ACC201 Financial Accounting

Introduction

Ansell Ltd. Is recognised as the global leader in terms of facilitating the various types of the safety equipment. The development and design of the manufacturing activities are considered with the range of activities which includes increasing demand from the customers. Some of the various types of the important products of the company has been seen to be ranging from “industry gloves and sleeve, medical grade glove, protective clothing and medical safety devices”. The discourse of the study has been seen to be considered with various types of the facets which are seen to be considered with the expenses for Ansell Ltd. The other evaluations of the study have been able to focus on the different rationale for the classification of the expenses. The second part of the report has been further able to consider the relevant disclosures associated to the accounting policies and changes in the accounting estimates and presence of the any error. The final section of the study has made use of the financial notes in the annual report to depict the relevant treatment of depreciation (Ansell.com 2018).

Analysis of Expenses

Determination of expenses 

The significant considerations in the financial statement of Ansell Ltd. has followed the income statement preparation by considering the function of expenses. Therefore, the disclosure of the expenses is seen to be based on the functions such as “distribution, cost of goods sold, selling, general and administration expenses”. The calculation procedure of the expenses applied with the multistep format is seen with the disclosure of the individual expenses as per each function (Jack 2015).

Expenses classified by function for Ansell Ltd.

Reasons for different method of classification of expenses used by the company

The main rationale for expenses is considered with the simplicity of the presentation structured followed in the report. The small organizations tend to prefer disclosure associated to the expenses based on the single step income statement. Therefore, the disclosing of the expenses by nature which is more relevant in terms of following the expenses as function. The main rationale for the classification of the expenses based on the functional role of in the bigger multinationals in order to monitor the direct units which are assigned immediately to the individual outputs, premium, rewards, material consumption directly associated to the outputs. Moreover, the use of simple method of single step is considered with the presentation of the expenses with the individual items like as “beginning inventory, purchases, rent expense, depreciation expense, supplies expense, utilities expense, interest expense and purchases” (Kallamu, Ashikin and Saat 2015).

Accounting Policy

The compliance statement of the accounting policy is recognised as per the principles which are stated in the “Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001”. Moreover, it is further discerned that the group adheres to the “International Financial Reporting Standards (IFRS)” which are accepted by “International Accounting Standards Board (IAS)”. The three concern areas in this report has been mentioned with the application of with “principles of consolidation”, “foreign currency” and “recoverable amount on noncurrent asset” (Needles, Powers, and Susan Crosson 2014). The consolidation process has been discerned with the several types of the consideration taken with the effect of the transaction among the groups which are not fully eliminated. Some of the major uses in the report has been traced in form of the differences in the recording of the foreign currency translation reserve. The important issues in the recoverable amount on the “noncurrent assets” are seen to be valued with the changes associated to the carrying amount of these assets (Muhammad and Scrimgeour 2014).

Accounting Policy main areas of concern in Ansell Ltd.

Notes to the 2016 financial statement

a. Cost of plant, properties and equipment

The depiction of the “property, plant, equipment” and “intangible assets” other than the individuals having “indefinite life is depreciated/amortized” based on “straight-line basis over their useful economic lives”. The board of the company is seen to be responsible for the various types of the activities which are considered with useful economic life of the assets. These are further reviewed for reviewing of the assets at least once in a year. This considered to be important for considering the prospective effect of the “depreciation rate and carrying value of the assets” (Scott 2015).

b. Depreciation amount

The depreciation of the company is seen to be classified with the various types of the method which are seen to be considered with the different type the assumptions like “freehold buildings, leasehold land and buildings, plant and equipment, building and building under construction”. The depreciation amount in 2016 is evaluated as $ 29 million. The accumulation of the depreciation on the overhead has amounted to $ 361.5 million in 2016. Moreover, the amounts under the “non-cash items” are depicted with $ 29 million. The availability of the information as per the deferred tax liabilities are included with the depreciation on the plant and equipment which is considered as $ 85.2 in 2016 (Henderson et al. 2015).

c. Depreciation period

The depreciation aspect is generally considered with the several types of the depictions which are seen to be considered with the “straight-line basis” for writing off net cost which is incurred on the individual “property plant and equipment” apart from the land value as per the estimated value of the assets. The “expected useful lives” as per the present and the previous years has been considered with the 20 to 40 years for “freehold buildings, lesser than 50 years or life of lease for leasehold buildings, 3 to 20 years for plant and equipment”. It is also discerned that the rates considered with the amortization and position are considered for reviewed every year for more relevancy (Beatty and Liao 2014).

