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Assignment 2- STEP 3 & 4
Assignment Stage 2 – Step 2
Assignment 2- STEP 3
Hi Everyone,
Here is my finished restating financial statements, any feedback is highly appreciated.
Assignment Stage 2 – Step 1
Top three blogs
1-Paul Feasey – https://beingheldtoaccount.home.blog/
I liked Paul’s blog because it was so informative and has a sense of humour. His blog reflects his hard work as I could see how much effort he put into his blog and assignment. He has written a quite in-depth analysis of his company and annual report. Paul is always ready to share his knowledge with all students without hesitation. Although I don’t know him personally, I met him in the pass session, and I have seen his comments to many students who were struggling to find an answer. A very motivated and thoughtful man.
2- Kyl Dunne – https://kdunne92cqu.home.blog/
A very keen and supportive colleague, I also consider his blog as one of the favourite ones. His blog shows his hard work and ambitious is so easy to navigate and read.
3-Bridget Biggin – https://biggincommunications.wordpress.com/
One of my favourites blogs is Bridget’s Blog. First time I looked at her blog, it tempted me to continue reading all here blogs. So, I started bit by bit. I found her blogs very interesting and informative. She expressed her thoughts and ideas in a very nice and clear way without any ambiguous I enjoyed reading her blog. Very easy to navigate and follow.
Studiosity Feedback: –
What an amazing service! Super-fast, free and convenient. My first experience with Studiosity was in assignment1 STEP1. I submitted my first draft at night and by 9 am the next day I got the feedback which was terrific in term of time response. I got good feedback especially in grammar, choosing of language and correcting some of my typo errors. Their feedback was a great help to me to pay attention to some weak parts in my writing as I am not a native English speaker. The only thing I would like the Studiosity team to consider is people whom English is their second language as sometimes we need more hints in the feedback.
As a student in this era, I feel we are super blessed with a huge amount of supports and services that are within our reach. I have used Studiosity for this assignment as well, and I will keep using this service over and over again for all my written assessment. I will definitely recommend Studiosity to everyone especially people whom English is not their first language
ASS-1/ STEP-5
Chapter 2-KCQ
UNDERSTANDING THE GAME. What an interesting topic. I know that in any game, to play well and achieve the desired result it is important to understand the rules of the game. Because If you do not know the game rules, it would be so boring and frustrating to play. Chapter 2 refers to accounting as a game, meaning there are some rules we need to be familiar with.
At the early stages of this chapter2, I understood that to play the accounting game we need to learn the rules. Learning the game, in turn, can help us understand how to prepare a firm’s financial statements.
It was interesting to recognise that firms have one set of accounting information that can be presented in two different ways. The first way is financial accounting that provides accounting information to people outside the firm. Another way is management accounting that provides accounting information to people inside that firm. I also could realise that there are rules that need to be followed in providing accounting information.
Finally, I have been introduced to the rules of accounting game, which are Generally accepted accounting principles (GAAP). I found that we have a lot of rules and these rules can be summarized with a single word that is ‘GAAP’ in the accounting world. Frankly, I have never heard about it before, but I believe this is the purpose of studying this chapter which is to learn the rules of the game and to know how to play it. I could understand that companies and their accountants are required to follow these rules when providing financial statements especially for outside parties, but it is not necessary to follow these rules in preparing financial statements for people inside the firm. Until this point, I was happy with what I understood, but I got confused. There was a contradiction, and I could not get it. Initially, it stated that these rules do not apply for management accounting and then it mentioned that accountants still need to follow these rules in preparing accounting information for internal use as firms have one set of accounting information. So, if I am not wrong, the summary is that people inside the firm will also get accounting information followed by the rules regardless that their accounting information does not require to be followed by rules. So, my question is Why accoutring information separated into two different ways if it is at the end same accounting information for both people inside and outside a firm?
It was a good relief to know that we don’t need to know about all these rules, as no one can do that. I was struggling to get my head around all the names of the accounting standards and acronyms. I could come to understand that any firm requires to produce a general-purpose financial statement which must adhere to these rules (GAAP). I was wondering why firms should do and follow all these rules? Is it to make financial statements more trustworthy? So, the investor and people who are interested have faith in their firm.
I liked it when Martin focused again on the way we should learn, understand and how we must construct our understanding. When I read that I considered that as a reminder for us to be active learners because we all need from time to time to remember what real learning is? I know it is not easy to turn from passive learner into an active one, as Martin said it takes effort and time. Honestly, I am trying my best to change my old habit of learning and built a new milestone in my learning way.
It was not easy to understand the concept of accrual accounting, but I could perceive that accrual accounting records the transaction of income and expenses as they occur whether or not cash has received. Martin gave us the electricity bills as an example for accrual accounting which was such a great example to understand the concept of accrual accounting.
Lastly, I came across these questions that Martin mentioned: is it a game? When we read a firm’s financial statements are we being ‘marketed to’ or ‘spun a story’, or are we being given a window into a firm’s economic and business realities? So, my answer to these questions is as follows. For the first question, I would say, YES, it is a game because it is possible to manipulate around numbers and how accurately and consistently information is presented. I believe it depends on the company and their accountant’s actual purpose, so if they seek to attract more investors and not to show what is going on in the firm, then people are being marketed. In other words, financial statements are not relevant and faithfully represented. On the other hand, financial statements that are relevant and faithfully represented can be very credible, trustworthy and meaningful documents for interested people.
