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Financial Reporting Disclosure in Endeavor International and Fairfax
Financial Reporting Disclosure in Australian Corporate Sector
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Institution
Financial Reporting Disclosure in Australian Corporate Sector
Introduction
Within Corporate sectors and some small and medium enterprises, financial statements and reports for documentary purposes which they consolidate to track and evaluate how much finances in respect to profits or losses the investment operations are making. The purpose of financial reports is to pass on this information to the stakeholders and the investors of the company (Deegan 2010). Thus, financial statements and reports is component of the critical contract between the external investors and the business because they have the right to be informed and to know if the fiscal investment is being spent shrewdly and at a significant return. The objective of this assignment is to develop a report based on two chosen corporate Australian groups. The report entails evaluating the yearly reports of the identified corporate groups focusing on their accounting practices and operational management.
The two companies being analyzed are Endeavour International Inc and Firefax Media Limited. The subsidiaries of Endeavor International are 8, while Firefax has five subsidiaries and it’s the major player in the media industry.
The goodwill methods:
Both the two companies have deployed business combination as a method of goodwill. In this case, the transactions and proceedings in which two or more subsidiaries or entities of an organization group are assigned to a common control as one accounting body. The accounting practices are observed by both companies for their investment amalgamation, regardless of whether equity assets or other resources are acquired (Deegan 2010). The regulation for the attainment of a controlled entity entails incurred liabilities; relocate assets and the equity interest offered.
For both Endeavor International and Fairfax, the goodwill reflects the surplus of cost of acquisition beyond the logical price of the share of the Group for the ultimate reasonable assets of the purchased entity at the acquisition time. Hence, the two corporate groups integrate goodwill on the acquisition of subsidiaries in indefinable assets. In view of the goodwill linked to the associates, it’s incorporated in business in associates. It is stretched to the reportage section for the purposes of impairment testing. For example, the investment impairment in associate for Fairfax group is $ (1,060) million while for Endeavor International Plc the sum is $98.8 million. Fairfax didn’t have a significant investment in acquisitions or associates for the financial year because it reflected nil figures in its financial consolidated statement.
Endeavor International on its side recorded some significant acquisition of the topical financial year, the Group managed to end the fiscal year with $2.1M investment from the intangible assets. Thus, the goodwill is rather retained to harm assessment in yearly basis as oppose to paying it off. This assessment could also be carried out more routinely when the variations is in scenario that is indicating some signals of impairment, and can be handled at a cost less accrued losses in damage.
It is also imperative to emphasize that, losses or additions towards the clearance of entity comprises of the haulage amount of goodwill subjected to the disposed entity.
On the grounds of impairment evaluation, assets are huddled on the lowest points where there are detached specific cash flows which are mainly independent of the cash inflows from the rest of assets. In assessing the in use value, the projected cash flows are discounted to the present value by way of post tax positioned down rate so as to reflect the present market approximations.
These companies assess at the end of every fiscal year period whether there is determined substantiation that a fiscal assets are damaged or not. As a result the Endeavor International and Fairfax, there fiscal asset is impaired and the relevant losses are sustained subject to injury indication (Endeavor International Plc 2010 financial report).
Impairment being the outcome of supplementary events which transpired after the initial recognition of the assets; that the loss events influence the projected position cash flows of the monetary assets which can be constantly anticipated. In respect to the equity investment grouped as available for sale, a protracted or considerable fall in the fair value a security below its cost is considered to the pointer of which the assets are impaired.
Concerning the acquisition by acquisition framework, the Endeavor International differentiates any non controlling interest (NCI) in the acquisition at costs reasonable or at the NCIs’ share balanced of the entity’s net limited assets. The addition of the deliberation transferred, the amount of any NCI in the subsidiary and the fair price tagged on the acquisition date of any pre equity venture in the subsidiary beyond the reasonable cost of the Endeavor’s share’s of the net tangible assets bought is indicated as goodwill in the fiscal statement. For example in the consolidated financial statement, Endeavor group reflected $12.5M in NCI. This result is the amount of Endeavor’s generated equity and sustained income of $10M and $2.5M respectively which is desirable compared to the performance of the previous year.
