Analysis Of Financial Statements: Seven Group Holdings Limited

Joint Ventures and Subsidiaries

Dsicuss about the Public Sector Accounting And Auditing In Europe.

Addressee: Board of Directors

Sender: XYZ

 Date: 11-05-2018

Subject: Highlighted from analysis of financial statements

Evaluation of the annual assertion of the firm helps in presenting overall composition of the group. The company Seven Group Holdings Limited has joint ventures in which the parent company has the potential to control overall timing of particularly reversal of temporary variances (Weygandt et al., 2015). Again, it is also likely that the variances shall not reverse in the predictable future.  Investment of the group in particularly Coates Hire can be categorised as specifically a joint venture even though the voting right of the group in Coates Hire is 50%. Other joint ventures include Flagship Property Holdings Pty Ltd with 47.3% ownership interest, Kings Square Pty Limited (with 50% ownership interest), Kings Square Pty Ltd (with 50% ownership interest). Total investment of the company in particularly associates as well as joint ventures stands at $1136.5 in 2017.

Analysis of the composition of the group reveals that there are subsidiaries that are particularly controlled by the group.  This segment of segment intends to put forward the fact that the Group essentially controls a specific business entity at the time when the same is exposed to or has definite right to specific variable returns from this association (Harrison et al., 2015). Essentially, financial declarations of different subsidiaries of the firm are also counted in the consolidated pecuniary declarations of the firm. The group has associates with varying percentage of ownership interest that include Beach Energy Limited, Energy Power Systems Australia Pty Ltd, Impulse Screen Media Pty Ltd, iSeekplant Pty Ltd, Mo’s Mobiles Pty Limited, Premier Capital Developments Pty Limited, Revy Investments Pty Limited, Revy Investment Trust and Seven West Media Limited.

Reason behind preparation of the consolidated financial statements when the subsidiary corporation is an entirely separate entity

It can be hereby brought to your notice that yearly financial statements of the firm presents consolidated financial assertion. This helps in covering actions of the parent corporation as well as its subsidiaries in a single statement (Hunton et al., 2015). In essence, this consolidated financial assertions shows as if they are essentially a single firm functioning under one roof.

In particular, analysis of financial statements of the firm replicates the fact that is non-controlling interests. The non-controlling interests are particularly in equity as well as the outcomes of particularly subsidiaries are reflected unconnectedly in group’s consolidated assertions of profit/loss along with other comprehensive earnings, consolidated pronouncement of group’s financial position along with consolidated assertion for alterations in equity (Tilt et al., 2014). As mentioned in the statement of Profit/Loss, non-controlling interests stand at $1.5 million.

Accounting Policies and Goodwill

It can be hereby mentioned that the Group under consideration has modified the accounting policy and in view of that identified an enhancement in goodwill to $85 million. Also, it can be mentioned in this context that management judgement is necessary for approximation of influence of different facets on earnings in the upcoming period upholding subsisting goodwill as well as intangible assets (Lin, 2017). The investments of the group also counts in goodwill recognized on acquirement, net of any kind of accumulated losses of impairment. Particularly, goodwill reflects excess of acquisition costs over particularly fair value of the share of the group of net identifiable assets of particularly acquired subsidiaries or else equity accounted investee at particularly acquirement date. As such, goodwill of particularly acquirements of subsidiaries is counted as intangible asset. Also, it can be hereby informed that goodwill on acquisitions of chiefly equity accounted investee is counted in investments accounted for utilizing method of equity (Millo et al., 2016). It is also important to take note of the fact that goodwill is not necessarily amortised and in place of that examined for the purpose of impairment yearly otherwise more regularly. In this regard, it is important to put firth the fact that goodwill is appropriately monitored for the purpose of internal reporting.

Different group entities essentially foreign group entities that do not have the currency of the hyperinflationary nation and functional currency for operation other than the Australia dollar are existent (Suryanto, 2016). In this regard, it can be hereby mentioned that there exists foreign currency variances for particularly foreign operations and that stands at ($48.6 million). Also, the group is particularly conditional on income taxes in the nation Australia as well as jurisdictions particularly in places where the company has foreign operations.

