Comprehensive Financial Accounting Analysis of Ansell Ltd

This report provides a detailed analysis of the financial accounting practices of Ansell Ltd. It begins with an examination of the company's expenses, including their classification by function and the rationale behind this method. The report then delves into Ansell Ltd's accounting policies, specifically addressing compliance with Australian Accounting Standards and International Financial Reporting Standards, as well as key issues in consolidation, foreign currency, and noncurrent asset valuation. The core of the report focuses on the notes to the 2016 financial statements, covering the cost of property, plant, and equipment; depreciation amounts, periods, and methods; and the treatment of impairment. The analysis includes figures and tables from the company's annual report to illustrate key points such as depreciation expenses, accumulated depreciation, and impairment calculations. The report concludes by summarizing the key findings regarding Ansell Ltd's financial accounting practices and their compliance with relevant accounting standards.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of Student:
Name of University:
Author’s Note:

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Table of Contents
Introduction......................................................................................................................................2
Task 1: Analysis of Expenses..........................................................................................................2
a. Determination of expenses.......................................................................................................2
b. Reasons for different method of classification of expenses used by the company.................3
Task 2: Accounting Policy...............................................................................................................3
Task 3: Notes to the 2016 financial statement.................................................................................4
a. Cost of plant, properties and equipment..................................................................................4
b. Depreciation amount................................................................................................................5
c. Depreciation period..................................................................................................................6
d. Depreciation method................................................................................................................7
e. Impairment...............................................................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
Ansell ltd is identified as a global leader in terms of providing various types of
production solutions. The main design and development and manufacturing activities of the
company is seen to include range of production solutions which is based on the increasing
demand of the customers. Some of the main products of the company includes industry gloves
and sleeve, medical grade glove, “protective clothing and medical safety devices” (Ansell.com
2018). The important discussions of the study have focused on an analysis of the expenses which
has determined the nature of the expenses for Ansell ltd. Some of the other depictions of the
study has been able to provide possible reasons on different methods of classification of
expenses. The second part of the report have provided the relevant disclosure of information on
accounting policies, changes in the accounting estimates and existence of any error. The last part
of the study is use the notes to financial statements for showing relevant treatment of
depreciation.
Task 1: Analysis of Expenses
a. Determination of expenses
Based on the depiction of annual report for Ansell Ltd. it needs to be discerned that the
company has followed the preparation of income statement by function of expenses. Henceforth,
the expenses are disclosed relevant to their function such as “distribution, cost of goods sold,
selling, general and administration expenses”. The aforementioned method of calculation of
expenses is used with a multistep format along with disclosing the individual expenses under
each function (Bott 2014).

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Figure: Classification of expenses by function
(Source: Sc-cdn-prod.azureedge.net. 2018)
b. Reasons for different method of classification of expenses used by the company
The main reason for following other method of expenses is mainly discerned with
simplicity of presentation of the information. Smaller companies tend to prefer disclosing the
expenses as per single step income statement. Henceforth, in such a case disclosing the expenses
by nature is more appropriate rather than following expenses as function method (Needles,
Powers and Susan V. Crosson 2014). The main reason for the classification of these expenses as
per functional role in larger corporations is more suitable for monitoring of the direct unit which
is immediately assigned to the individual outputs, material consumption, premium, rewards
which are directly linked to outputs. In addition to this, the use of simple method of single step
income statement is able to present the information of expenses with individual items such as
“beginning inventory, purchases, rent expense, depreciation expense, supplies expense, utilities
expense, interest expense and purchases” (Zhong and Li 2017).
Task 2: Accounting Policy
The statement of compliance with the accounting policy for the company is identified
with principles as stated under “Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001”. In addition to this, it is
further identified the group conforms with the “International Financial Reporting Standards
(IFRS)” and explanations accepted by the “International Accounting Standards Board (IAS)”
(Smyth and Whitfield 2017). The three issues in the annual report has been discussed with
“principles of consolidation”, “foreign currency” and “recoverable amount on noncurrent
asset”. During a consolidation process there are many possibilities that the effect of transaction
between entities in the groups are not fully eliminated. Some of the important issues in the
foreign currency has been depicted with differences in recording of foreign currency translation
reserve. The main issue for recoverable amount on the noncurrent assets valued at cost basis is
seen with changes pertaining to the carrying amount of noncurrent assets (Kallamu, Ashikin and
Saat 2015).

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Figure: Issues in The Accounting Policy
(Source: Sc-cdn-prod.azureedge.net. 2018)
Task 3: Notes to the 2016 financial statement
a. Cost of plant, properties and equipment
The “property plant and equipment” along with the “intangible assets” other than those
having “indefinite life are depreciated/amortized” as per “straight-line basis over their useful
economic lives”. The management of the company is responsible for reviewing the useful

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economic life of such assets at least once in a year and any changes pertaining to the useful life
will take the necessary prospective effect on the depreciation rates and carrying value of the
assets (Australian Academy of Business Leadership 2017).
Figure: Treatment of “property plant and equipment and definite life intangible assets”
(Source: Sc-cdn-prod.azureedge.net. 2018)
b. Depreciation amount
The disposition of classification of depreciation amount for Ansell Ltd. has been
discerned with several overheads such as “freehold buildings, leasehold land and buildings, plant
and equipment, building and building under construction”. The total amount for depreciation in
2016 is depicted as $ 29 million. The accumulated depreciation on the overheads has amounted
to $ 361.5 million in 2016. In addition to this, the deposition amount added under the non-cash
items has been discerned as $ 29 million. Based on the information available on deferred tax
liabilities the total depreciation amount on plant and equipment stood $ 85.2 in 2016 (Vafaei,
Ahmed and Mather2015).
Figure: Depreciation on plant and equipment
(Source: Sc-cdn-prod.azureedge.net. 2018)

