The report is based on analysis of the two consecutive year’s annual report of the ANZ bank. The report includes disclosure of the environmental practices done by the company along with the characteristics of relevance.Further, the report includes recommendations to the top management of the ANZ Bank so as to reinforce its compliance with the disclosure issue in coming future reporting years. It also contains the details of the purpose of the pre-acquisition entries done in the consolidated statements.
The relevance of the accounting is that the information in the financial statements must be in such a way that it becomes helpful and also affect the decision of the person needing it. The relevance is very crucial for the better quality of the information in the financial statements (Chen and et al. 2018). Here taking into consideration the annual report of Australian New Zealand Bank for the year 2016 and 2017, it was observed that the report has high qualitative characteristics of the relevance. It is because the financial information is based on the each of the material associate related to the group (Annual Report 2016. ANZ Bank). For example, the information provided in the report are systematically categorized and well organized which can be helpful for the investors to take the right decisions. The information are published as per the accounting standards and accurate in nature. Along with this the Bank also uses a Group performance framework so as to evaluate the overall performance of the ANZ Bank. The indicators in each of the category have an aim to deliver value to shareholders, and for that, they encourage the people so that they have a focus on both the long-term strategies and on the annual priorities.
The comparability in the accounting is about the financial statements over various periods of accounting so that it can assure the application of the same accountancy policies for a particular period of time (Collier, 2015). In the present research about the Australian New Zealand Bank, it was analyzed from the two-year annual report that the bank has published detailed information regarding its competitors, risk and uncertainties. Along with this the annual reports also include intra comparison from its last year’s data on the total remuneration and cash incentives. Talking about the inter-competition of the ANZ bank the report has included it, but it is not adequate enough. As the report does not include the names of the competitors, rather it only tells about the factors which subsidise to the risk of competition (Annual Report 2017. ANZ Bank). There was also on the details on the changes in the rules which govern the operation and functioning of the banks from 2016 to 2017, but it did not talk about what exactly the regulation changes were made.
By considering the disclosure of the environmental reporting practises done by the Australian New Zealand Bank, it was evaluated from the annual reports of both the years 2016 and 2017 that the Bank has identified the expectation of its customers, stakeholders, staff and the society and has operated in such a way which mitigates the impact on the environment. For this the bank fulfils the needs of the National Greenhouse and Energy Reporting Act 2007, (Annual Report of ANZ Bank, 2016). By imposing this it triggers the emission of greenhouse gas and the bank also holds a license of the Water Act 1989 which allows it totake outthe water from the Yarra River for regulating thermal activities head office building at Melbourne.
By analysing both the annual reports of 2016 and 2017 of Australian New Zealand Bank, it can be said that yes, the information and the disclosure stated by the bank in its annual reports areadequate and systematic. The information is categorized in a detailed manner, and the bank believes that providing adequate and effective information and data to its stakeholders, customers, staff and shareholders is a key to continue growth and success (Warren and Jones, 2018). The bank has an aim to have transparency in its information and activities it takes up. The bank has firm believe that in order to earn more trust they need to raise the standards of each continuously and everything they get involve in, be it serving the community or be it providing relevant and corrective information to the community (Annual Report of ANZ Bank, 2017). They provide data which go beyond obeying the regulation and laws so as to consider the ever changes needs and expectations of its shareholders and users. They also do this with balanced and fair deliberation in action and publishing information so that the society, customers and the employees get what they expect from the ANZ Bank.
From the above evaluation of the annual reports of the ANZ bank, it was found that there were certain issues regarding the incomplete knowledge about the competitors, changes taking place in the needs and preferences are stated but what they expect is not included in the reports (Watts and Zuo, 2016). Further, the information regarding the changes in the laws and regulations is engaged in both the reports but what actual changes in laws were made by the government were not stated.
So in order to improve the effectiveness of the disclosure of the annual reports of the Australian New Zealand bank, it can be recommended to the top management official of the ANZ bank that they must also state the names of the competitors and the actual threats from them (Beyer and et al. 2010). Similarly, the top management should also include the details of the amendments made in the laws and regulation by the government. It is crucial for any of the company to comply with the rules and policies made for them.
The consolidated financial statements of a corporate entity can be defined as the combined statements of the parent company and of its subsidiaries. It presents an aggregated overlook of the financial position of the parent company along with its subsidiaries. They also offer an image of the entire health of the whole group of the companies. For the preparation of the consolidated financial statements of the company, the pre-acquisition entries are first recorded, and this is done with some of the purpose (Wusatowska-Sarnek,2016). The main purpose of the pre-acquisition entry is to prevent the double counting of the equity of the economic business. Further, it also prevents the company from getting into the double counting of the total assets of the business. Along with this, the other purpose is to identify any goodwill on the bargaining purchase on the consolidation, and also it identifies the liabilities and assets which are acquired by the business and not identified by the companies in the group (Gitman, Juchauand Flanagan, 2015). The pre-acquisition entries also have a purpose of eliminating the carrying cost of the parent company which they invest in each of the subsidiaries against the pre-acquisition equity of the subsidiary.
The shares obtained on a cum dividend basis it signifies that the one who has acquired it has the right to the dividend which is already announced. In this effect, the parent company obtains two of the assets the dividend receivables and the investment in the subsidiary (Robinson, 2015).
