4th April 2015

ACCT11059: Using Accounting for Decision Making (Term 1,2016)

Assessment Stage 1: Getting Started

Course Coordinator: Martin Turner

Student: Malcolm Kenny

Step 1. Moodle Profile & Blog

I have successfully updated my profile description on Moodle, with a few words introducing myself. Along with a photo of myself and a link to my accounting blog. In addition to uploading a personal image of myself and updating my description on Moodle. I also included a link to my very first WordPress blog that I created. That can be viewed by every participant for ACCT11059 on the blog links forum page.

In the mix of creating my blog and trying to successfully navigate my way around the site. I did manage to come across some other participants in the course and said hi.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Step 2.

After viewing the ‘Find Your Company’ spreadsheet that was on published on Moodle at 5.00pm Friday the 11th of March. It was found, that the company that I would be dealing with throughout this semester was in in fact Primary Health Care. On first impression I had no idea what in fact Primary Health Care was and what they did for this world. However, with a little bit of reading and investigating their annual reports. I was soon able to find out what Primary Health Care Limited is all about.

Annual Reports for Primary Health Care

2015 Annual Report

2014 Annual Report

2013 Annual Report

Brief Overview about Primary Health Care Limited.

So I have been assigned Primary Health Care limited. With knowing absolutely nothing at all about what they do and who they are. Although in my opinion, I see this as a blessing in disguise. As I have no conceived thoughts or past experiences dealing with Primary Health Care Limited and am I going into this step with an open mind.

At first glance, it seems that Primary Health Care is one of Australia’s leading healthcare companies. Specializing in a large range of medical and health related services. Ranging from medical centres to pathology centres all around Australia. That has led to Primary Health Care also being Australia’s leading technology provider in the healthcare sector. With the advanced technology not only being used by hospitals, but also medical practices and medical practitioners.

Primary Health Care is also listed on the Australian Stock Exchange and is the company that is the governing body for many medical centres and pathology’s around Australia. Like QML, Abbott, Queensland Diagnostic Imaging, and Healthcare Imaging Services just to name a few. The company has a value that it must provide affordable, accessible and comprehensive healthcare for all Australians

Throughout Australia, Primary Health Care is behind 71 Medical Centres, 100 Pathology Labs, 168 Diagnostic Imaging Sites and as mentioned before the leading provider in healthcare technology. As the main strategy of Primary Health Care is to solely benefit the community by providing quality and affordable healthcare services to all Australians.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Reading Your Firm’s Annual Reports & Discussing (KCQs)

After further investigating Primary Health Care’s annual reports from 2012-2015. My initial reaction from reading the latest annual report (2015). Was that over the last four years Primary Health Care as seen a steady growth in a majority of all financial departments. Although I am very curious to why in 2012 there was such a large rise in total assets that significantly dropped off in 2013-2014 that now in 2015 is only getting above where it was in 2012.

Another key area that Primary Health Care like to take seriously, is the amount of revenue the company makes each year. That was clearly achieved in the 2015 annual report. With a 6.2% rise in revenue from 2014. With the numbers going from $1,524m in 2014 to $1,618m in 2015. In addition to key highlight of the revenue rise in Primary Health Care’s financial position. They also experienced a rise in net profit after tax, that increased 19.1% from $114.6m in 2014 to $136.5m for 2015.

I also noticed when going through the annual report especially in relation to the consolidated balance sheets. Was that the Goodwill (intangible assets) asset takes up a large part of Primary Health Care’s assets in the consolidated balance sheets. Although, it must be noted that the Goodwill asset of $2,832b in 2015 is still below the 2012 figure of $3,138b, that triggers me to think why is this the case. Did something occur to stop the Goodwill in 2013 achieving the same results? Did Primary Health Care cut back on Goodwill to improve another area of their company ? These are just some questions to why this could be the case. Regardless of this outcome. After reading the key sections of the annual report, and the directors letter, in my opinion Primary Health Care will continue to grow ever so slowly and will ultimately remain of one of Australia’s leading healthcare providers. Not only on the technology front, but will continue to expand its ever growing number of medical centres and pathology labs all around the country.

