Financial Analysis of Medibank Australia's 2016 Annual Report

This report analyzes the accounting items and related policies in Medibank Australia's annual report for the financial year 2016. Two main accounting items selected are trade receivables and property, plant, and equipment. The analysis reveals that the financial statements adhere to Australian Accounting Standards Board guidelines. Trade receivables include non-interest bearing accounts valued at fair value initially and amortized cost subsequently, with impairment allowances applied. Property, plant, and equipment encompass assets like land, buildings, and machinery; they are revalued triennially for land and depreciated using the straight-line method. These items constitute 11.15% of total current assets and 20.56% of non-current assets respectively, indicating their importance beyond mere financial metrics. The social impact includes customer engagement via trade receivables and societal implications of corporate property use. The report concludes that annual reports are vital for all stakeholders, offering insights into company performance and strategic direction.

Analysis of Annual Report for the Medibank Australia
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Introduction
This report provides an analysis of the accounting items, accounting policies, and
importance of the accounting items for the company and the society. For this purpose, an annual
report of Medibank Australia for the financial year 2016 has been selected. From the annual
report, two accounting items have been selected and then an analysis into the accounting policies
in relation to these accounting items has been conducted.
Two Accounting Items and their Accounting Policies
Two accounting items such as trade receivables and Property, plant and equipment have
been selected from the annual report of Medibank Australia (Annual report of Medibank, 2016).
The information extracted from the notes to accounts reveals that Metibank prepares its financial
statements based on the financial reporting framework prescribed by the Australian Accounting
Standard Board. In relation to trade receivables, it has been observed that the trade and other
receivables of the bank comprise non-interest bearing accounts. The bank recognizes the trade
and other receivables at the fair value on the initial recognition; however, subsequent recognition
is made at the amortized cost which is computed applying effective interest method. The
allowances for the impairment in the value of receivables is made and reduced from the
amortized cost. The trade receivables falling due for receipt within 12 months are accounted for
as current asset and that falling due after 12 months are accounted for as non-current assets
(Annual report of Medibank, 2016).
The property, plant and equipment comprises of assets such as land and building, plant
and machinery, leasehold assets, and assets under construction (Annual report of Medibank,
2016). The accounting policy in regards to land and building prescribes that land and building is
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to be valued at fair value and that fair is to be reviewed at least after 3 years for revision. The
building is depreciated applying the straight line method over the useful life. Further, the gains or
losses on the disposal of an item of land and building are book in the statement of comprehensive
income. Further, the items of property, plant and equipment are applied for impairment test so
that the carrying amount does not exceed to the recoverable amount of the assets (Annual report
of Medibank, 2016).
Importance of the Selected Items
The trade and other receivables of Medibank are $313.1 million forming part of the
current assets of the bank. The bank holds total current assets of $2,812.50 million. This implies
that the trade and other receivables of the bank are 11.15% of the total current assets. It indicates
that the trade and other receivables of the bank are not much significant. The property, plant and
equipment forming part of the non-current assets of the bank are worth $93.3 million. The total
value of the non-current assets is $453.7 million. The value of property, plant and equipment is
20.56% of the total non-current assets (Annual report of Medibank, 2016). Thus, looking at the
value of the property, plant and equipment, it seems that these items are not significant but
considering the use of these items in the smooth running of the business, it could be inferred that
these are of high importance for the bank (Shim and Siegel, 2007).
Social Impact of the Selected Items
The social impact of trade and other receivables is more important than any other
accounting item of an entity. The trade receivables are the customers who usages the products
and services of the entity. The company strives to fulfill all the requirement of its customer to
flourish and grow in the market. Further, the use of properties by the corporate also has impact
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on the society. The increase in the corporatization will decrease the space of accommodation for
the social lives (Cronin and Dearing, 2017).
Reflection on the Annual Report
The annual report provides information about performance of the company during the
financial year. The annual report of Medibank contains different sections such as director’s
report, financial report, corporate governance report, and business summary. At the starting
pages, the report provides a snapshot of the financial performance over the period of five years
(Annual report of Medibank, 2016). Further, the report provides a glimpse of the business
expansion and future plans of the management. The corporate governance section adequately
reflects the contribution made by the company for the social and environmental developments.
The financial report section provides detailed information on the financial performance and
position of the bank along with explanatory notes and auditor’s report. The annual report of
Medibank seems appropriate; however, improvements could be made in the presentation of the
information (Stittle, 2003).
Conclusion
From the discussion carried out in this report, it could be inferred that the annual report of
a company is an important document for not only the investors but all the stakeholders. The
information provided in the notes accompanying the accounts is crucial for the purposes of
analysis of financial performance.
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References
Annual report of Medibank. 2016. Annual report of Medibank for the year 2016. [Online].
Available at: https://www.medibank.com.au/content/dam/medibank/About-Us/reporting-centre-
2016/Annual%20report/Medibank_Annual_Report_2016.pdf [Accessed at: 18 September 2017].
Cronin, M.J. and Dearing, T.C. 2017. Managing for Social Impact: Innovations in Responsible
Enterprise. Springer.
Shim, J.K. and Siegel, J.G. 2007. Handbook of Financial Analysis, Forecasting, and Modeling.
CCH.
Stittle, J. 2003. Annual Reports: Delivering Your Corporate Message to Stakeholders. Gower
Publishing, Ltd.
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