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ACCT11059

ASSIGNMENT #2 - STEPS 3 & 4STEP 3: RESTATING MY COMPANY’S FINANCIAL STATEMENTS

The thought of Step 3 was daunting over me. I was avoiding it to say the least, but the time had come that I couldn’t put this nerve wracking step off any longer, I had to conquer it. I kept looking at Martin’s advice to allow 12-13 hours to complete this step, and I couldn’t knock the fear of failing a step worth 25% of my assignment. After reading Chapter Guide 4 my nerves increased. I was confused by all of the formulas and explanations which I was expected to understand and implement when restating my financials, and I wasn’t sure I was going to be able to complete the task. Nevertheless, I began.

Restated Statement of Movements in Equity

I started my journey with restating the Statement of Changes in Equity, which was presented as the ‘easy’ one. I quickly learnt that this would not be the case, actually finding it to be the hardest statement to restate out of all three. I began by opening up Maria’s video and followed her first steps, classifying my items into Operating “O” and Financing “F”. After doing so, I began the restating process. However, I was quickly stomped with a problem. In my original SOCIE, my company had only given a total figure for comprehensive income (CI). Therefore, I was required to work out what made up that total figure by looking off my Income Statement. You might be wondering why this is such a big problem. You see, at first it seems like nothing. I referred to my Income Statement and found what I thought were the comprehensive income items. However, after following the processes explained by Maria and entering these figures into my spreadsheet, I found that they didn’t equal the total CI figure in my original statement.

I began to rack my brain, moving around figures, trying different formulas, doing anything I could think of to try and resolve this issue. Sadly, I was unsuccessful. I knew that the major check for restating my SOCIE correctly was ensuring my final closing balance in this statement matched the closing balance of my original SOCIE. I also knew in order for this to happen, my total CI figure had to be correct. As a result of my CI figures not equalling the correct total CI the first way I tried, the only solution I could find was to include earlier items of the income statement which when added together, did equal the correct total CI.

As you can see in Diagram 1 below, in yellow I have highlighted the totals for operating and financial comprehensive income (which are not equal to the correct total figures displayed in the restated Income Statement), as well as the overall total CI figure which is correct. I have then highlighted in green the items I have included as ‘comprehensive income’, in

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order to formulate the correct total CI figure, thus ensuring my closing balance matches that of my original closing balance in my original SOCIE.

Diagram 1.

After overcoming that first hurdle I was positive I could move on to the next statement. I quickly formulated my closing balances and began checking them with my original figures. Everything was matching, and I was feeling over the moon… until I reached my 2014 closing balance. The balance I retrieved in my restated statement was $11,209,518, however the balance in my original statement was $11,213,612. I thought to myself, if each of my previous years had balanced correctly and I had used the exact formulas for each, how could this be?

I reached straight for my company’s Income Statement for 2014 and after some quick calculations, it became clear to me that this was the result of an error on my company’s behalf. It appears that when my company formulated their original SOCIE in their 2015 Annual Report, they used the wrong figure from the Income Statement for total CI of that year.

Diagram 2.

As you can see in Diagram 2 above, in the right-hand column where the 2014 figures are displayed, there is two figures with the heading ‘Total comprehensive income/(loss) for the year’. However, the second figure of $779, 714 (after Non-controlling interest has been considered), is the actual total CI figure which EGL Limited should have implemented into their 2015 SOCIE for 2014. However, as I have explained above, it is clear they have mistakenly used the earlier figure of $783,858, hence why the 2014 closing balance in my

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restated SOCIE does not match that of the original statement. To ensure my conclusion above was correct, I also checked that each of the other years within the statements (2015, 2016 & 2017) also implemented the lower figure, and I was pleased to find that they did.

After all of the above hurdles, I am now satisfied that I have restated my Statement of Changes in Equity to my utmost ability, and the aspects I am still unsure about, I have justified above as well as I possibly can.

Restated Statement of Financial Position

Next, I moved onto restating my company’s Balance Sheet. After the challenges I had to overcome in my Statement of Changes in Equity, I wasn’t overly confident to jump into this. However, I figured with the assistance of Maria’s video, I’d hopefully be okay. Once again, I started by classifying my items into “O” and “F”. Thankfully, this was a task I had confidence in doing, and I knocked it over in a matter of minutes. I then began restating my financials, following step by step the processes explained by Maria.

Surprisingly, I was finding the Balance Sheet quite easy to restate. When it came time to allocate cash to operating and financing, I opted to calculate the split on a percentage of revenue of 1%. This seemed quite appropriate from the suggestion from Martin in Chapter 4, and I was reassured when Maria also used 1% in her calculations for Wesfarmers.

