ASSIGNMENT 1 STEPS 3-6Dakota Richards

S0286675

Step 3: My Company – Coca- Cola Amatil

https://www.ccamatil.com/

Step 4: Coca – Cola Amatil Financial StatementsWhen I first saw the company I had been given for this assignment, my initial thoughts were thrilling. I was absolutely over the moon when I saw ‘Coca – Cola’. I thought to myself, I know this company and I know what they produce. Everyone, or most people drink some type of Coca – Cola whether it be normal, diet, zero, etc. I had the feeling of excitement and I wanted to learn all about Coca- Cola, when they started and I was quite interested to see the profits they make. The only part that had me unsure on was ‘Amatil’. I had never heard of this before and definitely never heard anyone say ‘Coca-Cola Amatil’. All I could think was well, I’ll soon find out.

WELCOME TO COCA – COLA AMATILCoca – Cola Amatil began life in 1904 as British Tobacco Company Limited. During the second World War, Coca – Cola was the new drink introduced to the American troops and by 1965 Coca – Cola turned into a household name and the company grew from there. Amatil actually stands for Allied Manufacturing and Trade Industries Limited which was the new trading name taking over British Tobacco. In 2004, the company acquired the Northern Territory Coca- Cola franchise which made them the sole licensee of Australia Coca – Cola Products. In 2006 and 2007, alcohol was added to the product list and then the company grew larger and larger.

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The following link shows a video of the complete history of Coca – Cola Amatil which provides a complete history on your everyday drink of Coca – Cola or similar. https://www.youtube.com/watch?v=QFKsFgS6SMc

Coca- Cola Amatil as five businesses which commence operations across six countries. These businesses manufacture and deliver beverages, ready to eat fruit and vegetable snacks and everyday consumed products.

This company has a wide (and I mean wide) range of products that they manufacture, package, sell and distribute to customers and consumers daily. The following is a list of products they provide which are surprising and unknown to most people.

Some of the non-alcohol drinks they produce involve Kirks Ginger Beer, Mount Franklin Water & Lightly Sparkling, Deep Spring Sparkling Water, Cascade Ginger Beer, Barista Bros Ice Coffee, Pump Water, Vitamin Water, Fruit Box, Neverfail Springwater, Peats Ridge Pure Spring Water, Fuze Tea, Mother Energy Drink and Monster Energy Drink. A handful of the alcoholic beverages they manufacture and produce include Canadian Club, Jim Beam, Midori and Galliano. Some of the food they provide are Goulburn Valley, SPC, Ardmona and IXL Jam. There are quite a few products that have been listed but that is now even half of what Coca – Cola manufacture and produce. I have personally chosen to list the ones provided because I was not aware of all the assorted brands and products that all fall under the Coca – Cola banner.

Coca – Cola Amatil’s Annual ReportThroughout viewing Coca – Cola Amatil’s 2016 Annual Report, I have noticed many noteworthy figures and statements. I have noticed that there is $490.5 million dollars free cash flow which is the highest amount in over a decade and a $100 million dollar increase over 2015. A statement was made in the overview summary on the report stating, ‘In 2016 Coca – Cola Amatil continued to make solid progress implementing the business strategies.’

As I start reading through the financial statements, all the information I had learnt while reading the study guide all falls into place. The layout of my financial statements in the annual report seemed to be straight forward, however the rest of the information in the 136 page report all seemed to be quite a blur and difficult for me to interpret.

Looking at the balance sheet it is clear where the total income profit figure is and that it has had an increase of approx. $9.3 million dollars since 2015 which is what all businesses want, an increased profit of income. It is then visible that the expenses have also increased since 2015 by $205.5 million dollars which is not a favourable concept in the accountant world as an increase in expenses means a decrease in total profit for the year. Coca – Cola Amatil’s profit was a total of $257.3 million dollars which is a $146.1 million decrease since 2015 which is due

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to the increase in support services and other expenses in 2016. As I read further into the footnote and notes of the financial statements I see that non-trading items are included in the support service and other expenses accounting the financial statements. The evidence shows that the increase in this account is due to the non-trading item of SPC which continued to face difficult market conditions and competition from cheaper products which has an impact on the businesses profitability figures.

As I move on to analyse the statement of changes in equity, it all becomes a little overwhelming as there are so many columns of different figures and information. I remember in my readings that it was outlined that we are only to look at the total column for now and not try too hard to figure out the individual information. I like that when I set this information out in my spreadsheet that all the information was correct and there were no differences in opening balances when going from year to year. When reading the titles of all the columns it seems interesting and exciting to find out information about the shareholder figures of the company so I look forward to learning about these different headings in more detail. As I compare the closing balance figures for 2015 compared to 2016 they are within $0.5 million dollars of each other which is a good sign and as Coca – Cola Amatil stated in their annual report that in 2016 they continued to make solid progress implementing the business strategies. The only questions I have after reading through the statement of changes in equity is about the report layout and if there was any viable way they could make it easier to read and analyse.

