Financial and Management Accounting

This article covers topics related to financial and management accounting, including job automation, regulatory influence on external reporting, and ratio calculation. It also includes a case study on Virgin Australia's consolidated financial report.

Running head: FINANCIAL AND MANAGEMENT ACCOUNTING
Financial and management accounting
Name of the student
Name of the university
Student ID
Author note

1FINANCIAL AND MANAGEMENT ACCOUNTING
Table of Contents
Part 1..........................................................................................................................................2
Answer to question 1..............................................................................................................2
Answer to question 2..............................................................................................................2
Answer to question 3..............................................................................................................3
Answer to question 4..............................................................................................................4
Part 2..........................................................................................................................................5
1. Regulatory influence on external reporting.....................................................................5
2. Virgin Australia – Consolidated financial report............................................................6
3. Ratio calculation............................................................................................................10
Reference..................................................................................................................................11

2FINANCIAL AND MANAGEMENT ACCOUNTING
Part 1
Answer to question 1
The job automation is a technological process by which the various operations of
businesses are performed without involving the human brain and their mental and physical
assistance. It is operated automatically through hi-tech technological control systems
(Teigland et al 2018). The technique is completely automated and the work done effectively
without involving the labour force. With the advancement of the technology and machines,
the labour force is being replaced by the high tech machines, boilers, robotics, and aircrafts,
stabilization ships However, the process of automation faces some ethical issues that are as
follows:
Security issues: The confidential business data can easily be hacked which are stored
in the automatic machines in the business.
Uneven economy: The hourly wage rate is the measure of growth in an economy.
The companies depend on the hourly production by the labour force but in the automation,
companies in lesser time can generate more production (Chui Manyika & Miremadi 2015)
Loss of jobs: The individuals who were dependent in the job roles are now have to
face threats due this automation in the work.
Ineffective technology: It refers to the failure in the artificial intelligence due to
some technical faults. It can lead to huge loss in terms on capital and time.
Answer to question 2
The basic procedure of job automation takes place with the help of the following
principles:

3FINANCIAL AND MANAGEMENT ACCOUNTING
Simplicity: the steps of the automation should not be very complex as it is to be handled by
many who may or may not have knowledge about the same.
Replacement of manual procedures: The online rules replace the manual labour techniques
in the business.
Flexible rules: The various rules that are to be applied in the machines are to kept flexible as
the different machines have different nature (Willcocks, Lacity&Craig 2017).
Proper training to the users: The individuals who are dealing with the operations of the
machines must be well trained and ensure that they know the exact method for executing the
job.
Answer to question 3
The two companies that have adapted the automation are Samsung and Google.
Samsung deals with electronics devices and Google deal is an online global search engine
company.
The advantages of Job automation are:
More accurate: In case of automated machine, the work is accurate without any conflict as
there is no human intervention.
Faster process: The process decreases the production time as is done automatically (Doster
et al. 2016).
Reduction of employee cost: Automation technology adapted companies has replaced the
labour force as a result there is reduced employee cost.
Larger production volume: The automation machines work systematically and
spontaneously operations as a result the production volume are increased.

4FINANCIAL AND MANAGEMENT ACCOUNTING
The disadvantages are:
No variety in techniques: any human brain involved therefore there is any versatility in
operations.
High investment: The initial capital investment is huge along with a high cost of installation.
Loss of job opportunities: Unemployment is increased, as there is a replacement of work
force with machines, reducing job opportunities.
Answer to question 4
The stakeholders of the chosen automation company Samsung are:
Directors of the company: The directors must be well informed with the automatic
machines to approve the same for implementation in the operations (Krishnan & Ravindran,
2017).
Executive officials: The company executives need to know about the techniques to supervise
the managers.
Management: It is necessary for them to be informed of the various natures of the machines
and the technologies to get effective results.
Contributors: They are needed to be aware to the process of automation so that the working
becomes smooth and regulated.

5FINANCIAL AND MANAGEMENT ACCOUNTING
Part 2
1. Regulatory influence on external reporting
Regulatory obligation on public companies depends on the type of the company that
is whether the entity is –
 Not disclosing company nor limited by company company
 Limited by guarantee company
 Not disclosing company (Asic.gov.au 2018)
Not disclosing company nor limited by company –
Companies fall under this category shal prepare their annual report in accordance with
Corporation Act 2001, Chapter 2M. In addition to that –
 The report shall be audited
 It must be filed with ASIC within a period of 4 months from the closing of the
financial year.
 Must be sent to members of the company within 21 days prior of holding next AGM
or within a period of 4 months from the closing of the financial year, whichever
comes 1st.
Limited by Guarantee Company –
If it is directed by any ASIC member or company, then the company must –
 Prepare the annual financial statements
 Prepare the directors report with required disclosures complied with the Corporation
Act, Section 300B.

