Comprehensive Analysis of Origin Energy's Financial Reporting

This report provides a detailed analysis of Origin Energy Ltd's financial statements, focusing on its adherence to International Accounting Standards (IAS). The analysis covers various aspects of the company's financial reporting, including the balance sheet, income statement, inventory valuation, and the treatment of assets and liabilities. The report examines the company's remuneration report, conceptual framework, and its compliance with IAS 37 concerning provisions, contingent assets, and liabilities. Furthermore, the report compares Origin Energy with AGL Energy Limited and discusses the company's transfer pricing policies and the application of prudence in the conceptual framework. The report is a comprehensive overview of Origin Energy's financial performance and reporting practices.

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Accounting
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Executive summary
This report focuses on Origin Energy Ltd, which is an Australian energy distributing company.
The main focus points include the way the company’s financial statements are prepared in
accordance to the International Accounting Standards(IAS). Some of the accounting statements
that will be looked at include: the balance sheet where we shall analyze how the Assets,
Liabilities, inventory and directors remunerations are accounted for in relation to IAS and also
other similar companies.

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Table of Content
Introduction.................................................................................................................................................4
Analysis of General Purpose Finanacial Report..........................................................................................4
Remuneration Report..............................................................................................................................4
Conceptual Framework...............................................................................................................................6
Income statement.........................................................................................................................................7
Inventory analysis....................................................................................................................................8
IAS 37 Provisions, Contingent Assets and Contingent Liabilities..............................................................9
Assets....................................................................................................................................................10
Present obligation.................................................................................................................................10
Transfer Pricing.........................................................................................................................................12
Prudence in conceptual framework.......................................................................................................12
Conclusion...........................................................................................................................................14
Appendix...................................................................................................................................................16

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Origin energy company
Introduction
Origin energy was established in 2000. It was after a demerger from Boral limited, in which
energy aspect of the business was removed from the building and construction business. The
company has over the year acquired other companies to increase its revenues and marketshare in
Australia (A review of the conceptual framework for financial reporting, 2013). In 2002, the
company acquired PowerCor, Citipower and Victorian electricity. Many other companies have
been acquired by Origin energy in a bid to be a market leader that it is today. In this paper we
shall analyse the financial statements of this company and establish if they are prepared in
accordance to the conceptual framework and other accounting standards.
Analysis of General Purpose Finanacial Report
Remuneration Report
As the statement of Operating and Financial Review (OFR) show, EBITDA for the year 2016
was $231 million. The company has not issued any dividends in 2016 and 2017, however the
company issued a dividend per share of 25 cents in 2015. Based on this figures, we can say that
the company has not been doing well in terms of creating wealth for the shareholders.

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+
Remuneration of shareholders are in line with shareholders returns. This is what companies are
implementing so that they do not pay director a lot of money while the most important person in
the company (the shareholder is not being rewarded as he ought or the performance of the
company does not allow the company’s directors to be paid as high as they are being paid.
The remuneration of the director is an operating expense of the company.According to IASB it
shows that in order to determine the result for the year - the total sales of goods or services made
by the company, net of costs. This first line of the results table will reflect the gross profit
obtained by the company at the end of the year. In economic terms, this gross profit is the one
that will enable the entity to meet its operating costs, including: 1) ordinary administrative,
marketing and financial expenses; 2) the remuneration of administrators, directors and trustees;
3) other fees and remuneration for services; 4) salaries, wages and the respective social
contributions; 5) royalties and fees for technical and other similar services; 6) advertising and
advertising expenses; 7) taxes, fees and contributions; 8) interest paid or accrued by classifying
them as suppliers, banks or financial institutions, subsidiaries, controlling or affiliated companies

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and, finally, depreciation and provisions(A review of the conceptual framework for financial
reporting, 2013). . Origin energy Ltd has done exactly this in preparing its financial statements.
. If the director's fee Origin energy is an operating expense as clearly stated in IASB I find
no reason to "limit" it, and less, "condition it" to profits (A review of the conceptual framework
for financial reporting, 2013). Therefore, the remuneration of the directors of this company are in
line with the standards set in the world and also the other companies such as AGL Energy
Limited use this methods and standards to remunerate their directors. The paradoxical (or
perverse of our system) is that if the director provides the company with other professional
services that are outside the managerial function (eg advertising, development, research,
technical advisory services, etc.) , The price for these services will not find any limit or
condition; Except, of course, that the service is contracted under market conditions and is normal
for the activity of the managed company.
Conceptual Framework
The board of Origin energy has adopted the use of IFRS(international Financial Reporting
Standards) when preparing and reporting its financial status. The objectives of the general
purpose financial information is to meet the needs of the various stakeholders and users such as
investors, creditors , investors , tax authorities e.t.c. The financial statements helps users predict
value and other predicting outcomes. Faithfful representation requires the company to disclose
all necessary information and represent what it purports. The financial statements have also been
prepared in a way to enhance comparability with industry and other similar companies.
Now let us suppose for a moment that the remuneration of our director was reasonable (Ezzamel,
2005). Or agreed to market values will inevitably present the limit of set in the company’s