KCQs from the Report

What does the term EBIT mean? Earnings Before Interest & Tax What is amortisation of intangibles? Involves the consistent reduction of a recorded

value of an intangible asset Why do the numbers differ from reports? e.g. the numbers in the 2015 annual report

in the 2014 column, don’t match up with numbers in the 2014 annual report, that ultimately throws out any chance of the numbers adding up in the spreadsheet.

What’s the difference between a balance sheet and a consolidated balance sheet? I believe that a balance sheet just shows the figures of one company, whereas a consolidated balance sheet represents the company and all its subsidiaries (different brands it might own)

What does EBITDA mean? Earnings Before Interest, Taxes, Depreciation and Amortisation

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Why do some numbers have brackets around them? Negative Numbers What’s the difference between basic and diluted shares? Basic Shares is the total

amount of stock held by all of the company whereas diluted shares include all possible sources of conversion to outstanding shares

Primary Health Care’s annual report was done by ‘Deloitte’ and independent Auditor What does the term ‘fully-franked’ mean? Is a dividend that the company has already

paid tax on There was figures for ‘Tax Receivable’ in the 2015 annual report and the 2012 annual

report but not the 2013-2014 reports. Why is this? In the Statements of movement in Equity, why did (Gain) transferred to income

statement only occur in 2012 and no other years? Why are the figures for ‘EBIT’ so low compared to other years? Why is there no figure for ‘Amortisation of borrowing cost’ in 2015 when every other

year has a figure? What does the term issued capital translate to? Issued Capital refers to the total

amount of shares that are held by shareholders What is a remuneration report?

Key Challenges for Primary Health Care

Throughout the 2015 financial year, Primary Health Care, went through a whole diverse range of challenges. With one challenge being, the resignation of their Managing Director and Chief Executive Officer Dr Edmund Bateman along with also, Mr Andrew Duff the Chief Financial Officer. As any company I am aware that this could lead to instability or riffs between workers vying for the job. This is why, one of the solutions that Primary Health Care had in place in order to fill the vacant positions. Was to hire someone with the same experiences/qualifications as Dr Bateman and Mr Duff as quick as possible. As both of these were vital roles in the company’s current success. Ultimately, both men were elevated through the ranks at Primary Health Care due to their efforts and dedication that they had previously demonstrated over the past couple of years working for Primary Health Care.

In addition to the personnel challenge that Primary Health care had to deal with last financial year. They also experienced a number of financial difficulties that were reflected in the annual report. However, since the report was published they have since done a review into how these difficulties occurred and found out for some of them why they effectively occurred, and how they are going to hopefully rectify these problems occurring again in 2016 financial year:

Problem: The EBIT declined by 3.3%

Why this occurred: Higher Amortisation Costs in the year, a net increase in medical practitioners over the past five years, the recruitment of staff in remote areas ultimately increased higher proportion acquisition costs.

Solution: Lower the cost of Amortisation costs to a stable price, try and limit the amount of recruiting that gets done in remote areas. Although this hard to control, due to a range of possible factors.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Problem: Uncertainty over the potential tax liabilities of healthcare practitioners, led to impacted performance in the second half of the financial year.

Solution: A settlement with the ATO took place, and all uncertainty over the potential tax liabilities has now been resolved.

Strategic Plans for 2016

For the 2016 financial year, Primary Health Care has developed four key strategic ideas that they would like to achieve by the time the current financial year is over. With each idea having a recommendation on how to achieve this goal. These strategic ideas are as followed:

Invest for growth Look to selective and capital-light expansion opportunities overseas in Pathology.

Improve returns on capital Focus on capital discipline to ensure investments undertaken drive improved returns.

Strengthen the balance sheet Reduced Balance Sheet debt and strong capital management will enable investment from existing capital base.

Engage Stakeholders Enhanced engagement with all stakeholders on all different levels.

