Discuss about the Westpac & Cochlear Limited.
Westpac has been regarded as the second largest bank in Australia in terms of the assets that has been held in by the banks in the country. The company is operational through the help of its headquarters that has been established at Kent Street Sydney. The customer database of the company has crossed the mark of 12.2 million. The company operates through the help of branches whose numbers has crossed the mark of 1200 and has almost 2900 ATMs all across the country. The bank has been operational not only in Australia but has spread its legs in other parts of the world, majorly New Zealand and United states. The operations of the bank have been functioning through the help of the 5 divisions which has its own functions and business areas which in total helps the business to grow and prosper.
The Westpac group function through the help of 5 divisions functions its operations:
Cochlear Limited, on the other hand, is an Australian based biotechnology company. This company has been operational initially through the support of the government and has been dealing in the manufacture of Nucleus cochlear implant, the Hybrid electro-acoustic implant and the Baha bone conduction implant. This company in the present day meets out the two third need of the world’s hearing implant market. Forbes has regarded this company as the world’s most innovative companies in the year 2011.The company is popular in America and Europe which takes care of its major sales.
As per the accounting policies that have been replicated by the management of the company in its Annual report, it is evident that the company makes use of the methods and accounting policies that are in accordance with the accounting standards that has been issued in by the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements of the company at the same time comply with the International Accounting Standards Board. If required the comparative figures of the company at the same time has been adjusted in accordance with the changes if any made in the current year numbers based on the changes made by the Australian Accounting Standards Board and the Corporations Act 2001.
As per the Annual report of Westpac Banking Corporation 2015 “The accounting policies and methods of computation adopted in the financial year were in accordance with the requirements for an authorised deposit-taking institution under the Banking Act 1959 (as amended), Australian Accounting Standards (AAS) and Interpretations as issued by the Australian Accounting Standards Board and the Corporations Act 2001. Westpac’s financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period. All amounts have been rounded to the nearest million dollars unless otherwise stated.”
Screen Shot of the Annual Report
Similar to the case in Westpac Banking Corporation, the annual report of Cochlear Limited has been prepared in line with the with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board and the Corporations Act 2001.
As per the Annual report of Cochlear Limited 2015 “The Financial Report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) and Interpretations adopted by the International Accounting Standards Board.”
Screen Shot of the Annual Report
Thus, considering all the above points and statements that we have obtained from the annual report of the company, it is evident that both the companies has complied with the conceptual framework and AASB standard requirements. The extracts that we have obtained from the financial statements of the company demark a true picture that the management of the company not only compiles with Australian Accounting Standards Board, the Corporations Act 2001 and with International Financial Reporting Standards (IFRS).
Being in case of both the companies, the audit report that has been provided in by the auditors states that the financial statements of the company provides a true and fair view of the financial position and performance of the company. Further, there has been no demarcation in the financial statements of the company that provides any evidence that the company has not complied up with the provision of Australian Accounting Standards Board and the Corporations Act 2001. Thus, there has been no instance that provides any information which provides any information that both the companies has not complied with the accounting standards.
As per the concept of prudence, the revenue and the assets in the financial statements of the company should not be overstated in any case by the management. The management s expected to be conservative enough in recognising the numbers in the financial statements of the company. The concept of prudence as result of its very nature has been incorporated in the Generally Accepted Accounting Principles. The prudence guideline is basically of general in nature. The management in this regard is expected to use its best judgement in determining when and how the accounting transaction needs to be recorded in the books.
There are multiple cases that we have witnessed in the corporate world that has let to disparity in the Corporate Reporting. As per the definition, the prudence concept keeps a check on the financial numbers of the company. There might be cases where the financial numbers may be manipulated in order to drive the attention of the users of the financial statements who might get affected by the numbers and may impact their decisions of investing in the company. In that case, the role of prudence concept plays a vital role. As result the same has been incorporated in the Generally Accepted Accounting Principles. The prudence guideline is basically of general in nature. The management in this regard is expected to use its best judgement in determining when and how the accounting transaction needs to be recorded in the books.
The disclosure requirement of both the companies has been made in line with the applicable accounting standards. Being the nature of business of both the companies are different so in that case, there might be differences in the requirement that has been placed for the purpose of the disclosures. However there might be no difference in terms of application of the standards being both the companies have used the methods and accounting policies that are in accordance with the accounting standards that have been issued in by the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements of the company at the same time comply with the International Accounting Standards Board.
