Advanced Corporate Accounting Report: Medibank Financial Analysis

This report provides an analysis of Medibank Private Limited's advanced corporate accounting practices, focusing on share-based transactions. The report identifies the company's use of equity-settled payment transactions, as recognized by Financial Reporting Standard (FRS) 20, where goods or services are received in exchange for equity instruments. It details the accounting treatment of these transactions, including the recognition of employee benefits expense based on the fair value of performance rights. Furthermore, the report addresses the identification of operating segments in accordance with AASB 8, highlighting how Medibank uses its internal financial information, reviewed by the Chief Operating Decision Maker (CODM), to define and report its operating segments, primarily health insurance and Medibank Health. The report includes references to relevant accounting standards and Medibank's annual reports to support its findings.

Running head: ADVANCED CORPORATE ACCOUNTING
Advanced Corporate Accounting
Name of the Student
Name of the University
Author’s note

1ADVANCED CORPORATE ACCOUNTING
Table of Contents
Identification of the type of share-based transaction of my company.......................................1
Accounting for share-based transactions...................................................................................1
Identification of operating segments for applying AASB 8.......................................................2
References..................................................................................................................................3

2ADVANCED CORPORATE ACCOUNTING
Identification of the type of share-based transaction of my company
Medibank Private Limited company follows one of the important share-based
payment transaction as recognised by Financial Reporting Standard (FRS) 20. The company
follows equity-settled payment transaction based on shares. This type of transaction has been
followed in most of the other companies belonging to the same industry (He, Evans and He
2016). In the process of this transaction, the company receives goods or services by taking
the equity instruments as considerations. The company also takes into account the share-
based payment reserve for the equities and use it to record the cumulative expense that is
recognised as a performance right of the key personnel of the company (Medibank.com.au
2019). The company has also introduced an Employee Share Plan Trust for the purpose of
managing its share-based payment arrangements.
Accounting for share-based transactions
The companies are required to recognise the goods and services which are transacted
in share-based payment transaction (Nichols, Betancourt and Scott 2017). After proper
recognition, the share-based payment transactions are accounted according to their categories
(Aasb.gov.au 2019).
Medibank private limited company transacts its goods through equity-settled payment
transaction based on their shares and therefore measures them at their corresponding fair
values. Due to the increase in the equity, the fair value of the performance rights is
recognised by the company as an employee benefits expense (Aasb.gov.au 2019). The total
amount of expenses is determined through the fair value of the performance rights that are
granted. (Medibank.com.au 2019). The expense amount of the company includes the
conditions of the market and also impact of other non-vesting conditions. In cases when the
fair value does not show an accurate estimation, the entity would measure the value of goods
and services through the increase in their equities by taking the fair value of equity

3ADVANCED CORPORATE ACCOUNTING
instruments as references (Nichols, Betancourt and Scott 2017). In the cash flow statement
under the investing activities, the company shows its purchase of shares for settling its share-
based payments.
Identification of operating segments for applying AASB 8
For the purpose of applying the principle of AASB 8, the company is required to
identify its operating segments. Operating segments can be defined as those parts of an entity
that engages in the business activities (Aasb.gov.au 2019). These business activities affect the
financial condition of the business through the earning of the revenue and the incur of the
expenses (He, Evans and He 2016). The operating segments can also be regarded as those
elements of the entity that generate operating results that are measured as well as reviewed by
the chief decision maker of the operational department of the company (Aasb.gov.au 2019).
Medibank Private limited company identifies its operating segments taking one of its
important financial information which is reviewed by the Chief Operating Decision Maker
(CODM) (Medibank.com.au 2019). The operating segments are reported based on the
reporting structure of the internal management of the company. In this context two significant
services have been reported by the company. One of these services is health insurance and
another of them is Medibank Health.

4ADVANCED CORPORATE ACCOUNTING
References
Aasb.gov.au 2019. [online] Available at: aasb.gov.au/admin/file/content105/c9/AASB8_08-
15_COMPnov15_01-16.pdf [Accessed 30 Sep. 2019].
Aasb.gov.au 2019. [online] Available at: aasb.gov.au/admin/file/content105/c9/AASB2_07-
04_COMPjul09_01-10.pdf [Accessed 30 Sep. 2019].
He, L., Evans, E. and He, R., 2016. The impact of AASB 8 operating segments on analysts’
earnings forecasts: Australian evidence. Australian Accounting Review, 26(4), pp.330-340.
Medibank.com.au 2019. [online] Available at: medibank.com.au/content/dam/retail/about-
assets/pdfs/investor-centre/annual-reports/Medibank_Annual_Report_2019.pdf [Accessed 1
Oct. 2019].
Nichols, N., Betancourt, L. and Scott, I., 2017. The FASB Simplifies the Accounting for
Share‐Based Payments. Journal of Corporate Accounting & Finance, 28(4), pp.8-19.