Contemporary Corporate Reporting and Evaluation of Lucky Lanka Milk Processing Company

This article discusses contemporary corporate reporting, accounting standards, and evaluates the financial and non-financial information of Lucky Lanka Milk Processing Company. It also includes a critical analysis of the company's performance and a comparison of financial ratios with Lanka Milk Food.

Running head: CONTEMPORARY CORPORATE REPORTING 1
Contemporary Corporate Reporting
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CONTEMPORARY CORPORATE REPORTING 2
Contemporary Corporate Reporting.
Part A
Corporate Reporting
Corporate reporting meaning differs according or depending to the intended audience of
the financial statements, (Lee & Maxfield, 2015). Corporate reporting can be defined as the
disclosure and presentation features of reporting which are different from accounting and its
measurements. Corporate reporting includes narrative reporting, financial reporting, corporate
governance reporting, integrated reporting, executive remuneration reporting and corporate
responsibility reporting. Corporate reporting comprises of voluntary disclosures which help to
add value to financial statements and make it useful to stakeholders of the company and other
external users of financial statements like the investors. Corporate reporting provides
stakeholders with insights into the activities of a company and therefore ends up to affect the
share price, (Corporate reporting,2014). Companies implement audit committees which help
them in ensuring corporate reporting and this act requires companies to be accountable and
transparent. The corporation act 2001 requires companies to safeguard integrity by corporate
reporting.
Importance of Corporate Reporting
Corporate reporting is used by companies because it is relevant in that it helps in
prioritizing social, economic and environmental issues which are useful for strategic planning
purposes. It is relevant in that it helps companies to illustrate and identify highly material issues
which help in the long-term success of companies, (Everingham, Kana & Wadee, 2012).
Corporate reporting enables companies to build good connection with their stakeholders and

CONTEMPORARY CORPORATE REPORTING 3
investors. Companies produce corporate reports so as to give enough information to specific
users of financial statements. Corporate reporting also enables companies to provide information
about how they raise funds and how those funds are utilized in the course of business. Corporate
reporting also helps companies to access debt, equity and other trade finances. Companies
produce corporate reports in order to avail their information concerning the financial position
and financial performance and this makes it useful to a wide range of financial statement users in
evaluating the stewardship of management and be able to make useful economic decisions.
Accounting Standards
Accounting standards can be described as authoritative standards that are used in
financial reporting, (Sapovadia, 2008). Accounting standards are the basic source of the
generally accepted accounting principles, (GAAP). These standards provide specifications of
how transactions and other accounting events should be measured, recognized, presented and
disclosed in companies’ financial statements, (Rayman 2013). Accounting standards are policies
that are imperative to all the accounting activities and they help business to run their activities
smoothly. All companies are required to adhere to the accounting standards set by FASB and
IASB, failure to comply with this standards will lead companies spending on legal action
initiated against it by their governments.
Importance of Accounting Standards in Reporting
Accounting standards enable companies to provide external users such as lenders and
investor, with information which is useful in decision making, (Sugara & Boland, 2011).
Accounting standards help companies to assess their business performance and be able to
compare it with the performance of competitors through the use of financial statements.

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Accounting standards enable companies to be transparent and by so doing they are able to
perform efficiently in the industry of operation, ( Al Frijat, 2016).
Accounting standards help in protecting the investors interests this is because if
companies adhere to the accounting standards they are able to provide the investors with genuine
and accurate reports which in return increases the investors’ confidence while making economic
decisions because they will have insights of how their money will be spend. Accounting
standards also help to prevent fraud both to the owners of businesses and customers. Accounting
standards also promote accountability and in the end making businesses to be efficient in
business transactions. Companies that adhere well to accounting standards are able to produce
financial statements that enable them to access investor capital. Accounting standards also help
in facilitation of reasonable assessment of business presentation and ensures good record keeping
by companies.
Part B
Introduction to Lucky Lanka Milk Processing Company.
Lucky Lanka milk processing company is situated in Sri Lanka and is majorly focused in
the field of milk processing in its aim to build a healthy nation. The company has a lot of
opportunities to supply its products over Sri Lanka. Its highly skilled and experienced staff uses
vast technology and fresh milk in production. Despite the fact that the company has this unique
features it has managed to acquire only 18% market share. The company currently manufactures
yoghurt and pasteurized milk. The products are of different flavors in yoghurt for example
vanilla, chocolate among others.

