIMITED
Table of Contents
1.0 Introduction...........................................................................................................................3
1.1 About Computer Shares Limited...........................................................................................3
1.2 Conceptual Framework..........................................................................................................3
2.0 Discussion..................................................................................................................................4
2.1 Accounting Issues/Problems..................................................................................................4
2.3 Financial Performance of the Company................................................................................5
2.3 Relevant Accounting Theories..............................................................................................6
3.0 Conclusion.................................................................................................................................7
Reference.........................................................................................................................................8

3COMPUTER SHARES LIMITED
1.0 Introduction
The Accounting Theory and Issues deals with the accounting principles followed by the
company and the relevant conceptual framework of the company is followed with respect to the
same. The accounting company follows the Australian Accounting Standards and the
Corporation Act 2001. The accounting framework provided by the company shows the
enhancing qualitative characteristics and the fundamental qualitative characteristics. Computer
Shares Limited Company has meet with the general purpose of financial reporting and the
relevant accounting standards was taken into account.
1.1 About Computer Shares Limited
Computer Shares Limited Company is an Australian based company, which helps in
transfer of stocks and different kind of employee share plans in the different parts of various
countries. The company was founded in the year 1978 in Melbourne, Australia and company
grew its operation globally. From technological services for stock exchanges, investors in the
form of
1.2 Conceptual Framework
The conceptual framework followed by the company involves the characteristics of the
company and the features presented like relevance, faithful representation, comparability,
verifiability, timeliness and Understandability. The current accounting issues observed in the
financials of the company while analyzing the accounting policies of the company it was found
that the reporting currency and the functional currency of the company was different. The same
was because of the geographic division of the operations of the company. The investors could
not assess the assessment of financial statement of the company in the functional currency

4COMPUTER SHARES LIMITED
properly. Historical value of the non-current asset of the company were applied while reporting
the value of non-current assets of the company. Frequent impairment of assets could be the best
possible solution (Schaltegger and Burritt 2017).
The relevant accounting standards followed by the company were in Accordance with the
Australian Accounting Standards and the Corporation Act 2001. The financial statement of the
company and the accounting policies followed by the company were in accordance with the
International Financial Regulatory System (Henderson et al. 2015). The accounting requirement
requires the company to follow the same in accordance with the Australian Accounting Standard
and the financial statement of the company were prepared using the principles of the
International Financial Regulatory System. Companies should well abide by the current rules and
regulations and should present the financials of the company in the prescribed format so that the
same helps the investors of the company assess the financial performance of the company
(Christensen et al. 2016).
2.0 Discussion
2.1 Accounting Issues/Problems
The accounting issue and problem identified by the company were on account of the
valuation of the non-current assets of the company at the historical value which does not help the
stakeholder’s asses the fair value of the assets. The Company should prepare the financial
statement of the company in accordance with the global accounting standards so that the users of
the financial report may easily evaluate and asses the information’s given. The application of
various assumptions in the various account heads of the financials of the company were some of
the crucial issues which needs to be dealt (Otley 2016).

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The operations of the company has been growing globally and the company has been
trying to expand the business services of the company. The company have recently collaborated
with the Citi group to launch innovative digital platform for the companies in order to facilitate
Proxy Voting (Beattie 2014).
2.3 Financial Performance of the Company
The profitability ratio of the company has been improving and the same were reflected
with the financials of the company. Return on Assets and Equity improved consistently for the
company showing the wealth creation for the company. The key competitors of the company
were Solium, Global Shares and Stock Transfer. The company in compare to its competitors
have performed well where the efficiency ratio and the profitability ratio for the company
increased significantly. The company has shown sustainability in generation of return for the
shareholders of the company. The company has also reduced the debt exposure of the company
thereby reducing the financial risk of the company (Berry et al. 2016). The performance of the
company in terms of the profitability has remained well within the line where the return on assets
for the company grew about from 6.72% to 7.81% from the year 2014-18. The return on equity
for the company has shown a health return increasing from 21.02% to 24.03% in the trend period
analyzed of 2014-18. The liquidity position of the company however in time period had
decreased. Company should understand the importance of maintaining adequate liquidity
position in the company so that the operations of the company are uninterrupted. The
management of the company should maintain an adequate liquidity position in the company in
contrast to the current obligations of the company.

