Financial Report Analysis: Comparing Sirtex and Altech Chemicals

This report provides a comprehensive analysis of the financial statements of Sirtex Medical Limited and Altech Chemical Limited, two companies from different industries. The analysis focuses on four key areas: leases, liabilities (including contingent liabilities and provisions), earnings per share (EPS), and intangible assets. The report examines the companies' policies, the impact of accounting standards (particularly AASB 16 on leases), and compares their financial performance in these areas. It includes a literature review of relevant studies and offers findings and recommendations based on the analysis. The report also covers the concept of EPS, its calculation, and its significance for investors, highlighting the contrasting EPS performance of the two companies. The report provides a clear understanding of the financial health and performance of these two companies based on the specific financial statement areas highlighted in the report.

Running head: CORPORATE FINANCIAL REPORT ANALYSIS
CORPORATE FINANCIAL REPORT ANALYSIS
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Author’s Note:

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CORPORATE FINANCIAL REPORT ANALYSIS
Executive Summary
The main purpose of this report is to analyze the financial statements of two separate companies
which belong to different industries. The report will be analyzing four different area of the
financial statement and what impacts theses assets have on the financial report of the companies.
The area which this report will be discussing are leases, liabilities including contingent liabilities
and provisions, Earning per share, intangible assets. The two selected companies for this
assignment are Sirtex Medical Limited and Altech Chemical Limited.

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Table of Contents
Introduction......................................................................................................................................3
Overview......................................................................................................................................3
Part 1................................................................................................................................................3
Concept........................................................................................................................................3
Company Analysis of Leases.......................................................................................................4
Literature Review........................................................................................................................6
Measures and Findings................................................................................................................7
Part 2................................................................................................................................................7
Concept........................................................................................................................................7
Company Analysis of EPS...........................................................................................................8
Literature Review........................................................................................................................9
Measures and Findings..............................................................................................................10
Part 3..............................................................................................................................................10
Concepts....................................................................................................................................10
Company Analysis.....................................................................................................................10
Literature Review......................................................................................................................11
Measures and Findings..............................................................................................................12
Part 4..............................................................................................................................................13
Concept......................................................................................................................................13

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CORPORATE FINANCIAL REPORT ANALYSIS
Company Analysis.....................................................................................................................13
Literature Review......................................................................................................................14
Measures and Findings..............................................................................................................15
Conclusion.....................................................................................................................................15
Reference.......................................................................................................................................17

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CORPORATE FINANCIAL REPORT ANALYSIS
Introduction
The main purpose of this report is to analyze two company’s financial report which
belong two different industries. The companies which are selected for this report are Sirtex
Medical ltd and Altech Chemical ltd. The report will also be analyzing specific areas of the
financial statement and a comparison will be made between the two companies.
Overview
Sirtex Medical Limited is an Australian company which is engaged in providing medical
treatment to the society. The company also provides medical services to the society and treats
patients. The company specializes in radioactive treatment for inoperable liver cancer. The
company has its headquarter situated in Australia and the company was established in 1997.
(Sirtex.com 2018).
The other company which is selected for this assignment is Altech Chemical Ltd which
has its headquarters in Australia and it is also listed in the Australian stock exchange
(Altechchemicals.com, 2018). The company is engaged in providing material and supply of
minerals. The company specializes in the production of alumina. The company is engaged in
exploration and mining activities.
Part 1
Concept
Leasing is the process of financing which is used by the companies in day to day
business. In a lease agreement, the lessor gives the right to use the property of the lessor to an
individual who is known as lessee for a certain rate of interest. Nowadays lease agreement are
used by businesses extensively for business purposes. The application of leases are more