As Deegan (2010) puts it, when the amounts are under the reasonable value of the definitive tangible assets of the entity acquired and the level of all sums have been evaluated, the variation is recognized openly in the profit or loss as price cut on the investment consortium. In situation where any component of cash deliberation is in arrears, the sums that are supposed to be paid in the future are discounted to their present cost at the acquisition date.
Similar trend is also evident at the Fairfax Group whereby the deliberation is arrived at through acquisition by acquisition framework and they recorded $2,082M. The impairment losses were receptively nil figured of which is a desirable scenario for the Fairfax group. Nonetheless, this simply came to be true not very long ago since under the earlier guiding standards, the NCI was at every time recognized at its share of the entity’s sum assets. The fiscal year balance stood at $1,833M which indicates that no substantial acquisitions or investments were realized within that specific financial year.
By critically assessing the financial statements and the whole annual reports of the two groups, it is correct that they were prepared with keen compliance to the Australian Accounting Standard Boards, AASB 3 and the AASB 27 (AASB3 and AASB 127). This is true since at the preliminary sections of the financial statements there is a clear indication that the company directors issued a declaration that the financial statements have been done in accordance to the stated regulatory accounting standards. In view of the AASB 127, did not consider the accounting systems for investment amalgamations and their effects on consolidation, also the goodwill cropping up from investment grouping. The principle requires that the mother company will deliver the consolidated financial reports in which it combines or merges its investment in entities or associates in accordance with the AASB 127 standards. According to the financial reports of the two companies, they have entirely consolidated their financial operations of the entities under one fiscal statement for the given financial year (AASB3 and AASB 127).
AASB 3 checks the acquisition modality where every event or transaction is an investment transaction, and for every case the appropriate subsidiary is to account for each within their fiscal reports. All the subsidiaries are also projected to apply acquisition procedure in to account for each investment amalgamation. In the financial statements delivered by the two companies, it is mostly indicated that all the activities or transactions of the mother with the entities were investment combination.
The two corporate groups have shown that every entity makes their individual financial statements prior to the consolidation. Nonetheless, certain disparities were observed from these disclosures. For example the Endeavor International Plc in their disclosure highlighted the other segments of investment in their operations; wearers Fairfax did disclose a consolidated statement which is general. When comparing the 2 financial consolidated statements, it appears that Fairfax group didn’t conduct meaningful investment or acquisition in other entities and associates in comparison to Endeavor International which did disclose significant investment and acquisition is associates.
References
Deegan, C. (2010). Australian financial accounting/Craig Deegan,6th ed, Australia: McGraw-hill.
Fairfax Media Limited Annual Report 31st December 2010, Retrieved from : HYPERLINK “http://www.fxj.com.au/shareholders/AnnualReport_FXJ_100921.pdf” http://www.fxj.com.au/shareholders/AnnualReport_FXJ_100921.pdf
Endeavor International Plc. Group Annual Report 30th June 2011, retrived from:
APPENDIX:
Jun-10 Jun-09
(i) Carrying amount of investment in associates $M $M
Balance at the beginning of the financial year 14, 819 14,764
Investments in associates acquired during the year 0 477
Adjustment for foreign exchange revaluation 8 20
Share of associates’ net profit/(loss) after income tax expense 685 55
Dividends received/receivable from associates -350 -387
Impairment of investment in associate 1060 0
From Fairfax consolidated Financial statement Intangible Assets.
(A) Asset revaluation reserve $M $M
Balance at beginning of the financial year 32 801
Revaluation of available for sale investments 2082 1358
Impairment losses transferred to net profit 0 2191
Tax effect on available for sale investments 281 0
Balance at end of the financial year 1833 32
From Fairfax consolidated financial statement, NCI p. 96
2011
Management rights — indefinite life 32
Goodwill 69.4
Other intangible assets 2.1
Balance 30 June 2011 74.4
2010
Management rights — indefinite life 10.5
Goodwill 44.4
Balance 30 June 2010 3 54.9
From Endeavor International Inc. consolidated financial statement.