Further, in the case of Cochlear Limited, the management of the company is required to make necessary judgement and estimates The application of these is going to impact the accounting policies and the amount of assets, liabilities, revenue and expenses the actual results in this case is likely to differ from the estimates numbers. These estimations and judgement are in line with the IFRS standards. In this case, the company has made necessary disclosure in terms of estimations that has been made in the books. However, in case of Westpac Banking Corporation, the estimation is relatively on a higher side based on the nature of the business that has been carried out by them. The bank is required to make necessary estimates of the future value in terms of funding costs and associated benefits of the derivatives etc. Thus, in both the cases, the approach that has been used for estimation and judgment is different. The level of estimation and judgement is relatively on a higher side in case of Westpac bank as compared to Cochlear Limited.
Both the companies are required to make disclosures in the books for the segments through which both of them are functioning. However, the nature of the segments may be different depending on the nature of business that has been carried out by them. In case of Cochlear Limited, the segments classification will be based on the nature of the products that has been manufactured by them whereas in case of Westpac Bank, the segments classification will be based on the nature of the services that has been provided by them. In case of Cochlear Limited, the segment classification will be Cochlear implants excluding sound processor upgrade, Sound processor upgrades, Total Cochlear implants, Bone anchored and acoustic implants. Whereas in case of Westpac Bank, the segments will be Westpac Retail & Business Banking, St. George Banking Group, BT Financial Group Australia (BTFG), Westpac Institutional Bank (WIB) etc.
The presentation of all disclosures that has been made in the books of both the companies is different. In case of Westpac Banking, all the financial numbers are disclosed for half year current year, half year previous year, Full year current year and Full year previous year whereas in case of Cochlear Limited, the disclosure has been made for last two year i.e. current and for the previous year.
The disclosure requirement of Earning per share in both the companies is more or less similar. However, there has been one line item i.e. Restricted Share Plan (RSP) treasury shares distributions which is in addition in Westpac bank which is not applicable on the Cochlear Limited.
Both the companies are required to make necessary provision in the books for the impairment However, the impairment basis is different for both the companies. The impairment for the Westpac bank is more or less associated with the loan amount that they have provided to the corporate and individuals whereas in case of Cochlear Limited, the impairment is more or less associated with the assets which has been owned in by the company. There has been specific disclosure that has been made in the books of Westpac pertaining to the impaired loans providing clear demarcation of the different nature of loan and the impairment provision that has been made in for each of these loan amounts.
Both the companies have made disclosure in the books for the subsequent events that took place after the reporting period However, in case of Cochlear Limited, there has been no major event except the dividend declaration that took place where as in case of Westpac, there has been a list of subsequent event that took place whose impact if required has been taken in the books.
Conclusion
Both the companies have made the required disclosures and presentation in the books based on the need of the hour. All the disclosures are in line with the accounting standards that have been issued in by the Australian Accounting Standards Board and the Corporations Act 2001. Thus, looking at the annual report, all the points’ stands positive for both the companies.
References
Westpac, Basic Background about Westpac, Viewed on 10th Dec 2016, https://www.westpac.com.au/
Cochlear, Basic Background about Cochlear, Viewed on 10th Dec 2016, https://www.cochlear.com/wps/wcm/connect/intl/home
Westpac, ‘Vision and mission Statement of Westpac’, Viewed on 10th Dec 2016, https://www.westpac.com.au/about-westpac/westpac-group/company-overview/our-strategy-vision/
Westpac, ‘Values of Westpac’, Viewed on 10th Dec 2016, https://www.westpac.com.au/docs/pdf/aw/Principles_for_doing_business.pdf
Westpac, Annual report of Westpac 2015, Viewed on 10th Dec 2016, https://www.westpac.com.au/docs/pdf/aw/ic/Westpac_FY15_financial_results.pdf
Cochlear Limited, Annual report of Cochlear Limited 2015, Viewed on 10th Dec 2016, https://www.cochlear.com/wps/wcm/connect/2a3956c0-f09d-4ce7-a8c9-8b0ddccf1999/en_corporate_annualreport2015_financial_1.54mb.pdf?MOD=AJPERES&CONVERT_TO=url&CACHEID=2a3956c0-f09d-4ce7-a8c9-8b0ddccf1999
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