Financial and Management Accounting

This article discusses job automation, principles of job automation, companies that have adapted automation, regulatory influence on external reporting for Australian public companies, consolidated financial report of Virgin Australia and more.

Running head: FINANCIAL AND MANAGEMENT ACCOUNTING
Financial and management accounting
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Table of Contents
Part 1..........................................................................................................................................2
Answer to question 1..................................................................................................................2
Answer to question 2..................................................................................................................3
Answer to question 3..................................................................................................................3
Answer to question 4..................................................................................................................5
Part 2..........................................................................................................................................6
1. Regulatory influence on the external reporting for the Australian public companies........6
2. Consolidated financial report of Virgin Australia..............................................................7
3. Ratio calculation of Virgin Australia for the year ended 30th June 2017..........................11
References................................................................................................................................13

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Part 1
Answer to question 1
The process of job automation refers to the technology by which the business
procedure is performed without the assistance of any human being. It is done automatically
with the help of technology. Various control systems such as hi-tech machineries, robotics,
boilers, stabilization ships and aircrafts stimulate the process (Patel et al 2018). It is a
completely automated technique of getting the work done effectively without involving
human labour force. As technology is advancing, machineries are replacing the labour.
However, some ethical issues that the job automation is facing are as follows:
Unemployment: As there are continuous, inventions regarding the making the
processes of the jobs automatic, the complex roles of the individuals in the jobs can be
replaced. Technology is reducing the dependence on the human labour and making the job
processes automatic that saves time and cost. However, it can be said that the process of
automating the job roles is a cause for increasing the threats of unemployment (Nokelainen,
Nevalainen & Niemi 2018). The labours that were dependent in the job roles are now have to
face threats due this innovation in the work.
Inequality: The system of the economy is such that it is assessed through the hourly
wage rate. The majority of the companies are dependent on the hourly production of work by
the labour force whereas the techno savvy companies in lesser time can generate more
efficiency and production. Therefore, there is an inequality in economy that can also lead to a
limitation while calculating the net production.

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Artificial stupidity: There can be at times failure in the artificial intelligence due to
some technical faults. In such cases, the company can face a huge financial loss and distress.
This can be a issue that the process of job automation may face (Salman, Majeed &
Alsahlawi 2017).
Security issues: As the technology becomes more sound the treat or security and
fraud increases side by side. There are hackers who can easily manipulate the automatic
machines and get all the information stored in the machines that are confidential. This can be
a major ethical issue.
Answer to question 2
The various principles of Job automation are as follows:
Elimination of manual procedures: The automation replaces the manual procedures with
the online rules
Automation rules: The rules in the process of automation must be kept flexible as the nature
of each machine differs.
Keeping the process simple: The automation happens in small steps but the steps are
complex therefore, it is necessary that the technology used should be simple.
Training of the developers of automation: The various individuals who are operating the
automation should be well trained and must know the exact technique of execution of
automation.

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Answer to question 3
The two companies that have adapted the automation are Hitachi and Siemens.
Hitachi deals with electronics and Siemens deals with construction. The various advantages
and disadvantages the company faces in automation are:
The advantages are:
Less time in production: – The automation speeds up the time of production as no thinking
is needed by the machine it is done automatically.
Increase in accuracy and repeatability – the automated machine does the work faster and
accuracy is maintained, as there is no confusion. It works according to the program set.
No human error – Human beings are prone to mistakes, when the machine works it works
automatically within the control of the programs therefore there is less errors (Chui Manyika
& Miremadi 2015).
No employee cost -The companies that have adapted the automation technology has replaced
the labour force as a result there is reduced employee cost.
Higher volume production – The companies work through automatic machines where there
is systematic spontaneous operations therefore the volume of production is increased.
The disadvantages are:
Lack in versatility – The automation works automatically with specific operations there is
no human brain involved in it resulting in no innovation and versatility.
Large initial investment – Automated machines can be one of the most costly operating
costs for a company. The initial capital investment is huge and there is cost of installation
associated with it.

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Increase in unemployment – Automation increases the rate of unemployment by replacing
work force with machines, reducing job opportunities.
Unpredictable costs –There are many costs including research and development costs of
automating a process, the cost of training employees to operate automated machines and
preventative maintenance costs (Lacity & Willcocks 2016).
Answer to question 4
The stakeholders of the chosen automation company Siemens include (Groover 2016):
Board of directors: The board of directors must know the various levels of information
related to the automatic machine that enhances the automation process; they are needed to be
made aware of the working of the machines that enhances the productivity in business.
Executives: The executives help in the working of the business if they are not made aware of
the automation process, and how it works it works be difficult for them to supervise the
management.
Management: The management is the most essential part of the business that regulates the
operation of the business. It is essential for them to be informed of the various nature of the
machines and the technologies to get effective results.
Contributors: The contributors are the other stakeholders who are related to the business;
they are needed to be aware to the process of automation so that the working becomes smooth
and regulated.