Assuming for instance that the Z Limited has acquired all the issued shares of the X Limited for $600000 when at the date of acquisition the X Limited has:
Cash $700 000
Dividend payable 20000
Share capital680000
The effects on the analysis of acquisition:
The consideration which was shifted for the acquisition must be classified differently:
Here only the consideration made for the shares which were acquired must be involved in the analysis of the acquisition that is $680000,and this then forms a portion of the pre-acquisition entries:
Share capital Dr 680 000
Shares in B Ltd Cr 680 000
The parent company (Z Limited) holds assets dividend receivables whereas the subsidiary X Limited has a liability dividend payable. If in case the consolidation is being carried out on the date of acquisition, then after this the dividend payable and the dividend receivables should be deducted, this is because the balances were not attributed to the parties outside the company.
Dividend payable Dr 20 000
Dividend receivable Cr 20 000
In the case when the dividends have been announced from the pre-acquisition profit and is later obtained by the buyer of the investment in that situation the amount of the dividend is subtracted from the cost of investment. The dividend obtained from the pre-acquisition profits is termed as a pre-acquisition dividend (Guay, Samuels, and Taylor, 2016). On the other hand, the dividend when announced from the post-acquisition profits and thereafter obtained by the buyer of the investment then that amount is subtracted from the investment cost. This dividend obtained out of the post-acquisition profits is defined as post-acquisition dividends.
According to the AASB127, there is no need to differentiate between the pre-acquisition dividends and the post-acquisition dividends. As per AASB127, all the dividends payable or paid by the subsidiary company to the parent company are identified as revenues in the profit or loss statement of the parent company (Dunbar, and Laing, 2017). Further, all the dividends are responsible for payment as they are being paid from the equity of post-acquisition.
In the analysis of the acquisition, the consideration shifted is a contrast with the recognizable net assets of the subsidiary company which have been acquired. Any amount of the goodwill in the books of the subsidiary company cannot be marked as a recognizable asset (Grossi, 2014). The goodwill of the subsidiary company should be deducted,and it is also essential to measure the additional goodwill which is not recorded in the books of the subsidiary company.
|
Parent |
Subsidiary |
Debit |
Credit GroupGoodwill |
|
0 |
50 |
100 |
150 |
When the goodwill is being purchased in the acquisition of the businesses the exchange transaction makes it enables which can reliably measure the goodwill. There isa number of techniques of the accounting for the purchased goodwill which is already in existence. Primarilyall the techniques involve either identifying the expenditure as an asset or the expense at the point when the acquisition is made.
On the date when the parent company acquires a controlling point in the subsidiary company,the carrying cost of the assets of the subsidiary company is no longer equal to the fair value. Other than this as per the AASB, 3 paragraph number 18 states that it is required that the recognizable assets and the liabilities of the subsidiary company must be shown at the fair value. The individuals setting the standards believes that if the assets and the liabilities are represented at the fair value, it will provide more of the relevant and correct information to its users, stakeholders and customers (Wahlen, Baginski, and Bradshaw, 2014). Although the standards depict an assignment of the cost of the business the standards do not need the recognizable assets and the liabilities which are acquired to be recorded at the cost. There are only one of all the assets which are not calculated and recorded at the fair value, and that is the goodwill of the company. The approach of fair value is being focused by the required accounting for any of the bargain made on the purchase of the combination. The approach is not at all responsible for the reduction in the fair values of the recognizable assets and the liabilities acquired because all these items are being recorded at the cost. Instead of these, the fair values can be termed as unchanged,and in case of excess of the fair values, they are identified as a profit or gain (Fraser, and Ormiston, 2016).
Conclusion
From the above evaluation of the annual reports of the ANZ Bank, it can be concluded that the annual reports of the years 2016 and 2017 were clearly and correctly offered relevant information for its users and stakeholders. Further, it can be concluded that the ANZ Bank should adopt the recommendation so that they can provide of the effective information in a better manner. Later on from the second part of the report, it was seen that from preparing an effective consolidated financial statement there must be proper analysis of pre-acquisition entries.
References
Annual Report 2016. ANZ Bank. Available at https://shareholder.anz.com/sites/default/files/anz_-_annual_report_2016.pdf. [Accessed on 23 May 2018]
Annual Report 2017. ANZ Bank. Available at https://shareholder.anz.com/sites/default/files/2017_anz_annual_report.pdf. [Accessed on 23 May 2018]
Beyer, A., Cohen, D.A., Lys, T.Z. and Walther, B.R., 2010. The financial reporting environment: Review of the recent literature. Journal of accounting and economics. 50(2). pp.296-343.
Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement comparability and the efficiency of acquisition decisions. Contemporary Accounting Research, 35(1), pp.164-202.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Dunbar, K. and Laing, G.K., 2017. Deconstructing the Accounting Standard AASB 13 Fair Value: Exit vs Entry Price for Assets.The Journal of New Business Ideas & Trends, 15(2), pp.12-19.
Fraser, L.M. and Ormiston, A., 2016. Understanding Financial Statements. Pearson Higher Ed.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Grossi, G., 2014. Consolidated financial statements in the public sector. In Public sector accounting(pp. 63-76). Routledge.
Guay, W., Samuels, D. and Taylor, D., 2016. Guiding through the fog: Financial statement complexity and voluntary disclosure.Journal of Accounting and Economics, 62(2-3), pp.234-269.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial statement analysis. John Wiley & Sons.
Wahlen, J.,Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Watts, R.L. and Zuo, L., 2016. Understanding practice and institutions: A historical perspective. Accounting Horizons, 30(3), pp.409-423.
Wusatowska-Sarnek, A.M., Housefield, L.G., Moore, R.M., Montero, E.E. and Bhaatia, P., United Technologies Corp, 2016. System and method for preventing powder depletion/contamination during consolidation process. U.S. Patent Application 15/111,588.
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