Understanding Omantel Financial Statement

Management Accounting 1
Management Accounting
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Management Accounting 2
Q6. Going concern is a basic underlying assumption in accounting. Explain why the going
concern basis is important in understanding Omantel financial statement; Support your
answer with evidence from Omantel annual report.
Going concern principle is a financial assumption that entity will remain in business for
the foreseeable future of the business, (Hardies, Breesch and Branson, 2016, pg. 27).
According to the Omantel financial statement, the going concern is necessary to provide
return on investment to shareholders and maintain optimal capital structure to reduce the cost
of capital. (Salehi, Tarighi and Sahebkar, 2018, pg.732).
From the omantel annual report provided on 2017, the going concern of the firm were
calculated bellow as gearing ratio
RO’000 RO’000
Total borrowings 1,966,355 8,171
Less: Cash and cash balance (380,996) (68,522)
Net Debt 1,585,359 (60,351)
Total equity 1,597,827 546,701
Total capital 3,183,186 486,350
Gearing Ratio 49.8% -
Q7. There are different basis approaches to valuing inventory that are allowed by GAAP, explain
the principal’s methods of valuation required by IAS2 inventories, provide some evidence from
annual report of Omantel.
FIFO valuation method is based on the principle that first inventory received will be the first one
to be sold resulting in highest ending inventory. (Toma, Ionescu and Founanou, 2018, pg. 999).