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Part 2
1. Regulatory influence on the external reporting for the Australian public
companies
Various obligations for the purpose of financial reporting of the public company is depended
on the fact that whether the company is –
 Not the disclosing entity
 Is limited by the guarantee
 Not the disclosing entity or not the company that is limited by guarantee
Not the disclosing entity –
The public company which is not the disclosing entity does not require to company
with the Part 2M.3 of Corporations Act if all the conditions as per ASIC Corporations
Instrument 2016/785 are complied with and it is not –
 The borrowing corporation
 Guarantor for such borrower
 The license for financial services (Asic.gov.au 2018)
And the company –
 Is wholly owned company
 Undertaken the deed for cross guarantee with each other company under the closed
group
These companies are not required to prepare the audited financial statement to lodge
with ASIC or to send it to the members.

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Is limited by the guarantee –
When directed by any member of ASIC or the company, the company shall prepare –
 Annual financial reports
 Director’s report with particular disclosures as per section 300B of Corporations Act
Those are –
 Prepared as per Chapter 2M
 Reviewed or audited
The company shall notify the members regarding the annual report.
Not the disclosing entity or not the company that is limited by guarantee –
These companies must prepare the annual financial reports as per Chapter 2M of
Corporation Act 2001. Further, the financial reports shall be –
 Audited
 Lodged with the ASIC within 4 months period of end of the financial year
 Sent to the members within 4 months of the closing of financial year or prior to 21
days of next AGM, whichever is before.
2. Consolidated financial report of Virgin Australia
a. Accounting equation
Assets = Liabilities + Equities
Accounting equation at beginning –
Total assets = Liabilities + Equities

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$ 6040.8 m = $ 5142 m + $ 898.8 m
Accounting equation at beginning –
Total assets = Liabilities + Equities
$ 6355.8 m = $ 4782 m + $ 1573.8 m
b. Audit
The financial statement of Virgin Australia for the year ended 2017 was audited by
KPMG. As per their opinion the financial report of the company is prepared in compliance
with Corporation Act 2001 and –
 Gives true and fair view of the company’s financial position as on 30th June 2017 and
financial performance of the of the company on the closing of year (Svanström 2013)
 Complied with the Corporations Regulations 2001 and Australian Accounting
Standards
c. Additional services by auditor
KPMG apart from audit services provided some non-audit services during the year.
The details regarding the services are –
 Assurance services related to transactions for raising debt, compliance with the
service level agreements and various other assurance procedures for non-financial
statements
 Taxation services
 Other services that includes due diligence and services associated with capital
restructure, advice regarding accounting matters, divestments and procedures those
were agreed upon.

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d. Non – current assets
Largest non-current asset of the company is Property, Plant and property and its
opening book value is $ 2872.8 million and closing book value is $ 2916.6 million. The asset
is stated at cost reduced by the amount of impairment loss and accumulated depreciation.
e. Depreciation method
For property, plant and equipment depreciation is charged on the basis of straight line
method over the assets estimated useful life.
f. Revenue
As per the financial statement for the year ended 2017 largest source of revenue is the
revenue from Airline passenger. The amount of revenue from this source is $ 4,275.3 million
out of total revenue of $ 5,047.3 million (Weygandt, Kimmel & Kieso 2015).
Other ancillary revenue includes the – (i) revenue from redemption of the credit
voucher when the carriage is complete or the credit voucher is not expected to get redeemed
by passenger (ii) revenue earned from provision of various airline related services that
includes charter revenue, on-board sales, other product revenue and freight revenue (Fraser
and Ormiston 2016).
g. Finance cost
Finance cost expenses for the year ended 2017 was $ 184.7 million. The expenses
have been increased from $ 181 million in 2016 to $ 184.7 million in 2017.
h. Contingent liabilities
The company did not have any contingent liabilities as at 30th June 2017.