27 NCI 2011 2010
Interest in: $M $M
Contributed equity 10 8.2
Retained earnings 2.5 2.8
Total 12.5 11
From Endeavor International Consolidated financial statement, Non Consolidated Interest:
Financial Reporting and Compliance by Oil and Gas Companies in UAE
Financial Reporting and Compliance by Oil and Gas Companies in UAE
Student Name:
University:
Subject:
Instructor:
November 4st, 2013.
Financial Reporting and Compliance by Oil and Gas Companies from United Arabs Emirates (UAE)
Abstract
This study proposal intends to investigate the level of financial reporting and compliance with the IASs (International Accounting Standards) by oil and gas companies from the UAE. Based on the study sample of 60 oil and gas companies, the study establishes that financial reporting and compliance has improved overtime, from 60% in late 90S to 90% in 2010. In spite of strong cultural and economic ties among UAE states, there was considerable variation in financial reporting and compliance among oil and gas corporations based on the internationality, leverage and size. The study offers de jure evidence as opposed to de facto harmonization within the region.
Introduction
Speedy globalization of financial markets has resulted to increased demands for more globally comparable accounting and financial reporting. Harmonization of financial and accounting reporting is one approach of promoting a more consistent and transparent reporting and in that aspect, IASB (International Accounting Standards Board) generates global accounting standards for utilization by private sector companies or entities across the globe. Generally from 2005, there has been extensive adoption of International Accounting Standards Board standards on compulsory basis. Accordingly, there is growing interest in reporting comparability being attained as well as the role of enforcement bodies and auditor promoting compliance.
This paper aims to investigate the level of financial reporting and compliance with the IASs by gas and oil companies from UAE and the factors related to compliance. The UAE states has from 1986 progressively made IASs mandatory for all or some listed companies. This background enables us to examine the application of IASs in various economically important states that were early IASs’ adopters. Compulsory use within the UAE states offers an opportunity to explore the role of enforcement bodies and external auditors in promoting IASs financial reporting and compliance.
The UAE setting has a number of features that are important for the study of compliance. Some states within the region have been early compulsory IASs adopters, which imply their firms have greater experience with the application of IASs in a compulsory as opposed to voluntary environment. Within the UAE setting the study can examine the relationship of the state regulatory frameworks and compulsory compliance over a period of time. In some nations such as the European Union, companies have more recently adopted the IASs or their application has been voluntary as in the case of Germany and Switzerland in the early 90s. This study contributes to the literature by examining financial reporting and compliance within a mandatory setting. Moreover, it offers useful insights regarding the relationship of compliance levels, IASs adoption and the effectiveness of enforcement bodies and independent auditors. As a result of the extensive adoption of the IASs, the focus has now been geared toward the level upon which firms comply with IASs within the mandatory setting. This study is among the few if not first to offer empirical evidence regarding this matter. Although the study only looks at UAE states, the findings highlight issues that may be equally important in other nations where the IASs have been utilized.
The rest of the paper is structured as follows. The following section explores the institutional framework for financial reporting and compliance within the UAE member states, literature reviews as well as the research question. Section three describes data collection, sample selection and statistical methods. The last section summarizes the study.
Literature Review
Earlier studies examining the adoption of IASs indicate that differences between firms in the level of financial reporting and compliance reflect their state of origin, meaning that there are important elements within the frameworks of national financial reporting that affects their compliance. The framework of a nation’s financial reporting (that is the practices and laws that govern or regulate financial reporting) has a fundamental role in outlining the requirements of financial reporting, creating a due process for enforcing and monitoring accounting and financial reporting standards, and in influencing the level of compliance with such standards. Oil and gas companies within the UAE share a number of common features, for instance company law require that audited accounting and financial reports be developed and submitted to a department of the government. The enforcement bodies, such as the central banks, stock exchanges and government departments are in place and there are provisions within the law for noncompliance penalties. Likewise auditors must be licensed and could be culpable for penalties for violation of the company law.