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prominently used in airline industry, retail industry and shipping industries (Schallheim, Wells
and Whitby 2013). Some of the airline business are also in the business of leasing the aircraft
which is used in the business. Generally leases are of two types operating leases and financial
leases. Operating leases is the lease which is of a short term basis and which is used by
businesses to acquire equipment on short term basis. Generally the useful life of the asset
acquired in an operating lease is more than the term of use of the lease. As per the previous
standard on leasing operating leases were not disclosed and represented in the balance sheet of
the company. Financial leases are more frequently used in business where assets are brought by
the lessor in order to finance theses to the lessee for a certain rate of interest. Financial leases are
recorded in the financial reports of the business.
Company Analysis of Leases
As per the balance sheet of Sirtex Medical ltd, the terms of leases of the company are that the
lease payments for operating leases, where all the risks and benefits remain with the lessor and
charged as expenses in the period in which such expenses are incurred. All leases are recognized
as a liability and amortised accordingly on the straight line basis as per the policy of the
company. Sirtex Medical ltd has recently replaced AASB 117 with the new lease standard AASB
16 which recognizes all leases as liability and are accounted for on balance sheet, other than
short term and low value leases. The new lease standard provides new effect on the definition,
application, sales and back accounting of lease transactions (Cornaggia, Franzen and Simin
2012). The new standard also requires proper disclosures of the same in the annual reports of the
company. As the management has implemented the new AASB 16 currently so the effect on the
financial report is not ascertained completely. However the management expects the following
changes will take place:

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a. Significant increase in the leases assets and financial liabilities in the balance sheet.
b. The value of lease assets will decrease more quickly than lease liabilities due to the effect
of reported equity
c. EBIT as shown in the profit and loss account will be higher as former leases interest will
all be part of the finance cost of the business.
The consolidated balance sheet shows that the company has leases in Sydney, Singapore,
Germany and also in United States. The duration and the remaining useful life of such leases
are shown in the figure below:
Figure1: Table showing Operating Leases of Sirtex Medical ltd as per 2016 annual
reports
Source: (Sirtex.com 2018)
As per the annual report of Altech Chemical ltd for 2016, shows that the company has
leases in the financial statements. As per the company’s policy such leases are recognized as
operating or financial leases based on the economic substance of the lease which reflect the risk
and benefits associated with that particular lease. The company policy is to recognize the leases
as per the old standard of the company and apply straight line method of amortization on such
leases. The company plans to introduce AASB 16 from 1st January 2019, till then the old

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standard will be used in order to recognize leases. As per the management of Altech Chemical
ltd AASB 16 will introduce change in the management by not differentiating operating and
financial leases from each other. The management of the company is of the view that the new
standards implementation will be affecting the Group’s financial statement but the exact estimate
of impact is not possible to predict. As per the annual reports of the company for 2016, the
company holds various mineral leases which they can use for exploration. The company is in the
production of minerals and production of alumina.
Literature Review
As per studies show that as per the old standard on leases there are two types of leases
which are recognized. One is the capital leases or finance lease which is shown in the financial
statements and another is off balance sheet leases which are operating leases which are not
recorded in the balance sheet of the company (Altamuro et al. 2014). In an article it is shown
that a large number of business uses off balance sheet leases or operating leases in order to
strengthen their balance sheet as the level of debts are not shown in such a balance sheet. Various
time series data show such similar results (Cornaggia, Franzen and Simin 2012). Another study
which was conducted on Hong Kong fast food industry shows the problem of implementation of
the new standard of leasing. The lease was introduced by IASB in order to tackle the problems
which the previous standard faced. The other aim was to ensure that the financial statements
reflect true economic reality of the company (Tai 2013). A recent study shows that a research
was conducted on how much amount of operating leases companies uses in order to finance their
activities. The research was conducted on the top 40 JSE listed companies. The aim of the
research is to show how the new standard on leases will impact such companies (De Villiers and
Middelberg 2013). An investigation was undertaken to the effect of capitalizing operating

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leases on firm’s immediacy to
their debt covenant violations. The results of analysis show that the US companies uses such
leases as instruments for generating capitalization in the companies (Lee, Paik and Yoon 2014).
Measures and Findings
As per the analysis of the above area on the lease of both the companies the following
recommendations can be suggested which are given below:
1. Sirtex Medical Limited has implemented the new standard AASB 16 which records all
kinds of leases, however Altech Chemical has not yet implemented the new standard and
therefore the company should implement the new standard as soon as possible earlier
than 2019.
2. The operating leases of Sirtex limited is much more as compared to Altech limited which
can be reduced as with the implementation of the new standard the cost of the company
will also be increasing.
3. Both company uses straight line of amortization of such leases.
Part 2
Concept
Earning per share is that portion of profit which can be attributed to each and every
issued share capital of the company. In other words Earning per share(EPS) is the amount of
profit per share which the investors of the company receives as dividends. As per the formula
EPS is calculated by dividing Profit after tax (PAT) by the total number of shareholders of the
company. a company which has high EPS is capable to provide dividends to the public or it can
use this profits as retained earnings and reinvest in the business for the further growth of the

