Corporate Accounting Report: Funding Sources, Provisions, and Assets

This report provides an in-depth analysis of corporate accounting practices, focusing on the funding sources utilized by organizations, with Boral Limited and Brickworks Limited serving as case studies. It identifies both internally generated funds, such as retained earnings and equity, and externally raised funds, including borrowings and trade credit. The report evaluates the merits and demerits of each funding source, considering factors like creditworthiness, dividend policies, and potential impacts on control. Furthermore, it examines the application of AASB 137, provisions, contingent liabilities, and contingent assets, analyzing the liabilities and assets reported by the chosen companies and their measurement bases. The analysis includes an assessment of the companies' compliance with AASB 137, specifically regarding the recognition and measurement of provisions. The report concludes by emphasizing the importance of maintaining an optimal balance between internal and external funding to achieve optimal financial leverage. The analysis covers the different classes of assets recorded and their measurement basis, including inventories, receivables, plant, property, equipment, and goodwill. References include key accounting standards and relevant literature on corporate finance and reporting.

CORPORATE
ACCOUNTING

INTRODUCTION:
 Various sources of funds used by the organizations is discussed.
 The chosen companies for evaluating the funding sources used to
raise the funds are Boral Limited and Brickworks limited.
 Concepts of provisions in the standard “AASB 137 provisions,
contingent liabilities and contingent assets” is analysed.
 Assets and liabilities are examined along with their basis of
measurement.

IDENDIFICATION OF FUNDS USED BY
COMPANIES:
Internally generated funds
 Retained earnings
 Equity shares or contributed equity
Externally raised funds
 Borrowings
 Lease financing
 Trade credit

IDENTIFYING THE PERCENTAGE OF
INTERNALLY GENERATED AND
EXTERNALLY RAISED FUNDS
For Boral limited
Year 2019 2018 2017
Internally generated funds 5528.9 5575 5421.2
Externally generated
funds 3233.1 3278.8 3397
Total funds raised by
company 8762 8853.8 8818.2
% of internally generated
funds 63% 63% 61%
% of externally generated
funds 37% 37% 39%

For Brickworks limited
Year 2019 2018 2017
Internally generated
funds 1884001 1761984 1658058
Externally generated
funds 452517 432014 422079
Total funds raised by
company 2336588 2202998 2080137
% of internally generated
funds 81% 80% 80%
% of externally generated
funds 19% 20% 20%

IDENTIFYING MERITS AND
DEMERITS OF FUNDS SOURCES
Merits of equity share
 Credit worthiness
 No mandatory dividend payment
 No collateral required
Demerits of equity share
 Cheaper source
 Formalities and delay
 Dilution of control

Retained earnings merits
 Permanent source
 Readily available
 Enhances credibility
Drawback of retained earnings
 Opportunity cost
 Dissatisfied shareholders
 Uncertain source
Merits of borrowings
 Tax deductibility
 Lower interest rate

Drawback of borrowings
 Reduces borrowing capacity
 Maintaining provisions
 Fixed charges
Merits of trade credit
 Enhances credit worthiness
 Convenient and continuous source of fund
 Boosting sales volume
Drawback of trade credit
 Risk of overtrading
 Limited amounts

EXAMINING DIFFERENT
LIABILITIES REPORTED BY
COMPANIES
Current liabilities
 Trade creditors
 Provisions
 Employee benefits liabilities
 Borrowings and loans
 Financial liabilities
Non current liabilities
 Financial liabilities
 Provisions
 Loan and borrowings
 Deferred tax liabilities and other liabilities

EXAMINING THE KEY
PROVISIONS OF AASB 137
 Provision is regarded as the liability of uncertain things or of
uncertain amount.
 Provision can also be used in context of the items such as doubtful
debts, depreciation and assets impairment.
 Provision recognition is done for the obligation that is independent of
the future events of entity and results from any past events.
 The best estimate of provision is determined by accounting for
uncertainties and risks surrounding around events.

EVALUATING COMPLIANCE OF
BORAL AND BRICKWORKS LIMITED
WITH AASB 137
 Financial report does not mention about the standard, the company has
made reference to recognize provisions.
 Boral limited have satisfied all such condition and have recognised
provisions outlined in the standard.
 Financial report of Brickworks limited clearly reveals that the company
has made reference to the standard AASB 137.
 Brickworks have made provisions related to remediation, employee
benefits, workers compensation and infrastructure costs.

IDENTIFICATION OF DIFFERENT
CLASS OF ASSETS RECORDED:
Current assets
 Receivables
 Inventories
 Cash and cash equivalent
 Assets classified as held for sale and financial assets
 Prepayments,
 Receivables, contract assets
 Derivate financial assets
 Land held for sale
 Assets held for sale
 Current income tax assets