Jensen and Meckling (1976) agency-theory model argues that minimizing information asymmetry between firms manages (insiders) and capital providers (outsiders) reduce agency costs (residual loss, bonding, and monitoring). The purpose for reducing agency costs offers an incentive for IASs adoption because adoption results to more transparency and greater disclosure in comparison to the situation within the GAAP. Nonetheless, to optimize benefits from implementing higher quality standards, firms have to exhibit compliance to the standards. The incentive to seek compliance benefits may systematically differ between oil and gas companies, founded on their individual features. The study explores below various firm features that could be associated with the compliance level. Large oil and gas firms are more visible and hence, could be highly expected to comply with IASs. Hussain, Islam, M Gunasekaran & Maskooki (2008) state thatlLarge oil and gas firms act to avoid state intervention and to safeguard their reputation. Whereas the scholars base their arguments on advanced markets, they as well apply in UAE states, where large oil and gas corporations are economically important and politically visible. The privatization of large state-owned oil and gas corporations imply that are a focus of investor and government attention. Besides, large oil and gas corporations have huge resources to utilize on compliance and are less probable to be affected by proprietary information disclosure as opposed to their smaller counterparts. The other important point is that large oil and gas firms could be older, with well developed financial and accounting reporting systems, implying that compliance is affordable to them.
In addition, large oil and gas companies are more likely to be international, meaning, to have more international sales, foreign investors, or have international listing on stock exchanges. Ahmed (2009) demonstrate that oil and gas companies cross-listed have greater compliance levels. Within the UAE most oil and gas companies are not cross listed outside their region, nevertheless, they seek international investors. This could offer motivation for greater compliance, to render accounting and financial reporting more comparable and transparent and to enhance the credibility of the company. Oil and gas companies with greater leverage could be anticipated to disclose more financial and accounting information minimize agency cost, thus reassuring debt-holders that the company safeguards their interests.
Within the UAE setting, three shareholder entities characteristically have significant ownership equity in oil and gas companies list on the UAE stock exchanges. These shareholder groups include the institutional investors, dominant families and government together with its agencies all of whom can influence the quality and level of disclosure and IASs compliance level. In UAE these shareholder groups are considered insiders since they normally have representatives in the board of directors of these companies and hence have greater access to the companies’ internal information. As a result, this study anticipates that oil and gas companies with more insiders (i.e. greatly held ownership) has little incentive for financial reporting compliance to the IASs that oil and gas companies with extensively held ownership share.
Method and Data
Selection of Sample
The purpose of this research study is to investigate financial reporting and compliance to the IASs by oil and gas companies from the UAE during the period between 2001 and 2010. We selected 2000 as the beginning point because all the UAE states had adopted the IASs.
Financial Reporting and Compliance Measurement
Financial reporting and compliance with the IASs is evaluated using self-developed compliance index, as this is in conformity with prior financial reporting and compliance studies( Hussain, Islam, Gunasekaran, & Maskooki, 2008).. The checklist is founded on 14 standards comprising, IAS 1, 10, 14, 16, 18, 21, 23, 24, 27, 28, 30, 32, 33 and 37. Initially, all the IASs were considered to be factored in, but some were omitted since they were not applicable to the UAE oil and gas companies (such as IAS 12, 15, 19, 26, 34, 20, 11, 38, 35, 31). Since a number of reporting years for every state were factored in the study, various standards were applicable for every state. Each applicability standard to companies’ annual financial report was established and the relevant section of the checklist was applied in data collection. The entire financial annual report was perused and data obtained. Every disclosure item within the checklist was allocated a value of (1) when it was disclosed and (0) when it was to disclosed by applied. The items, which were apparently not applicable, were assigned N/A. The items that did not have sufficient information were provided to determine applicability was denoted as do not know (DK). The principal index is the general compliance measure, with the DK and N/A items excluded, and comprising a measurement and disclosure-compliance measure. Robustness test were conducted to establish the results’ sensitivity to the treatment of possible ambiguous DK and N/A items. The checklist items were not weighted since this procedure could introduce bias and subjectivity.