2015 Key Highlights

6.2% Rise in Revenue (1.6m) 19.1% Rise in Net Profit After Tax (136.5m) 17.6% Rise in Shares (26.7c/Share) Primary has identified 5 further new large scale medical centres to be built. With 31 registrars training in Primary Health Care’s institution, the future for Primary

Health Care looks bright and committed.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Am I Happy with my firm?

Yes, and no. Personally, I would have been liked to be dealt with SRG (Super Retail Group). As I currently work under the Super Retail Group banner here in Rockhampton. That would have made the task of finding out what my firm does and the challenges its facing a whole lot easier when it discussing it in this assignment. As I would have been able to talk to my line managers and read the latest newsletter about what the company is doing this financial year.

Although, that being said, I am extremely grateful to be dealt with an Australian company and not an overseas company. That makes the understanding of the money currency a whole lot easier and less stressful when updating my spreadsheet. Secondly I am open to new things, and one of these new things was learning about what exactly Primary Health Care does and what they do in Australia. And since finding about my company at the end of the first week. I have been intrigued by not only my company (Primary Health Care) but the health industry in a whole. As I now have a new found respect, for endless work and hours they put in behind the scenes. Help shaping the world that we live in today. Whether its building medical centres in the middle nowhere, or updating the Pathology lab in Brisbane. It all helps in long run, as some individual will be benefitting from these outcomes. This is why I am not overly disappointed with the company I have been given, as its interesting and totally new experience for myself that I am eager to learn more about.

Articles about Primary Health Care (Know your Firm)

In addition to the information I have just talked about in regards to Primary Health Care’s report and key challenges it had to overcome. I also found a couple of news articles/videos that give a bit more of an insight to the firm I am dealing with, and how they stack up with the major overhaul. That will be affecting the health system in 2016, with one these overhauls resulting in a rise in price for blood test and scans. That will ultimately affect the current relationship with you and your GP.

To read more about this article please click here. (January 3rd,2016)

At moment throughout the news, there is plenty of news articles surrounding Primary Health Care and their shares. With share prices rising as much as 9.2% to a high of $4.15. Although these prices are constantly changing every minute with new information and facts. The main reason why these prices are constantly flocculating is largely due to the Federal Government planning to scrap bulk-billing subsidies for Pathology and screening.

To read more about this information, please click here. (March 18th, 2016)

In addition to the article I have just talked about briefly. It must also be mentioned that later that day on March 18th, 2016. Primary Health Care was the primary target of a takeover bid by Chinese company ‘Jangho Group’. That ultimately proved to be another factor for the ever changing share prices. The result of the takeover bid resulted in the Jangho Group claiming an 11% stake in the company.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

To read more about this important topic and what the boss of Primary Health Care (Peter Gregg) had to say about the takeover. Please click here. (March 18th,2016)

My Top 3 Blogs:

After a very long time looking and navigating my way around the many hundreds of blogs it so dearly seems. I have finally managed to decide on my top three blogs that caught my interest. I’ve decided on these blogs due to the following reasons:

1. The Final AcCountdown by Amy Plant

Firstly, who doesn’t like a good pun to start off. For me the title was hit and found it kind of amusing considering the course we are doing is Accounting, that I hear isn’t the funniest thing nor is it my type of thing. Another reason why I really like the blog that Amy has constructed, is the amount of time and effort she puts into her work. Not only for content surrounding the assignment for ACCT11059, but the extra work she puts in behind the scenes delivering weekly articles and news from all sorts of material. In relation to the assignment, Amy also gives a very deep insight to her firm of Oroton. As with the information she has acquired from reading her firms reports and obtained from the website. Amy has also managed to include personal experiences when shopping at Oroton in Perth. That helps give that personal feeling that she likes her firm and is very passionate about it, and will strive to deliver the key concepts and ideas that Oroton has to offer. This why I have chosen this blog as one of my three, as I will be certainly waiting for the next post to pop up on ‘The Final AcCountdown’.