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Lucky Lanka operates in a very promising business environment because the country has
enhanced political stability which encourages local manufacturers to continue with productivity.
Due to this factors, the company has potential of investing in different places and succeed. The
economic condition shows that there is a possibility of future economic growth as there is also
enough supply of labor, (Proctor, 2007). The company is also affected by inflation, interest rates
and disposable income.
The target market expectations are very high due to increased consumer knowledge in
consumption of nutritious food. The company majorly deals with the production of nutritious
foods and this is an advantage to them due to fulfilling the social needs of customers. Lucky
Lanka faces stiff competition from top competitors such as New dale, Highland, Lanka milk food
and Kethmale. The customers have high bargaining power because they are aware of other
quality milk products. Threats of few quality milk products in the market and there are no
barriers of new entrance of milk products in the market. Milk products are purchased from a few
selected suppliers which raise the bargaining power of suppliers.
Evaluation of Financial Statements for The Recent Five Years.
The financial statements of the company for the last five years (2017 -2013) have been
prepared using the same accounting standards and same methods of computations which comply
with LKAS 34 interim financial reporting. There have not been any material events which have
been taking place after the balance sheet date which require some adjustments and disclosures in
the financial statements. There have been some little changes in the current classification of
items and where appropriate changes were done for example in the year 2016 and 2017. The
balance sheets produced by the company represent the true economic position of the company.

CONTEMPORARY CORPORATE REPORTING 6
Property plant and equipment is measured using the revaluation method. The company
reviews the residual values, methods of assets depreciation in each year of reporting. The
company derecognizes assets and financial liabilities. The company applies the carrying value
while measuring the associates and subsidiaries. The company tests the impairment of goodwill
in every financial year. The company prepares financial statements in accordance with Sri Lanka
accounting standards. Depreciation is calculated using straight-line method. Revenues, expenses
and assets are recognized using the net amount of tax. Property plant and equipment are
measured using the fair value. Revenue is measured using the fair value. The company engages
valuation specialists in determining the fair value of assets. Assets are valued over their useful
lives.
Evaluation of Non -Financial Information
Non-financial information deals with social and environmental aspects, (Maj 2018).
Lucky Lanka milk processing company reports on non-financial information. It reports on
corporate governance whereby it describes its decision making systems and how the stakeholders
directly or indirectly control the company activities. The board of directors are committed to
provide and ensuring business integrity and professionalism in all the activities of the business.
The board of directors is comprised of six members whereby two are executive members and
four are the non-executive members. The board members list the rules that are laid down by
Colombo stock exchange and submit the annual dependence declarations. The board members
work on an informed basis, due diligence, good faith and in the best interest of the company.
The company reports on the remuneration of the executive members and it has executive
committee which recommends the remuneration that is payable to the executive members. The
committee sets guidelines for the remuneration of other senior management of the company. The

CONTEMPORARY CORPORATE REPORTING 7
main motive behind this activity is to attract and retain required skilled human resources which
makes the company to be successful and sustain its performance and operations.
The company reports on corporate social responsibility whereby it complies with the
rules, regulations, prescribed practices, procedures, internal policies and ethical standards. The
company has implemented strong risk control and management mechanisms in order to monitor
and make sure that the company complies with rules and laws which are applicable to it. It
conducts internal audits to mitigate possible risks of not complying with the accounting
standards. The company also ensures that it maintains environmental well-being by using
sustainable processing methods.
Critical Analysis of the Company’s Performance
2017 Financial Ratios
Gross profit ratio=Gross profit/revenue *100
435,077,000/1185,145000* 100 =36.71%
Efficiency ratio
Trade receivable days= trade receivables/revenue*365
210,411,000/1185145000*365= 64.80 which is 65days
Liquidity ratio
Current ratio= current assets/current liabilities
448,296,000/453,709,000= 0.988
Gearing ratio= debt/debt + equity

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306148,000/1280483,000= 0.239
Investor ratio
Return on shareholders= profit available to equity shareholders * 100%
2.69* 100% = 27%%(www.imfgruop.ik,2017)
2016 Financial Ratios
Gross profit ratio=Gross profit/revenue *100
373,124,457/995,245,984* 100 = 37.49%
Efficiency ratio
Trade receivable days= trade receivables/revenue*365
184,657,355/995,245,984* 365 =67.7 which is 68 days
Liquidity ratio
Current ratio= current assets/current liabilities
404,661,953/372,137,858 =1.087
Gearing ratio= debt/debt + equity
227,516840/1142567,000 = 0.1991
Investor ratio
Return on shareholders= profit available to equity shareholders * 100%
2.90 * 100% = 29%%(www.imfgruop.ik,2016)

