Financial Analysis of Transurban Holdings Ltd. Report

This report analyzes the financial performance of Transurban Holdings Ltd., focusing on its accounting policies related to toll road concessions, as dictated by Australian Accounting Standards. The report examines the flexibility management has in determining asset values, particularly considering the fixed asset model, and how the company's revenue is highly dependent on toll road services. It also explores the potential impacts of industry risks, such as fluctuations in oil prices, on the company's financial structure, including the balance sheet and income statement. The report highlights the importance of the toll road business for Transurban, the application of AASB 15 for revenue recognition, and the strategic decisions made by the management in maintaining financial stability. The analysis includes a discussion of the Cross City Tunnel acquisition and its implications, emphasizing the need for customer satisfaction and business strength in sustaining revenue and financial performance.

Running head: ANALYSIS OF TRANSURBAN HOLDINGS LTD.
ANALYSIS OF TRANSURBAN HOLDINGS LTD.
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1ANALYSIS OF TRANSURBAN HOLDINGS LTD.
Executive Summary
In this report the analysis of the annual report of Transrurban Holdings Ltd, are made. The
accounting policies that are adopted by the company for maintain the revenue of the company.
The company uses the fixed asset model for maintain the revenue coming from the service of
Toll Roads.

2ANALYSIS OF TRANSURBAN HOLDINGS LTD.
Accounting Policies related to Toll Road Concession
Transurban Holdings Ltd. is engaged in the operations of the toll road that is situated in
Australia. Transurban Holdings Ltd. adopted accounting policies in accordance with Australian
Accounting Standards. Transurban has the right to the toll concession assets during the
concession period. As per the analysis of the annual report of Transurban, it can be identified that
extension for the concession has been granted (Griffin & Wright, 2015). The concession has
been granted for many concessions due road development project and the improvement of the
road development project. After the concession period, all assets are returned to the respective
Government.
Transurban Holdings Ltd. usually uses the accounting policies to maintain the quality of
Toll Roads. The toll roads which are created by the company are to be considered as the asset
and it also taken as a part for future income. These incomes are mainly highlighted in the cash
flow of the company. The service concessions that are received from the toll roads are to be
considered as the revenue for the company (Masztalerz, 2016). The company usually maintains
the high quality of toll roads that helps the company to maintain the revenue of the company.
After analysis of the cannula report of the company, it can be identified that the company’s main
source of income is from the Toll roads. Trusurban Holdings Ltd. usually follows the principles
that are mentioned in AASB 15 for the accounting of the revenue received. The company takes
the service of the toll road as the performance compulsions and also the revenue for the business.
As the company priories AASB 15 standards more for calculating and recording of the revenue,
they have the option of choosing either asset model of intangible or fixed. The selection of the
model are basically depends on the management of the company.

3ANALYSIS OF TRANSURBAN HOLDINGS LTD.
Importance of Flexibility Management
The management of Transurban Holdings Ltd. usually selects the asset model. The asset
model can be either financial asset model or intangible asset model. The business’s main
operation is to maintain the toll roads and construction. The maximum revenue for the company
generated from the servicing in the toll roads (Jensen et al., 2015). The companies usually
implement AASB 15 for the interpretation of the 12 service commissions. The management of
the company mainly decides whether the company will implement the intangible asset model or
the fixed asset model. As per the provisions of the intangible asset model, it can be stated that the
revenue received by the company need to measure under the fixed value and hence it can
determined as the stand alone price for selling. As per analysis it can be observed that the
maximum revenue received from the Toll Roads of the company (Masztalerz, 2016). The
management usually goes for financial asset model. As per the financial asset model the market
price of the service are being determined and also takes into account. If the management of the
company goes for the financial model then the company will be more benefited as the revenue
received from the service can be determined easily and can be measured. Though the all thing
depends on the choice of the management of the company. The management of the company
usually choses the accounting model depending on the situations and financial revenue structure
of the company. As per the annual report of the company, the management of the company
follows the correct model that helps the company to maintain the financial position of the
company. Thus, it can be stated that the management of the company usually uses the fixed
financial model after realizing the revenue source and also evaluating the financial performance
of the company in a single year.

4ANALYSIS OF TRANSURBAN HOLDINGS LTD.
Potential Impacts in Toll Roads
As per the annual report of the company of 2018, that the principal activity of the
company that are followed by generating revenue from providing service in Toll Roads and also
from construction. The company also maintains the Toll Roads and its assets. The service for
Toll Roads is recently adopted by the company for increasing the value of revenue. As per the
annual report of the company of 2018, it is evident that the company is generating maximum
revenue from the services of the Toll Roads (Masztalerz, 2016). The company’s revenue can be
easily diminished if the service for the Toll Roads business is being diminished. The financial
structure of the company will be highly deteriorated if the business for the service will be
diminished. If such thing happens then every financial statement of the company starting from
the balance sheet to the profit and loss statement will be highly affected. The assets of the
business will also diminish and the liabilities of the company will increase. Thus, the
sustainability of the company will be in danger (Jermakowicz, et al., 2014). So, as whole it can
be safely said that the financial structure of the company will be affected. This is the reason the
management of the company needs to identify the business strength. The business strength for
Transurban Holdings Ltd. is the service provided for the Toll Roads. The management of the
company needs to focus on the Toll roads business as it covers the maximum part of the revenue
for the company. The company needs to increase the customer satisfaction factor while providing
the service for the Toll Roads. These efforts will help the company to increase the revenue and
stabilize the financial structure of the company.
Situation which may arise if the Oil Price Rises
If the oil prices of the country increases then the use of the vehicles will decrease for a
considerable amount. The decrease of the vehicle on the road means the less people will give toll

5ANALYSIS OF TRANSURBAN HOLDINGS LTD.
on the road and hence the revenue for the company will directly affected. As observed from the
annual report of the company of 2018, it can be determined that the company’s revenue is highly
dependent on the service from the Toll Roads. The revenue of the company will decrease
drastically. The profitability of the business will be directly affected as the service for the Toll
roads provide highest number of revenue to the company. The toll road tax collection will be
increased and the company will be affected massively. The reducing profitability will also affect
the sustainability of the company and hence the company’s financial structure will be decreasing
to the considerable amount (Masztalerz, 2016). Thus, the vary in the price of the oil has the
direct effect in the company’s financial structure. If the revenue of the company falls then the
company’s balance sheet will also be altered and the income statement of the company will
highly affected. The income statement will present more expenditures and the balance sheet of
the company will also increase to a considerable height. As the income statement will show more
expenditures than the revenue then the operations of the company will be affected. As the
company follows one of the best financial frameworks, the management of the company can
handle the situation properly. The accounting policies adopted by the company are of immense
importance and the management of the company uses the principles of the accounting policies in
a most efficient manner (Jermakowicz, et al., 2014). The company will be highly affected by the
rise in oil price. The accounting policies that are used by the company can easily help in
reporting framework in the business and in taking major decision in the business.

6ANALYSIS OF TRANSURBAN HOLDINGS LTD.
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