2. Journal Junkie by Tahlia Evans

Tahlia Evans, the Journal Junkie. Not so much a bad thing when you think about it. As you can always count on Tahlia to have something up on her blog. A reason why I think I tended to lean towards Tahlia’s blog, was the fact that her blog is simple lay out. As it’s very easy to navigate and find your way round unlike some other blogs. The content is easy to read, concise, and to the point. She doesn’t ramble on just for the sake it, she gets her point across which for me, I find very helpful and beneficial for my learning. I wasn’t trying to be biased, but I did like the fact that Tahlia was dealt with Aurizon. As having a couple of friends working with Aurizon here in Rockhampton. I found it extremely helpful reading the information she has blogged, as it helps me acquire a greater understanding of what my best friends are doing day to day and what exactly their company has been involved in since their commencement. This reason and the reason that Tahlia’s blog is simple, easy to navigate and the content is easy to comprehend is why I have chosen it to be a part of my top three blogs.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

3. sarahvn68 by Sarah

Hallelujah! I am not only one struggling to find the balance between work/life. Although I am sure there are plenty of other students in the same boat feeling the exact same way I do. The reasons why I liked Sarah’s blog was once again, it’s a simple but effective layout. The content is easy to access and is a real pleasure to read. Another reason why I liked Sarah’s blog was that she has added her personal experiences and feelings. Not afraid in admitting that she is struggling to find the time to dedicate herself towards university when she is trying to juggle a life and work commitments. Although she is determined to get on top of it and make it her best year yet. In addition to Sarah’s outgoing nature, I found it very ironic when reading about her firm (Monadelphous). That in fact her current owner used to work for Monadelphous immediately prior to starting his business over 20 years ago. Taking a key interest in engineering, it was exciting to learn that Monadelphous is a leading engineering company, providing large scale construction and maintenance all across Australia. Sarah also provided insightful information about Monadelphous financial records and that it’s not all downhill for struggling company. In addition to hearing that the company is struggling with the financial pain. This is one reason why I have chosen this blog to be a part of my top three blogs. As I am eager to see how the company travels with the involvement of Sarah’s blog.

So there you have it! My top three favourite blogs for ACCT11059. It was interesting to read all the different types of blogs and pages that made it a very hard trying to narrow it down to only three.

Blog Forum

To view where I posted it on the blogs forum click here.

Please find below some links to some discussions I had with fellow course participants:

I discussed Tahlia’s company (Aurizon) with her here.

I discussed Steven’s company (Nearmap) with him here.

Than Steven and I discussed my KCQs from chapter one and three here.

Similarities and differences with another person’s report

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Step 3.

Please find attached the excel spreadsheet with Primary Health Care’s financial information uploaded as requested.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Step 4.

Writing down some of your ideas, reflections and reactions to reading Chapter 1 and Chapter 3 in the Study Guide.

Chapter 1 KCQs

I must admit prior to even clicking on the ‘Study Guide’ link to progress to the different chapters, I had my doubts about accounting and whether I really wanted to continue my university adventure in its entirety. I was anxious and didn’t know what to expect. I largely believe this was due to not studying or reading anything about accounting whether it was at school last year or during the break. Although with some advice and speaking to the people that matter most. I made the click, read the chapter one, and boy, didn’t my mind open up. I felt like I was immersed with the author (Martin) receiving a one on one conference. His personal experiences tied in with the technical attire. Made the reading easy and the task of continuing to read each page and other chapters a pleasure rather than a job. As I was able to reflect and think about what exactly he was talking about and understand what is actually being said. This was effectively made a whole lot easy with the use of Martin’s choice of words and experiences. Instead of an author rambling on and making the whole chapter too full on and content heavy.

After reading chapter one (A way of Viewing a Business) my whole conception of accounting was changed. In a positive way too I must add. Martin’s thoughts and ideas not only helped open my mind about accounting, but he helped me realise that accounting is much more than I originally thought. As I had the thoughts that accounting would be extremely boring and I would be spending a majority of my time analysing and critiquing excel spreadsheets.

