Prudence
The report is prepared for discussing the conceptual framework of the two-selected organization that is CTI Logistics Company and K & S Corporation Company. Structure of governance along with evaluation of guidelines and rules by analyzing their financial reports of both the organizations are considered in the study. Moreover, the report prepared demonstrate the issues attributable to the internal as well as external control and structure of remuneration. It also involves the discussion of principles of prudence that is applicable to both the companies. The general purpose of the financial reporting is taken into account for these two companies. CTI logistics is a transportation brokerage company that has logistics team that helps in creation of heath capacity, providing services to customers and providing consistent business by keeping carriers busy (Ctilogistics.com 2017). K & S Corporation Company is an organization that is engaged in contract management, transportation and logistics, fuel distribution and warehouse. K & S has three segments of its operation. Both the organization strengthens their financial statements by formulation of distinctive strategies.
Weil et al. (2013) opines that prudence can be considered to be one of the most important concepts that is referred to as conservatism as well as accounting principles. This is necessary for registering of both liabilities and expenses during the period of realization.
The objectives and aims of financial reporting is revealed as per the conceptual framework and statement of CTI Logistics Company follows the essential requirement of framework. Financial statements of CTI logistics are prepared under the convention of historical cost. However, it does not involve the sale of financial assets that is measured at fair value. All the statements comply with the international financial reporting standard that is issued by AASB. Financial position of CTI are revealed by the projection of balance sheet (Drury 2013). The two aspects that is liabilities and assets are taken into consideration in this particular statement.
In this case, preparation of financial pronouncements considers uncertainties of accounts along with other facts as regards events and circumstances namely doubtful, receivables, economic lives of different fixed assets such as plant, property and equipment and many others. There are certain uncertainties that can be detected by revealing specific corporate disclosures right after undertaking prudence particularly prudence (Cheng et al. 2014). Thus, prudence refers to the notion that is particularly takes into account magnitude of restraint for exercising judgement on uncertainty levels (Ksgroup.com.au 2017).
The conceptual framework reflects the aim as well as objectives of particularly financial declaration that is essentially qualitative in characteristics and renders vital information. Analysis of the financial statements of the company K S Corporation particularly follows all the important necessities of Conceptual Framework. As such, projections presented in the balance sheet assist in comprehending the overall financial position of the company Ks Group. However, this particular statement helps in understanding two different broad notions such as the assets as well as liabilities of this corporation. Essentially, this aspect considers inventory as well as net inventory, financial liabilities, intangible assets along with the equity of the shareholders. However, according to the financial announcements of the company KS Group, it is hereby declared that the board of the corporation has allowed a final dividend of around 1.5 cents during the year 2016. In addition to this, it is also important to take note of the fact that declarations of dividend also render vital information as regards the potential stakeholders of the company K S Corporation. The primary aim of financial declarations is to acquire favourable credit rating (Allee et al. 2015).
Conceptual framework of accounting
In a bid to develop conceptual framework, it is imperative for IASB to eradicate the references from the basic notions of prudence. Advantages of financial reporting refers to particularly prudence notion presented specifically in the conceptual structure (Wahlen et al. 2014). This helps in maintaining information consistency along with neutrality of activities.
The conceptual framework as applied in the preparation of financial statements of CTI logistics relates to the concept of prudence that helps in neutrality and brings in the consistency of information. Some of the disadvantage of financial reporting of this organization is there are some biasness in stating the amount of figures that influences the evaluation of financial report (Henderson et al. 2014).
The total assets of CTI logistics stood at $ 157889403 in financial year 2016 as against $ 161887698 in year 2015. This indicates that value of current assets has reduced in recent year. The depreciation of Total assets is carried out at historical costs that involves expenditure that is directly related to several items acquired under total assets.
As per the statement of financial position of the firm during the year 2016, it can be hereby mentioned that the total assets of the corporation has declined to $445004000 during 2016 from $536259000 in 2015. However, the company has proper internal control in place for safeguarding the assets (Ksgroup.com.au 2017).
The net tangible assets of CTI logistics has value of $ 678422 as consideration at the date of acquisition. Total value of tangible assets for financial year 2016 stood at $ 101641264 compared to $ 95488833. Depreciation of assets is calculated using the method of straight line that leads to allocating cost net of their residual value over the useful estimated lives (Lee 2014).
The value of intangible assets stood at $ 29933929 in financial year 2016 as compared to $ 31121478 in financial year 2015. Intangible assets of CTI logistics comprised of customer relationships, goodwill, software, security lines and trade names. These intangible assets are tested annually for impairment and are not subjected to amortization (Grant 2016).
As per the annual declaration of the corporation K S Corporation, it can be hereby mentioned that AASB 116 for particularly plant, property and equipment along with AASB 138 for Intangible assets present the directives for enumerating depreciation, amortisation. In particularly, intangible assets are primarily enumerated at cost. However, after initial recognition, specific intangible assets of the corporation are essentially carried out at specific cost less any kind of accumulated amortisation along with collected impairment losses. As per the report, intangible asset is registered to be $6307000 during the year 2016. On the other hand, tangible assets of the firm is registered to be $1.5 per share in terms of book value. As stated in the annual report, depreciation is enumerated on essentially a straight line basis utilizing the certain specific rates.