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business (Zeitun and Tian 2014). This is also a measure for profitability of the company. many
investors use this EPS of a company to make decisions whether to invest, retain or sell the shares
of the company. The EPS of the company is shown in the financial report of the company. EPS is
shown in two parts Basic EPS and Diluted EPS. Basic EPS is the amount of profit which is
available for the common shareholders of the company during a reporting period whereas
Diluted EPS considers the convertible shares also. These convertible shares of the company
consist of preferred shares, convertible debentures, stock options.
Company Analysis of EPS
As per the analysis of the Sirtex Medical Limited’s financial report, the company has a
growing EPS. The company has been targeting the earing per shares growth as the target of the
company. The growing rate of Earning per share of the company will definitely be improving the
performance of the group. Increasing earning per shares reflect that the company has increasing
returns on the capital which was contributed by the shareholders. The basic earning per share of
the company is 93.7 cents which has increased from the previous year eps which was 71.4 which
shows the growth of the company in terms of EPS.
Figure 2: (Table Showing EPS growth)
Source: (Sirtex.com 2018)

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As per the balance sheet of Altech Chemical ltd, the EPS of the company is subdivided in
basic and diluted EPS. The basic earning per shares is calculated by dividing net loss by the
weighted average number of shares of the company. The diluted earning per share is calculated
by dividing net loss by weighted average number of shares and also dilutive potential shares. The
basic EPS of the company is in negative figure .0008 which has slightly improved from the
previous year figure.
While analyzing the EPS of both the companies it is easily depicted that the EPS of the
Sirtex ltd is much better than the EPS of Altech ltd. The basic reason for this is the Altech ltd has
incurred a loss in the year 2016 as well as 2015, thus the EPS depicts a negative figure.
Literature Review
The Eps of any company is a performance indicator of the company which the investors
consider in the business. It is also an indicator for the investors whether to invest in the stocks or
not. Thus investors and stock brokers consider the Eps of the company which has a growing Eps
rate in order to invest in them (Sumangala 2012). Earning per share of any company is
considered to be an important factor in order to determine the share price and value of the firm.
Recent studies show that most of the investors take their decisions about investing in a stock on
the basis of the EPS which the company has acquired (Islam et al. 2014). Any company is
required to show the Eps of the company in the financial statements. The earning per share is
divided into basic Eps and Diluted Eps (Jorgensen, Lee and Rock 2014). Earning per share is that
portion of profit which can be attributed to each and every issued share capital of the company.
In other words Earning per share(EPS) is the amount of profit per share which the investors of
the company receives as dividends. As per the formula EPS is calculated by dividing Profit after
tax (PAT) by the total number of shareholders of the company (Bonaimé 2012).

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Measures and Findings
As per the analysis of the above area on the earning per share of both the companies the
following recommendations which can be provided are for Altech Chemical ltd. The company
needs to improve their earning per share as this is an important indicator of how the company is
performing. In addition to this the company needs strategies which can result in growth rates of
Eps like Sirtex ltd.
Part 3
Concepts
The liabilities of the company include the current and non current liabilities as per the
balance sheet. The current liabilities consist of all the liabilities which have to be paid off with in
a period of one year or even less such as trade payables and the non current liabilities includes
liabilities which are of long term nature such as long term debts. Trade payables or the creditors
which gives money or supplies to the company for credit (Kapan and Minoiu 2013). Long term
debts on the other hand are also credits which the business takes for a longer period say 4 to 5
years or even longer.
Company Analysis
As per the financial statement of Sirtex Medical Limited, the company has current
liabilities which includes trade payables and others, current tax liabilities and provisions. The
total of trade payables and others show a figure of $28090000 for the year 2016. The break up of
trade payable is $16296000 and the other payable as shown in the notes of accounts is
$11794000. Then comes the current tax liabilities of the business which refers to the liabilities
which relates to income tax of the company. The current tax liability of the company as per the
financial statement of 2016 shows $7239000. The provision refers to the amount which is kept