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Figure: Depreciation on non-cash items
(Source: Sc-cdn-prod.azureedge.net. 2018)
Figure: Accumulated depreciation in 2016
(Source: Sc-cdn-prod.azureedge.net. 2018)
c. Depreciation period
It is discerned that depreciation is generally charged based on “straight-line basis” for
writing off the net cost incurred on individual items of property plant and equipment excluding
land as per the estimated useful life. The “expected useful lives” in the present and previous
years are considered with 20 to 40 years for freehold buildings, lesser than 50 years or life of
lease for leasehold buildings, 3 to 20 years for plant and equipment. It needs to be further
understood that the rates associated to the position and amortization are considered for review
every year for more appropriateness (Jack 2015).

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Figure: Assessment of depreciation period for Ansell
(Source: Sc-cdn-prod.azureedge.net. 2018)
d. Depreciation method
The application of depreciation method for recognition and measurement of fixed assets
such as “property, plant and equipment” is duly stated by the company by the use of “cost less
accumulated depreciation and impairment losses”. It used to be further understood that the cost
under this consists of several types of expenditures which are seen to be directly attributable to
the “acquisition of the items”. In addition to this, the subsequent costs are also included with the
“carrying amount” of the assets which are recognized separately only when there is probably
“future economic benefit” associated with the life of assets. In such a case the assets will be
measured by the company in a reliable manner (Supriyanto, kharis raharjo 2016).
Figure: method of measurement and depreciation of asset for Ansell Ltd
(Source: Sc-cdn-prod.azureedge.net. 2018)
e. Impairment
The impairment is applicable to the non-tangible assets such as goodwill. The goodwill
and “intangible assets with indefinite life” are treated under impairment at least once in a year. It

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is to be further understood that the carrying amount for such assets execute the defined benefit
for “fund assets, deferred tax assets and financial assets” which are reviewed with the relevant
indicators of impairment (Abhayawansa and Guthrie 2014). In case such gauges exist, the asset
is considered for impairment as per the carrying amount. It needs to be further understood that
the “recoverable amount” of such an asset is determined by high cost of disposal and value. The
recoverable amount of the “CGU” is generally depicted with “value in use calculation” utilized
with the “five-year cash flow projections”. It is further understood that the cash flows used for
value in use are estimated with the current condition and henceforth it does not include the cash
outflows are cash inflows to enhance the asset performance are such elements which may arise
from future restructuring. Moreover, the average annual sales growth rates are applicable as per
the discounted cash flow model which ranges between 2% to 4%, whereas the growth in the
terminal year is depicted as 2% to 3% (International Accounting Standards Board 2016).
The “impairment loss” is documented by Ansell whenever the “carrying amount of an
asset or its CGU exceeds its recoverable amount”. This loss is recognized in the income
statement under cost of “goods sold and selling, general and administration expenses”. In case
there is no amount which can be related to the objectivity of an event the impairment loss is
reversed (Muhammad and Scrimgeour 2014).

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Figure: Notes to impairment for Ansell Ltd
(Source: Sc-cdn-prod.azureedge.net. 2018)
Conclusion
Determination of classification of expenses by the company's discerned with preparation
of income statement by function of expenses. Henceforth, the expenses are disclosed relevant to
their function such as “distribution, cost of goods sold, selling, general and administration
expenses”. The rationale for following different classification method of expenses is mainly
discerned with the differing size of organization, presentation and simplicity. Some of the
important issues in the foreign currency has been depicted with differences in recording of

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foreign currency translation reserve. The main issue for recoverable amount on the noncurrent
assets valued at cost basis is seen with changes pertaining to the carrying amount of noncurrent
assets.It is further observed that depreciation is generally charged based on “straight-line basis”
for writing off the net cost incurred on individual items of “property plant and equipment”
excluding land as per the “estimated useful life”.

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References
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10.1111/auar.12012.
Ansell.com. (2018). Mission and Values. [online] Available at:
http://www.ansell.com/en/About/Corporate/Mission-and-Values.aspx [Accessed 17 May 2018].
Australian Academy of Business Leadership, S. (2017) ‘Australian Academy of Accounting and
Finance review.’, Australian Academy of Accounting and Finance Review, 1(1), pp. 44–68.
Available at: http://www.aaafr.com.au/index.php/AAAFR/article/view/3.
Bott, R. (2014) Accounting, Igarss 2014. doi: 10.1007/s13398-014-0173-7.2.
International Accounting Standards Board (2016) ‘IAS 36 Impairment of Assets’, IFRS Green
Book 2016, pp. B2459–B2570. doi: 10.9780/22315063.
Jack, L. (2015) ‘Future making in farm management accounting: The Australian “Blue Book”’,
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Market’, Asian Journal of Finance & Accounting, 6(1), p. 271. doi: 10.5296/ajfa.v6i1.5486.
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la=en&modified=20170823225606 [Accessed 17 May 2018].

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