Financial Analysis: Owner's Equity and Liabilities of ASX Companies

This project report provides a comprehensive analysis of the owner's equity and liabilities sections of two ASX-listed companies, AMP Limited and Boral Limited, within the materials industry. The report is divided into two parts, with Part A examining the specific items included in the owner's equity (common stock, retained earnings, accumulated other comprehensive income, and other equity) and liabilities sections (short-term debt, long-term debt, deferred income tax, and other liabilities). It details the movements in these items over a three-year period (2016-2018) and discusses the relative advantages and disadvantages of each company's sources of funds. Part B explores the concepts of small, large proprietary companies, and reporting entities. The report uses financial data to illustrate key accounting principles and provides insights into corporate financial management. The analysis covers the movement in each item recorded under the owner equity section and liabilities section. The report's conclusion summarizes the key findings and implications of the analysis, offering a clear understanding of corporate financial reporting and analysis.

CORPORATE AND
FINANCIAL
ACCOUNTING

ABSTRACT
The project report summarizes about items included in the owner's equity section and
liabilities section of two ASX listed companies. As well as concept of different companies such
as large, small and reporting entity is also mentioned.

Table of Contents
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
PART (A).........................................................................................................................................4
(I) Items which are recorded in the owner's equity section of both companies..........................4
(ii) Explanation of the movement in each item recorded under the owner equity section.........5
(iii) Explanation of items that are recorded under liabilities section..........................................7
(iv) Explanation of the movement in each item recorded under the liabilities section.............8
(v) Explanation of the relative advantages or disadvantages of each sources of fund each of
selected companies is using......................................................................................................10
PART (B).......................................................................................................................................11
Concept of small, large proprietary company and reporting entity..........................................11
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12
APPENDICES...............................................................................................................................13

INTRODUCTION
The term accounting is very crucial for each and every kind of organisations for
management of financial transactions in an effective manner (Krasodomska and Cho, 2017).
The corporate accounting can be defined as a type of accounting that is linked with gathering all
kind of financial data and preparation of financial accounts so that financial resources can be
managed. It is important to know that this type of accounting is essentially required by
companies. While the financial accounting is associated with preparation of final accounts of
organisations as well as become an important framework better planning. The project report is
categorised into two parts A and B. In part A, items that included in equity section, liabilities
section are described in broad sense. In addition, importance and drawback of sources of fund for
selected companies is also mentioned. While in part B, concept of small, large and right entity is
explained.
For completing part A of project report two companies which are listed in ASX are
selected. The two companies are AMD limited and Boral limited. Both of companies are in the
material industry
MAIN BODY
PART (A)
(I) Items which are recorded in the owner's equity section of both companies.
Owner's equity- In general, the owner's equity defines an owner's ownership in company.
So in this section of balance sheet, those items are included that invested by an organisation's
owner in business (Hussain, Rigoni and Orij, 2018). Herein, below items that are recorded in
owner's equity section are described that are as follows:
AMP limited :
 Common stock- This can be defined as a kind of stock whose holders have right to vote
in companies' operations and activities. In addition, the holder of this stock is being
preferred as owner of company due to having more rights.
 Retained earnings- It may be defined as those earnings which remain after making
payment of dividend to shareholders. This is being considered as a saving for companies
as well as included in owner's equity section.

