Financial Accounting Practices Of Two Australian Companies In Compliance With AASB And IFRS Standards

Academies Australasia Group Ltd

To research on the subject of application regarding accounting standard in the financial accounting practices of two different companies of same GICS group to find out their compliance in maintenance of AASB and IFRS standards for safeguarding the interest of the stakeholders with ensuring prudence or transparency in maintenance of financial accounting, we have selected two companies of Australia enlisted in ASX (ASX, 2014).  Both are from the GICS Industry Group of consumer service. The first one is Academies Australasia Group Limited with the ASX code AKG.

The company is listed in ASX since 1977 and the financial year of the company is ended on 30^th June of every year (Aasb, 2016). The company has its registered office at Sydney, NSW and it is involved in the business of higher education through different institutes. The other company is Ainsworth Game Technology Limited who is engaged in designing, developing and manufacturing of gaming machines, allied software and equipments. This company is listed in ASX with code AGI (Aasb, 2005). The company is enlisted in ASX since 2001with fiscal year ending on 30^th June.

The company has its head quarter at Newington, NSW. In this present article we will explore the financial reporting of the companies with the main objective of their compliance of AASB and IFRS standards in order to ensure proper following of the guideline of Corporation Act 2001 of Australia (Asx, 2015). In order to do that, we will consult the annual financial report of the companies with main emphasis on compliance of AASB and IFRS for their GPFR. The main research materials are directors’ report and the auditors’ report. Along with that we will consider the major financial statements of the companies in the form of consolidated financial position or balance sheet and income statement or profit and loss account to analyze as per requirement of this article (Charteredaccountants, 2015).

Academies Australasia Group Ltd:

The company had adopted all required AASB standards as prescribed by Corporation Act 2001 as per applicability to the business. Early adoption of standards had not been made other than AASB15 related to Revenue from Contracts with customers. The company will pursue the adoption of AASB 16 related to Lease as per the deadline of   1^st January, 2019. This adoption will replace the existing standard AASB 117.

AASB 16 will be introduced in the area of Lease and allied interpretations with the impact of single Lease accounting model which will mitigate the need for leases with the classification of operating or financing leases with the recognition of right-to-use assets and liability for all respective leases except short term leases with the tenure of less than one year and lease against low value assets. AASB 16 will also have effect on the depreciation of right to use assets of non-current in nature. The board of directors has also concluded that the impact of introduction of AASB 16 may have impact on the financial statements of the group, and it is not possible to provide a reasonable impact of this impact on the same area. Below extract from the annual financial report of the company had emphasized on this issue (Aasb, 2011).

Analysis of Financial Reports

Early adoption of AASB 15 related to Revenue from Contracts with Customers by furnishing of re-statement of comparative amounts had been done since July 1^st, 2014 for the purpose of recognition of the same with the reorganization of the income as per the standard. This adoption will restructure the contracts with customers as per the prevailing provision of the said standard to make the accounting statement of the company to be at par with the AASB standard 15. Below extract will highlight the issue as per Directors’ report as on 30.06.2016 (Asx, 2015).

The directors of the company are responsible for the proper presentation of GPFR as per requirement of the Corporation Act 2001 with the standard AASB 101. This compliance will ensure by following guideline to ensure prudence for the stakeholders as per AASB 101. The directors’ report has emphasized on this issue for different aspects of presentation of GPFR as per standards set by IFRS to be complied. The auditors also have expressed their liability to present the financial statements with their moral, ethical and professional obligation in order to provide proper GPFR to comply with the need of Prudence for the stakeholders (Aasb, 2015).  

Analysis of Financial Reports:

For the purpose of analyzing the financial reports of the company, we have selected two financial statements which can reveal the financial position of the company in the forms of Income Statement and Consolidated financial position. We are appending below the screen shot of those with analysis and respective presentation of graphs followed by recommendations.

