The current study depicts the evaluation of different factors along with several mechanisms that drives organization culture. This particular report is prepared to comprehend the overall operation procedures with particular orientation to an ASX listed company that is CSR building products, Australia. CSR building products is a major industrial company that is engaged in production of building products in Australia. Organization is making investment in building system that helps in reducing complexities on construction. Such system helps in reducing construction time for customers and delivering better comfort, energy efficiency and designs (Beattie 2014). Increased output and activities have been witnessed in all the businesses and continuous investment in acquisition; innovation and joint venture have benefitted organization.
Objectives of preparing financial statement by organizations are reflected in the conceptual framework that provides users with vital information of qualitative nature. General purpose financial reporting intends to provide financial information of reporting entity that is relevant and useful to range of stakeholders such as creditors, investors, lenders and some potential sponsors. It has been ascertained from analyzing the annual report of CSR Building product that company adheres to particular conceptual framework requirements. Organization complies with Australian accounting standard that ensures that financial statements and notes are in compliance with International financial reporting standard (Grant 2016). Assumptions and estimates about carrying value of liabilities and assets are required to be made by CSR group that are based on historical experience and other reasonable factors under circumstances (Nangih and Davies 2014). The consolidated financial statements of group have been prepared by aggregation of all entities financial information. A breakdown of all individual items is provided in the statement of financial position and users of annual report finds relevant. The board of directors have presented a final dividend of 12 cents per share that makes up full year dividend to 23.5 cents as per financial declarations.
The financial report of CSR Building products is prepared according to Corporation Act, 2001 and Australian accounting standard that is free from material misstatement and gives a fair and true view. It is stated by director in note 1 of financial statement that consolidated financial statements are in compliance with IFRS according to AASB 101 presentation of financial statements.
The remuneration report of CSR building product is prepared according to requirements of corporation regulations and section 300A of corporation act, 2001. Planned explanation of senior executives, key management personnel to shareholder has been provided in the annual report. Framework of remuneration is based on principles that aligns with shareholder interests and are performance driven and provide opportunities that are market driven. Issues concerning remuneration are overseen by remuneration and human resource committee (DesJardins and McCall 2014).
There is annual reviewing of base salary of personnel when they are promoted. In order for employees to acquire shares of CSR, they are required to forgo a part of their fixed remuneration. Long-term incentive plan of CSR provide employees with the opportunity to build their interest in CSR equity. Performance rights are not entitled to dividend payment during vesting period. Equity incentive plan are designed for encouraging share ownership for employees and there are not conditions attached relating to performance. Employees under this plan have full voting rights and are entitled to dividend and other distributions (Khojastehpour and Johns 2014).
CSR group faces several issues in making best estimate of future liabilities and measurement of provision for environmental rehabilitation, restoration and legal claims. There are a number of ongoing legal disputed in which CSR group is involves currently and they are in process of remediating land in relation to legacy factor sites. However, organization is not acquainted with any pending prosecutions concerning environmental issues that have the likelihood of materiality impacting business performance.
The estimation of rehabilitation cost is done reliably and immediate recognition of liabilities is done when there is identification of environmental exposure. Future cost estimates requires judgement for extinguishing such obligations (Hawrysz 2017). Given the issues faced by organization in relation to environmental matters, group seems according updating of provisions and estimates.
Above table depicts asbestos related claims along with all known claims. Total amount spend by organization on settlement of claims went on decreasing considerably from $ 31 million in year 2013 to $ 21.9 million in year 2016.
Valuation of inventories is done at net realisable value lower cost. Net realisable value is the estimated selling price less necessary cost to make sales and estimated completion cost. Recognition of written down value of inventories is done as an expense and the total amount stood at $ 6.6 million. In accordance to the financial declaration of CRS building products, value of inventories stood at $ 320 million in financial year 2015 compared to $ 348.8 million in year 2016 respectively.
Recognition of account receivable is initially done at fair value and it is subsequently measured at amortised cost. Review of outstanding balance form the basis of raising allowance for doubtful debt at the balance date. Bad debts are written off against change in allowance account that is recognized in financial statement performance.
Value of trade or account receivable is recorded at $ 268.7 million in year 2015 as against $ 319.6 in year million 2016. It indicates that total value of trade receivables has increased in current year. Total amount of noncurrent receivable was recorded at $ 51.4 in year 2015 as against 51.3 in year 2016. There is limitation in credit risk concentration due to large number of customers. An allowance for impairment is established by CSR group that is representative of incurred losses estimation in respect of trade and other receivables. No material amounts were receivable from other transactions with joint venture entities as disclosed in the notes to financial statement. Receivables are stated in financial report by including the amount of GST.
As depicted from financial report of CSR building products, value of plant property and equipment is recorded at $ 821.3 million in year 2015 while value stood at $ 729.2 in year 2016. This increase in value was due to purchasing of PPE in year 2016 as well as proceeds generated from selling.
Acquisition of property, plant and equipment is done at historical cost by deducting depreciation. Expenditures that are directly attributable to items acquisitions are incorporated in historical cost. The carrying amount of assets or any amount that is recognized as separate assets results in subsequent cost. If the carrying amount of assets exceeds the recoverable amount then carrying amount of such assets are written down immediately to its recoverable amount. PPE are tested for impairment by group for ensuring that they are not carried above their recoverable amount.