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2015 Financial Ratios
Gross profit ratio=Gross profit/revenue *100
368,249,352/962,911,905*100 =38.24%
Efficiency ratio
Trade receivable days= trade receivables/revenue*365
182,635,602/962,911,905* 365 = 6.9 which is 7 days
Liquidity ratio
Current ratio= current assets/current liabilities
307,311,982/273,717,660 =1.1227
Gearing ratio= debt/debt + equity
150,332,568/1,002,290,395= 0.15
Investor ratio
Return on shareholders= profit available to equity shareholders * 100%
2.6 * 100 = 26%(www.imfgruop.ik,2015)
2014 Financial Ratios
Gross profit ratio=Gross profit/revenue *100

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365,290,290/893,123,959* 100= 40.9%
Efficiency ratio
Trade receivable days= trade receivables/revenue*365
131,487,736/893,123,959 * 365 =53.49 which is 54 days
Liquidity ratio
Current ratio= current assets/current liabilities
236,561,344/297,667,245 = 0.0008
Gearing ratio= debt/debt + equity
237,201,039/763,101,198 = 0.3108
Investor ratio
Return on shareholders= profit available to equity shareholders * 100%
2.8 * 100 = 28%%(www.imfgruop.ik,2014)
2013 Financial Ratios
Gross profit ratio=Gross profit/revenue *100
331,603,101/837,580,595* 100 =39.59%
Efficiency ratios
Trade receivable days= trade receivables/revenue*365
261,475,963/837,580,595* 365 = 113.94 which is 114 days

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Liquidity ratio
Current ratio= current assets/current liabilities
123,925,116/172,950,759 = 0.7165
Gearing ratio= debt/debt + equity
207,738,887/587,519,465 = 0.3535
Investor ratio
Return on shareholders= profit available to equity shareholders * 100%
2.7 * 100 = 27% (www.imfgruop.ik,2013)
Comparison of the Financial Ratios with Lanka Milk Food
2017 Financial Ratios
Gross profit ratio = 15.04%
Efficiency ratio = 117 days
Liquidity ratio = 1.60
Gearing ratio = 9.72
Investor ratio = 14%(www.imfgruop.ik,2017)

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2016 Financial Ratios
Gross profit ratio =14.53%
Efficiency ratio= 114 days
Liquidity ratio = 1.02
Gearing ratio = 13.76
Investor ratio = 31% (www.imfgruop.ik,2016)
2015 Financial Ratios
Gross profit ratio = 10.34%
Efficiency ratio = 79 days
Liquidity ratio = 0.71
Gearing ratio = 3.96%
Investor ratio = 20%(www.imfgruop.ik,2015)
2014 Financial Ratios
Gross profit ratio = 10.34%
Efficiency ratio = 70 days
Liquidity ratio = 0.84

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Gearing ratio = 5.20
Investor ratio = 15%(www.imfgruop.ik,2014)
2013 Financial Ratios
Gross profit ratio = 16.81%
Efficiency ratio= 12 days
Liquidity ratio =0.77
Gearing ratio = 3.67%
Investor ratio =9.3%
2013 2014 2015 2016 2017
0
20
40
60
80
100
120
Lucky Lanka Milk Processing Company Ratios
profit Efficiency liquidity gearing investor

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2013 2014 2015 2016 2017
0
20
40
60
80
100
120
140
Lanka Milk Food Company ratios
profit efficiency liquidity gearing investor
Looking at the liquidity ratios of these two companies, Lucky Lanka liquidity ratio shows
that its ability to pay short-term liabilities is faster than Lanka milk food. Looking at the gearing
ratio of this two companies for example in the year 2017 Lucky Lanka had a gearing ratio of
0.29 which implies that it uses less debt than equity and that shareholders have more claims than
creditors. On the other hand, Lanka milk food company had a gearing ratio of 9.7 which indicate
that it uses more debt than equity and this leaves the shareholders with no claims in the business
assets.
The gross profit ratio of Lucky Lanka for the five years indicate that the company is able
to earn adequate return compared to Lanka milk food company for example in the year 2017
Lucky Lanka had a gross profit of 36.71% and Lanka milk food had a gross profit of 15.04%.
Looking at the efficiency ratios it shows that lucky Lanka manages its assets effectively in fewer