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constitution if at the close of the balance the shareholders notice that the profits of the fiscal year
were not as bulky as they expected, and the worst thing is that the same problem will be
presented to us at the end of the year, the shareholders warn that the profits were as bulky as they
expected but They decide to send them in full to reservations (IASB proposals for first-time
application of international financial reporting standards, 2002). That is, while the loyal and
diligent director advises to follow a conservative dividend policy, which is accepted by the
shareholders, he will be entitled to a remuneration that cannot exceed 5% of the profits of the
fiscal year. consequently, while shareholders benefit from diligent management, they may see
their compensation decimated if 5% of the year's profits do not reasonably compensate for the
position and the responsibilities assumed (Bebchuk and Fried, 2006).
If we accept that the director's fee is one of the many operating expenses that the company must
bear: what is the meaning of limiting it to the declared profits and dividends, Is it not the
payment of royalties or other fees for services Contracted with third parties or even with related
parties (directors, trustees or shareholders) one of the many common ways to distribute the
operating profit of the year. If this is so: why discriminate against the director who performs
permanent functions (Executive remuneration and employee performance-related pay, 2013).
Therefore, the directors of Origin energy ltd have been paid in accordance to the set accounting
standards and based on the company’s performance which is what accounting framework
prescribes (Katsikas, Rossi and Orelli, 2017).
Income statement
The image below shows the Net income of Origin Energy for the year 2016,2015 and 2014
respectively. All the reprting has been done in accordance to the International Financial

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Reporting Standards(IFRS). The company has not understated any of its expenses, for example
the salaries reported are a true reflection of what the company actually paid. The revenues are
also a fair reflection of the company’s line of income. The taxes part has however not been
included showing the company’s obligations to the government but all the other details in the
have been posted in accordance to International Accounting Standards.
Inventory analysis
The inventory of the company are valued at net realizable value or lower cost as per the AASB
guidelines. However, the directors report has not made it clear on how the measurement of cost
is done and also the provision for losses. Oil and gas companies such as Origin energy must have
the ability and Capacity to deal with any changes in any situations trhat may occur for example
the decreasing oil prices that was experienced in 2014. Decrease in prices of oil decreases

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inflation, which forces the company to stop drilling. Origin energy is also affected by such
situations.
IAS 37 Provisions, Contingent Assets and Contingent Liabilities
In order to clarify the concepts of present obligation, legal obligation, implied obligation,
contingent assets and contingent liabilities, we can simply refer to IAS 37 in determining
Provisions, of contingent assets and contingent liabilities (Lont, 2010).

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Assets
The company has total assets which is capitalized at the fair value of assets leased and presents
the value of minimum lease. The company has put out financial figures that pertains to long term
and short term assets of the company. The estimated useful life of an asset is the time when the
asset is useful. Assets of a company are used in everyday life when in every other year the
company keeps on increasing its assets. Factors that affect assets are time, depreciation and
useful life.
Present obligation
In some rare cases it is not clear whether or not an obligation exists at the present time. An event
occurring in the past has given rise to a present obligation if in Origin Energy , taking into
account all available evidence, there is a greater probability that the obligation has been incurred,
at the balance sheet date, otherwise (Knell, 2006).
We can express the above concept in a simpler way: "When the probability that the obligation
has been incurred is more than 50%".
Legal obligation
It is one that derives from a contract, from the legislation or from another legal cause. The
company has various legal obligations especially considering it is an Energy company.
Implied obligation

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It is one that is derived from the actions of the company itself, in which:
Due to an established pattern of behavior in the past, to business policies that are in the public
domain, or to a statement made in a sufficiently specific way, the entity has revealed to third
parties that it is willing to accept certain types of responsibilities (Lont, 2010).
Example: A free repair guarantee on the oil products sold by the company for a period of six
months.
Contingent liabilities
It may arise for one of two reasons:
It is unlikely that the company will have to satisfy it, releasing resources that incorporate
economic benefits and the amount of the obligation cannot be assessed with sufficient reliability.

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Provision
Contingent liabilities probability of existence of the current obligation> 50%. If the estimate is
reliable, Provision will be made If the estimate is unreliable,Will be reported in the report
probability of existence of the current obligation <50%. As a conclusion of the above, in order
to determine whether a possible provision should be recognized as an item on the liability side of
the balance sheet, we can carry out an "accounting check", through the two questions and their
answers (Mallin, 2016).
Transfer Pricing
For transfer pricing activities, the company has recorded non. It does not record or disclose the
information related to their policies of transfer pricing.
Comparison with other company- AGL Energy Limited
The companies are both energy producing companies. The company needs the ability to sustain
itself in growth and development like in AGL Energy Limited. AGL is also an energy producing
company in Australia that have a good brand and accounts for its financials in accordance to
AASB standards for financial reporting. The people on valuation have valued the company lower
than its value as per the AASB policies and standards in accounting. Everything should be in the
direction of companies progress in financial reporting and standards.
Prudence in conceptual framework