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Telstra & TPG Telecomm Ltd - Accounting and Analysis for Managers

   

Added on  2020-03-01

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Title: Telstra & TPG Telecomm Ltd• Unit code and unit name: MBA711 – Accounting and Analysis for Managers • Name of the Unit Chair: Dr. Achinto Roy • Name of Lecturer : Dr. Achinto Roy • Your full name and Deakin student ID number. • Due date: Friday 25 August, 2017 by 11:59 pm (AEST). If granted a time extension, then insert the following: o Revised date approved by the unit-chair (show approved date). “I certify that the attached work is entirely my own, except where material quoted or paraphrasedis acknowledged in the text. I also declare that it has not been submitted for assessment in any other unit or course.”
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Financial analysisTable of Contents1.Analysis and explanation of the depreciation policy of each company...............................................22.Inventory Methods and impact on Profitability...................................................................................33.Identification & Analysis of Intangibles of the company......................................................................44.Comparative summary of policies (covering points 1 to 3) adopted by both companies....................5Recommendation........................................................................................................................................8References...................................................................................................................................................92
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Financial analysis1.Analysis and explanation of the depreciation policy of each company Depreciation and its impact on profitability.Telstra Ltd - The Company uses straight-line basis method of depreciation taking into consideration the estimated useful life of the fixed assets. The fixed assets that are depreciated using this method include property, plant, equipment, buildings and leasehold property but exclude freehold land (Telstra, 2016). The company’s policy is that the company starts charging depreciation only when the assets are put to use in the company. The estimated useful life and the residual value of the assets are estimated by the management using judgment basis and the review is done every year for the same. Further, the assessment is also done in comparison with other companies in the industry.The effect of this method of depreciation on profitability remains the same every year as the same amount of depreciation is reduced and then the net profit arrives (Brealey et. al, 2011). Hence, it can be described as a consistent method that helps in arriving at the profit with ease. But as the depreciation is a non-cash expense, profits reduce but not the cash flows.TPG Telecom Ltd.- This company also uses the straight line method of depreciation and usesthe estimated useful lives of the assets to calculate depreciation amount. The estimated usefullife is estimated by the management according to the trend in the industry and as per own judgments (TPG Telecom Ltd, 2016). The review is done in this company also on an annual basis for the estimated useful lives. But, the estimated useful lives estimated by this company are totally different from that estimated by Telstra Ltd. The effect on profitability is the same every year as the amount of depreciation expense is the same for every year (Davies & Crawford, 2012).3
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