The annual general meeting of CTI logistics was held on 22nd November, 2016 and there is resolutions mentioned in AGM concerning which the shareholders are requested to follow the details. They approve final dividend payable to shareholders and approval is made in the meeting itself. Some of the resolutions concerning financial statements were passed in the annual general meeting.
Process for updating conceptual framework
The annual general meeting (AGM) of the company KS Corporation mentions about the ordinary business. It mentions about the financial statements with focus on the adoption on the remuneration account, election of members of the board (Abeysekera 2013). Report on the annual general meeting helps in understanding the pronouncements of the directors as well as auditors of the corporation (Ksgroup.com.au 2017).
Shareholders of CTI logistics are paid dividend twice a year and dividend payment are resumed in year 2016 and 2017. Payment of dividend is subjected to improvement in the financial performance of company. Business plan of organization encompasses some of the objectives that comprise of maximizing the return and profits attributable to shareholders by constantly reviewing of the operations of organization (Li 2013). At the annual general meeting, shareholders are liable to determine the non-executive director remuneration.
Overview of the operations K S Corporation, overall financial position, and strategies of conducting business along with outlook of the management helps shareholders in gaining clear understanding regarding the financial position of the firm. The review also helps in deciphering the financial declaration issued by the company presented and presented according to the directives stated in the ASIC RG (247) (Ksgroup.com.au 2017).
Financial overview of the corporation K S Group reveals that the operating revenue of the company has declined during the year 2016 as compared to the year 2015. In essence, profit after tax as well as significant items has considerably declined during 2015 compared to the year ago period. The dividends per share is registered to be 1.5 cents as compared to 7 cents. In addition to this, the returns on shareholders’ funds also declined significantly to (52) % from the level of 4.5%. Thus, it can hereby mentioned that for the year 2016, the company’s performance is not very satisfactory/favourable for investment in the company (Ksgroup.com.au 2017).
The directors report comprise of audited remuneration report, change in state of affairs, directors meetings, company secretary, several events that is subsequent to balanced date, environmental regulation, principle activities of group in addition to reviewing of results and operations of business. Revenue from operations of organization was reported to be at $ 150640994 and was up by 21.5% in the recent year. Due consideration was given to operating conditions of company and there was a reduction in interest bearing debt by amount of $ 6.6 million. Company paid an interim dividend of 4c per share and for financial year 2016, there was not declaration of final dividend. There are no particular environmental regulation that operations of CTI logistics is subjected. Organization does not had any non-audit services in the current year. The ability of group is to safeguard their capability to continue and recognized as going concern that provides return to shareholders. Amount of dividend payable to shareholders is adjusted for maintaining the capital structure. Shareholders of organization in the current year take a dividend reinvestment plan (Edmonds et al. 2016).
The directors’ report of the company KS Group illustratively explains about the resource based operation of the firm. This section of the annual declaration reveals the fact that the company has encountered a decline in the revenue founded on Western Australian resource. This report also declares the reason for decrease in the revenue generated by the pull back of diverse miners. This report also declares that the volumes of Chemtrans have also decreased in 2016, projects of Bunbury timber also greatly suffered. On the other hand, this report also mentions certain positive aspects that reveals performance above expectation of particular business segments. In addition to this, the directors’ report also divulges about the focused approach of the company that has helped it to become sharper, assisted in functioning at low cost and operate a tough trading cycle (Marabel-Romo et al. 2017). Apart from this, this report also explicates the manner in which the company has acquired and maintained market share in a competitive environment (Maynard 2017). This segment of the annual report also mentions about the business development in different divisions of operation.
Advantages and disadvantages of financial reporting
From the above analysis, it is recommended to CTI logistics that they should enhance their financial performance by efficiently utilizing their assets that helps in generating profits so that it will lead to increased dividend payment to shareholders. There was a decline in cash flow resulting from trading conditions difficulties. The logistics operations needs to be optimized that will help in utilizing the production capacity and improving the logistic process efficiency.
It can also be said that particular cost reductions as well as strategies of business enhancement of K S Corporation have advanced. The company has consistently realized the transformations in terms of cost reductions of property lease, rationalization as well as replacement of particular motorized fleet, introduction of IT system, reduction in number of employees and many more. Critical evaluation of the report reveals that the management of the company primarily focuses on the maintenance of flow of cash and sound balance sheet having low gearing.
From the above analysis of the financial statements of CTI Logistics Company, it can be said that though the value of total liabilities has reduced, value of total assets has also declined. However, the revenue generated from operations has increased considerably whilst the fall in assets value and increased liabilities. Profit attributable to shareholder in the current year has increased that leads to increased dividend payment. Overall, it can be said that the performance of CTI logistics was remarkable as profits and revenue were upon by considerable figures that increase investment by shareholders.
Based on the annual report of the K S corporation, it can be hereby concluded that the financial outcomes of the company during the year 2016 was quite disappointing, whilst certain important units of the business have enhanced their overall performance considerably.
Reference:
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