It occurred to me while reading chapter one in the early paragraphs. That Martin is right, accounting really does helps us connect to reality and what really is occurring within our firm. As being brought up in family business for the past 15 years. I do recall it’s not all black and white. As there is a lot of variables that can occur during 12 months, whether it’s holidays, staff issues, or the weather. They all affect the bottom line, so yes as Martin said in paragraph 2. “Accounting is not like a corporate camera taking precise photos of what is going on. Rather, each firm experiences its own economic and business realities quite independently of what gets recorded in its accounts”.

Another concept that occurred to me that I found rather surprising but simple. Was the fact ‘MYOB’ actually stands for Mind Your Own Business. When I personally thought at first glance that ‘MYOB’ would stand for Manage Your Own Business. Although what would I know, this is the first ever accounting reading I have ever done. So now I know that it stands for ‘Mind Your Own Business’ it will be hopefully embedded in my mind forever.

In addition to the MYOB understanding and what accounting really is. I found it surprising that the simple word ‘value’ can have such a large impact on businesses. With the term ‘value’ being in relation to things that matter to us and that firm can either create or destroy value. Whereas I would of thought that value in accounting is the estimate value of an object in relation to money.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Another surprising concept that I found really interesting was concept of ‘Double-entry Accounting’. On first reading, I thought to myself why on earth would accountants have to type everything in twice. Was it just to check whether they made a mistake or not? or was it always done just for sake of it and has been passed on through the numerous generations. Well no, even though double-entry accounting has been occurring for a very long time. It’s not to check whether the numbers were incorrectly entered the first time and so that we can rectify this mistake come the second time round.

The main concept that I was about to learn and take advantage of by using it in one of my Peerwise questions. Is the fact that double-entry accounting takes place to ensure that there is a certain system of recording transactions of a firm in such a specific way that ensures the relationships between different elements of the business model that underpins accounting is kept intact. I must admit after reading this paragraph surrounding double-entry accounting, I did in fact have to re-read this paragraph in order to grasp a better understanding. As at first I was slightly confused about what double-entry accounting was and why it was needed. Even though the answer was right in front of me it just took me a little bit of time to acquire what its main purpose is and why it was needed. Although that’s the purpose of going over something again and I believe now I am better off and have a sound knowledge of double-entry accounting that will continually build.

I also obtained the key concept that there are five key elements to accounting. These being assets, liabilities, equity, revenue and expenses. Accordingly, it was vital for myself to know which key term was what. Especially considering a lot of these terms are being used on Peerwise and will be used frequently throughout this course.

In essence after reading chapter one of the study guide. It felt like it did a world of good for not only my knowledge but my confidence levels. As now I felt confident in using some of the key accounting terms and concepts on discussion forums and blogs. Below are some key concepts that I felt were important towards my learning. It could also be mentioned that throughout reading the chapter. I didn’t necessarily find anything boring as such, as all the information was critical to my understanding of accounting. Although, I did find one paragraph very confusing, which was the paragraph about Trust. As it felt like I was saying trust or trustee every second word that started to do my head in. Confusing me with what an actual trust was. However, with a bit of re-reading once again and slowing down. I was able to comprehend the information and make sense of it.

Key Concepts & Questions (Chapter 1) Cont.

MYOB actually stands for Mind Your Own Business Entity Concept Accounting is not like a corporate camera Sole traders/Partnerships/Companies Double-entry accounting Debit on the left, Credit on the right Ledgers and Journals

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Businesses can also be organised as a Trust Why is there no exact date for when companies should empty out their temporary

Revenue and Expenses accounts? Bookkeeping The 5 Key elements of accounting: assets, liabilities, equity, revenue, expenses The quotes help put life perspectives into place, and give greater meaning Businesses are everywhere you look Why are companies their own separate legal entity? The accounting equations (Short/Long version) In Charlie Munger’s quote, what does he mean by double entry bookkeeping?

Chapter 3 KCQs

So here we go, chapter 3 and before I have even read chapter 3. I have inputted the data from Primary Health Care into the excel spreadsheet. Hoping that this chapter would clarify what I have just done and what these financial statements were all about, and before you knew it I clicked on chapter 3 and the first words I saw was ‘Introducing Financial Statements.

