This report has been executed on the topic “Corporate accounting” in which discussion will be made regarding the different aspects of accounting related to a company. This report will cover the analysis of the industry in which selected company is operating so as to analyse the key competitors and competitor in the business environment. Discussion will be made regarding the sources of funds and key elements of financial performance reported in the annual report of Tatts Group Limited. Different accounting policies adopted by Tatts Group Limited will be discussed in this report.
Tatts Group Limited (Consumer Discretionary) is operating in the gambling industry of Australia (except Western Australia) and in New Zealand. It is engaged in wagering, lotteries and gaming activities which are its core business activities. Tatts Group Limited was founded in 2006 with the merger of Tattersalls Limited and UNiTab Limited. Its headquarter is located in Queensland, Australia. Its products are wagering, lotteries and gaming machines. Tatts Group Limited has segmented its business operations into three divisions which are lotteries, wagering and gaming solutions. Net operating income of Tatts Group Limited in the financial year 2015 was $ 251.96 million A$ (Tatts Group, 2017). The story of Tatts Group Limited had started in the year 1881 when George Adams had organised a first tattersals public sweep on the Sydney club. Purpose and values of Tatts Group Limited include playing and performing as a team, creating positive change, be amazing, performing with heart and having fun. Its vision is to be the world’s best gambling group by keeping a focus on providing quality experience to the customers. Tatts Group Limited is fulfilling its responsibility towards the society and making efforts for the purpose of creation of positive changes. It is having a strong employee base of more than 2400 employees who are performing the operations of Tatts group Limited in an effective manner (Tatts Group, 2016).
Tatts Group Limited is operating in the gambling industry of Australia. There has been a rise in the gambling industry of Australia as the spending in gambling industry of Australia is more than that of the United Kingdom (Card Player News Team, 2016). Fastest growing segment in the gambling industry is the mobile gambling. Digital technologies have provided support to the gambling industry of Australia. Various rules and regulations have been formulated by the Government of Australia and Tatts Group Limited is complying with these rules and regulations for conducting their operations within the legal framework (Australian Government, 2017). Between 2014 to 2015, the total gambling expenditure of Australia got increased by $ 1.62 billion which is equivalent to 7.7 % of the expenditure in 2014. According to Roy Morgan Research of 2014, annual gambling expenditure or spending in Australia is $ 16. 3 billion including spending on Keno, Sports betting, Scratch Tickets, Casino table games, Lotteries, Poker machines and racing betting. According to the report published by ABC News 2011, around 70 % of Australians were engaged in gambling in the past year (ABC News, 2011).
Tatts Group Limited which was founded as a horse betting firm is one of the leading lottery operators and is offering various services including betting services, technology repair services and electronic gaming machine monitoring. Competition in the gambling industry of Australia is rising which has affected the performance of Tatts Group Limited (Lamacraft, 2016). The key competitors of Tatts Group Limited are Tabcorp Holdings Limited, Midwest gaming and entertainment, Landry’s restaurants and INTRALOT S.A (Tay, 2015). In the year 2014, the operating margins of Tabcorp Holdings Limited was 15 % and on the other hand, operating margins of Tatts Group Limited in the year was 14 %. These companies operating in the gambling industry of Australia are providing tough competition to Tatts Group Limited (Hopkins, 2015).
Internal sources of finance or funds can be explained as the finance found inside the business. External sources of finance can be explained as the funds which are obtained from outside the business. Tatts Group Limited has raised funds using both internal and external sources of funds. Tatts Group Limited has also used Reserves including Available for sale financial assets revaluation reserve, hedge reserve, share based payment reserves and foreign currency translation reserve which are part of internal sources of funds (Tatts Group, 2016).
Tatts Group Limited have issued ordinary shares which are the part of external sources of finance for the purpose of raising funds for conducting operations of the business. Tatts Group Limited have adopted dividend reinvestment plan according to which it provides an option to its shareholders to reinvest the dividend amount rather than accepting cash for dividend. The closing balance of the shares on 30th June 2016 was 1,464,523,643 (Tatts Group, 2016).