Total liabilities of CSR building products comprised of current and noncurrent liabilities. Total current liabilities increased from $ 466.3 million in year 2015 to $ 488.8 million in year 2016. Value of noncurrent liabilities declined from $ 447 in year 2015 to $ 409.8 in year 2016. Total value of liabilities decreased from $ 913.3 to $ 898.6 million in year 2016. The items of revenue and expenses are not allocated to segments as per policy of group. Consequently, associated liabilities and assets are not allocated to segments. For the purpose of financial reporting, group make use of balance sheet liability method for ascertaining any temporary difference between carrying amount of liabilities and assets. The liability provision of product is determined by aggregation of estimates of United States and Australia. Estimation of present value of liabilities is done by discounting of estimated cash flows using pre tax rate that takes into consideration current market assessment of risk and time value of money over specified period taxable (Richardson et al. 2013).
An intangible asset such as software that is acquired internally or developed internally includes development expenditures and it is measured at costs initially. Such assets are then subsequently carried by deducing impairment loss and accumulated amortization. Measurements of such intangible assets that have not been obtained through acquisition are done at cost. Goodwill of group is not amortised and they are annually tested in an event of indication of impairment. Amortization or depreciation of assets is done at rates that are based on expected economic life by employing a method of straight line (Quinn 2014). Goodwill, land and trade names having infinite lives are not amortize or depreciated. Total value of intangible assets for year 2015 recorded at $ 108.2 million while value stood at $ 115.6 in year 2016.
The accounting treatment of leases by lessee is primarily affected by AASB 16 that was released on 23rd February in year 2016. Recognition of all most all leases on balance sheet is done in accordance with this particular standard. Current distinction between financial, leases and operating leases is removed by the application of this new lease standard.
For almost all lease contracts; rental payment is required to be done in event of recognition of financial liability and assets. The quantification of expected impact of this particular lease standard is being done by group currently. However, it is expected that the impact of this standard would be material to group performance. Any payments to be made on operating leases are expensed over the lease period on straight line basis.
The recognition of current and deferred tax is done as an expense in the statement of financial position except in case when value of tax is directly debited to equity or it is related to any credited items.
Offset of tax assets and liabilities is done when it is considered legally enforceable to do so. It has been concluded by CSR group that deferred income tax will be recoverable based on approved business plans using estimates of future taxable income. Recognition of deferred tax liability is not done in relation to temporary taxable differences between that arises from goodwill. Analysis of financial report of CSR building product depicts that it has been declared by directors of group that payment of debt will be done as and when they fall due.
Prudence is considered as one of key accounting principle and as per the concept of prudence, the expenses should not be underestimated and amount of revenue that is recognized should not be overestimated. Accountants who are considerate about adoption of accounting policies taken prudence into analysis of approximation of overstatements in relation to liabilities or assets during specified accounting period. Several uncertainties are taken into account in relation to certain events such as economic life of assets such as plant, equipment and property, collection of doubtful debtors and different fixed assets (Komninos and Cameron 2017). Proper application of prudence helps in exercising certain degree of causalities and detection of specific corporate disclosures.
The accrual of expenses and interest income is done on timely basis and unwinding of interest component of discounted liabilities and assets is done as finance cost. Assessment of carrying value of assets depicts that value that are used in calculations are based on discounted cash flow that is expected to arise from assets and a post tax annual discount rate. Valuation techniques form the basis of fair value measurement of financial items listed in financial report (Henderson et al. 2015).
It is important for IASB to eliminate diverse references from prudence concepts for developing a conceptual framework. The particular notions of prudence presented in conceptual framework are depicted in advantages or benefits of financial statement pronouncements. Applying prudence concepts helps in neutrality of actions along with maintenance of specific information.
Conclusion:
Evaluation of financial report of CSR building groups depicts that consolidated financial statement along with notes to statement are prepared and presented in accordance with Corporation act, 2001 and Australian accounting standard. Moreover, analysis of report also demonstrates that a true and fair view of financial statement and performance of group is presented in the annual declaration. It is also mentioned on the annual report that preparation of financial statement is done by adhering to the International financial reporting standard. After the evaluation of financial statements and other relevant accounts, it can be deduced that there is no manipulation and they are free from any material misstatement. The auditing of financial information of CSR limited has been done in accordance with Australian auditing standard. It carries out evaluation of accounting policies appropriateness is done by auditors and accounting reasonableness estimates along with overall presentation if financial report.
Therefore, it can be inferred that preparation of financial report is complies with accounting standard. The current financial performance of CSR limited has been encouraging reflected by continuous improvement in consecutive earnings. Over the past few years, the improvement in performance of CSR has resulted in higher dividend payment to shareholders. Executives of CSR limited are provided with equal opportunity to take the advantage of growth opportunities by becoming an owner of shares of group. There has not been any manipulation of accounts in self interest of employees. Nonetheless, some issues are faced relating to environmental exposure and payment of remuneration. In nutshell, it can be said that there have been true and faithful representation of financial information by group.
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