Fortis Annual Report: Account Receivable and Measurement Perspective

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Added on 2023/06/03

AI Summary

This report examines the Accounts Receivable section of Fortis's 2017 annual report. It analyzes how this item relates to the measurement perspective on decision usefulness within accounting theory. The analysis includes a comparison of the 2016 and 2017 figures for Account Receivable, highlighting the impact of trade receivables and the efficiency of realization. The report emphasizes the significance of Account Receivable as a component of working capital and its implications for decision-making. It demonstrates the importance of measurement from an accounting perspective, referencing the fair value or net realizable value of the asset as presented in the annual report. The analysis includes specific excerpts from the Fortis annual report to illustrate key points, such as the recognition of fair value for energy contracts and the estimation of unbilled revenue. The report concludes by summarizing the key findings and their relevance to financial statement analysis. The provided solution demonstrates an understanding of accounting principles and the practical application of financial statement analysis.

FORTIS ANNUAL REPORT ACCOUNT RECEIVABLE ANALYSIS
Question
Examine Fortis's annual report Accounts Receivable and talk about how it relates to measurement
perspective on decision usefulness explain why you feel that this item demonstrates the measurement
perspective. Apply the concepts related to accounting theory and demonstrate that you understand the
measurement perspective. As part of your explanation, include a quotation or excerpt from your
company’s annual report to illustrate the item you’ve identified. • Bibliography / Works cited. Written
portions of your submission should be written in proper business language, and in your own words.
Your report should be properly referenced (any words or ideas other than your own should have a
reference to the source.) This has to only be half a page double spaced. Attached you will find the
annual report.
Answer
The figure for Account Receivable and other Current Asset reported in Financial Statement of the
company is 1131 Million CAD for year ended December, 2017 and 1127 Million CAD for year ended
December, 2016.
The break-up of the same encompassed trade receivable of $ 492 in year 2017 and $507 in year 2016
showing efficient realisation on the part of the company as the sales have increased the year from
2016. Further, it is significant for the purpose of decision making as it is a component of working
capital and the large amount of receivable compared to sales shows poor management on the part of
the company to manage its receivable. Thus, the measurement of receivable is important from
accounting perspective. Further, the same represents the asset that is realisable by the company from
external parties and have a bearing on long term.
Measurement perspective represents the fair value or net realisable value of the asset. It is evident
from the notes to accounts of Fortis Limited as depicted in the lines below:
The fair value of the Corporation’s energy contracts is recognized in accounts receivable and other
current assets and long-term other assets
(fortisinc, 2017)
Further, the measurement of accounts receivable involved an estimation of $ 575 Million in the
consolidated revenue of $8.3 Billion as it is evident from the line here-in-below:
The unbilled revenue accrual for the period is based on estimated electricity and gas sales to
customers for the period since the last meter reading at the rates approved by the respective
regulatory authority
As at December 31, 2017, the amount of accrued unbilled revenue recognized in accounts receivable
was approximately $575 million (December 31, 2016 – $551 million) on consolidated revenue of $8.3
billion for 2017 (2016 – $6.8 billion).
(fortisinc, 2017)
Thus, the asset have majorly been recognised based on fair value perspective or Net realisable Value
in Financial Statement
References