Corporate Accounting Assignment | Reporting
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Added on 2019-11-08
Corporate Accounting Assignment | Reporting
Added on 2019-11-08
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CORPORATE ACCOUNTING
Corporate accountingContentsPart I............................................................................................................................................................3Introduction.................................................................................................................................................6Literature Review........................................................................................................................................6Conclusion.................................................................................................................................................10References.................................................................................................................................................112
Corporate accountingPart I1.The year 2016 was highly challenging for Surfstitch. The operations as a public companybegan and that was done with high expectations and strategic aim to develop a global community of customers who are engaged and cater to the variety of products and other services to increase the lifestyle of action sport. However, the big disappointment that came in the way was that the aims were not met and the business fell short of all plans and predictions that lead to a major loss of $154.7 million (Surfstitchgroup, 2016). The profitability, as well as cash flow, got disturbed as the gross profit margin dropped to 40% from a level of 46% and the expenses that were underlying enhanced by $27.9 million to $111.8 million.2.Goodwill and intangible assets have an indefinite useful life and not subject to amortization. It is tested yearly for the purpose of impairment (Kalpan, 2011). Goodwill arose from subsidiaries acquisition was done at cost less impairment loss that was accumulated (Merchant, 2011). Goodwill was contained in intangible assets and testing was done for impairment (Landsman et. al, 2015). The goodwill arose for the acquisition of SHPL of SurfStitch Pty Limited, SurfStitch Europe Pty Limited and SurfStitch USA (Surfstitchgroup, 2015). Comparing the 2016 and 2015 balance sheet it can be noted thatthere is a drop in the subsidiaries investment. The investment in subsidiaries figures stoodat $1,30, 614 million in 2015 while it declined to $37,650 million in 2016. This means that the investment part has been given less consideration and going by the company’s operations, the investment pattern was muted to a considerable extent (Nobes, 2012).The cash position in 2016 declined as compared to the year 2015. This means that the cash was used the course of activities. The figure of 2015 stands hugely that is $30,488 million while it declined to $9373 million indicating that cash was used in the business and was not involved in an idle manner (Surfstitchgroup, 2016).3.The selling and distribution and administrative expenses indicate that in 2016 there has been a sharp increment in the expenses as compared to 2015. This can be attributed due to a strong rise in the revenues (Mark & Michael, 2016). Since the operations were huge,3
Corporate accountingtherefore; it needed more expenses to cover its activities. It jumped from a figure $44,683 million to $ 101,268 million (Surfstitchgroup, 2016).On the other hand, the impairment expenses were higher in 2016 as compared to 2015. The impairment stood at $19,702 in 2015 as compared to $88,850 in 2016.4.As per the fundamental analysis and the financial statement interpretation it can be said that the company’s performance has declined in 2016. The losses extended and the company was unable to present a strong scenario. The level of current assets and total assets declined while current liabilities and total liabilities increased. The equity position of the company declined that is not a good indicator (Laux, 2014). Hence, at the current juncture, the shares of Surfstitch must be held. However, the company’s share must be kept under the radar because one bad year cannot determine the long term viability of the company (Christensen, 2011). For the current time, it should be left untouched or under hold mode.4
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