CONTEMPORARY CORPORATE REPORTING 15
days (65) compared to Lanka milk food (117 days). The investor ratios show that Lucky Lanka is
able to pay its shareholders more dividends compared to Lanka milk food.
Impression Management.
This deals with how the company ventures in influencing customers’ perception about it,
(Busenbark, Lange & Certo 2017). The company puts strategies to achieve customer loyalty by
offering diversified products and services. It focuses on ensuring healthy life of the nation by
offering products which are of nutritional value to their customers. Lucky Lanka provides its
employees with a better working place and utilizes their capabilities well. It also provides
security for its shareholders.
Lucky Lanka tries to impress the stakeholders by continuously improving their products,
processes, ideas and be able to come up with a more efficient way that enables them to give more
satisfaction to their stakeholders. The company is passionate about customer care in that it is
dedicated to serving customers better than its competitors. The company tries to impress the
employees by establishing teamwork so as to achieve its strategic objective. The company
manages to meet deadlines in terms of work accomplished and this is impressive to stakeholders.
Lucky Lanka upholds democracy from senior management to minor workers as they
adhere to the same rules and regulations. This attracts more highly skilled employees and makes
the company sustain its good performance. It is result driven and this is impressive to the
investors and stakeholders. Good corporate governance and effective internal control helps the
financial statements to be faithful and show the performance of the business in the market.
Lucky Lanka milk processing company manages the image it creates to its customers by
being a market leader in terms of technology, development of products and enhancing its

CONTEMPORARY CORPORATE REPORTING 16
reputation by producing healthy foods. It creates a good perception in the maximization of
shareholders’ wealth through increased profits. Reporting on non-financial information enables it
to create good perception by the users of financial statements and its customers. The activities of
the company portray a true and fair image to its customers.
Recommendations to the Client.
The client should invest in this company. This is because of the company reports of
sustainability and financial information which has shown the true picture of the company
performance. The client can use this information in making an important decision about the
company. There are strong and effective internal controls which ensures that the company works
hard to maximize the shareholders’ wealth.
The company operates in a stable economy with a good possibility of growth in future,
investing in the company implies that an investor will be able to get good earnings per share. A
stable economy with favorable conditions show that the business may not become bankrupt
putting shareholders' wealth at stake. In a stable economy like Sri Lanka, the company has many
opportunities to expand and grow due to its diversified milk products and this is a good indicator
to the client that investing in this company will be useful.
Lucky Lanka milk processing company has a high gross profit ratio which is a good
indicator to an investor of getting high returns. Investing in a company with increased profits
means that the investors will be able to grow because as profits increase the dividends and
earnings per share increases.
The company has high profit compared to its competitors like Lanka Milk food. This
means that it is able to generate income faster than its competitors hence it would be appropriate

CONTEMPORARY CORPORATE REPORTING 17
to invest in it. The liquidity of the company shows that it can easily convert assets to cash in
order to meet its short-term obligations and so the company may not become bankrupt. This
shows the client or an investor that the company operates efficiently.
Conclusion
To sum up we can say that corporate reporting by companies deals with sustainability
reporting on non- financial information, (Slehat, Alnimer & Abbadi,2013). Companies should
report conduct corporate reporting so as to add value to their financial statements. Companies
which implements corporate reporting make their financial statements to be relevant, authentic
and engaging.
Lucky Lanka Milk processing company deals with the provision of nutritious food to
people. It has a lot of opportunities to spread its market of operation throughout Sri Lanka due to
a stable economy, wide customer base, vast development in technology and due to good
economic policies of the country. Lucky Lanka operates as a market leader in the milk food
industry and this is achieved by timely introduction of new products, identifying competitors
such as Lanka Milk food and developing new diversified milk products.
Lucky Lanka is a company which has managed to impress its customers by providing
them with diversified nutritious foods (www.luckylanka.ik). It maximizes on shareholders’
wealth by meeting deadlines. The company is focused on innovation and builds teamwork so as
to retain their qualified staff to enhance its production. Looking at the gross profit ratio the
company has been able to utilize every shareholders’ rupees and generate income. The company
prepares its annual reports in accordance with the Sri Lanka accounting policies which indicates
that there are strong and effective internal controls.

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CONTEMPORARY CORPORATE REPORTING 19
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CONTEMPORARY CORPORATE REPORTING 20
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CONTEMPORARY CORPORATE REPORTING 21
Appendixes
Tables
Profit represent the gross profit ratio
Efficiency represent the efficiency ratio
Liquidity represent liquidity ratio
Gearing represent the gearing ratio
Investor represent the Investor ratio
LKAS 34 - Sri Lanka accounting standard 34 interim financial reporting
FASB- Financial accounting standards board
IASB- International accounting standards board