Commonwealth Bank Financial Statement Analysis: 2017-2018

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Research Assignment
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Table of Contents
Introduction......................................................................................................................................3
Task 1: Analysis of expenses...........................................................................................................4
Task 2: Accounting policy...............................................................................................................6
Task 3: Notes to the 2017/2018 Financial Statements.....................................................................7
A) cost of the plant, properties, and its equipment:...................................................................7
B) Depreciable amount..............................................................................................................7
C) Depreciation Period..............................................................................................................7
D) Depreciation method.............................................................................................................8
E) Revaluation...........................................................................................................................8
F) Impairment............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
Here in this part, it has been discussing over the topic of deprecation like which method of
depreciation used for which period and how much amount calculated for the period. It is also
included the revalue amount of the assets of the Commonwealth bank and showed how much
amount is increased or decreased during the period. It will help the bank to make their further
decision in the interest of the bank which can increase its efficiency and profitability throughout
the year.
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Task 1: Analysis of expenses
In the Commonwealth Bank, there is having many expenses in the statement of the profit and
loss with the specific change in the operations function. There is having many types of expenses
are analysis below:
 Operating expenses
The operating expenses increases, the operating expense includes the salaries and other benefit
has given to the staff; the remaining expenses have included in the other expenses. In 2017, the
expenses were $10622m, and in 2018, the expenses increased up to the $11599m.
 Staff expenses
The staff expenses are also increases is to 0.5% determined by wage inflation in the department
of the organisation. Commonwealth Bank has partly offset by lower employee incentives for
giving by the department of the organisation.
 Occupancy and equipment expenses
The Occupancy and equipment expenses are also increases in the Commonwealth Bank; the cost
has covered the rent, personal property taxes, insurance on the building and contents. It increases
because it has made the relocation of the offices to a single location, annual reviews, and
depreciation.
 Information technology services expenses
The expenses are increases due to high investment done by the Commonwealth Bank; it has also
the high risk from the investment and project is made by the Commonwealth Bank.
In the Commonwealth Bank is using the function method to formulate in expenses to show the
expenses in the income statement. In the statement are having different shows in nature and
function. In the income statement by function is having the one listed is disclosed according to
the different functions like the cost of goods sold, selling, administrative function, in the working
notes they will classify in the form of the different function (Enston, 2018).
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Different methods of classification of expenses
In this method, it contains the financial expenses which all the expenses of finance will derive in
the same column. There is having different classification methods is following by the different
companies that have shown below,
 Financial expenses.
 External services expenses
 Amortisations
 Salary and wage and other personal expenses
These all the methods are useful to make the classification of the expenses is useful to make in
the efficient (Mendelu, 2019).
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Task 2: Accounting policy
In the AASB 108, it is making the accounting policies is making the changes in the accounting
estimates and errors, which is making an effective result for the organisation. In Commonwealth
Bank is using the equator principles with the signatory and it uses for making the standards they
set for the assess, mitigate, and they will manage and monitor to the ESG risk for the project
finance loans. It is making policies for other business loans for the organisation’s systems and
processes (Time, 2019).
 In the first case, it will make changes in the accounting estimates and errors; the settlement
includes a $5m penalty, from the financial consumer protection ASIC’s cost, this used for the
independent expert will monitors, policies in the BBSW business.
 In the second case, it is making the fix root cause, including the culture, investment, and
governance. It simplifies underlying operational processes policies and systems
(Commonwealth bank, 2018).
 The carbon positive road map is parting with the Green Building Council; it is making the
different policies to retrofit existing buildings, improves new buildings.
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Task 3: Notes to the 2017/2018 Financial Statements
A) cost of the plant, properties, and its equipment:
Here the cost of assets like plant, property, and equipment are recorded at cost method, or it
means recorded at that cost when the cost incurred at the time purchased. Indirect and
incremental costs also included in the costs of the above assets.
