University Company Accounting: AGL Energy Financial Statement Memo

This memorandum, addressed to the Board of Directors of BHP, provides an overview of AGL Energy's business operations and technical aspects of financial statement consolidation. It analyzes AGL Energy's consolidated financial statements, prepared in accordance with AASB10, highlighting key elements such as the consolidated income statement, balance sheet, governance policies, and the role of the audit and risk committee. The memo further examines AGL's sustainability approaches, solvency through current ratio analysis, and the treatment of goodwill as an intangible asset. It also delves into related party transactions, as disclosed in the annual report, offering a comprehensive understanding of AGL's financial performance and reporting practices. The memo references AGL's 2018 annual report and relevant accounting standards, providing a solid foundation for understanding the company's financial position and operational strategies.

Running head: COMPANY ACCOUNTING
Company Accounting
Name of Student:
Name of the University
Authors’ note

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MEMORANDUM
To: The Board of Directors of BHP.
From: [Name, Designation]
Cc:
Subject: Overview of AGL Company and Technical aspects of consolidation of financial
statement.
Date: 8thSeptember 2019
This following memorandum is generally used to provide complete assistance to the
stakeholders and board of directors of AGL Energy’s for the purpose of understanding the
present market of the organizations business along with the other compositions of business
performance from the managerial points of aspects. The AGL Energy is mainly the
combination form of parent and subsidiary companies and some other related associates. As
per the provision of AASB10 every parent company need to maintain their annual
consolidated financial statement (Aasb.gov.au 2019). In case of AGL Energy also, required
maintaining the consolidated financial statement for purpose of providing the comparable
financial information to the board of directors and also to the company’s stakeholders. This
organization is mainly engaged in manufacturing and supplying electricity and gas in all over
Australian market (Hoyle, Schaefer, Doupnik 2015).
According to the provisions that mentioned in AASB 10, whether or not a subsidiary
company maintain their individual financial report as an individual legal entity, the parent
company need to maintain the consolidated financial statement, which is generally the
combination of both the parent and subsidiary companies financial report (Aasb.gov.au
2019). The main purpose of making such consolidated statement is to present all the relevant

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information regarding the company to the individual stakeholders and to the directors, so they
would able to take required financial and business decisions. Through the consolidated
financial statement the directors and other stakeholders can able to analyse comparable
reports of both the parent and subsidiary company (AGL 2018). Using the consolidated
statement AGL Energy normally maintain accountability as it is consider as the responsibility
of the parent company to account the entire group activities.
Figure 1: Consolidated Income statement of AGL in Annual Report 2018.

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Figure 2: Consolidated Balance sheet of AGL in Annual Report 2018.
In AGL Energy’s annual report representing company’s different policies regarding the
governance policies. In this governance policies generally reflecting the various aspects
regarding company’s operations and the impacts of such policies over conducted operations.
The purpose of maintain the corporate governance in relation to evaluate company’s values,
it’s board and committee of board, executive teams, risk management, financial
frameworkand reporting, diversity, key corporate governance polices and also shareholders’
engagement (Kovács 2015). During the FY2018 using the governance policies the AGL
Energy decided the following agendas; AGL’s new generation plan including the
announcement of new 250MW gas- fired power station and 100MW efficiency up gradation
to Bayswater power station, ongoing assessment of the LNG import jetty (AGL 2018), some
transformation initiatives including customer experience transforming project and up
gradation of enterprise resource planning etc.
Generally the audit and risk committee of an organization is consider as the operating
committee mainly engaged in supervising and representing the internal audited financial
report. Followed the annual report of 2018, the AGL is providing the complete details of their

