Financial statement Analysis - Sample Assignment

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student:
Name of the University:
Author Note

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FINANCIAL STATEMENT ANALYSIS
Table of Contents
Introduction......................................................................................................................................2
Provisions and Contingencies..........................................................................................................2
Recognition criteria and measurement issues..................................................................................2
Contingency record..........................................................................................................................3
Leased items that have been disclosed in the books of accounts....................................................3
Requirements and classification of the leased items.......................................................................4
Reclassification of the leased item..................................................................................................5
Non-current asset.............................................................................................................................6
References and Bibliography...........................................................................................................8

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FINANCIAL STATEMENT ANALYSIS
Introduction
The accounting statements of the corporate entities are the primary books that are
referred to for the purpose of assessing the financial accounts of the corporate entities. This
means that the financial information that has been provided by the accounting statements reflect
the fact in regards to the financial and the liquidity positions of the corporate entities. The
financial statements that are prepared by the administration of the corporate entities are utilized
by the stakeholders and the other third party investors who have been utilizing the accounting
statements for the purpose of assessing the business structure and the financial performance of
the corporate entities.
This particular study aims to look into the corporate entity of Farm Pride Foods Limited
and aims to analyze the financial accounts and other aspects of the business entity.
Provisions and Contingencies
The issue that has been presented in the question refers to the particular financial
component of provisions and contingencies that have been disclosed in the books of accounts of
the corporate entities. It has been stated in the financial report of the corporate entity that the
provisions have been recognized at the time of the consolidated entity is having a constructive or
a legal obligation. The financial component of provisions have been raised due to the past events
due to which an outflow of the benefits that are economic in nature will come out and the
outflow can be carried out in measurable terms. It must be noted here that the effect of the time
value of money if material, then the discounts on the provisions are charged by utilizing a pre-tax
rate that results in the reflection of the risks that are only applicable to the liability.
It must further be noted here that there has been no mention of contingencies in the books
of accounts. This means that the annual report of the corporate entity consists of no such
information in regards to the contingencies of the business entity (Barth 2013).
Recognition criteria and measurement issues
It has been mentioned in the annual report of the corporate entity that the recognition
criteria that has been utilized by the administration of the business entity is the new accounting
standard that has still not been issued in terms of operations of the corporate entity. It has been
further mentioned in the books of accounts of the corporate entity of Farm Pride Foods that the

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FINANCIAL STATEMENT ANALYSIS
firm has undertaken the adoption of the particular standard. Moreover, a detailed review of the
obligations of the company that have been included in a number of contracts in regards to the
performance of the company on the basis of the material revenue streams. Moreover, the
assessment that has been conducted reveals the fact that the adoption of the process of
recognition and measurement of the revenue by the Group. It has been further mentioned in the
annual report of the corporate entity that the adoption of the new accounting standard will result
in the increase in the volume of the financial disclosures.
It must be further noted here that the fixed assets of the firm like the property plant and
equipment has been measured on the basis of the particular method of impairment and the other
intangible assets like goodwill and related assets have been measured on the basis of the fair
value method, impairment method or other related method. The financial component of
provisions have been recognized with the help of the method of impairment (Barth, 2015).
Figure: Provisions
Source: (Mardini, Crawford and Power 2015)
Contingency record
It must be stated here that there has been no mention of a contingency recorder in the
books of accounts of the corporate entity. This means that the administration of the business
entity has not mentioned any contingency in the annual report of the firm. Therefore, the
recording of the contingency cannot be stated.
Leased items that have been disclosed in the books of accounts
It has been mentioned in the annual report of the corporate entity that the leases that have
been disclosed in the financial report of the corporate entity shall be recorded on the basis of the