I continued through the process and had managed to completely restate my figures in under an hour. Although I couldn’t get my hopes up just yet, I now had to do all of my checks to ensure I had successfully restated my statement. I started by checking that my Total Assets figure in my original Balance Sheet was equal to my Operating Assets (OA) plus Financial Assets (FA) in my restated statement. I was relieved to find that these figures matched. Next, I checked that my Total Liabilities figure in my original Balance Sheet was equal to my Operating Liabilities (OL) plus Financial Obligations (FL) in my restated statement. Once again, I was pleased to find that the figures matched. At this point, I was feeling quietly confident that I had completed my restated Balance Sheet correctly. However, I still had one final important check to do. In order for my restated Balance Sheet to be complete, my Net Operating Assets (NOA) needed to equal my Total NFO + Equity. After a quick check, I was able to let out a final sigh of relief as I found that my figures matched.

Restated Statement of Financial Performance

Finally, I had approached my final statement, the Income Statement. After the struggle that was restating my SOCIE, I was overjoyed to have successfully completed my Balance Sheet, and without being over confident, I was ready to take on my final challenge, restating my Income Statement.

Again, I followed the same process as above, firstly classifying my items into “O” and “F”, before beginning the restating process with the guidance of Maria’s video. It’s safe to say that by this point I was finding the restating process to be a reasonably straightforward procedure. I had finished entering in all of my financials in under half an hour and I was confident I had restated my Income Statement correctly. However, as usual I made sure to check that my figures matched before getting too excited. For this particular Income Statement, I was required to ensure my figure for Comprehensive Net Profit after tax (CI)

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was equal to my original total CI. Thankfully, I found this to be the case. I was pleased to quickly overcome this statement without facing any problems.

Overall, I can definitely say that restating my financial statements was a positive learning curve. Although I had to overcome some small bumps at the start of my journey, I quickly overcame them and in turn, found success in restating my following statements. Step 3 has definitely deepened my understanding of the difference between financial and operating items, as well as enhanced my overall understanding of EGL Limited’s financial statements as a whole.

STEP 4: PROVIDING AND RECEIVING FEEDBACK

After my first experience of providing and receiving feedback in Step 6 of Assignment 1, I was enthralled to learn I would be provided this opportunity once again in Assignment 2. Where I once would have rolled my eyes at the thought of racking my brain to give someone else feedback on a topic I myself don’t fully understand, I was excited to have a look at how other people had presented their restated spreadsheets and give my input and feedback on how I thought they had done.

I have found the Facebook page for this Unit to be a major help in asking for feedback and assistance from other members of the Unit, when I have faced problems. I will admit, I didn’t utilise this facility as great as I could have when completing Assignment 1, however, I have now realised the benefits which come from using the tool to receive help. As a result of receiving help from other students, I have been made to feel assertive towards the work I have completed within Assignment 2, particularly in Step 3 where I had many doubts.

As you will find below, I have provided feedback to three of my fellow peers, on their draft Step 3. I have thoroughly reviewed each of their draft works and feel confident that the feedback I provided will be helpful and assertive.

COMPLETED PEER FEEDBACK SHEETS:

Feedback From: Portia Di Bella

Feedback To: Mackenzi’s Blog

Comment on Mackenzi's Blog

My Comments

Step 3 Restated Statement of Movements in Equity

The first check I looked for when reviewing your restated SOCIE was that your end balance in your

Restated Statement of Changes in Equity

Balance Sheet

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Income Statement

Commentary and discussion with others

(Note: You may wish to give some comments on their Excel spreadsheet)

restated statement matched your closing balance in your original statement. The two did match which is an immediate indicator to me that you’ve restated this statement successfully. Next, I checked you had used correct formulas throughout the statement, especially when calculating totals. Again, you have been successful in incorporating these formulas. You’ve also clearly followed the correct layout when restating your headings and figures. Finally, I was unable to check your “O” and “F” totals matched those in your restated Income Statement as you are yet to complete that particular statement.

Restated Statement of Financial Position

Moving onto the Balance Sheet, the first check I completed was seeing if your Total NFA – Equity matches to your Net Operating Assets (NOA). After seeing that these figures don’t match each other it immediately indicates to me that you may have made a mistake somewhere in your figures. After further review, a mistake could have been made within the restating of your operating figures or when formulating figures in your working area. Overall, I’d suggest following Maria’s video which takes you through each step, in order to identify all/any areas you may have.

Restated Statement of Financial Performance

I can see you haven’t completed restating your Income Statement yet. However, judging from the restated statements you have completed, it’s clear you’re definitely on the right track.

I’d advise watching Maria’s video on Restating the Income Statement to assist you in restating your own company’s statement.

Step 4Individual feedback with other students

You have provided some useful feedback and comments which will help other students in the Unit.

Overall ASS#2 (Steps 3 & 4) Overall, it is clear you have an understanding of how to restate your company’s financials and have spent a great deal of time and effort in presenting your restated financials. However, I would suggest taking some time to watch Maria’s videos and review your statements once more, just to check that all your figures and formulas have been inputted correctly,

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and you have completed the step to its full potential. From what I have seen so far, you are definitely on the right track to producing a great Step 3 and 4.