Analysis of firm’s annual statement replicates the fact that in a bid to uphold economic sustainability of the firm, the company maintains a register for strategic risk analysis. This register can help in identification, assessment, ranking along with upgrading important strategic risks (Brusca et al., 2016). Yearly assertion of the firm reflects that this report contains a separate segment on corporate social responsibility that replicates the fact that the company is concentrated on sustainability during long term period. As such, this company has a risk management structure that in turn can help in the process of identification of investment, different risks associated to financial along with operational risks (Kogan et al., 2018). In particular, the company has policies to manage overall quality and Westrac intends to maintain specific accreditation to the standard ISO 9001 for Quality Management System. Also, there are strategies for control of contamination. As such, environmental risks relatable to the usage otherwise storage of different hazardous materials are recognized and at the same time handled by means of regular tracking of business premises, analysis of maintenance of conformation and emergency processes and suggestions from various external consultants, agencies of government on different environmental matters (Othman et al., 2018). Also, management of the firm takes care of the environment and is considered as the central to the way the group undertakes business and essentially forms an important part of vision of the company.

Risk Management

Further, it can be hereby mentioned that the company has a policy of human capital management that includes policy on safety, training policies and strategies for retention as well as engagement. With regard to safety it can be said that the company has the policy of proper identification, analysis along with control of different risks together with hazards in a bid to avert injury (Zambon, 2017). Essentially, the company makes health as well as safety crucial to different activities of the business. The company also inspires workforces of the corporation to stop or delay work. The company also complies with pertinent regulations, standards namely Life Saving Rules, establishing varied internal objectives as well as targets that again drive to persistently enhance health along with safety performance (Amiram et al., 2018). Additionally, the firm also engages different contractors along with suppliers who necessarily share value and operating with them can satisfy both health as well as safety anticipations. There are policies in place for emissions and the company currently engaged with particularly Caterpillar worldwide analyse material scrapping of business and reuse strategies. There are emission strategies for the business as well. A number of initiatives were formulated to aid reduction of emissions counting establishment of standards indicating towards Tier 4 Final/Stage IV. This standard calls for the need of reduction of 80% in specifically NOx emissions from the prior Tier 4 that reflects towards Interim Standards. As regards improvement of working conditions, it can hereby stated that the group endeavours to exert a positive contribution to the societies in which the company functions. The company imparts training along with analysis in the areas of pre-employment (Zeff et al., 2016). Apprentice, machine operation, high risk for work licenses, technical aspects post trade, technology and many others.

In this context, it can also be put forward that the company has a corporate governance statement that sketches main corporate governance exercises along with conformation with third edition of particularly ASX Corporate Governance Principles pronounced by Corporate Governance Council. It can be hereby observed that business entity thrives to maintain compliance with the 8 different principles laid down for corporate governance. The company makes effort to adhere to the principles that include establishment of solid base for particularly management as well as oversight, structure as well as framework of the board to enhance value. acting ethically and accountably (sticking to regulations of ASX listing, Corporation Act, Income Tax Assessment Act in addition to Code of Conduct for company’s directors. Also, the corporate governance policy of the firm also includes safeguarding overall integrity in the area of corporate reporting through an effective audit as well as risk committee, effective external audit function and many others (Bertomeu & Magee, 2015). In addition to this, the company also follows the principles of delivering timely as well as balances disclosures and for that purpose the company also conforms to various obligations of disclosure of mainly ASX listing regulations. Furthermore, the company has essentially adopted and at the same time implemented specifically a continuous disclosure policy that establishes processes for the recognition of material price sensitive information as well as reporting of this kind of information to company secretary for assessment.

Corporate Governance

Essentially, the company also adheres to the corporate governance principle of respecting authority as well as power of the shareholders of the firm (Taleb et al., 2015). As mentioned in the communication policy for particularly shareholders of the business unit.

As per the policies, the company’s board has the authority to handle business with respect to the Corporations Act of the year 2001 together with Constitution of the company. The company also adheres to the principle of respecting authorities as per the communication strategy of the company, ASX pronouncements and many others. Further, the company also recognizes and at the same time handles risk of the business. The company has a audit as well as risk committee that establishes risk management structure. The business entity has a committee charter in the area of audit as well as risk (Elliott et al., 2016). There are important risk functions in place that can help in monitoring, presenting suggestions as well as analysis of the entire board in association to adequacy along with efficacies of the risk management structure.

