200400 COMPANY ACCOUNTING AUTUMN 2014
GROUP ASSIGNMENT
One of the assessment items for this unit is a group report. Please refer to your Unit Learning Guide for further information in regard to submission and the marking criteria. Below is a choice of topics for the group report. Your report should be based on ONE of these topics.

Choice 1
Topic: Accounting for intragroup transactions. During a financial year it is common for companies within the economic entity (group) to transact with each other. The following is an extract from Note 32 of the BHP Billiton Annual Report 2013. Transactions between each parent company and its subsidiaries … are eliminated on consolidation and are not disclosed in this note. Terms and conditions Sales to and purchases from related parties of goods and services are made in arm’s length transactions at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured and settlement occurs in cash. Other amounts owing from related parties represent secured loans made to jointly controlled entities under co-funding arrangements. Such loans are made on an arm’s length basis with interest charged at market rates and are due to be repaid between 30th September 2013 and 31 August 2031. No guarantees are provided or received for any related party receivables or payables. No provision for doubtful debts has been recognised in relation to any outstanding balances and no expense has been recognised in respect of bad or doubtful debts due from related parties. SOURCE: BHP Billiton,‘Notes to financial statements: 32 Related party transactions’, BHP Billiton Annual Report 2013.

Requirement for Choice 1  The information provided by BHP Billiton in Note 32 provides users with an overview of their approach to intragroup transactions. Discuss and demonstrate why users may or may not find this information useful for their decision making. The terms and conditions for related party transactions appear to be conducted under market conditions. Describe why management has adopted this approach.

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Your report should draw heavily on the relevant chapters from the textbook in addition to supporting your discussion points from broader research using academic literature.

Choice 2
Topic: Segment reporting Segment reporting breaks an organisation’s reporting into sub-units known as segments. The focus of AASB 8 Operating Segments requires disclosures about sectors and locations in which the organisation operates. These sectors are known as ‘operating segments’. Requirement for Choice 2:    Discuss the issues involved in allowing management to determine the basis of measure for operation segments. Discuss the entity-wide disclosure in AASB 8 that need to be made about major customers. Discuss and demonstrate the likely benefits of segment reporting to users of GPFS.

In your report you should compare and discuss examples from the most recent Annual Reports of 2 top 20 listed ASX Companies. Choose your companies carefully to ensure they are in similar industries to enable meaningful comparison. Wesfarmers or Woolworths are excluded from selection Your report should draw heavily on the relevant chapters from the textbook in addition to supporting your discussion points from broader research using academic literature.

Choice 3
Topic: Earnings per share Chapter 26 considers the application of AASB 133 Earnings per Share when determining the calculation and required disclosure of earnings per shares (EPS) and diluted EPS. The Commonwealth Bank is listed on the Australian Securities Exchange and the listing rules require disclosure of their earnings per share in their annual report. To assist users to better understand the figures provided in Note 7 ‘Earnings per share’ the Commonwealth Bank disclosed the following information that provided guidance on how the calculations were made. Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the Bank by the weighted average number of ordinary shares on issue during the year, excluding the number of ordinary shares purchased and held as treasury shares. Diluted earnings per share amounts are calculated by dividing net profit attributable to ordinary equity holders of the Bank (after deducting interest on the convertible redeemable loan capital instruments) by the weighted average number of ordinary shares issued during the year (adjusted for the effects of dilutive options and dilutive convertible non-cumulative redeemable loan capital instruments). SOURCE: Commonwealth Bank of Australia, ‘Notes to the Financial Statements: Note 7, Earnings per share Annual Report 2013, p. 100, available at www.commbank.com.au/aboutus/shareholders/pdfs/annual-reports/2013_Commonwealth_Bank_Annual_Report.pdf.

Requirement for Choice 3:   

Identify examples of financial instruments or other contracts that can result in the creation of additional ordinary shares. Explain why shareholders need to know the dilutive EPS. Why is the EPS number that important in financial reporting that there is one accounting standard devoted to this calculation process?

In your report you should compare and discuss examples from the Commonwealth Bank Annual Report plus 1 other ASX listed competitor in the same industry. Your report should draw heavily on the relevant chapters from the textbook in addition to supporting your discussion points from broader research using academic literature.