Tatts Group Limited has following AASB standards which have been formulated with a motive to ensure that the operations are conducted or executed in an effective manner. Tatts Group Limited has followed AASB number 2 “Share-based payment”. It has created a share-based payment reserve which is being issues for the purpose of recognising the fair value at grant date of the performance option and performance rights issued. Share-based payment has been disclosed under Shareholder’s equity in the summary of the financial information (Kober, et. al., 2013). Tatts Group Limited has followed AASB 15 “Revenue from contracts with customers” according to which revenue is recognised as soon as the control of the goods or services is transferred to the customers. Tatts Group Limited has planned to adopt a new five step process for the purpose of recognition of the revenue. AASB 16 Lease is also followed according to which Tatts Group Limited has operating lease commitments of $ 148.2 million at 30th June 2016. AASB 9 is also adopted by Tatts Group Limited and according to this standard, classification, measurement and de-recognition of the assets and liabilities (Cory, 2010).
From the analysis of the annual report of Tatts Group Limited of 2016, it has been identified that there are no such events which have occurred after the reporting date of the annual report. These events which occur after the reporting date could have created huge impact on the operations of the Tatts Group Limited. If there will be any such event, then the impact of those operations will be disclosed in the subsequent financial periods of the group. There is a need to disclose the events which are occurring after the reporting date so as to present the data or facts in a fair manner (Tatts Group, 2016).
Accounting policies can be explained as the specific principles, rules and process which the management team of the company adopts or follow for the preparation of the financial statements of the company (Zhuang, 2016). Tatts Group Limited has complied with the IFRS which are issued by the IASB and historical cost convention has been followed for the preparation of the financial statements of Tatts Group Limited. The segment information of Tatts Group Limited has been prepared by following the accounting policies (Turner, et. al., 2011). It has disclosed the total assets and total liabilities only when the amount provided on regular basis to the chief operating decision maker of Tatts Group. Revenue of the Tatts Group has been recognised on the fair value on considering the condition of receiving or receivable. Provisions have been created for the legal or constructive obligations which are the result of the past events. Benefits to employees are provided and Tatts Group Limited has considered employee benefits including wages, salaries, annual leave, long service leaves, performance-based incentives and termination benefits (Larkin & DiTommaso, 2012).
The carrying amount of the property, plant and equipment at the reporting date are mentioned in the below attached table. This table discloses the carrying amount of the property, plant and equipment on 30th June 2016.
|
Particulars |
Amount ($ ‘000) |
|
Land |
11,551 |
|
Land and buildings |
3,406 |
|
Freehold land |
22,057 |
|
Buildings |
28,521 |
|
Freehold improvements |
9,185 |
|
Leasehold improvements |
13,221 |
|
Plant and equipment |
59,815 |
|
Assets under development |
23,907 |
|
Goodwill |
3,650,511 |
|
Licences |
598,575 |
|
Brands |
98,069 |
|
Software |
46,563 |
|
Other |
258,827 |
Accounting policy of recognition and measurement of the asset: recognition of the assets which are classified as held for sale is done by measuring the lower of the carrying amount and the fair value less cost of the disposals except few assets which are deferred tax assets, assets which are arising from the employee benefits and investment property. The balance of the assets of Tatts Group Limited at 20Th Jun 2016 was $ 15 million. Property, plant and equipment are recognised and measured at the historical cost concept has been followed by Tatts Group Limited. The valuation of the land and building is done by deducting depreciation from the cost of the buildings. The assessment of the land and building of Tatts Group was done by the independent valuers which was greater than the carrying value. Depreciation was charged on the basis of Th straight line method of depreciation except land (Victorian Responsible Gambling Foundation, 2016).
Intangible assets of Tatts group Limited included goodwill, licences, brand, IT development and software and research and development. Tatts Group has not amortised goodwill but it has been tested for the impairment. Another intangible asset of Tatts Group is licences and the useful lives of these are finite are carried at the cost less than the accumulated amortisation and impairment losses. Brands which are having useful life as finite are carried at the cost which is less than amortisation and impairment losses from the cost. The cost which has been incurred in the development of the products or systems will be contributed future period (Yogonet, 2017).
Goodwill is impaired for 6 months for the purpose of testing. Provisions have been made for the recognition of the impairment. The amount of impairment losses have been deducted from the value of from the cost of the licences. For conducting the process of testing of the impairment, goodwill has been allocated to the cash-generated units (Guthrie & Pang, 2013).
Conclusion
This report has discussed the background of Tatts Group Limited as well as the industry in which it is operating and competition prevailing in the gambling industry of Australia. Discussion has been made regarding the internal as well as external sources of finance which are being used by Tatts Group Limited. It is vital for business to comply with the accounting standards and accounting principles which have been formulated for the purpose of regulation of the activities of the business. Carrying amount of the different assets including property, plant and equipment at 30th Jun 2016 of Tatts Group have been discussed along with the key elements of the financial performance of Tatts Group Limited.
References
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