Feedback From: Portia Di Bella

Feedback To: Pia Brown (Pia’s Blog)

Comment on Pia's Blog

My Comments

Step 3 Restated Statements of Movements in Equity

The first check I looked for when reviewing your restated SOCIE was that your end balance in your restated statement matched your closing balance in your original statement. The two did match which is an immediate indicator to me that you’ve restated this statement successfully. Next, I checked you had used correct formulas throughout the statement, especially when calculating totals. Again, you have been successful in incorporating these formulas. You’ve also clearly followed the correct layout when restating your headings and figures. Finally, you correctly classified “O” and “F” and your Total Operating Comprehensive Income and Total Financial Comprehensive Income in your restated SOCIE match those in your restated Income Statement. Therefore, it’s clear you have been successful in all aspects of restating this particular statement.

Restated Statements of Financial Position

Next, I reviewed your restated balance sheet. The first thing I checked was your working area to distinguish whether or not you had used the correct formulas to calculate your allocation of cash. It is clear to me that you have done so. The next thing I checked which I believe to be the most important check, was your Net Operating Assets (NOA) and Total NFA – Equity matched. These did, which immediately tells me all the other figures you used throughout must also be correct. Finally, I checked your layout and use of formulas when calculating

Restated Statement of Changes in Equity

Balance Sheet

Income Statement

Commentary and discussion with others

(Note: You may wish to give some comments on their Excel spreadsheet)

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total figures, and I am happy to say it is obvious you have been vigilant in the layout and process you followed, and in turn successful with this part of the step.

Restated Statement of Financial Performance

Finally, I reviewed your restated Income Statement. I was pleased to see that your Comprehensive Net Profit after Tax (CI) figure matched that of your previous financial statement. You have also again used formulas and followed an appropriate layout when setting out your new statement. However, the only potential problem I noticed is that your final CI figure in your restated Income Statement doesn’t match your total CI figure in your restated SOCIE.

Step 4Individual feedback with other students

The feedback you have provided to peers is attentive and provides some great tips. I believe it will be very useful to those who have received it.

Overall ASS#2 (Steps 3 & 4) Overall, you have produced an excellent Step 3 and 4. It is clear you understand the formulas which had to be used within the statement, and the steps we must follow in order to restate our financials. You have done a great job in following the task at hand and with very minimal changes I believe you will have a perfect Step 3.

Feedback From: Portia Di Bella

Feedback To: Jamie Wakeman

Comment on Jamie Wakeman's Blog

My Comments

Step 3 Restated Statements of Movements in Equity

When reviewing your restated SOCIE, the first thing I looked for was that the closing balance in your restated SOCIE matched your closing balance in your original statement. As these figures matched, I can initially assume you have restated all of the elements of your SOCIE correctly. However, before making that assumption I checked your formulas, layout, and classifying of “O” and “F”, to be sure. I found your elements of “O” and “F” to be classified correctly, and I am pleased to see you have used formulas and

Restated Statement of Changes in Equity

Balance Sheet

Income Statement

Commentary and discussion with others

(Note: You may wish to give some comments on their Excel spreadsheet)

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a neat, appropriate layout throughout. Finally, I did a quick check against your restated Income Statement to ensure your Total Operating Comprehensive Income and Total Financial Comprehensive Income match, and I was glad to find that they do. Overall, it is obvious to me that you have done everything correct within this statement.

Restated Statements of Financial Position

Next, I reviewed your restated balance sheet. The first thing I checked was your working area and more particularly, what formulas you had implemented to calculate your allocation of cash. The next thing I checked which I believe to be of high importance, was that your Net Operating Assets (NOA) and Total Equity - NFA matched. These did, which immediately tells me all the other figures you used throughout must also be correct. Finally, I checked your layout and use of formulas when calculating total figures, and I am happy to say it is obvious you have been vigilant in the layout and process you followed, and in turn successful with this part of the step.

Restated Statement of Financial Performance

Finally, I reviewed your restated Income Statement. I was pleased to see that your Comprehensive Net Profit after Tax (CI) figure matched that of your previous financial statement. Your total Operating and Financial Comprehensive Income figures match in both the SOCIE and Income Statement. You have also again used formulas and followed an appropriate layout when setting out your new statement.

Step 4Individual feedback with other students

You provided some very useful feedback and tips, including ones to myself. The help you provided me with personally, definitely helped me through an area of weakness when I was restating my own company’s financials. I am certain the feedback you provided to others would have been just as helpful and greatly appreciated.

Overall ASS#2 (Steps 3 & 4) Overall, it is clear you have a very deep understanding of your company’s financials, which is clearly shown in the restating of statements you have provided. You have done an excellent job and there is nothing that I would suggest needs improvement.

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ACCT 11059 – Accounting, Learning and Online Communication Portia Di Bella