Chapter 3- KCQ
Finally, I have been introduced to the financial statements. Since I commenced my course in accounting, I started to hear about financial statements more frequently. I always wonder, what are financial statements? When Martin mentioned, “It will be sort of like meeting someone for the first time at a party” that was exactly my interpretation about financial statements. As I have no idea about, apart from the name. When I read chapter 3 and did my annual report analysis, I was able to recognise that there are four general purpose financial statements which are the Balance sheet, the Income statement, the Statement of changes in equity and the Statement of cash flows.
I Initially thought that financial statements have a similar layout and design for all firms. It was interesting to know that they vary from firm to another even the name of the financial statements itself and the name of their items can differ.
In chapter1 and 2 I could understand that the general idea of financial statement is like our report card that tells others the performances and activities of a business over a period of time. So, interested people, can gain insight into the economic and business realities of a firm. Now it is the time to dive deeper into the four general purpose financial statements and understand the purpose of each one and why we need the four of them?
Firstly, the balance sheet is also known as a statement of financial position or financial condition. It shows the firm’s position on a given day, as for my firm’s annual report the given day was on 31st of July. The balance sheet lists the firm’s assets, liabilities and owners’ equity. By connecting with what I understood in my previous reading to chapter 1 especially when Martin explained it in an accounting equation ‘Assets = Equity + Liabilities’. I was able to realise that the concept of a good financial position is where assets are higher than liabilities. I even applied this equation to analyse the financial position of my company’s annual report. The hardest part of the balance sheet was to read the footnotes as they were not clear enough to me.
Income statements can also be called a statement of profit or loss or statement of financial performance. It tells us about what is going on in a company within a certain period, normally a year. Again, back to what I learned in chapter1 and through my reading this chapter, I started to make more sense about the concept that profit and loss is revenue less expenses = Profit.
Another financial statement is the statement of movements/changes in equity that shows us the change in owner’s equity (the owner’s stake-holding) – whether improved or not. I could recognise some of the items that Martin mentioned when I looked at my company’s statement of changes in equity, but honestly, I could not analyse or understand this statement as well as the previous ones.
The last one in the series of financial statements is the statement of cash flows. It demonstrates to us the inflow and outflow of cash in addition to the opening and closing cash balances in the firm’s balance sheet for a period of time which is usually one year. I could summarise that cash is very important to sustain a business regardless of the company’s loss or fail.
It was delightful to learn about all these financial statements as I was satisfied with what I could achieve in analysing my firm’s annual report based on what I learned in this chapter and previous ones.
ASS-1/STEP-4
ASS-1/STEP-3
Funtastic
First Impression
I was assigned a company named ‘Funtastic’ on Friday of week1. I instantly thought it is the furniture company that we have here in Mackay “Fantastic Furniture”, but when I looked for more details in the spreadsheet, I found that I was mistaken. I was surprised at first as I know this company does manufacture furniture. When I looked more carefully at the details of my company, I could see there is a spelling difference. My company name is Funtastic with “U” the other company is Fantastic with “A”. Although it called ‘Fantastic Furniture’, for a moment, I got tricked by the name, which was a little bit of a distraction. I was neither happy nor sad when I initially checked about the website of my company as I have never heard about it. However, I was satisfied that my company is Australian because I could know where it is located and how popular is it here in Australia. I have decided to ask some of my friends who have children to see if they would have heard about Funtastic. Unfortunately, most of my friends did not recognise it. It was not easy to get information about Funtastic as there is not much about it on the internet. Even on their website, most of their embedded YouTube videos are inactive or deleted. Luckily, I found a couple of websites that had interesting information to include in the background of the company.
Background information
Funtastic is a marketer, manufacturer and distributor of products such as Toys, Apparel, Tech and Confectionery. They have been trading since 1996, which is an indication of their long performance. The Company’s headquarters are based in Melbourne, Australia. Their sales and marketing team are located in both Australia and Hong Kong while the research and development and operations team are in China. Funtastic has a presence in 50+ of the most important markets worldwide.
At first, I thought that they make their own brand, but that was not the case, as Funtastic market and distribute other toy brands and offer online shopping and shipping around the world.
One of their successful global stories was selling over 11 million ChillFactor brand units in more than 50 countries worldwide.
In 2018 Funtastic had a significant achievement, they secured a deal to distribute Toy Story 4 products in Australia and New Zealand a return forecast of over $25 million during 2019 and 2020.