6FINANCIAL AND MANAGEMENT ACCOUNTING
Further, the company must inform its members about the annual statements.
Not disclosing company –
The companies those fall under this category are not required to comply with
Corporation act, Section 2M.3 if all the required conditions as per ASIC Corporations
Instrument 2016/785 has been complied with and the company is not –
 A license for the financial services
 A borrowing company
 A guarantor for such borrowing
It is applicable for the companies –
 Those are wholly owned
 Signed up the cross guarantee deed with other company (Asic.gov.au 2018)
2. Virgin Australia – Consolidated financial report
Answer (a) – accounting equation
Assets = Liabilities + Equities
Accounting equation at beginning –
Total assets = Liabilities + Equities
$ 6040.8 m = $ 5142 m + $ 898.8 m
Accounting equation at closing –
Total assets = Liabilities + Equities
$ 6355.8 m = $ 4782 m + $ 1573.8 m

7FINANCIAL AND MANAGEMENT ACCOUNTING
Answer (b)
For the financial year ending on 30th June 2017, Virgin Australia’s financial statement
was audited by KPMG. As per the opinion of the auditor –
 The report was prepared as per the requirement of AAS (Australian accounting
standards) and Corporation Act 2001
 The report presents true and fair view of the financial position as well as the financial
performance of the company dated on 30th June 2017 (Virgin Australia 2018)
Answer (c)
In addition with offering the audit services, KPMG also offers some non-audited
services to the company that includes –
 Taxation services
 Assurance services associated with the debt transactions, service level compliance and
assurance services for non-financial statements
 Other services like services and due diligence related to capital restructure, accounting
advices, divestments and various other agreed upon procedures (Svanström 2013).
Answer (d)
As per the annual report of the company the largest non-current asset is plant,
property and equipment. Opening book value of this asset is $ 2827.8 million whereas the
closing book value of the asset is $ 2916.6 million. Asset is valued at cost less accumulated
depreciation and impairment loss, if any (Virgin Australia 2018).
Answer (e)

8FINANCIAL AND MANAGEMENT ACCOUNTING
Company charged the depreciation as per straight line method on plant, property and
equipment.
Answer (f)
Largest revenue source for Virgin Australia is from Airline Passenger and the revenue
is amounted to $ 4257.30 million in total revenue amounting to $ 5,403.70 million.
Company’s other ancillary revenue includes –
 Credit voucher redemption revenue after completion of carriage or it is established
that the credit voucher will not be redeemed
 Revenue generated from providing airline services like on-board sales, charter
revenue, freight and product revenue (Virgin Australia 2018).
Answer (g)
The company’s finance cost for the year closed on 30th June 2017 amounted to $
184.70 million. The amount went up to $ 184.70 million from $ 181 million for the year
closed on 30th June 2016.
Answer (h)
For the year ended on 30th June 2017, Virgin Australia did not have any contingent
liabilities
Answer (i)
During the year ended 30th June 2017 Virgin Australia issued shares amounted to $
4,400.60 million. Issue of the shares increased the capital of the company by the amount of $
943.30 million (Virgin Australia 2018).

9FINANCIAL AND MANAGEMENT ACCOUNTING
Answer (j)
Net cash flow from operating activities for the year ended 30th June 2017 for Virgin
Australia amounted to $ 273.90 million whereas the net loss of the company for the same
period amounted to $ 185.80 million. Hence, it can be observed that the amount of cash flow
from operating activities is larger as compared to net loss of the year (Abeysekera 2013). The
amount is different as the net income is calculated by deducting the COGS, interest,
depreciation, various other operational expenses and tax expenses from net revenue whereas,
operating cash flow is calculated by considering the net income, non-cash expenses and
changes in the amount of working capital.
Answer (k)
Virgin Australia reported the following items under liabilities as unearned revenue for
the year ended 30th June 2017 –
 Credit vouchers for $ 13.5 million
 Unearned loyalty program revenue for $ 412.8 million
 Unearned passenger revenue for $ 647.7 million
 Other unearned revenue for $ 0.2 million
This is expected for any company under this industry as the unearned revenue is
related to the ticket sales to the passenger and requires various estimates and judgements.
Further, it also requires judgements regarding the non-attendance of passengers and the
probability that the passengers will exercise their contractual obligation.
Answer (l)
Director’s declaration states their opinion regarding whether the company’s
consolidated financial statement prepared in compliance with the Corporation Act 2001. It

10FINANCIAL AND MANAGEMENT ACCOUNTING
further states the declaration whether requirement of Corporation Act, Section 295 or not.
Moreover, it states whether the entity is efficient to meet its obligations or not.
Director’s report on the other hand, states the information of the directors as well as
alternate directors like their qualification, name, special responsibilities and experience. It
also gives information of the director’s interest, director’s meeting, review of financial as
well as operating performances, KMP, remuneration report, remuneration overview of the
executives and details regarding the share options.
Both director’s declaration and director’s report is necessary as the declaration states
regulation compliance and report states detail information about the directors.
Answer (m)
Half year’s report is necessary to comment if there is any material events or
transaction is there under the period and its impact on the financial status of the company
(Weygandt, Kimmel & Kieso 2015).
Half year reports are prepared for the period from 1st July 2016 to 31st December 2016
3. Ratio calculation
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
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

11FINANCIAL AND MANAGEMENT ACCOUNTING
Reference
DosterB.A Helak D.A Reed D C& Smith, M.D., International Business Machines Corp,
2016. ‘Intelligent inclusion/exclusion automation’. U.S. Patent 9,384,044.
Teigland R van der ZandeTeigland & Siri S 2018. The Substitution of Labour: From
Technological Feasibility to Other Factors Influencing Job Automation.
Willcocks LLacity M & Craig 2017. Robotic process automation: strategic transformation
lever for global business services?. ‘Journal of Information Technology Teaching Cases 7’
pp.17-28.
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.
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 19 Apr. 2018].

12FINANCIAL AND MANAGEMENT ACCOUNTING
Weygandt J J Kimmel P D & Kieso D E 2015. Financial & managerial accounting. John
Wiley & Sons.
Krishnan & Ravindran 2017 June. IT service management automation and its impact to IT
industry. In ‘Computational Intelligence in Data Science ICCIDS 2017 International
Conference’ pp. 1-4. IEEE.