After reading of the first paragraph, I thought to myself, what an excellent idea to introduce the whole concept of this chapter with the setting of a party. In my opinion, this was an excellent way to lighten the mood, considering that this chapter is all about accounting and showing that you can have a little bit of fun once in a while. Instead of getting straight into it and being bombarded with information and stats evolving accounting.

As I went on and read, I came to grips that there are four main financial statements used throughout accounting. Although it raised the question, why are we only using three financial statements in our assignment? Like we have to fill in the data for the balance sheet, the statement of changes in equity and the income statement. But why not the cash flow statement? Maybe some businesses don’t have the cash flow statement at all. It’s just something that I would like to know. Although it gave me that little confidence boost, that I was indeed able to find Primary Health Care’s three financial statements that were required and input them onto the excel spreadsheet.

In addition to the four financial statements, as I further read on through the chapter. I came across the interesting concept of accrual accounting. And that accrual accounting just doesn’t record one type of transactions but it records all various transactions such as revenue and expenses, and that in in this process judgements are made all the time by different people. I believe I understood this concept a far lot easier than other concepts due to the fact that it was straight forward laid out, and didn’t include any ambiguous words that that I wasn’t familiar with.

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Now after just wrapping my head around the four financial statements and which each one consists of. Wasn’t I unprepared for what laid next. The concept I am making reference to is ratios. For some reason I just couldn’t come to grips with what ratios did exactly or what their meant for. Like I have a vague idea about what they do and how their used but not complete confident understanding that I would be able to tell someone else that has no idea about what they are. I believe it could be due to the fact, that at the start of the ratios paragraph. There was a lot of information surrounding the history of the word ratio, and where it came from and who started using it etc. etc. Where in this instance I would have just preferred a straight forward explanation that would have got me what I needed in a couple of seconds rather than minutes later.

Another key concept that the author got me thinking about. That I found interesting was the simple concept of value but in relation to money. Because it’s true, a lot of people would prefer to have the money now rather than later, well I know I definitely I would. I guess it just gives that sense, that when you have it, you know it’s yours and no one else can take it off you unless you decide you want to get rid of it. Whether it’s paying a bill or paying for something you have purchased. Whereas in the future, you may be quite wealthy and don’t need the $20 but you’ll take it just because its money. It just shows that in the current time money is valued quite highly among the human needs. And what good is it waiting for that money in five years’ time when you could have it now and make good use of it.

Hallelujah, the topic of footnotes was mentioned. I was hoping it would be. As I had no idea what on earth these little numbers were doing next to different items on my three financial statements. Although with the author’s clear explanation and the inclusion of the lightening the mood party concept. It was easy to come to terms with, that these little footnotes that are found on annual reports next to certain items on the balance sheet. That give greater depth about what actually happened for that specific item either earlier or later on in the report.

Accordingly, after finishing the reading for this chapter. I feel like I am able to look back on my annual report and spreadsheet for Primary Health Care and be able to make more sense of it and understand a lot more, on what’s actually occurring throughout it. With the knowledge of what each financial statement is about, and what the footnotes mean for certain items on the balance sheet. This was all ultimately helped due to the easy layout of the chapter and the different view the author came on. With the setting of a party occurring rather than delving straight into the accounting information.

Key Concepts & Questions (Chapter 3) Cont.

Why not the cash flow statement? Cash Flow Statement, Statement of changes in equity, Balance sheet, Income

statement are the four financial statements and should be available in a majority of annual reports

Accrual Accounting Ratios

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

DD Model The Du Pont approach was popular, but how popular was it exactly? Money is valued a lot more these days Footnotes How is the specific day of the balance sheet chosen for some companies?

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny

Step 5.

Provide feedback to other students.

Feedback From:

Feedback To:

Comments Step 1Introductory Words in Description BoxPhoto and description Link to your blog Step 2Background information on company Comments/KCQsComments on other’s blogs Step 3Input company’s financial Statements Step 4KCQsOverall ASS#1

Using Accounting for Decision Making (ACCT11059) s0286671 – Malcolm Kenny