HA2032: Financial Accounting Assignment on Company Funds and Entities

This report, prepared for Holmes Institute's HA2032 Corporate and Financial Accounting unit, examines the different sources a company can use to raise funds, focusing on owners’ equity, liabilities, and cash equivalents. It analyzes the financial statements of ANZ Bank and Commonwealth Bank from 2016 to 2018, comparing the trends in shareholders' equity, including ordinary share capital and reserves, and the evolution of liabilities such as deposits, debt issuances, and deferred tax liabilities. The report also defines and differentiates between small proprietary companies, large proprietary companies, and reporting entities, outlining their respective compliance requirements. The analysis includes a review of the implications of the Australian Accounting Standards Board (AASB) regarding reporting entities and the importance of financial reporting for decision-making.

Corporate and Financial Accounting

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Introduction
The paper is divided into two parts such as Part A and Part B. In Part A, the discussion is made
on the owner’s equity and liabilities. In Part B, the three concepts of entities will be discussed
such as sole proprietary, large proprietary and report proprietary.
Part A
1. There are different items have been recorded under the heading of Equity in the balance sheet
such as retained earnings, reserves, ordinary share capital, and non-controlling interests. These
items have different meaning and concepts that have been used by the company to operate the
business effectively. Retained earnings define the amount of profit that the company kept aside
by subtracting dividends or the other distribution payments of investors. The word reserves
define the balance that an organization kept aside for the particular reason for the future benefits.
Ordinary Share Capital is the amount of capital which is raises by the different sources such as
public and private sources by issuing the common shares (Hugonnier, and Morellec, 2017).
2. Owners’ Equity of Both the Banks
ANZ Bank
2017-2018
2016

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The total amount of shareholders equity of ANZ Bank is increasing with the minor percentage
from 2016 to the year 2018. The items contained under the owners’ equity are also fluctuated in
the year 2018 from the previous years 2016 and 2017. The amount of ordinary share capital is
decreasing in the year 2018 from the year 2016. In the year 2016, the amount of share capital is
28765 which are decreasing in the year 2018 by 27205. It has been found that the amount of
ordinary share capital is increasing in 2017 but due to limited funds or shares, it is decreases in
the year 2018 (ANZ, 2018). The amount of reserves reflects that the market rate of loan is
increasing due to which the company is not able to maintain the reserves with the high amount.
As per the analysis, it is observed that the amount of reserves is also declined in the year 2018.
As the passage of time or the years, the amount of reserves of the company is decreasing. In
2018, the amount of retained earnings is increasing which is a positive indication for the firm as
it is earned amount (Geddes, 2017). The overall picture of equity is that the amount of
shareholder equity is increasing.
Common Wealth Bank
2017-2018

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2016
As per the analysis of owners’ equity of Common Wealth Bank, it is observed that the amount of
equity is increasing which reflects that the company raises the capital through shareholders
instead of borrowing money from outsiders. It has been found that the amount of total equity is
60756 in the year 2016 but in the year 2017 and 2018 it is increasing such as 63600 and 67860
respectively (Commonbank, 2017). The amount of ordinary share capital is increasing in the year
2016 and 2017 which states that the company has enough funds that helps to issues the shares to
to raises the capital. The overall amount of equity is increasing from 2016 to 2018 which is
beneficial for the company and also beneficial for the long term survival in the market.
3. The heading of liability defines the company payments that the organization has to pay in the
coming future. Under this heading, there are a lot of items are contained as per the business of
the organization such as derivative liabilities, payables, bank acceptances, bills payable, debt
issues, deferred tax liabilities, insurance policy liabilities, current tax liabilities, deposits and
other public, and the others. Deferred tax liabilities is the income tax expenses which the

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organization to pay at the end of the year. Bills Payable defines the paper in which the amount is
written that has been taken by the company on credit from the external parties. Debt issues are
the amount which is taken by the company from outside in order to raise the capital by issuing
shares. Derivative Liabilities refers the liabilities of the borrowers under all derivatives that are
examined on the market basis. Deposits define the amount that the public invests in the bank as
savings and the other terms (Jacewitz, and Pogach, 2018).
4. Liabilities of Both the Banks
Common Wealth Bank
2017-2018
2016

