Financial Analysis of K & S Corporation Limited

This essay analyzes the financial report of K & S Corporation Limited covering aspects such as fixed tangible and intangible assets, provisions, contingent assets & liabilities, revenue, leases and conclusion drawn from the study of the above aspects.

2018
K & S CORPORATION
LIMITED

Table of Contents
Introduction
Property Plant And Equipment
Intangible Assets
Provisions And Contingencies
Leases
Revenue
Conclusion
References

Introduction
K & S Corporation Limited is a listed company which is engaged in transport and logistics,
contract management, warehousing and distribution and fuel distribution. The head quarters of
the company is situated in Australia. The company has three segments namely Australian
Transport, Fuels and New Zealand Transports. The Australian Transport is engaged in providing
logistical services to consumers within Australia (Bromwich & Scapens, 2016). The Fuels
Segment is basically engaged in distribution of fuel to customers like fishing, farming and retail
within south eastern region of South Australia. The New Zealand Transport segment provides
logistical services to consumers within New Zealand. The given assignment is about preparing
as essay based on the financial report of the above mentioned company covering the aspects
such as fixed tangible and intangible assets, provisions, contingent assets & liabilities, revenue,
leases and conclusion drawn from the study of the above aspects (Alexander, 2016).
Property, Plant & Equipment
The Property, Plant and Equipments stands in the Balance Sheet valued at $ 350.998 million as
at 30 June 2017. Plants and equipments are valued at cost price as reduced by accumulated
depreciation and impairment in value, if any whereas land and buildings are valued at fair value
after giving effect to accumulated depreciation and impairment loss, if any, except for land
which is a non depreciable asset (Das, 2017).
Alternatively, plants and equipments could be valued at market price instead at cost less
depreciation. Market value is the amount at which an asset or liability should exchange on the

date of valuation between buyer and seller who are willing to transact in an arm’s length price
after doing proper marketing and also where each parties involved had acted knowledgeable
and prudent manner without compulsion. In this manner the value of the asset will state its real
worth in the market as at the date of balance sheet, which is way more prudent since the value
of any asset never remains stagnant (Dichev, 2017).
Intangible assets
The company has reported Intangible assets in the financial reports which includes Goodwill
and other intangibles. The disclosure requirements for intangible assets are laid down in IAS 38,
issued by International Accounting Standards Board. According to the provisions the intangible
assets are required to be value initially at cost and after recognition of the asset either at cost
or revaluation model (Belton, 2017). A company is required to disclose the information about
each class of intangible assets differentiating between self generated assets and other
intangible assets.
K & S Corporation Limited has properly disclosed the measure of valuation adopted by the
company for valuing Goodwill, which is not self generated rather it is acquired in business
combination (Goldmann, 2016). Goodwill was initially recognized at cost and after its
recognition at cost less impairment loss, if any, also the impairment loss when recognized for
goodwill are non reversible. The same measure of valuation is adopted and disclosed in case of
other intangible assets. The company has also disclosed the useful lives of the assets as
assessed, whether they are finite or infinite and the assets with finite lives are amortized over
the period of its useful lives (Linden & Freeman, 2017).

Provisions, Contingent Liabilities (commitments) and Contingent Assets
Provision refers to setting aside of an amount for a known liability. Provisions are recognized
when there arises a present obligation resulting from a past event and which requires outflow
of resources and a reliable estimate can be made of the outflow of resources. The company has
disclosed in the notes to financial statements the information regarding the creation and
reversal of provisions. Where the company expects a provision amount to be reimbursed, it
recognizes it as asset if the reimbursement in virtually certain and the provision related
expenses are recorded net of ant reimbursements (Jefferson, 2017). The company also
discounts the amount of provision at market rate where time value is material. The company
has made provisions both current and non-current such as employee benefits, self insured
workers’ compensation liability, etc.
Contingent Liabilities are those liabilities which may be incurred depending on the outcome of
an uncertain future event. These are disclosed in the financial statements as notes. During the
period the company has disclosed contingent liabilities in relation to interlocking guarantees
between the company and its subsidiaries and other in relation to legal claim.
There is a legal claim in relation to number of minor legal actions pending against the
companies within the consolidated entity, the liability of which is not admitted and the claims
will be defended (Saeidi, 2012). The Directors are of the view that the amount involved is not of
significant value. There are two views: Firstly, the company may not disclose such contingent
liability since the legal actions are minor and the same are not expected to materialize and if it
does it will not affect the company significantly and reporting contingent liabilities affects the

investors view on the company. Secondly, the disclosure of contingent liability is very significant
even if it relates to minor amount. It makes the financial report more transparent and reliable.
Contingent assets are possible assets which may arise as a result of a gain which is contingent
on future events which are not in entity’s hand. It is prudent to not disclose such assets in the
financial statements and the company has not recorded any such contingent assets in the
financial reports (Heminway, 2017).
Leases
Finance Lease is considered as the company’s one of the financial instruments. During the
period the company has acquired property, plant and equipment amounting to $ 46.10 million
by means of finance lease. The company has disclosed various information as per AASB 16
regarding the classification and valuation, the company classifies the leased assets under Level
2 (Knechel & Salterio, 2016). The company has identified the lease assets as long term lease and
the expenses in relation to the leased assets are considered as operating lease. The company
has leased premises in Australia, South Australia, Victoria, New South Wales and Northern
Territory. The operating lease rental commitments are classified as within one year, more than
one year but less than five years and more than five years. The consolidated entity leases
property under non cancellable lease agreement having a term of one to fifteen years which
can be renewed and terms can be renegotiated.
Revenue

Revenue recognition is a very important aspect of a company. Revenue is recognized when the
flow of future economic benefit is probable and the amount of revenue is measurable. Where
the flow of economic benefit is not probable then revenue is not recognized.
K & S Corporation Limited has also recognized revenue on the basis of probability of flow of
income to the entity. There are some specific criteria in respect of recognition of revenue in
certain cases. These are discussed below:
 Sale of Goods: In case of sale of goods the revenue is recognized by the company at the
time of transfer of risks and rewards of the ownership of the good to the buyer from the
seller and the same is measurable. The risks and rewards are considered as transferred
when the goods are delivered to the customer. The net sale consideration is taken for
revenue recognition, i.e., after providing for discount allowed, sales return. In case of
fuel products sales revenue is recognized when fuel is provided. The company’s sales
revenue is comprised of sale of fuel products to entities other than the consolidated
entity (Trieu, 2017).
 Provision of Service: The Company recognizes revenue from distribution of customer
goods when the goods are dispatched.
 Interest: The Company uses effective interest method for recognizing revenue when the
interest accrues. Under this method the interest is calculated on the basis of amortized
cost of the financial asset using the effective interest rate which is same as the rate that

exactly discounts the estimated future cash receipts and the same is allocated over the
relevant period.
 Dividend: The Company recognized dividend when the same has been declared and the
right to receive has been established (Werner, 2017).
Conclusion
K & S Corporation Limited is a leading transport and logistics company having various segments.
The above data has compiled from the financial report for the year ended 30 June 2017 of the
company. On the analysis of the above data we can conclude that the company has a sound
disclosure system which is clear and understandable. The method of valuation and basis of
reporting by the company leaves no place for doubts. The system of revenue recognition is
broadly explained in the notes to financial statements. The company has also disclosed
contingent liabilities of even minor amount to maintain transparency and provide more insight
to financial statements. The fixed assets are value at cost less depreciation and provisions are
created which are both current and non-current. To sum it up, the main purpose of this
assignment is analyze the method of valuation and disclosures of various information the
financial statements, and the same has been met.

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