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i. Issue of share
Virgin Australia issued 4400.6 million shares during the year 2017. The capital
increased by $ 934.3 million owing to the issuance of shares.
j. Loss for the year
Net loss of the year for Virgin Australia amounted to $ 185.8 million. On the other
hand, the net cash flows from the operating activities amounted to $ 273.9. Amount of
operating profit is larger as compared to the net loss. Reason of difference between the
amounts is that the operating cash flows are computed by taking into account the net income,
changes in the working capital and non-cash expenses. On the other hand, the net income is
computed through subtracting the cost of sales, depreciation, interest, operational expenses
and taxes from total revenues (Virgin Australia 2018).
k. Unearned revenue
Various elements reported under liability as unearned revenue are as follows –
 Unearned passenger revenue amounted to $ 647.7 million
 Unearned loyalty program revenue amounted to $ 412.8 million
 Credit vouchers amounted to $ 13.5 million
 Other unearned revenue amounted to $ 0.2 million (Virgin Australia 2018).
This is expected for the company under this sector as computation for unearned
revenue from passengers associated with sales of tickets requires judgements and estimates. It
also includes the assessment of the historical passenger for non-attendance rates to determine
probability that contractual rights of the passengers will be exercised.
l. Director’s report and director’s declaration

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The director’s report includes the details regarding the directors and alternate
directors like name, experience, qualification and special responsibilities. It further includes
details of directors meeting, director’s interest, financial and operating review, remuneration
report, key management personnel, executive’s remuneration overview and share options
(Abeysekera 2013).
On the other hand, the director’s declaration includes the director’s opinion regarding
whether the consolidated financial statement of the company has been prepared as per
Corporation Act 2001. Further, it included declaration regarding whether the company will b
able to meet liabilities or obligations. The directors further gave the declaration regarding
whether the company followed requirement under section 295 A of Corporation Act 2001 or
not.
Both are required as director’s report includes details of directors while the director’s
declaration includes compliance of various regulations.
m. Annual reports
Apart from the annual report, half year reports are also published by the company to
comment on the material transactions and events for the period and its impact on the
company’s financial position.
The half year report covers the period from 1st July 2016 to 31st December 2016.
3. Ratio calculation of Virgin Australia for the year ended 30th June 2017
Ratio Formula Result
Return on equity Profit before interest and tax / Average equity -0.10
Return on assets Profit before interest and tax / Average assets -0.02
Profit margin ratio Net profit/Revenue -0.04
Asset turnover ratio Net sales / average total assets 0.81
Current ratio Current assets / current liabilities 0.76

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Debt to equity ratio Total liabilities / Total equity 3.04
Interest coverage
ratio Profit before interest and tax / interest expenses -0.66
Debt coverage ratio Profit before interest and tax / debt payment -0.09
Price earning Stock price per share / Earning per share 5.71
Dividend per share Given Nil

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References
Abeysekera I 2013. A template for integrated reporting. ‘Journal of Intellectual Capital’ Vol
- 14(2), pp.227-245.
Asic.gov.au 2018. Reporting obligations for public companies | ASIC - Australian Securities
and Investments Commission. [online] Available at:
http://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-
reports/reporting-obligations-for-public-companies/ [Accessed 14 Apr. 2018].
Chui Manyika J & Miremadi M 2015. Four fundamentals of workplace
automation. ‘McKinsey Quarterly’, 293 pp.1-9.
Fraser L M and Ormiston A 2016. ‘Understanding Financial Statements’ Pearson Higher Ed.
Groover M P 2016 Automation, production systems, and computer-integrated manufacturing.
Pearson Education India.
Lacity M C & Willcocks L P 2016 A new approach to automating services. ‘MIT Sloan
Management Review’ vol - 58(1), p.41.
Nokelainen Nevalainen & Niemi 2018 Mind or Machine? Opportunities and Limits of
Automation. In ‘The Impact of Digitalization in the Workplace’ pp 13-24 Springer, Cham.
Patel Devaraj Hicks & Wornell 2018. County-level job automation risk and health: Evidence
from the United States. ‘Social Science & Medicine’ 202, pp.54-60.
Salman Majeed M. & Alsahlawi 2017 March. Automation of a Fault Management System for
Bahraini Telecommunication Companies. In ‘International Conference on Information
Technology and Communication Systems’ pp. 60-69 Springer, Cham.

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Svanström T 2013. Non-audit services and audit quality: Evidence from private
firms. ‘European Accounting Review’ Vol - 22(2), pp 337-366.
Virgin Australia 2018. Virgin Australia | Book flights & holidays with Virgin Australia.
[online] Available at: https://www.virginaustralia.com/au/en/ [Accessed 14 Apr. 2018].
Weygandt J J Kimmel P D and Kieso D E 2015. Financial & managerial accounting. John
Wiley & Sons.