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new accounting standard that will be effective from the financial year of 2019. The particular
accounting standard of AASB 16 that has been established by the Australian Accounting
Standards Board has been established for the purpose of designing the new leasing standard. The
different components of the leases that have been included in the books of accounts are the
operating leases, finance leases and the other leases that have been associated with the fixed
assets and other equipment. It must be noted here that the property leases refer to the non-
cancellable leases that vary within the terms of one to eleven years. It has also been mentioned in
the accounting statements of the corporate entity that the leases that are related to property
cannot be cancelled and should be paid in advance. Furthermore, it has been mentioned in the
accounting report of the corporate entity that the rental provisions that have been contingent in
nature under the agreements of the lease require the minimum amount in regards to the payments
of the lease (Barth, 2015).
Figure: Leases
Source: (Mardini, Crawford and Power 2015)

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FINANCIAL STATEMENT ANALYSIS
Requirements and classification of the leased items
It has been mentioned in the annual report of the corporate entity that the leases have
been classified at their inception and have been categorized on the basis of operating or the
finance leases. These leases have been based upon the economic substance in regards to the
agreement for the purpose of reflecting the particular benefits and risks that have been incidental
in regards to the aspect of ownership.
The component of finance leases refer to the leases that have been associated with the
fixed assets. It has been further mentioned in the annual report of the corporate entity that the
capitalization of the finance leases have been carried out and the recording of the liability and the
asset of the corporate entity have been carried out on the basis of the present value in regards to
the minimum amount of the payment of the leases. The expense in relation to the interests have
been calculated on the basis of the rate of interest and have been included in the financial costs
that have been included in the statement of the comprehensive income. It must be noted here that
the depreciation on the leased assets have been carried out on a straight-line basis in regards to
the useful lives that have been estimated (Newberry, 2015).
The component of the operating leases or the payments of the operating leases have been
recognized on the basis of a straight-line method. The incentives in regards to the lease payments
that have been received in regards to the operating leases have been recognized on the basis of a
liability and has been amortized on the basis of the term over the lease.
Reclassification of the leased item
A hypothetical situation in regards to the reclassification of the lease might be necessary
when the particular situation that has been mentioned in the leasing contract needs to be changed
or altered. Often there are times when the conditions or the terms of the contract is required to be
changed for the purpose of mutual agreement between the two parties of the contract. This means
that the alteration in the leasing contract can be carried out with the help of a change in the
already prepared contract. Therefore, changes in the conditions will result in the changes in the
leasing contract which will ultimately lead to the reclassification of the leased item. Moreover,
changes in the particular accounting standard might also lead to the change in the reclassification
of the leased item. This is because the terms of the contract will change which will further lead to

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the reclassification of the leased item. Thus, these are the situations in which a leased item needs
to be reclassified (Newberry, 2015).
Non-current asset
The particular non-current asset that has been included in the financial report of the
corporate organization refers to the intangible asset of goodwill. The goodwill is an intangible
asset that has been recognized by the particular method of impairment. The particular method
that has been utilized by the firms is the method of impairment for the valuation and the
recognition of the intangible asset.

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There are other methods that might be utilized for the purpose of measuring the non-
current asset. One of the potential method has been the fair valuation method. The fair value
method can be utilized for the purpose of measuring recognizing the intangible asset. Moreover,
the goodwill of the firm is mostly computed on the basis of the fair value method in most of the
business entities (Newberry, 2015).
Figure: Non-current asset
Source: (Mardini, Crawford and Power 2015)

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References and Bibliography
Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting
Horizons, 28(2), pp.331-352.
Barth, M.E., 2015. Financial accounting research, practice, and financial accountability.
prAbacus, 51(4), pp.499-510.
Chand, P., Patel, A. and White, M., 2015. Adopting international financial reporting standards
for small and medium‐sized enterprises. Australian Accounting Review, 25(2), pp.139-154.
Crawford, L. and Power, D.M., 2015. Perceptions of external auditors, preparers and users of
financial statements about the adoption of IFRS 8. Journal of Applied Accounting Research,
16(1), pp.2-27.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting.
Pearson Higher Education AU.
Mardini, G.H., Crawford, L. and Power, D.M., 2015. Perceptions of external auditors, preparers
and users of financial statements about the adoption of IFRS 8: Evidence from Jordan. Journal
of Applied Accounting Research, 16(1), pp.2-27.
Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public Money
& Management, 35(5), pp.371-376.