Now when I think about the balance sheet, the first thing that comes to my mind is about the equation of Assets = Equity + Liabilities and I can see where this comes into play while perusing through the balance sheet. I like when I learn something and I can then interpret it against actual information in real companies by looking at the total equity and liabilities and equalling the total assets figure, its magical.

Coming to read the statement of cash flows I become to get a little confused and information overload when thinking about inflows and outflows and operating and investing. I can see that the total net operating cash flows have increased since 2015 by approx. $148 million dollars which is due to increases in most of the sub accounts of operating cash flows. The total net investing cash flows has also had an increase since 2015 by $131.6 million dollars but is still showing as a loss due to the additions of property plant and equipment loss increasing. The net financing cash flows has had a major drop since 2015 dropping by $560.9 million dollars due to the increase of proceeds from borrowings and other financial liabilities and the major decrease to be nil proceeds from issue of ordinary shares in subsidiary and a decrease in borrowings repaid. The statement of cash flows then comes to a total cash and cash equivalents held at the end of the year to be a total increase since 2015 of approx. $139.6 million

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dollars. After reading the statement of cashflow and writing all the information above I am still unclear on all the meanings of the individual sub accounts and their meanings so I look forward to learning about these accounts to better enable my analysing skills for financial statements.

Concluding reading the financial statements, I feel a little overwhelmed that there is still a fair bit of information that I am yet to learn about but I feel good in the fact that I can see the equations and how the figures all formulate and so on. Once I have learnt about the individual sub accounts of these reports, I will then have a better knowledge and maybe even diverse ways of viewing these accounts.

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Step 5: Reading Chapters 2 & 3 (Section 3.1 & 3.2) ‘Understanding the game.’ What a way to capture readers and get them intrigued and wanting to learn about the game of accounting. When I personally think about accounting being a game I think about the game as winning by hoping for the best profit or outcome for a business. Another way could be winning the game by balancing and reconciling accounts and being a more successful business than others.

Keeping financial information and accounts internal and not provide external parties seems fair. The business information such as income, expenses, assets and liabilities should be kept confidential. I believe this should be the case except in the case of banks when applying for loans, etc.

‘If I want to play the game, I need to know the rules.’ Is it weird that when I read and think about that, that I think about a horror film and if I don’t know the rules, I die? Gosh I’ve only just started reading and my head is already in la la land. Concentration now needs to kick in. Accounting isn’t a horror film, it’s an exciting adventure that continues until you get an answer or outcome. I love accounting and death is not going to happen. Oh, how my brain thinks crazy things sometimes.

It makes sense that financial statements are interesting for a wide variety of people because they are all affected and everyone’s always a little curious on how a business is running financially. I suppose I’m the type of person who drives to McDonalds and buys a meal then thinks to myself, ‘the owner of this store must be loaded, everyone gets McDonalds.’ The thing I don’t think is, there are so many expenses for a fast food restaurant such as all the food, electricity,

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wages and so much more. I mean the wages themselves would be crazy as there are so many people who work at McDonalds. Anyway, that’s enough about McDonalds, it’s making me hungry. Overall, I would be curious to see McDonalds or any other fast food restaurants financial statements out of curiosity.

Reading about how financial statements grew and changed over time, I never would have thought that in the 1930s, that there would have been a significant increase in financial statements availability in the US. I suppose it’s not something I’ve ever had to think about but that’s 87 years ago. That’s a long time for financial statements to develop and surprising that they are still around and useful with the changing of the technology and reporting world nowadays.

I did find the definition of financial and management accounting quite interesting. That financial information is for external users and management is for internal users, which makes sense really when you think of management accounting being for the manager type roles in a business. If most firms only keep one set of accounts, why are two different reports produced? Why not just use the same report for internal and external users?

I’ve always heard and read the word GAAP here and there but never stopped to think about what it means and what it’s all about. Generally accepted financial statements, the rules of the game accountants follow. I didn’t know that the AASB, ASIC and ASX were all included in GAAP. The number of rules would be endless I can imagine. I wasn’t aware that if a firm sits under the reporting entity category then they are required to produce general -purpose financial statements and comply with all the rules of accounting. I had to re-read what the definition of a reporting entity is, but I now understand why this is the case.

We are all different and we all have our own thoughts and opinions. I agree completely with this statement do believe and like the idea of working together and helping each other out to make decisions and analyse information. I also agree that completely a university degree doesn’t automatically make you an accountant. If you did real learning and thought and processed all the information, then you are one step closer. Myself personally, I find that I learn better through practical learning. Completing a tax return or producing a set of financial statements in practice is easier for me to understand than reading a load of information and trying to remember it all in my head. I don’t want to just an accountant. I want to be a great one and I hope my real learning and thought processes at university will help me achieve my goal of being a great accountant.