A multivariate evaluation was deployed to analyze differences between states in levels of compliance as well as relationships and time trends between the compliance level and company features. Due to the fact that dependent variable (compliance index score) ranges between 0 and 1, it was rearranged by taking the odds ration logarithm. For instance, if the overall compliance level to the IASs for firm is given by P, then the odd ratio logarithm Y is given by;
Summary
The study has established that the average level of financial reporting and compliance by oil and gas companies in 85% of the checklist index items in the study period, but the level of compliance has steadily increased. In spite of the strong cooperative economic and cultural ties, there is considerable variation in compliance level by the oil and gas companies across the UAE member’s states. Oil and gas companies from Saudi Arabia recorded the highest level of financial reporting and compliance. Companies from Oman and Kuwait substantially improved their compliance than any other states, and this could be attributed to improved enforcement and monitoring in Oman and Kuwait.
Conclusion
The International Accounting Standards Board standards have been established for application as national standards in nations across the globe regardless of the economic development level and culture. Since extensive compulsory adoption is comparatively new, not much is known concerning the effectiveness of IASs adoption in different nations. Investigating the financial reporting and compliance by oil and gas companies within the UAE is of great interest due its distinctive characteristics for instance strong association between UAE member states, developing country statue accompanied with significant wealth and considerable cultural differences in relations to most western nations. The study shows that financial reporting and compliance of oil and gas companies within UAE is de jure as opposed to de facto, implying that IASs as implemented by law as opposed to practice, a significant noncompliance is imminent.
The financial reporting and compliance framework by oil and gas companies within the region are established on company-law regulations that are enforced by government agencies and has penalty provisions for violation for those requirements. Their framework places excessive dependence on independent auditors and feature just only limited operations by the stock exchanges as well as enforcement agencies in compliance checks and taking measures for non-compliance.
References
Ahmed, K. (2009). Disclosure policy choice and corporate characteristics: Journal of
Accounting, 3(1), 183-203.
Hussain, M., Islam, M. M., Gunasekaran, A., & Maskooki, K. (2008). Accounting standards and
practices of financial institutions in GCC member countries. Managerial Auditing Journal, 17(7), 350
International Accounting Standards Board (IASB) (2010). International Accounting Standards
and SIC interpretations. London: IASC
If I Could Change the World
If I could Change the World
Name:
Institution:
Date:
If I Could Change the World
If I could change the world, I would crack down corruption in Ghana. Considered as the gold coast, Ghana was free from colonial rule in 1957. Gold and cocoa were the economy earners of the time, but recently oil has dramatically aided the sector. With its booming revenue-generating resources, Ghana is expected to be higher than other African countries in economic development. Ghana is considered stable among the West African countries, but insights have shown that corruption has become a significant menace. Ghana being the first West African country to gain independence, other neighbouring countries look up to Ghana as a leader, but the case is twisting. Although they seem to be below the bar on the list, bribery and corruption are decelerating Ghana (Index 2010). According to Gordon (2017), widespread corruption still exists in Ghana, mainly in the parliament and the health sector.
Corruption destroys the lawfulness of the state. In developing countries, corruption has been a critical plan in every politician. Questions have been posed as to who causes corruption. But to narrow down to an answer is to start at the base as to why one would be corrupt. The greed for money, political powers, and the need for higher living standards are the reason that leads to one being corrupt (Churchill et al. 2013). We need to keep the topic squarely in view as it has become a global pandemic. Corruption has been termed to be the greatest enemy of progress in current world times. Corruption has adverse effects that ordinary people tend not to take an interest in. In developing countries, corruption has made nation citizens fail to meet their needs, such as sending their children to public schools because they have turned the free public education to their money-generating business. In sectors like the health sector, mothers have had miscarriages; people have had deaths that could be manageable because medicine provided to the public for free is no longer the case. Global organizations have come together to discuss means to fight the practice knowing that it will not take a day or year to extinguish corruption. In newspapers and media tv, numerous headlines have frequently stuck the front pages in developing countries and the USA and Europe.
According to the International Monetary Fund (IMF), good governance is governance that is free from corruption defining corruption as the abuse of the public office. Hillman 2004, disagrees with persons who say state that its people corrupt the politicians. Coming from the people’s side and not as a leader, he states that its citizens work to bear the consequences and take the burden of the blame. Coming to a breakdown to defining corruption, Rose-Ackerman defines it as the misuse of office power for personal or political gain. Various organizations have come together to explain what corruption stands out to be. When looking at it, its illegal, non-legit action lacks transparency, a crime, and doesn’t promote the people’s interests.