Annual Report- KCQ
Funtastic annual report https://corporate.funtastic.com.au/
Annual report: https://corporate.funtastic.com.au/investors/asx-announcements/
When I first looked at my company’ s annual report, I felt so scared that I could not read it and I even neglected it for a while, as it was huge around 90 pages for each of the three years. I was afraid to start to read, which increased my stress more. I was already far behind in my studies. After attending a couple of pass sessions and discussing a few things with my lecturer, I realised that I need to read just a few pages, understand what my company does and what was interesting in their annual report. So, I dared to read my company’ s annual report for the first time. The first question was what an annual report is? I have heard of annual reports but never had a chance to have a look at any. I was very frustrated as I could not understand anything, but there was no way to step back and give up. When I did my Step1 assignment, I decided to keep positive and believe that nothing is impossible to achieve with some guidance and hard work.
I went through a few blogs and read them to see what other students’ company have and how they could analyse their company’s annual report, and what was the key concepts that I need to focus on. I must admit, it was very helpful with my second attempt to read my company’s annual report. I started to understand and analyse the information presented in the annual report based on my reading to chapter 3 and reading some other blogs.
The first thing that caught my attention, was that Funtastic is listed on Australian Securities Exchange (ASX), which means their financial statements are supposedly prepared under the accounting standards.
By looking at Funtastic’s balance sheet, I found it has no minority interests or ‘non-controlling interests’ in the equity section, which means it is 100% owned by the parent company so the parent company can control all the equities and profit/loss of the group of companies. By taking a deeper look at their balance sheet, I was able to see that they were not in a good financial position as their total liabilities were significantly higher than total assets for the last three years, which affected negatively on the equity interests of the owners of the firm because of the high labilities. My analysis was based on my understanding of our accounting equation ‘Equity = Assets – Liabilities in chapter 1 and the relationship between these three items.
Their income statement showed that their revenue kept dropping from $105 million in 2015 to $41.7 million in 2018. In their Directors’ Report, there was no record for net profit in 2015 nor 2016 whereas in 2017 they had a significant loss of about -$29.7million. When I did compare their income statement and Directors’ Report, I found that they had lost in 2015 and 2016 as they did in 2017. Also, their income statement showed that most of their figure numbers were in negative even their total comprehensive income, was in the negative, which means there were losses and no other income. I could understand that as long as the company has not run out of cash, they can keep trading but based on my basic knowledge any company needs to be making profits to sustain the reason for being in business. So, I could not understand how the company could manage that without making any profit? What other income did they have to keep them performing? All details were a bit confusing.
It seemed the company did not make a profit until 2018 where their net profit was $28.2 million. At first glance, I thought they had changed their strategies for 2018. It was interesting to notice in the Chairman’s Report that their strategies have not changed their strategies. They just negotiated their debt obligation with the National Australian Bank (NAB), and they succeeded in that. Subsequently, they began showing a profit.
Though there was a net profit in 2018, a significant part of that profit is because of selling of international business, debt restructuring and capital raising as it is mentioned on director’s report. Still, I could not understand how debt facility restructuring reduced their debt by $36 million when it mentions that they struck a deal with the NAB who reduced their indebtment by $21.1 million. Moreover, it was hard to believe that the NAB bank gave Funtastic a $16.1 million debt forgiveness. I know that NAB bank did it but I still wondering why NAB would give $16.1 million forgiveness? What did they gain in return? Again, I could not find an answer to these questions.
I could find a website that is talking about Funtastic financial status in the first half of 2018 when this company first recorded a profit. As with most Australian retailers, Funtastic is struggling partly because of the furious competition from online shopping.
For more details, you can visit this website
The company could successfully complete a capital raising of $7.0 million on 9 October 2018. I was surprised when I found that. How could they raise $7.0 million? Who would be interested enough to invest in Funtastic company? When especially the company has been struggling to make a profit for years. It was hard to understand all this. However, it appears that the company has successfully overcome all their challenges without changing their strategies and the evidence is in the fact that Funtastic it still running today and conducting successful activities and deals in the business world as their Chairman’s Report claim.
I was so curious to find how much their share price is? I was a bit shocked when I figured that their share price was only 0.08 cent in 2018. I expected to be low but not just a few cents. The Directors’ Report-Remuneration showed that since 2014 they had a significant downturn in their share price from $1.925 to just 0.08 cent. When I compared my company’s share price with another colleague who is the company is EVENT Hospitality and Entertainment I found that my company’s share price is so midget compared with over $13 per share. I found that my company as many of my other colleagues’ companies try to show the glossy and the great part of their businesses. I could find a few similarities between my company’s annual report and other peers’ company’s annual report. My company used a set of consolidated financial statements as with many others. Funtastic similar to other companies focused solely on their great part of performance with no much details about their challenges and loss.
I cannot believe that I could analyse my company’s annual report after I have been feeling so down, overwhelmed and not knowing where to start. I know that my analysis may not be correct and professional. However; the whole idea of this assignment is to learn. I know also there is still an enormous amount of important information that I could not analyse or understand, but I believe that can come with time. At the end, I feel very thankful for the pass team and my colleagues in the pass session and my lecturer who helped to understand this task and to do my best.
I cannot say that I have enjoyed reading the annual report of my company neither reading about their operations and activities, but I can say I have learned a lot in this assignment. I learned not to give up as life is full of challenges. The key success is to learn how to overcome these challenges, and I believe that what makes me a university student. It was a good experience to learn how to analyse the annual report, and I’m happy to continue learning new things in the accounting world.
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