Accrual accounting, would it be weird to say I’ve looked forward to reading this section? I love the quote about the businessman and the accountant because it comes back to my idea of being an accountant and that this particular accountant isn’t just an accountant, he’s a great one. I like that I feel as though I can relate to this information as I have an idea of what accrual accounting is.

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Accrual accounting is recording transactions when they are incurred whereas cash accounting is recording the transaction when the money has been received. Let’s hope I’ve got this right. I really like the example provided regarding electricity. I still live at home so I have yet to experience my first electricity bill and yikes I’m a bit worried for that. It’s exactly right that we are provided with electricity but we don’t actually pay for it until later. After reading about various people wanting to know what is happening to a firm at regular interval, it all makes sense that accrual accounting comes into place. This allows for all cost and benefits to be included and shown for the period when it was incurred and not just when the cash was received which is reasonable.

A going concern, now if I was asked to explain what this meant I would have a bit of trouble. I hear it in practice and have an average idea but explaining what it meant would be hard for me. Now that I read what it means, it is quite obvious in the fact that a firm will continue to operate business unless in the case of a good reason to cease operations. When putting together a set of financials and making the judgements required, I find when I get stuck and am unsure and cannot make a decision that I ask for a second opinion.

While reading about the two key qualities of accounting information, it is obvious as to why and I also feel as though another key quality coming after the first two should be appearance. When I see financial statements that are an absolute mess, I find it difficult to follow and read through easily whereas when the formatting and layout is nice and simple, it is much easier to follow and process. No one wants to read information that is not required and wasting time. I agree that it’s important to be simplistic and only include relevant and faithful representation of data in financial statements and other accounting information.

As I come to the end of reading chapter 2, I am thinking about all the useful information I have learnt about financial statements and about the information involved and how better or improve financial statements rather than having unnecessary information included for example. I look forward to now moving on to read section 3.1 and section 3.2 of chapter 3.

Reading the first words of section 3.1 got me excited already. What financial statements look like. I see financial statements throughout my work so I have a basic idea of what they look like although the firm where I work would not deal with large financial statements like the size of the companies we are looking at in our assignments where they are 100 or more pages long. I am looking forward to being introduced to the different financial statements and gaining an insight on the meanings and ideas of each report.

I like the idea of the balance sheet being at an exact date as you can see exactly how the business is going at that exact time and see the asset, liabilities and equity values. It makes sense to produce a balance sheet yearly or companies could even look at it quarterly or monthly. I think this is a clever idea so the

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internal parties of the company are aware of the situation rather than getting to the end of the companies’ life and realising the company wasn’t operating well and is now closing or bankrupt, etc. As I start to read some of the footnotes in my companies’ balance sheet, my mind starts to spin. So much information, footnotes learning will be saved for another day.

Business on the move, seems interesting. As good as a balance sheet can be seeing the businesses overall at a certain date, Martin is right when he says that business is never static because it’s not. There’s always an expense or income or something happening somewhere in the business so these reports I’m about to learn about, I assume will be the income statement, changes in equity and cash flow because these things are forever changing.

The income statement understandably shows the income and expenses to then provide the profit or loss of the company therefore being the ‘income statement’. While reading about the income statement, I found it easy to relate it back to my knowledge and experience looking at income statements.

I love the fact that Martin described the statement of changes in equity as nerdy and geeky because it’s so true. When you look at the statement of changes in equity compared to say the balance sheet or income statement, it’s like “wow, where did all this information come from and what does it all mean?” Besides the fact that the statement of changes in equity is a complete information overload, I understand its importance.

Depending on the type of person you are you may like or not like the cash flow statement. If you are a person that likes to spend money regularly you may not be a fan of the cash flow statement as you will see all the money that has been lost. I’ve recently introduced myself to a new budget involving paying rent to my parents, paying my car off, paying my phone bill and also putting a certain amount of money to my savings each week. Before I started this budget, I would be one of those people who wouldn’t like to look at a cash flow statement of how I spend my money because let’s just say, I love to shop. If I was to be provided with a cash flow statement since introducing my budget, I’d be happy with myself because I have adapted quite well to this new budget and although no more shopping, I will be a happy girl when I can afford to buy a house in a couple of years’ time.

After being introduced to the four main financial statements, I feel like I have taken in a lot of information also been able to expand the knowledge I already have and understand why things are in place and why things are produced for a reason. I also feel as though a lot of the information I have just read has gone in one side and flown out the other but as Martin said, we are just getting introduced and there still more to learn about our new friends, the financial statements.

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I look forward to learning and expanding my journey into the game and rules of accounting.

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