d. Depreciation method

The depreciation method for the measurement and recognition of “property, plant and equipment”, which has been duly included in the company by using “cost less accumulated depreciation and impairment losses”. It is also understood that the cost related to the expenditures are directly associated with the “acquisition of the items”. Moreover, the various costs are further seen to be considered with the “carrying amount” of the assets which are considered as per the “future economic benefit” related to the assets life. In this case the assets are measured as per the measurement of the company in a reliable manner (Mullinova 2016).

e. Impairment

The impairment is appropriate with the “non-tangible assets such as goodwill”. The “intangible assets with indefinite life” and goodwill is treated as per the impartment done at least once in a year. It needs to be further discern that the carrying amount of these assets are considered with the defined benefit of the “fund assets, deferred tax assets and financial assets”. These are reviewed as per the relevant indicators taken with the impairment. The various indications in the assets are regarded with the impairment based on the carrying amount. The “recoverable amount” of this asset is taken into account with the increased cost and value. In addition to this, the recoverable CGU amount which is used with the “value in use calculation” utilized with the “five-year cash flow projections”. It has been also considered that the cash flows used in the values are seen to be estimated with the present situation and this is not seen to include the cash outflow for enhancing the asset performance like future restructuring. The average annual sales growth considerations have been further seen to be based on the various types of the “discounted cash flow model which ranges between 2% to 4%, whereas the growth in the terminal year is depicted as 2% to 3%” (Macve 2015).

The inclusion of the “impairment loss” is recognized by Ansell when “carrying amount of an asset or its CGU exceeds its recoverable amount”. This loss is identified with the income statement included under the cost of “goods sold and selling, general and administration expenses”. If there is no amount which may be related to the objectivity then the impartment loss (Reid and Myddelton 2017).

Conclusion

The determination of the consideration of financial statement of Ansell Ltd. has followed the income statement preparation by considering the function of expenses. Therefore, the disclosure of the expenses is seen to be based on the functions such as “distribution, cost of goods sold, selling, general and administration expenses”. in addition to this, main reason for expenses is considered with the simplicity of the presentation structured followed in the report. The small organizations tend to prefer disclosure associated to the expenses based on the single step income statement. Therefore, the disclosing of the expenses by nature which is more relevant in terms of following the expenses as function. The main rationale for the classification of the expenses based on the functional role of in the bigger multinationals in order to monitor the direct units which are assigned immediately to the individual outputs, premium, rewards, material consumption directly associated to the outputs. The three concern areas in this report has been mentioned with the application of with “principles of consolidation”, “foreign currency” and “recoverable amount on noncurrent asset”. The depiction of the “property, plant, equipment” and “intangible assets” other than the individuals having “indefinite life is depreciated/amortized” based on “straight-line basis over their useful economic lives”. The depreciation amount in 2016 is evaluated as $ 29 million. The accumulation of the depreciation on the overhead has amounted to $ 361.5 million in 2016. Moreover, the amounts under the “non-cash items” are depicted with $ 29 million.

References

Ansell.com. (2018). Mission and Values. [online] Available at: https://www.ansell.com/en/About/Corporate/Mission-and-Values.aspx [Accessed 17 May 2018].

Beatty, A. and Liao, S., 2014. Financial accounting in the banking industry: A review of the empirical literature. Journal of Accounting and Economics, 58(2-3), pp.339-383.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Jack, L. (2015) ‘Future making in farm management accounting: The Australian “Blue Book”’, Accounting History, 20(2), pp. 158–182. doi: 10.1177/1032373215579423.

Kallamu, B. S., Ashikin, N. and Saat, M. (2015) ‘Asian Review of Accounting’, Asian Review of Accounting Asian Review of Accounting Asian Review of Accounting, 23(3), pp. 232–255. doi: 10.1108/ARA-11-2013-0076.

Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.

Muhammad, N. and Scrimgeour, F. (2014) ‘Stock Returns and Fundamentals in the Australian Market’, Asian Journal of Finance & Accounting, 6(1), p. 271. doi: 10.5296/ajfa.v6i1.5486.

Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments: recognition and assessment" for bank financial accounting. Modern European Researches, (1), pp.60-64.

Needles, B. E., Powers, M. and Susan V. Crosson (2014) Principles of Accounting, Financial Accounting. doi: 10.1037/h0092877.

Reid, W. and Myddelton, D.R., 2017. The meaning of company accounts. Routledge.

Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.

Wilson, R., 2014. Sean T. McGuire. Accounting Review, 89, p.4.