BAO2203 - Corporate Accounting Assignment
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Added on 2019-11-08
BAO2203 - Corporate Accounting Assignment
Added on 2019-11-08
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Running head: CORPORATE ACCOUNTINGCorporate AccountingName of the Student:Name of the University:Author’s Note:
CORPORATE ACCOUNTING1Table of ContentsPart I:...............................................................................................................................................21. Mentioning the financial predicament that is faced by Surfstitch Ltd:.......................................22. Mentioning about the 2015 goodwill, investment in subsidiary and cash position.....................23. Mentioning about the 2016impairment costs, selling & distribution and administrativeexpenses in the profit and loss statement:........................................................................................24. Providing relevant recommendations whether to buy, hold or sell Surfstitch Ltd shares andwhy:.................................................................................................................................................3Part II:..............................................................................................................................................4Identifying about: Why is it necessary to have a continuous reporting regime for disclosureentities and is it effective?................................................................................................................4References:......................................................................................................................................9
CORPORATE ACCOUNTING2Part I:1. Mentioning the financial predicament that is faced by Surfstitch Ltd:There are certain predicament in the financial records of Surfstitch Ltd after the exit ofJustin Cameron in 2015, who was considered to be one of the founders. This forced themanagement of Surfstitch Ltd to write down the assets, which directly increased its financiallosses. This increment in the overall financial losses was also conducted due to the high-end costof sales, and selling & distribution expenses conducted by the organisation. These irrelevantexpenses did not allow Surfstitch Ltd to generate the required revenue to support its revenuegrowth. Therefore, in both 2015 and 2016 financial year the company faced major losses (MarketIndex 2017).2. Mentioning about the 2015 goodwill, investment in subsidiary and cash positionThe goodwill portrayed in 2015 was of $73,832,000 in its books, while the investment insubsidiary stood at $70,197,000. Moreover, during 2015 Surfstitch Ltd cash and cash equivalentposition stood at $40,837,000 in its annual report (Market Index 2017).3. Mentioning about the 2016impairment costs, selling & distribution and administrativeexpenses in the profit and loss statement:There was no impairment expense identified in annual report of 2015 fiscal year, while in2016 the impairment costs amounted to $88,999,000. Furthermore, the selling and distributioncost during 2016 mainly rose to $101,268,000 levels from $44,683,000 in 2015. Moreover, theadministrative expenses of the organisation increased exponentially in 2016 to the levels of
CORPORATE ACCOUNTING3$49,237,000 from $7,424,000 in 2015 (Market Index 2017). Therefore, it could be understoodthat the organizations overall profit and loss statement depicted the loss in revenues, as theoverall expenses increased in fiscal year. However, the revenue of the organization alsoincreased, which was not adequate to support its rising expenses.4. Providing relevant recommendations whether to buy, hold or sell Surfstitch Ltd sharesand why:The evaluation of the annual report of Surfstitch Ltd mainly helps in identifying theloopholes in the financial performance of the company. The company has not performed well inthe last 2 years, where the revenue has increased but expenses also increased exponentially. Thisrising expenses mainly increased losses of the organisation, which in turn hampered its ability tocontinue with the operations. The overall operational capability of the organisation declined in2015 when its partner and co-founder opted out from the business endeavour. This mainlyincreased the chances of more loss for the company, as it was not able to cope up with thechanging management.The oral valuation of goodwill declined exponentially in 2016 as compared to 2015, asrecorded in its annual report. This mainly indicated that the organisation was using manipulativefigures to inflate the overall share value. Moreover, the administrative expenses of theorganisation have inclined rapidly during the past 2 years, where the overall income is not able tocope up with the rising expenses. Hence, it is advisable to investors to ignore the company forinvestment related decisions. The current investors of Surfstitch Ltd could sell the shares atevery instance it gets, as there is no future for this organisation.
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