 Accumulated other comprehensive income- As name assists, this can be defined as those
income and revenues which are unrealized (Reverte, 2016).
 Other equity- Except from above items rest of all are included in other equities.
Boral limited- In this company's owner equity section, same items are included as above
company.
(ii) Explanation of the movement in each item recorded under the owner equity section.
Under the project report, three years items of owner's equity section are observed of two
various companies. As well as it is usual that there can be movement in financial data of all items
of owner's equity section. Herein, below movement in each item of owner's equity section is
detailed that is as follows:
AMP limited :
 Common stock- In this company, the amount of common stock was of $ 9619 GBP
million in year 2016 that decreased in next year and became of $ 9376 GBP million.
While in next year 2018, it increased by 1.34% and became of $ 9502 GBP million
(About financial statement of AMP limited, 2019). So, this can be seen that company's
common stock is fluctuating year by year.
 Retained earnings- In year 2016, the amount of retained earning was in loss of ( $ 185
GBP million ) that improved little bit in next year 2017 and became of ( $ 164 GBP
million ). On the other hand, in year 2018 this changed in a negative manner and became
of ( $ 886 GBP million ). This is showing that company's savings are weaker in all three
years but specially in year 2018, it was in poor conditions. The reason of this situation
can be lower net profit of company in all of three years.
 Accumulated comprehensive income- This company's comprehensive income was of $
156 GBP million in year 2016 that decreased and became of $ 101 GBP million in year
2017. On the other hand, in year 2018 the change in this income was positive because it
was of $ 193 GBP million.
 Other equity- The amount of other equity was of ($ 2128 GBP million) in year 2016 that
improved little bit and became of ( $ 2111 GBP million ) in year 2017. On the other

hand, in year 2018 this was of ( $ 2124 GBP million ). So overall, company does not
have any amount of other equity in all of three years.
Boral limited:
 Common stock- In this company's balance sheet the amount of common stock is constant
in two years 2017 and 2018 that is of $ 4265 GBP million (About financial statement of
Boral limited, 2019). While in year 2016, it was of $2246 GBP million. Hence, there is
no any movement in company's common stock.
 Retained earnings- The amount of retained earnings of above company is fluctuating year
by year. Such as in year 2016, it was of $ 1098 GBP million that increased in next year
by 5.28 % and became of $ 1156 GBP million. Though, in year 2018 it increased and
became of $ 1310 GBP million. Hence, it can be find out that company's retained
earning was better in year 2017 while in year 2016, it was lower.
 Accumulated comprehensive income- The comprehensive income of this company was
of $99 GBP million in year 2016. In year 2017, it changed and became comprehensive
loss of $ 26 GBP million. As well as in year 2018, this raised and became of $ 115 GBP
million. It shows that company's accumulated comprehensive income is increasing and in
better position except from year 2016.
 Other equity- Except from above mentioned equities, company has some other equities
whose amount was of $ 64 GBP million in year 2016 that decreased and became of $ 45
GBP million in year 2017. As well as in next year 2018, it was of $ 41 GBP million. So
the movement in the amount of other equities is in negative manner that is decreasing.
(iii) Explanation of items that are recorded under liabilities section.
In general, there are two kinds of items are included in liabilities section which are
current and non current liabilities. Herein, below description of items included in liabilities
section of both of companies is mentioned that is as follows:
AMP Limited:
 Short term debt- As name assists, this can be defined as those debts or loans which are
acquired by companies for a shorter time period. Generally, this kind of loan is taken for
less then one year for making payment of day to day operations and activities.

 Long term debt- This kind of debt is opposite of short term debt. It is so because, this is
being taken for long time period that can be more then one year (Cho and Chun, 2016).
The long term loan is being taken by companies for purchasing large machineries or for
making any investment in any project.
 Deferred income tax- It can be defined as a kind of liability that occurs on the basis of
earned income and recorded in company's balance sheet which is not paid.
 Other liabilities- Apart from other liabilities, rest liabilities are included in this. These can
be current and non current liabilities.
Boral limited:
1. Current liabilities:
 Short term debt
 Capital leases- This can be defined as a type of agreement in that lessor transfers the
ownership rights to lessee after end of lease period.
 Accounts payable- It is also a current liability for companies that occurs due to credit
purchase or any small loan. In this, companies become liable to pay their creditors.
 Deferred income tax
 Other current liabilities
2. Non current liabilities:
 Long term debt
 Capital leases
 Deferred tax liabilities- It is a kind of tax liability that occurs in current time period and
not yet paid. This is being considered as a liability for companies.
 Deferred revenue- This is also a non current liability for companies which raises due to
sale of those goods whose payment is not done by customers (Wahyudin and Solikhah,
2017).
 Pension and other benefits- Companies pay pension and various kind of benefits to their
retired and current employees. This becomes obligation for organisations to provide
financial benefits to their employees and it acts as a liability.
 Other long term liabilities