Income Statement:

Analysis of the above with comparison of 2016 performance with 2015 is given with variance impact:

ACADEMIES AUSTRALASIA GROUP LIMITED
Analysis of income statement for the F Y ended on 30.06.2016
Components	Amount in AUD ‘0000s	Amount in AUD ‘0000s
	2016	2015	Variance (+/-)
Revenue from continuing operation	54,985	56,755	(3)
Less Student acquisition and teaching cost	25,359	24,167	5
gross profit	29,626	32,588	(9)
other expenses(net off)	35,505	32,976	8
loss before tax	(5,879)	(388)	1,415
Income tax expenses	1,567	561	179
loss for the year	(4,312)	173	(2,592)
Exchange difference on foreign currency	20	35	(43)
loss attributable for the year	(4,332)	138	(3,239)
dividend per share	–	4.5	(100)

Analysis

ACADEMIES AUSTRALASIA GROUP LIMITED
Analysis of consolidated position of financial statement for the F Y ended on 30.06.2016
Components	Amount in AUD ‘0000s	Amount in AUD ‘0000s
	2016	2015	Variance (+/-)
Current Assets	23,422	23,282	1
Non Current Assets	45,694	46,260	(1)
Total Assets	69,116	69,542	(1)
current Liabilities	39,116	27,757	41
Non-current liabilities	4,912	16,223	(70)
Total Liabilities	44,028	43,980	0.11
net assets	25,088	25,562	(2)
Share capital	36,504	32,553	12
Accounted losses	(11,603)	(7,377)	57
foreign currency translation reserve	73	93	(22)
non controlling interest	114	313	(64)
Total equity	25,088	25,562	(2)

Below graph is presenting the analysis-2016 vs. 2015:

The company is passing through financial instability and to counter the same, the company should follow the below recommendations:

• Compliance of Corporation Act 2001 to ensure proper Prudence for the stakeholders
• AASB standards and IFRS compliance is to be ensured for better financial reporting management of the company
• Conceptual framework is to be adhered to in order to assure proper process of GPFR maintenance.

The company is complying with AASB 119 related to employee benefit with the structure of remuneration as per below screenshot emphasizing on the remuneration of Directors with different facilities (Deloitte, 2016).

The company is complying with the impact of AASB 9 of 2014 for financial instruments which had replaced earlier version of same standard effective since 2009. The same had been considered to be implemented with the provision of early adoption by assessing the impact of the same on the GPFR of the company.

The company is also considering the early adoption of AASB 15 to replace the existing AASB 111, 118 and 1004 for revenue recognition form contracts with customers.

AASB 16 is followed with the objectives of lease reformation in case of operating or financing leases.AASB 8 is followed for the global resource allocation and assessment of performance as per geographical location.Extract from annual financial report of the company which features comparison between 2016 and 2015.

Analysis

AINSWORTH GAME TECHNOLOGY LTD
Analysis of income statement for the F Y ended on 30.06.2016
Components	Amount in AUD ‘0000s	Amount in AUD ‘0000s
	2016	2015	Variance (+/-)
Revenue	285,477	240,643	19
Less cost of goods sold	113,779	88,640	28
gross profit	171,698	152,003	13
Expenses net off other income	103,915	86,350	20
profit from operation	67,783	65,653	3
net finance income	6,990	28,666	(76)
profit from equity investment	365	–	#DIV/0!
profit before tax	75,138	94,319	(20)
income tax expenses	19,435	23,966	(19)
Profit for the year	55,703	70,353	(21)
Other comprehensive income	951	5,428	(82)
Total Attributable Income for the owners	56,654	75,781	(25)
Basic earning per share(in pence)	0.17	0.22	(23)
Diluted earning per share	0.17	0.22	(23)

The below graph features the presentation to understand the comparison

Given below the extract of consolidated position of financial statement of the company for year ended 30.06.2016 from annual financial report:

Analysis: 

AINSWORTH GAME TECHNOLOGY LTD
Analysis of consolidated position of financial statement for the F Y ended on 30.06.2016
Components	Amount in AUD ‘0000s	Amount in AUD ‘0000s
	2016	2015	Variance (+/-)
Current Assets	208,062	221,180	(6)
Non Current Assets	227,920	127,452	79
Total Assets	435,982	348,632	25
current Liabilities	47,706	52,482	(9)
Non-current liabilities	72,389	15,663	362
Total Liabilities	120,095	68,145	76
net assets	315,887	280,487	13
Share capital	193,754	182,360	6
Reserves	133,610	116,385	15
Accumulated losses	(11,477)	(18,258)	(37)
Total equity	315,887	280,487	13

The below graph features the presentation to understand the comparison

The company is growing its business with statutory compliance of AASB standards. The company is maintaining prudence by following conceptual framework as set by accounting standard with adoption of IFRS for its GPFR.