The plant, property, and equipment are included in two types of assets. First, which belongs to
the bank itself and the other which is owned by the bank on the lease?
The total cost of plant, property, and equipment from the owned assets is $ 1298, and the cost of
assets owned on lease is $ 162 (in a million), this is the real cost after deducting a subsequent
amount of depreciation. So the total cost for the business of assets is $ 1460 at the end of the
year, June 30th, 2018.
B) Depreciable amount
Depreciation amounts:
On leasehold improvements = $ 913
On equipment = $ 1316
Depreciation amount on assets held on lease = $31
Some of the above depreciation amounts are $ 2260.
C) Depreciation Period
Generally, the depreciation calculated for one year, which is a calendar year or financial year as
per the suitability and norms of the respective country is to follow. Such a period is called an
accounting period for calculation made for disclosing the income and expense over the year and
its balance sheet. The depreciation calculated for one year, which started from 1st of July 2017
and end June 30th, 2018 (Commonwealth bank, 2018).
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D) Depreciation method
The bank use SLM (Straight Line Method) method to be calculating depreciation amount on the
assets for the accounting year and this is shown in the bank income statement or its profit or loss
account as per the bank prepared. Hence the SLM method is used to calculate the depreciation
amount.
E) Revaluation
Here the revaluation amount of plant, property, and equipment which is owned and held on lease
is to show in the following.
The devalued amount taken after the depreciation is less from the respective assets.
Owned assets by a bank
At the end of June 2017 and 2018, the cost of land and building was $ 426 and $ 397
respectively. By comparing bot cost, it is clear that the value of land and building is decreased by
$ 29. Hence the revaluation amount is $ 397.
Leasehold improvements cost in 2017 and 2018 was $ 454 and $ 444 respectively. So it is clear
that it also gets decrease by an amount of $ 10. So the revalued amount of its assets is $ 444.
Equipment revaluation amount is $ 457 by comparing the two years cost, i.e. 2017 and 2018 $
464 and $ 457. The cost of equipment is also decreased by $ $ 7.
So from the overall revaluation, it is analysed that the total revaluation cost of plant, property,
and equipment is decreasing and the total cost of these assets after a revaluation is $ 1298.
Assets owned on lease
Lease Assets: The amount on lease assets is increase by $ 12, and its revaluation amount is $
162.
From both assets (owned and lease assets), the revaluation cost of the above assets is $ 1460
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F) Impairment
There is no impairment cost of the plant, property, and equipment (Commonwealth bank, 2019).
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Conclusion
From the above task, it has been concluding that the cost of plant, property and equipment's is
decreasing due to the many reasons. Such reasons are due to obsolete of assets, use of assets, and
time of assets. All these affect the cost and the efficiency of assets. It also concludes impairment,
but as per the information, it has been seen that there no impairment is made on the company
assets and seen bank using SLM method for depreciation purpose. Hence from the overall task, it
has been concluded the task based on bank assets and its revaluation method.
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References
 Commonwealth bank. (2018). Annual report. Commbank. [Online] Available at:
https://www.commbank.com.au/content/dam/commbank/aboutus/shareholders/pdfs/results/
fy18/cba-annual-report-2018.pdf [Accessed on: 25 May. 2019]
 Time, F. (2019). What Is Occupancy in a Profit & Loss Statement? Chron. [Online]
Available at: https://smallbusiness.chron.com/occupancy-profit-loss-statement-35013.html
[Accessed on: 25 May. 2019]
 Mendelu. (2019). 2.1 Expenses, their identification and classification. Mendelu. . [Online]
Available at: https://is.mendelu.cz/eknihovna/opory/zobraz_cast.pl?cast=59680 [Accessed
on: 25 May. 2019]
 Enston. (2018). Income Statement by Nature vs. Income Statement by Function. Enston. .
[Online] Available at: https://enstoncorp.com.sg/accounting/income-statement-by-nature-vs-
income-statement-by-function/ [Accessed on: 25 May. 2019]
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