Any relevant matters that can be discussed herein include the financials of the firm. Analysis of the financial statements of the firm reveals the fact that the revenue of the firm is recorded to be 2.28 billion in 2017 whereas the same was recorded to be 2.84 billion. This reflects the fact the fact that the revenue of the firm has declined during the current period 2017 in comparison to the previous year period. Again, operating income of the firm is registered to be 119.70 million during the year 2017 while it was observed to be 126.10 million during the period 2016. Also, the operating income of the firm is also said to have declined considerably during the period 2017 as compared to the figure registered a year ago. Further, it can be hereby mentioned that net income of the firm is witnessed to be $20.90 million in the year 2017 while the same is recorded to be 172.20 million in the year 2016. All these figures reflect undesirable financial condition of the firm and instability in the operations. Additionally, accounting information on the flows of cash reveals the fact that capital spending of the firm has increased from (49.20) million to (32.70) million. Again, key financial information alo replicates the fact that the free flow of cash expressed in million has also decreased during 2017 in comparison to the year 2016.

Based on the calculated figures on key financial ratios, the financial soundness of the corporation can be appropriately analysed. As regards, operating performance, it can be hereby stated that the return on assets of the firm expressed as percentage is recorded to be 3.25% in 2016 in comparison to 0.42 %. In essence, this replicates the fact that efficiency of the firm to acquire earnings out of the invested assets has considerably decreased. In particular, the return on equity has decreased to 0.99% in 2017 in comparison to 7.49% in 2016.  This reflects the fact that efficiency of the firm in generating returns on equity has considerably declined during the current period. In addition to this, according to the calculated figures, it can be hereby stated that return on invested capital of the firm has also declined sharply from the level 6.36% to around 2% in 2017. This reflects the fact that company’s effectiveness and efficacies to generate return on capital invested has decreased reflecting an unfavourable financial condition of the firm (Erb & Pelger, 2015).

Again, based on analysis of operations of the firm, it can also be hereby mentioned that the company also faces several investment risks that can be considered as material business risk. Essentially, it can be hereby stated that overall financial performance of SGH along with tghe returns made available to shareholders might perhaps get affected by specifically both the recognition plus availability of fitting opportunities of investment. In this connection, it can be also slated that investment opportunities are in essence subject to particular market conditions along with other facets that are to large extent outside of the control of the firm (Kim & Zhang, 2014). Fundamentally, there also subsists minority investment risk as seven group has minority interests in large number of listed corporations.

Development of oral and written communication strategies

Discussion: Communication are an important aspect of the business. When it comes to development of oral and written communication, it expresses the views ideas of the business. It is the basis of knowledge and information that are communicated within the business. In the meeting there has been information that has been communicated to the internal members regarding the performance and the operations of the company. The loss in the revenue which has led to a financial crisis in the company. In the meeting the mechanism for effective communication to the stakeholders of the company has been discussed. Various actions regarding the process of transferringknowledge to the shareholders are identified that includes a true and fair representation of the annual report, memorandums and the prospectus. It is to note that the company must have a common goal according to which the communication, is to be taken place. The facts and the figures in the reports must be written in proper manner so that the Stake holders are well infirmed.

Conclusion:

communication is an important step where the information regarding the company operations are exchanged. There must a proper technique for the communication process and the reports must be true and fair.

Place where meeting was held

People present, absent, apologies

What was discussed and agreed on

The follow up action concerning to each member of the team

Any other pertinent matter, specific things that was agreed in other wise disagreed on

References

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Bertomeu, J., & Magee, R. P. (2015). Mandatory disclosure and asymmetry in financial reporting. Journal of Accounting and Economics, 59(2-3), 284-299.

Brusca, I., Caperchione, E., Cohen, S., & Rossi, F. M. (Eds.). (2016). Public sector accounting and auditing in Europe: The challenge of harmonization. Springer.

Elliott, W. B., Fanning, K., & Peecher, M. E. (2016). Do Investors Value Financial Reporting Quality Beyond Estimated Fundamental Value? And, Can Better Audit Reports Unlock This Value?. Working paper, University of Illinois at Urbana–Champaign.

Erb, C., & Pelger, C. (2015). “Twisting words”? A study of the construction and reconstruction of reliability in financial reporting standard-setting. Accounting, Organizations and Society, 40, 13-40.

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Millo, Y., Barman, E., & Hall, M. (2016). Accounting measurement tools and their impact on managerial decision making. economic sociology_the european electronic newsletter, 17(2), 17-23.

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