HI5020 Corporate Accounting: Funds, Liabilities, Assets & AASB 137

This report provides a detailed analysis of the various sources of funds utilized by companies, focusing on Computershare Limited and Link Administration Holdings from the ASX. It examines the evolution of these funding sources, distinguishing between internally generated funds like retained earnings and externally raised funds such as borrowings and trade payables. The report also identifies the merits and drawbacks of each funding source, including the impact on shareholder control and financial risk. Furthermore, it summarizes the key concepts of AASB 137 concerning provisions, contingent liabilities, and contingent assets, assessing the compliance of the selected companies with this standard. The report identifies and categorizes different classes of assets, examining the measurement basis used for each, such as fair value, historical cost, and net realizable value. The analysis concludes that both companies utilize a mix of internal and external funding, and their asset measurement aligns with accounting standards.

CORPORATE
ACCOUNTING

INTRODUCTION:
 A detailed discussion on the several sources of funds used by
companies is presented.
 The chosen company from the ASX is Computershare limited and Link
Admin Hldg.
 Standard AASB 137 has been understood by understanding and
summarizing the concepts of provision.
 For the different classes of assets recorded, measurement basis has
been examined.

EVOLUTION OF VARIOUS SOURCES
OF FUNDS:
 Different source of funding by Link group include retained earnings,
contributed equity, borrowings and interest bearing loans, trade and
other payables.
 Computershare limited raises funds by way of retained earnings,
contributed equity, interest bearing liabilities, payables and mortgage
servicing related liabilities (Computershare.com 2019).
 Borrowings and interest bearing loans and trade payables are
externally raised fund.

IDENTIFYING PROPORTION OF
EXTERNALLY AND INTERNALLY
GENERATED FUNDS
 For Link group,
2019 2018 2017
Funds raised internally 2142194 1880438 694371
Funds raised e ternallx y 1503795 1180069 462037
Total funds raised b o any c mp y 3645989 3060507 1156408
of internall generated funds% y 59% 61% 60%
of e ternall generated funds% x y 41% 39% 40%

 For Computershare limited
earY 2019 2018 2017
Funds raised internally 1706427 1455187 1315607
Funds raised e ternallx y 2746476 2108392 2194008
Total funds raised b o any c mp y 4452903 3563579 3509615
of internall generated funds% y 38% 41% 37%
of e ternall generated funds% x y 62% 59% 63%

IDENTIFYING MERITS AND DRAWBACKS
OF DIFFERENT SOURCES OF FUNDS
Retained earnings merits
 Issue costs
 No interference of outsiders or other shareholders
 No dilution of control
Drawbacks of retained earnings
 Dissatisfied shareholders
 Lack of optimal utilization of funds
 Over capitalization
Merits of Contributed equity benefits
 No obligatory dividend payment
 Long term financing source
 No collateral pledge

Drawbacks of Contributed equity benefits
 Costly funding
 No tax benefits
 Control dilution
Merits of trade payables
 Easily available
 No legal repercussions
 Low cost financing
Drawbacks of trade payables
 Risk of bad debt
 Firm goodwill

Merits of loans or interest bearing liabilities:
 Major growth driver
 Tax shield
 Lower interest rates
Drawback of loans or interest bearing liabilities:
 Long term source of finance
 Procurement is difficult

EXAMINING DIFFERENT TYPES OF
LIABILITIES
Current liabilities
 Fund liabilities
 Employee benefits
 Trade and other payables
 Borrowings and interest bearing loans
 Current tax liabilities and provisions.
Non current liabilities
 Deferred tax liabilities
 Provisions
 Trade and payables
 Provisions, payables,
 Deferred tax liabilities,
 Mortgage servicing related activities

KEY PROVISIONS UNDER AASB 137
 Provisions are the accounts where the liabilities of uncertain amount
arises at uncertain time (Aasb.gov.au 2014).
 Standard outlines certain criteria when recognizing provision.
 Reporting entities are required to comply with the requirements of
AASB 137 when dealing with provisions.

 Computershare limited and Link group, have not mentioned about the
compliance with “AASB 137 provisions, contingent liabilities and
contingent assets” in their financial report.
 Provisions is settled by the Link group by exercising judgement in
determining the expected economic benefits outflow
 For Computershare limited, provisions is recognized as per the
recognition criteria set out in the standard.
 Measurement of provision is done for settling the current obligation
represents the best estimate of the expenditure.

IDENTIFICATION OF DIFFERENT
CATEGORIES OF ASSETS
Current assets:
 Current tax assets
 Cash and cash equivalent
 Derivative financial assets
 Fund assets
 Other assets
 Trade and other receivables
 Long servicing advances
 Bank deposits,
 Available for sale financial assets,
 Cash and cash equivalent
 Receivables and classified asset held for sale.

 Non current assets
 Derivative financial instruments
 Receivables
 Deferred tax assets
 Financial assets available for sale
 Intangibles and property
 Plant and equipment
 Investment
 Other assets and intangible assets

EXAMINING MEASUREMENT BASIS
OF DIFFERENT CLASS OF ASSETS
 Trade receivable- Fair value and amortization cost
 Deferred tax assets- Balance sheet method
 Goodwill- Loss by subtracting impairment loss
 Plant and property- Historical cost by deducting impairment and
accumulated depreciation.
 Derivatives- Fair value
 Inventories- Net realizable value and cost whichever is low

CONCLUSION
 Computershare limited and Link group have generated the funds
internally by way of issuing equity shares and retained earnings and
have raised externally by way of borrowings, trade payable and
mortgage.
 It has been ascertained that the companies have recognized and
measured provisions aligning with AASB 137 requirements.
 Different classes of assets recorded by the company are measured
using different specified measurement basis.

REFERENCES LIST:
 Aasb.gov.au., 2014. AASB 137 Provisions, Contingent Liabilities and Contingent
Assets. [ebook] Australian Accounting Standard Board. Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-
04_COMPjun14_04-14.pdf [Accessed 28 Jan. 2020].
 Computershare.com., 2019. 2019 Annual Report. [ebook] Computershare.
Available at: https://www.computershare.com/News/Annual%20Report
%202019.pdf?1 [Accessed 28 Jan. 2020].
 Investors.linkgroup.com., 2019. 2019 ANNUAL REPORT. [ebook] LinkGroup.
Available at:
https://investors.linkgroup.com/FormBuilder/_Resource/_module/YfKsMKLWK0Wi
syLm5uTWZA/file/reports/LNK-2019-Annual-Report.pdf [Accessed 28 Jan. 2020].
 Picker, R., Clark, K., Dunn, J., Kolitz, D., Livne, G., Loftus, J. and Van der Tas, L.,
2019. Applying IFRS standards. John Wiley & Sons.