Understanding corruption has helped us know that even the little favors used in the public sector speed up self-operations. Another type that is practices in higher levels of government is grand corruption. Grand corruption occurs when government officials embezzle funds for contracts that are millions of dollars undercover. Another means is looting, whereby officials place things that are never real, such as goods delivered. Most government corruption cases take place in service delivery. The most common corruption is individual corruption, especially in police service administration. Traffic police have been mentioned as culprits in this conduct as they have been sites taking bribe from drivers.
The other key element that needs answers and in-depth analysis is why persons get corrupt. Corruption is constant, and it unveils poor governance. Corruption is a factor where poverty levels are high, weak institutions, lack of accountability and transparency. Both global and inter-government factors have factored causes of corruption in Ghana. One of the other factors that led to Ghana’s corruption is the lack of a body that deals with corruption when forming the government. Once, the first politicians practised the acts and walked free without charge. This failure to hold people responsible and punish them increased corruption in Ghana. Choosing leaders with integrity has been an issue not only in Ghana but in other nations. During elections, some leaders tend to beg for votes from the public addressing what agendas they tend to achieve, but after gaining power, the results are a bombshell. The Ghanian citizens have also lacked a system to report corruption cases, and thus the public has been left out in participation to curb the menace. With corruption in government, nepotism has arisen as people favour their own. Service delivery penurious as the qualified are left out when the favoured are taken in.
In a case where a police officer practices bribery, the aftermaths of the result are insecurity and poor-quality service delivery. The final effects only burden the locals who are inferior in the ecosystem. In the health sector, corruption will only result in death and life. Health practitioners may demand money for medicines while they should be given free. This greed for money leads to poor service delivery to the local as, without money, they can’t access satisfactory services. Corruption has also led to other factors such as drug trafficking so that the locals can cater to their needs. With crime, violence against women and children has sparked an increase, and they lack accountability as all branches in the Ghanaian government are corrupt. Political corruption is also a key hindrance to the economic growth of Ghana. For instance, in a campaign 2016, a politician was seen buying votes in a market seen in a viral video (Cheeseman et al., 2017). These act shows that their freedom of expression is cut as they will vote based on enticement rather than voting for a leader whose agenda is to forefront development. Corruption created an enormous disparity between the rich and the poor as services are available to those with a higher ranking in society. It’s heart-rending that the citizens who work tirelessly and pay taxes don’t get value for their nation-building participation.
Understanding corruption is that in the end, everyone is affected negatively; hence it’s everyone’s responsibility to take action and trail this pandemic. Although intergovernmental bodies have been formed to curb the menace, it highly recommends that citizens stop the practice. Ghana antigraft body and Ghana Integrity Initiative (GII) has given stats that approximately 3 billion USD is lost on corruption annually (Sarfo-Kantankah, 2018). In efforts to end corruption, the Ghanaian country should end impunity, and those involved in the practice held responsibly. The government should also have transparency and contact between the governments and the governed be initialized.
References
Cheeseman, N., Lynch, G., & Willis, J. (2017). Ghana: the ebbing power of incumbency. Journal of Democracy, 28(2), 92-104.
Churchill, R. Q., Agbodohu, W., & Arhenful, P. (2013). Determining factors affecting corruption: A cross country analysis. International Journal of Economics, Business and Finance, 1(10), 275-285.
Gordon, M. B. (2017). Bribery and corruption in public service delivery: Experience from the Ghana Judicial Service. Available at SSRN 2922519.
Hillman, A. L. (2004). Corruption and public finance: an IMF perspective. European Journal of Political Economy, 20(4), 1067-1077.
Index, C. P. (2010). Transparency international. URL: http://www. transparency. org/news/feature/cpi_2013_now_is_the_time_for_action.
Rose-Ackerman, S. (1999). Political corruption and democracy. Conn. J. Int’l L., 14, 363.
Sarfo-Kantankah, K. S. (2018). Corruption is a big issue: A corpus-assisted study of the discursive construction of corruption in Ghanaian parliamentary discourse. Legon Journal of the Humanities, 29(1), 226-258.