(iv) Explanation of the movement in each item recorded under the liabilities section.
Under the project report, three years items of liability section are observed of two various
companies. As well as it is usual that there can be movement in financial data of all items of
liability section. Herein, below movement in each item of liability section is detailed that is as
follows:
AMP limited :
 Short term debt- The above company had short term debt of $ 8832 GBP million in year
2016 that decreased in year 2017 and became of $ 3728 GBP million. While in year
2018, it again decreased and became of $ 3245 GBP million. This shows that company's
loans are decreasing year by year. The reason of it can be that organisation may not be
dependent on loans for completing their operations.
 Long term debt- In year 2016, company took long term loan of $ 5241 GBP million that
raised in next year 2017 and became of $ 7654 GBP million. While in year 2018, it
decreased by just $ 27 GBP million and became of $ 7627 GBP million. This shows that
company is increasing the amount of long term loan year by year. The reason of it can be
that company may be expanding money in larger projects which is leading to dependency
on loans.
 Deferred income tax- The amount of this liability was of $ 2001, 2261 and 1706 GBP
million in year 2016, 2017 and 2018. Herein, the reason this difference can be change in
earned income.
 Other liabilities- The company had other liabilities of $ 116445 , 127159 , and 125909
GBP million in year 2016, 2017 and 2018. Key reason of this fluctuation can be due to
companies operations and activities.
Boral limited
1. Current liabilities:
 Short term debt- The amount of short-term debt is inconsistent such as in year 2016, it
was of $ 359 GBP million that increased by huge difference and became of $ 414 GBP
million. On the other hand in year 2018, this decreased and became of $ 13 GBP million.

 Capital leases- Company had capital lease of $ 1 GBP million in 2016 that increased and
became of $9 GBP million in next year. As well as again in year 2018, it decreased in a
similar manner and became of $6 GBP million.
 Accounts payable- The amount of this current liability was of $ 608 GBP million that
increased and became of $ 812 GBP million in year 2017. While in year in 2018, it was
of $ 752 GBP million. The reason of this difference can be increase and decrease in
credit transactions.
 Deferred income tax- The company had deferred income tax of $37 GBP million in year
2016 that increased and became of $64 GBP million. While in year 2018, it decreased
and became of $20 GBP million.
 Other current liabilities- The amount of other current liability was of $177 GBP million
that decreased and became of $169 GBP million in year 2017. On the other side, in year
2018 it was of $204 GBP million.
2. Non current liabilities
 Long term debt- The amount of long term debt was higher in year 2018 that was of $2497
GBP million. While in year 2016 and 2017, it was of $1009 and $2168 GBP million
respectively.
 Capital leases- The amount of capital lease was of $3 GBP million in year 2016 that
increased and decreased in next two years.
 Deferred tax liabilities- In 2016-17, there was no any deferred tax liability while in year
2018, it was of $40 GBP million.
 Pension and other benefits- Company paid pension & other benefits of $11. 44 and 41
GBP million in three years. The reason of this movement can be change in number of
employees.
 Other long term liabilities- The amount of other long term liabilities were of $59 GBP
million in year 2016 that increased and became of $ 186 and 197 GBP million in year
2017 and 2018.