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According to the report of Common Wealth Bank, it has been found that the amount of total
liabilities is increasing is increasing from the last year of data. In the year 2018, the liability of
the company is 907305 which is increasing from 2016 as the amount is 872322 which depicts
that the company borrows the money from outside which is not beneficial. Increasing liability of
the company increasing the issues for the company related to financial crisis. The amount of
deposits and the other public is increasing with the higher percentage which directly affects the
overall amount of total liabilities of the bank. The amount of deposits is 588045 which is
increasing in the year 2018 with the amount 622234 (Commonbank, 2017). The increasing
amount of deposits does not affect the business as this amount helps the organization to survive
in the market for long time (Hau, and Lai, 2016).
ANZ Bank
2017-2018

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2016
It is observed that the amount of liabilities of Common Wealth Bank is increasing in the year
2018 which is not beneficial for the company. Increasing liabilities defines the negative situation
of the company (ANZ, 2018). It has been found that the amount of deposits and other borrowings
is increasing with the high percentage in 2018 from the previous year 2017 and 2016. The
amount of deposits is 588195 in 2016 and in the year 2018 it is 618,150 which are increasing.
The increasing deposit is beneficial for the banks as it reflects that the more or more people
invest in the bank. The amount of debt issuances is increasing from 2016 to 2018 with the major
percentage of total liabilities. In 2016, the amount of debt issuances is 91080 which is increasing

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in 2017 by 107973, and in the year 2018 it is 121179. The increasing debt issuance is highly
contributed in the increasing liabilities of the company. The whole analysis of liabilities of the
bank states that the total liability is increasing which is not good for the long term survival of the
company.
5. There are four types of funds that the organization is used to raise the capital to operate the
business smoothly and effectively such as debts, owners’ equity and cash and cash equivalent.
These funds help the organization to raise the capital so that the companies operate the business
effectively. Cash and cash equivalent defines the cash in hand which helps to pay all the short
term expenses of the company. It is required for the company to have the cash in hand in order to
pay all the short term expenses. Owner’s equity is the best source to raise the capital as there are
many benefits that the organization can gain. Issuing the share helps the organization to raise the
capital and it is depend on the company to pay the return amount to the shareholders. It is not
required for the company to pay the same amount of return to shareholders as the company
invests. Debt is also one of the funds that the company used to bring the money in the company
to operate the business. Issuing the debt can easily pay by the company in return to the people in
installments or the other way.
Part B
Small proprietary company
Meaning:
A small proprietary company is a company which fulfills or complies at least two categories of
the following categories:

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1. If the gross operating profit of the organization is less than $25 million for the particular
financial year.
2. If the assets of the organization are less than $12.5 million for the particular financial
year.
3. If the firm has less than 50 employees in that particular financial year.
Compliance
The following are the compliance which is needed to be maintained by a small proprietary
company:
1. By setting of the registered office of the company.
2. By setting up of the place for the business of the company.
3. The company must appoint the directors, which should specify their rights duties and
obligations of the company (Australian Securties and Investment Commission, 2019).
4. The company should set up the business name and it should be registered by ASIC.
5. The company should provide and update all the keys changes regarding the management
and functions of the company.
6. By maintaining the financial records of the company.
7. By paying the annual fees to the ASIC.
8. By providing any such information which ASIC thinks fit to be furnished by the
company.
Large proprietary company

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Meaning
A large proprietary organization is the company which operated the business at the large areas
and it also fulfills any two criteria from the following three criteria:
1. If the consolidated value of the assets of the firm is more than $25 million in that
particular financial year.
2. If the consolidated profits of the organization is more than$50 million in that particular
financial year.
3. The current working employees are more than 50 in the particular financial year (Nexia,
2018).
Compliance
1. The company should maintain financial records and such records should be properly
audited by the auditor.
2. The company should provide detail information regarding its day to day business
operations in the annual reports of the company.
3. The company should work in compliance to rules mentioned by the ASIC.
4. The company should hold at least one annual general meeting in a year.
5. Any other such compliance which ASIC thinks fit which are to be made by the company.
Reporting entity
Meaning
According to AASB the crucial role on the reporting entity has been published in Australian
Financial Reporting, it also gives a history as well as summary and directions to use the reporting

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entity for different purposes. As per the current regime of reporting entities which are other than
reporting entities are compulsory required to present special purpose financial statements. As per
SAC-1 a reporting entity can be referred to, an entity, where the users are reasonably dependent
on general purpose of financial reports for the relevant information which can be used for taking
strategic business decisions with regards to allocation of the resources that are of scarce nature
(Australian Securties and Investment Commission, 2019).
Compliance
Generally three major implications are required to be followed by the reporting entities. All the
applicable accounting standards must be used in preparing the general purpose financial
statements. There are several advantages and risks which are associated with each reporting
framework. For example: reporting entities contains listed public interest entities, public
companies, such as educational institutions and it also includes the large private companies
whose major users are external shareholders and investors and they are not authorized to look
after any document accept the annual report of the company.

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References
ANZ. (2016). 2016 Annual Report. [online] Available From:
https://shareholder.anz.com/sites/default/files/anz_-_annual_report_2016.pdf [Accessed
23/09/19].
ANZ. (2017). 2017Annual Report. [online] Available From:
https://shareholder.anz.com/sites/default/files/2017_anz_annual_report.pdf [Accessed
23/09/19].
ANZ. (2018) History. [online] Available From:
https://shareholder.anz.com/our-company/history [Accessed 23/09/19].
ANZ. (2018). 2018 Annual Report. [online] Available From:
https://shareholder.anz.com/sites/default/files/anz_2018_annual_report_final.pdf [Accessed
23/09/19].
Australian Securties and Investment Commission. (2019) Are you a large or small
proprietary company. [online] Available From:
https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-
reports/are-you-a-large-or-small-proprietary-company/ [Accessed 27/09/19].
Australian Securties and Investment Commission. (2019) Lodgement of financial reports.
[online] Available From: https://asic.gov.au/regulatory-resources/financial-reporting-and-
audit/preparers-of-financial-reports/lodgement-of-financial-reports/ [Accessed 27/09/19].

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Commonbank. (2016). Annual Report 2016. [online] Available From:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/2016-
asx/2016_Annual_Report_to_Shareholders_15_August_2016.pdf [Accessed 23/09/19].
Commonbank. (2017). Annual Report 2017. [online] Available From:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-
reports/annual_report_2017_14_aug_2017.pdf [Accessed 23/09/19].
Commonbank. (2018). Becoming a simpler bank. [online] Available From:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/results/
fy18/cba-annual-report-2018.pdf [Accessed 23/09/19].
Geddes, C. (2017) What Causes Retained Earnings to Decrease?. [online] Available From:
https://bizfluent.com/info-12031550-causes-retained-earnings-decrease.html [Accessed
23/09/19].
Hau, H. and Lai, S. (2016) The role of equity funds in the financial crisis propagation.
Review of Finance, 21(1), pp.77-108.
Hugonnier, J. and Morellec, E. (2017). Bank capital, liquid reserves, and insolvency risk.
Journal of Financial Economics, 125(2), pp.266-285.
Jacewitz, S. and Pogach, J. (2018) Deposit rate advantages at the largest banks. Journal of
Financial Services Research, 53(1), pp.1-35.
Nexia. (2018) Large proprietary company thresholds doubled . [online] Available From:
https://www.nexia.com.au/news/accounting/large-proprietary-company-thresholds-doubled
[Accessed 27/09/19].

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The Commonwealth. (2018) About us. [online] Available From:
http://thecommonwealth.org/about-us [Accessed 23/09/19].