Financial Statement Analysis and Reporting - Finance Assignment

This assignment solution analyzes a company's financial statements, focusing on the relationship between net earnings and cash flow from operations, and the dividend payout ratio. It examines the company's segmented reporting based on IFRS 8, assessing the informativeness of the reported segments. The solution also reviews significant accounting policies, particularly regarding property, plant, and equipment, and evaluates the clarity and detail provided in the notes. The analysis references specific notes and calculations, offering insights into the valuation of assets and the overall quality of the financial reporting, including the reconciliation of the effective tax rate. The solution highlights the importance of understanding financial statements for investors and other users.

ANSWER
Ans. 1
a) On the basis of the correspondence between the net earnings and the cash flow from
operations, the company has reported high quality earnings. Cash flow from operations
and the net earnings are related in the sense that through the net earnings only, the figure
of the cash flow from operations can be derived. Net earnings comprises of the result of
operations of the company in which the company is engaged. Without the net earnings,
the operating cash flows cannot be determined. The company has reported in detailed
manner in consolidated statement of cash flows for the year ending 31st December 2016
(Mills, 2016).
b) The company has paid the dividend and the Dividend payout ratio of the company is
$48348 / $ 181702 = 26.60 %. This ratio implies the share of the profit which the
company has distributed among the shareholders of the company. No dividend payout is
not covered by operating cash flows rather they are covered by cash flow from financing
activities. The main implication is that through this ratio only more and more investors
will be attracted.
Ans. 2
As per the annual report of the company, two segments have been reported – Meat product group
and agribusiness group. (IAS Official Website, 2013)
As per the IFRS 8 on operating segments, the company is required to report on all their operating
segments along with their geographical locations and their major customers. The segments are
regarded as reportable only if they contribute 10% or more than 10% in the total revenue earned
by the company (EY Official Website, 2016).
The company has provided more detail then the details required by the standard.
Yes, the segmented information as provided by the company is very informative. It is because
the company has first explained about the two segments in very detailed manner and thereafter
has provided the financial data for the two years along with quarterly results.
The major customer details segment wise have not been disclosed is in my opinion very useful
information not only for the potential but also for the existing investors and users of the financial
report of the company.

Ans 3
a) After reviewing the Note number 3, it has been observed that these significant accounting
policies can be partially understood by average reader. The main reason for the partial
understanding is that in some policies the accounting knowledge is required and without
having that knowledge it will be difficult to understand the importance of those policies.
For instance, in the note pertaining to the business combination and goodwill, the average
reader cannot understand the significance of the cash generating units (Hung, 2017).
b)
i) The selected note number is eight pertaining to property plant and equipment. It
has been selected because the valuation of each asset has been discussed in detail
and the calculation is also very well described.
ii) The more detailed analysis with calculation is required in the note pertaining to
impairment of assets and the goodwill. It is because the estimate of future cash
flows has not been detailed.
c) Overall opinion is that the company has provided the detailed and exhaustive notes with
each explanation and calculation. For instance, the company disclosed the reconciliation
of the effective tax rate in a very proper and exact manner.
REFERENCE
EY Official Website, (2016), “IFRS 8 Operating Segments” available on
http://www.ey.com/Publication/vwLUAssets/IFRS_8_Operating_segments_Implementat
ion_guidance/$FILE/IFRS_8_Operating_Segments_IG.pdf accessed on 14/03/2018.
Hung, M., (2017), “Financial statement effects of adopting international accounting standards:
the case of Germany”. Review of accounting studies, 12(4), 623-657.
IAS Official Website, (2013), “Operating Segments” available on
https://www.iasplus.com/en/standards/ifrs/ifrs8 accessed on 14/03/0218.
Mills, J, (2016), “The power of cash flow ratios”. Journal of Accountancy, 186(4), 53.