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Profitability 2014-06 2015-06 2016-06 2017-06 2018-06
Net Margin % 12.5 7.81 8.04 12.68 13.15
Return on Assets % 6.72 4.45 4.11 6.6 7.81
Return on Equity % 21.02 14.05 14.17 22.66 24.23
Return on Invested Capital % 10.29 6.95 6.61 10.48 12.68
Interest Coverage 6.17 5.68 5.5 7.73 7.28
Liquidity/Financial Health 2014-06 2015-06 2016-06 2017-06 2018-06
Current Ratio 1.33 1.7 1.65 1.66 1.14
Quick Ratio 1.2 1.56 1.57 1.51 1.02
Financial Leverage 3.04 3.27 3.63 3.24 2.97
Debt/Equity 1.14 1.37 1.46 1.2 0.81
Key Ratios -> Efficiency Ratios X 2015-06 2016-06 2017-06 2018-06
Days Inventory 1.25 1.03 1.01 0.89 0.74
Payables Period 6.17 4.71 4.79 48.46 44.23
Cash Conversion Cycle 82.19 86.32 109.06 69.3 5.31
Receivables Turnover 4.19 4.06 3.23 3.12 7.48
Inventory Turnover 291.62 354 361.99 409.74 489.28
Fixed Assets Turnover 10.96 12.9 14.38 18.22 20.67
Asset Turnover 0.54 0.57 0.51 0.52 0.59
2.3 Relevant Accounting Theories
The Accounting theories applied by the company were relevant in accordance with the
IFRS and the Australian Accounting Standard Board. The application of various principles in
relation to the financials for the company were disclosed. The company had used various
management approach and beliefs on the different accounting theories used and the relevance on
the applicability of different approach were applied by the management of the company. The
company had classified the derivatives instruments of the company at the fair value in order to
report the fair value of the assets reflecting true economic value (Smith 2017). The financial
statement of the companies were presented in the US dollars and the functional currency of the
company was the same. The company have provided relevant details about the various

7COMPUTER SHARES LIMITED
accounting policies used in the financial statement of the company and the relevant accounting
standard policies followed. The recognition and the treatment of revenue, assets of the company
were some of the crucial points that needs to be dealt with proper analysis (Libby 2017).
3.0 Conclusion
The analysis of the accounting policies and the relevant accounting standards of the
company were in well accordance with the Australian Accounting Standard Bodies and the
Corporation Act 2001. The stakeholders needs to be well aware of the financial situations of the
companies and the same can be done by assessing the financial performance of the company.
The accounting theories and assumptions used by the management of the company are some of
the crucial accounting portions in the company.
4.0 Recommendation
After assessing the financial performance of the company, it was evaluated that the
financial performance of the company has shown some improvements in the efficiency and
profitability of the company. Investors can invest in the company after assessing the relevant
information’s and data given about the company.

8COMPUTER SHARES LIMITED
Reference
Beattie, V., 2014. Accounting narratives and the narrative turn in accounting research: Issues,
theory, methodology, methods and a research framework. The British Accounting Review, 46(2),
pp.111-134.
Berry, A.J., Broadbent, J. and Otley, D.T. eds., 2016. Management control: theories, issues and
practices. Macmillan International Higher Education.
Christensen, H.B., Nikolaev, V.V. and WITTENBERG‐MOERMAN, R.E.G.I.N.A., 2016.
Accounting information in financial contracting: The incomplete contract theory
perspective. Journal of accounting research, 54(2), pp.397-435.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
Hoque, Z., 2018. Methodological issues in accounting research. Spiramus Press Ltd.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Smith, M., 2017. Research methods in accounting. Sage.