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committee members and also their individual performance relating to risk and management
concern(AGL 2018). This audit and risk committee is engaged in maintaining the integrity of
financial statements, supervisions, investigation, strength and weakness of the management,
improvement inefficiencies and internal and departmental units need to operate as per the
provisions of applied laws and theories.
Figure 3: Members of Risk and Audit committee during the year 2018
AGL, in their Annual report 2018 is providing the complete details of their sustainability
approaches and regarding committee member’s individual performance during this particular
period. For the purpose of company’s sustainability the company issued an individual report,
which reflecting company’s performance in relation to environmental, social and economic
challenges facing the AGL and the energy industry.
The best way to judge the solvency power of a company is through the determination of
current ratio during the particular period. According to the annual report 2018 of AGL, the
consolidated Balance sheet presenting the value of current assets is $3806 million and the
current liability is $2308 million , using both the balances, presenting the current ratio of the

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company is 1.64:1. Normally the current ratio of a company is presenting the degree of risk
relating to business operation for long run purpose (AGL 2018). AGL’s financial report is
presenting the amount of current assets is more comparing to the value of current liabilities,
that generally reflecting the stable solvency power of the company.
Figure 4: current assets & current liabilities for 2018with current ratio
Followed the accounting principle Goodwill is generally considered as an intangible assets.
Such goodwill is normally arising in a business through the acquisition from other
organization, as cost of establishment at the date of acquisition of the business less
accumulated impairment losses, if any. Goodwill, generally achieved through the relationship
with customers, market reputations, trade or brand name or due to many other reasons. The
presence of gain on bargain purchase generally exists in case of the higher value of the cost
of acquisition comparing to the fair value of net assets. In case of goodwill acquisition
situation of gaining is so much rare and according to the provisions of AASB 10, the
company required to assessment such goodwill value before consider such value as gain.
According to the accounting principle goodwill is consider as an intangible assets and it
should be disclosed under the head of non-current assets in the consolidated balance sheet of

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an organizations. In some cases the company present such values in an Appendix format in
their financial reports (Lopes 2019). Here the AGL’s goodwill value shows in Appendix 17,
where the net carrying amount presented was $2,881 million till 2018. Normally Goodwill is
an unidentifiable asset as it is evaluated as a residual value and the previous year's ending
value is considered as the present year opening value. According the provision provided in
AASB 10 the impairment charges reduced the value of good will and which is disclosed in
the Appendix 11 as well (AGL 2018).
Figure 5: Good will value during 2017 and 2018
Followed the Annual report of AGL’s for the year ended 2018 the board of directors need to
provide some attentions relating to related party disclosures (Refer Note 36 of annual report
2018). In related party transactions mainly engaged the joint operations, joint ventures and
also the other associates. Usually all the related party transaction is made on the basis of
arm’s length price, i.e. at normal market values and rates and based on normal commercial
terms. In case of outstanding balances at the yearend are in unsecured position and settlement

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made using the cash balance (AGL 2018). The transaction values are disclosed in the blow
figure;
Figure 6: Related party transactions values for 2017 & 2018
It can be concluded with such conclusion that, this memorandum is particularly not included
all the necessary details and compact details of AGL’s business operations, for such purpose
it required to analysis the Annual report 2018 of such company efficiently along with such
report need to analyse AGL’s sustainability report for the purpose of evaluation company’s
future strategy and the issues generally company faced during conduct their operations. It is
also recommending to follow the AASB rules in case of understand company’s investing and
managerial activities properly.

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References:
2018annualreport.agl.com.au.(2019).[online]Availableat:https://
www.2018annualreport.agl.com.au/xmlpages/resources/TXP/agl_energy/finrep/pdf/
AGL_Energy_Annual_Report_2018.pdf [Accessed 8 Sep. 2019].
Australian Accounting Standards Board 2011, AASB 10Consolidated Financial Statements,
Australian Accounting Standards Board, viewed 10 January 2019,
<https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf>.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kovács, Z.I., 2015. Immaterial Assets in the Hungarian Accounting System and Financial
Statements. Public Finance Quarterly, 60(2), p.226.
Lopes, A.I. and Lopes, M., 2019. Effects of adopting IFRS 10 and IFRS 11 on consolidated
financial
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.
Wong, R.M., Kim, J.B. and Lo, A.W., 2015. Are related‐party sales value‐adding or value‐
destroying? Evidence from China. Journal of International Financial Management &
Accounting, 26(1), pp.1-38.