The recommendation is to:

• To follow AASB standards as per implementation as specified by the Corporation Act 2001 of Australia.
• IFRS is to be followed as per requirement of the company to comply with the Corporation Act 2001.
• As the company is maintaining the positive trend in its business with global implication, they have to be more proactive to ensure international standard implication so far accounting management and financial reporting is concerned. 

• Revenue from continuing operation had been decreased by 3% while the cost of student acquisition and teaching cost are increased by 5%.
• Gross profit is reduced by 9%
• Net off other expenses(administrative) is increased by 8%
• Loss of operation is increased with positive variance of 1415%
• Statutory income tax expense of the company is increased by 179%
• Derived loss for the year is with negative variance of 2592%
• Exchange different of foreign currency is decreased by 43%
• Consolidated loss attributable for the year is with negative impact of 3239%
• Earning per share is 5 cents negative with no earning for last year.
• Dividend per share for 2016 is not there with last year declared dividend of 4.5 cents per share(Aasb, 2015).

Ainsworth Game Technology Ltd

• All items with positive variance are revenue, cost of goods sold, gross profit, expenses with net off other income and profit from operation which features that the organization is passing through growth while net finance income, profit before tax, income tax expenses, profit for the year, other comprehensive income, total attributable income for the owners, basic earning per share and diluted earning per share are with negative variance.  

Academies Australasia Group Ltd

• Current assets are increased with 1% variance
• Non-current and total assets are decreased with 1% variance
• Current liabilities are increased by 41% and non current liabilities are also increased by 70% with total liabilities are increased by 0.11% variance
• Net assets are decreased by 2% variance.
• Share capital is increased by 12% to enhance fund position of the company
• Working capital derivation through calculation of current assets over current liabilities is showing negative which is depicting the negative impact on the cash strength of the company.
• Accounted losses are increased by 57% variance
• Total equity is decreased by 2% variance with retrospective negative effect of foreign currency translation reserve and non controlling interest of 22 and 64%
• Current assets, current liabilities and accumulated losses are in negative variance.
• All other featured items of consolidated position of financial statement are with positive variance.
• Working capital is positive depicting the cash richness of the company.
• Net assets and owners’ equity are increased in 2016 by 13% over 2015.  

References 

Aasb, 2005. Director and Executive Disclosures by Disclosing Entities: Removal of AASB 1046 and Addition to AASB 124. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/ACCED143_09-05.pdf [Accessed 09 January 2017].

Aasb, 2007. Presentation of Financial Statements. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-04_COMPsep05_01-06.pdf [Accessed 13 March 2017].

Aasb, 2011. Fair Value Measurement. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB13_09-11.pdf [Accessed 18 January 2017].

Aasb, 2015. Presentation of Financial Statements. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 18 January 2017].

Aasb, 2016. Accounting standards. [Online] Available at: https://www.aasb.gov.au/Pronouncements/Current-standards.aspx [Accessed 17 January 2017].

ASX, 2014. Corporate Governance Principles and Recommendations. [Online] Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed 17 November 2016].

Asx, 2015. Asx Listinig Rules. [Online] Available at: https://www.asx.com.au/documents/rules/gn04_foreign_entities.pdf [Accessed 29 September 2016].

Asx, 2015. Company financial statement. [Online] Available at: https://www.asx.com.au/asxpdf/20160225/pdf/435bmsckx0y0s6.pdf [Accessed 02 December 2016].

Charteredaccountants, 2015. AASB 136 Impairment of assets. [Online] Available at: https://www.charteredaccountants.com.au/Industry-Topics/Reporting/Australian-accounting-standards/Analysis-of-AASB-standards/AASB-136–Impairment-of-assets [Accessed 24 October 2016].

Deloitte, 2016. Changes to AASB 119 Employee benefits measurement and recognition. [Online] Available at: https://www2.deloitte.com/au/en/pages/human-capital/articles/changes-aasb-119.html [Accessed 01 April 2017].