Financial Accounting Assignment: Analysis of TPG Telecom and Telstra Corporation

Financial Accounting Assignment

By student name
Professor
University
Date: 5th Oct, 2018.
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Executive Summary
Overall financial analysis of two companies has been done in this report. Conclusion on
important elements of income statement, cash flow statement and debt equity position of the
shareholders is done based on the annual reports of the company. A comprehensive analysis on
the success of the company and its stakeholders with potential investors is the main aim of this
project. The financial viability of the company can be determined through this analysis which
will further help the investors in making correct investment decision.
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Table of Contents
Introduction.................................................................................................................................................4
Owner’s Equity Analysis..............................................................................................................................4
Statement of Cash Flows Analysis.............................................................................................................10
Statement of Other Comprehensive Income.............................................................................................16
Treatment related to Corporate Tax:........................................................................................................19
Conclusion.................................................................................................................................................19
References.................................................................................................................................................21
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Introduction
Listed under the Australian stock exchange, TPG Telecom Limited and Telstra Corporation are
two companies analysed in this assignment. Both are strong competitors of each other under
telecommunication sector. In this assignment an analysis of both the companies have been given.
A comprehensive analysis on the success of the company and its stakeholders with potential
investors is the main aim of this project. The financial viability of the company can be
determined through this analysis which will further help the investors in making correct
investment decision.
TPG Telecom is a company which provides mobile related services and is specialised in
providing IT related services to business and consumers. With second largest ADSL2+ network,
the company is the second largest internet service provider in Australia with 671000 ADSL2+
subscribers and the largest mobile virtual network operator with 358000 and 360000 landline
subscribers and mobile subscribers respectively (Abdullah & Said, 2017).
Telstra Corporation limited is a leading provider of pay television, mobiles, telecommunication
network and market voices, internet access and other product and services. Originally founded in
1991, this government owned company was formed under the act of parliament. The company
was privatised in 3 stages in 1997, 1999 and 2000. One third of its shares were sold in 1997 by
the Government for 14 billion Australian dollars when the company was first listed under the
Australian Stock Exchange (Naci & Hasan, 2012).
Owner’s Equity Analysis
1. The own capital of the shareholders is the amount of funds invested by the owners of the
company. It is also known as Owner’s equity. This equity bears more return in comparison to
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the debt because of involvement of high risk factor in case of equity. The equity shares,
preference shares, dividends, net profit, retained earnings and other reserves are part of
owner’s equity and are distributable to the shareholders of the company (Visinescu, Jones, &
Sidorova, 2017).
The components of equity can be described in the following manner:
 Share Capital: The total fund invested by the owners in the company is known as share
capital. The owners of the company are called the shareholders of the company. The total
capital of the company is divided into small denominations called shares which are traded
in the market from where the shareholders can buy these shares (Charles H, Giovanna,
Dennis M, & Robin W, 2015). The total share capital of Telstra Corporation Limited was
$5167 Mn. in 2016. The company bought back shares in 2016-2017 which resulted in the
overall decrease in share capital to $4421 Mn. In case of TPG Telecom Limited, the
company issued new shares in 2016 -17 resulting in an increase in share capital from
$1051.9 Mn. in 2016 to $1449.4 Mn. in 2017 (Linden & Freeman, 2017).
 Reserves: The amount of profit that is kept aside by the company for future use is known
as Reserves. It consists of the comprehensive income of the year, forfeited employee
share awards, employee share awards net of employee contribution and unexercised
awards. The total reserves of TPG Telecom Limited decreased from $41.2 Mn. in 2016 to
a negative $18.1 Mn. in 2017 because of a huge decrease in the other comprehensive
income of the company in 2017. The same faith was faced by Telstra Corporation
Limited when the reserves of the company decreased from $62 Mn. in 2016 to a negative
$105 Mn. in 2017 because of the same reason.
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