(v) Explanation of the relative advantages or disadvantages of each sources of fund each of
selected companies is using.
AMP limited company:
 Short-term loan- This is a kind of source of fund in that is being used by companies for
shorter time period of less then one year.
Advantage- Its advantage is that this is easy to get as well as fulfil the need of working capital
requirement.
Disadvantage- Higher interest rate is the main issue of this source of fund.
 Long term loan- It is a type of source of fund that is being taken by organisations for
longer time period of more then one year (Gupta, 2016).
Advantage- This is easy to pay back of option of paying in small instalments.
Disadvantage- It is not easy to get because under this loan is provided on the basis of
company's credit score.
 Retained earnings- This is an internal source of fund that remains in companies after
making payment to shareholders.
Advantage- There is no requirement of any additional cost to get this fund.
Disadvantage- This is not utilized by companies in an effective manner.
Boral limited:
This company have similar sources of fund as above company have.
PART (B)
Concept of small, large proprietary company and reporting entity.
1. Small proprietary company- An entity is being called a small proprietary company if has
minimum two below mentioned features:
 If an entity has assets whose amount is less then $12.5 million at the end of year.
 If number of employees are less then 50.
 If amount of gross revenue is less then $25 million (Rouf, 2017).

Compliance and reporting requirement- In this kind of company, there is no any specific
compliance and reporting requirement. It is so because this type of company is being operated at
a small level hence, they do not have shareholders who want to see their financial statements.
2. Large proprietary company- An entity is being called a small proprietary company if has
below mentioned features:
 If an entity has assets whose amount is more then $12.5 million at the end of year.
 If in an entity has number of employees more then 50 and till without any limit.
Compliance and reporting requirement- It is essential for these kind of companies to follow a set
of rules and regulations as well as present financial statement in front of shareholders after
auditing. They apply the compliances as per Australian securities and investment commission.
3. Reporting entity- It may be defined as an type of company in that prepares and presents the
financial statements to all kind of their internal and external stakeholders.
Compliance and reporting requirement- This kind of entity implements the compliances as per
Australian accounting standard board. In addition, it is essential for these entities to present the
financial statement to various kind of stakeholders (Haller, Link and Groß, 2017).
CONCLUSION
As per above project report, it can be concluded that organisation's financial statements
include information about different financial transactions. In the report, items that are included in
owner's equity and liability section are concluded. In addition, the critical evaluation of sources
of funds that is being used by chosen companies is also mentioned. While in the end part of
project report concept of large, small and reporting entity is described.

REFERENCES
Books and journals:
Krasodomska, J. and Cho, C. H., 2017. Corporate social responsibility disclosure: Perspectives
from sell-side and buy-side financial analysts. Sustainability Accounting, Management
and Policy Journal. 8(1). pp.2-19.
Hussain, N., Rigoni, U. and Orij, R.P., 2018. Corporate governance and sustainability
performance: Analysis of triple bottom line performance. Journal of Business Ethics.
149(2). pp.411-432.
Reverte, C., 2016. Corporate social responsibility disclosure and market valuation: evidence
from Spanish listed firms. Review of Managerial Science. 10(2). pp.411-435.
Cho, E. and Chun, S., 2016. Corporate social responsibility, real activities earnings management,
and corporate governance: evidence from Korea. Asia-Pacific Journal of Accounting &
Economics. 23(4). pp.400-431.
Wahyudin, A. and Solikhah, B., 2017. Corporate governance implementation rating in Indonesia
and its effects on financial performance. Corporate Governance: The International
Journal of Business in Society. 17(2). pp.250-265.
Gupta, A., 2016. Financial Accounting for Management. Pearson Education India.
Rouf, M .A., 2017. Firm-specific characteristics, corporate governance and voluntary disclosure
in annual reports of listed companies in Bangladesh. International Journal of
Managerial and Financial Accounting. 9(3). pp.263-282.
Haller, A., Link, M. and Groß, T., 2017. The term ‘non-financial information’–a semantic
analysis of a key feature of current and future corporate reporting. Accounting in
Europe. 14(3). pp.407-429.
Online:
About financial statement of AMP limited, 2019. [online]. available through:
<http://financials.morningstar.com/balance-sheet/bs.html?
t=AMLYY&region=usa&culture=en-US>
About financial statement of Boral limited, 2019. [online]. available through:
<http://financials.morningstar.com/balance-sheet/bs.html?
t=BLD&region=aus&culture=en-US>

APPENDICES
1. Balance sheet of AMP limited:
2. Balance sheet of Boral limited: