My Draft Assignment

After a little bit of researching and a YouTube video I finally worked out how to upload my draft assignment to my blog, please find the link below.

Draft Assignment

Chapter 3 - Introducing Financial Statements

I was looking forward to this chapter of the study guide, hoping that I was going to grasp a good understanding of what we have been working on and hopefully reassure me on my work so far. Sometimes being a distance student is so hard!! I lack confidence when it comes to numbers and I am an over thinker which I honestly believe makes me confuse myself even more. Regardless, I think I did well in this chapter, I feel a little fuzzy on the du Pont structure and question two for this chapter kind of stumped me but I believe I have answered it correctly and if not, please feel free to enlighten me.

When this chapter explained that financial statements were set out differently from company to company my first thoughts were, I got this! I was aware that firms set out their financial statements differently just by looking at those prepared by myself for Caltex and the ones my peers have completed for their assigned companies. I was also aware that different companies called their statements different things for the same reason; I learnt this through my peers’ blogs. I don’t quite understand why they would be called different names, especially if they are Australian companies. I would have thought there would be a guideline or rule for this, obviously not.

To be honest, before I read through Chapter 1 and had to answer the questions, in particular question 2, I had no idea that the assets, liability and equity were all included in the balance sheet only. I expected to see these throughout the four financial statements I had in front of me, little did I know then. This chapter has now confirmed this and settled any doubt I had about that and about my answer to Question 2 for Chapter 1. Light bulb moment, the balance sheet does state this pretty clearly however, I wasn’t sure if it was a trick.

This chapter states that in the balance sheet there should/may be a category called ‘Investment in Subsidiaries’ which lists the firms in which the company, along with the shareholding the parent company has in each of them. My company, Caltex Australia Ltd, does not have a category called ‘Investment in Subsidiaries’ and the only thing closest to this was the ‘Investments accounted for using the equity method’. When I went to the notes for this category it does list five other company names and a percentage of interest of which I am assuming they own. Would this be correct? Is this their ‘Investments in subsidiaries’? If so, I was expecting there to be more than five of these. Maybe because they franchise a lot of their retail outlets, this takes away many of their investments? Also, out of the five companies, three are 50% owned by Caltex, two are 40% owned and one is 25% owned by Caltex but these are not listed on the balance sheet as ‘non-controlling interests’ or ‘minority interests’ as this chapter suggests. It does however show, in the 2014 Annual report, the percentages owned for the years 2013 and 2014 and these did not change over those two recorded years.

This chapter explains that the income statement will also include the ‘non-controlling interests’ or ‘minority interests’, again, Caltex Australia does not list either of those categories, rather lists ‘share of net profit of entities accounted for using the equity method’ and this is listed at $917,000.00 for 2014. I am unsure why they name this category different and I am unsure what the ‘equity method’ is. This is another question of mine, what is the equity method?

Looking at my companies Statement of Changes in Equity I can see that their balance at 31^st December 2013 ($2,159,579.00) is larger than that of the balance at 31^st December 2014 ($2,532,591.00). There is not a large difference but there is still a decrease which I would think is a cause for concern, should it be?

Question 3-1

What is wrong with just doing what ‘works’ in relation to analysing financial statements? There are plenty of experienced practitioners in our capital markets. Why do we not simply find out what most are doing and just do this ourselves? What do you think and why?

I don’t think that we could do ‘what just works’ or what everyone else is doing because every company’s financial statements are different, they contain different categories and therefore will require different analysis. If they were all analysed the same then they would all require the same categories and layouts etc. to be successful. But then again, every business is different so how can you analyse them as being the same? It just would not work.

Question 3-2

What is the benefit of having a structure, such as the du Pont Company’s framework, to help use ratios to analyse a firm’s financial statements? Is it any better (or worse) than simply doing what experienced practitioners do? Why or why not?

I believe, the benefit of a structure, such as the du Pont Company’s framework to use ratios to analyse a firms financial statements may be that of time. By looking at ratios there is a quick and clear cut identification of the performance of the company. However, as this chapter explains, an ‘analysis of a firms financial statements can help us gain an understanding of the quantified dollar effects of the companies economic and business realities’. The du Pont Company’s framework is not quantifiable and therefore I do not believe it is any better than what experienced practitioners do. How can you truly understand the value if it isn’t quantifiable? 

Chapter 1 - 'A Way of Viewing Business'

When reading through Chapter 1 ‘A way of viewing business’, I must admit, there were a lot of times I asked myself ‘what does this seriously have to do with accounting?’. I am still overly confused why there was so much time discussing typewriters and QWERTY keyboards when really, we could have just had one sentence that said “we continue to do things the same way as it would be too hard and long a process to teach ‘an old dog new tricks’” and hey, I get it, I am a ‘don’t fix it unless its broken’ kinda gal. At the end of the day, I have very limited time to do the things I need to in everyday life and when it comes to studying, I like to know that I am getting facts straight up, tell me what I need to know, no beating around the bush. Regardless, these are my thoughts reading through the chapter.

Dr Martin Turner introduces MYOB in the very first paragraph, phew, this one I know. Whilst I am not in an accounting position at work, we do use MYOB and I often us it to produce outstanding debtors ledgers to identify which if my customers is in debit over their trading terms. One thing I did not know about MYOB is that it stands for ‘Mind Your Own Business” and really, it’s kind of obvious!

Later Dr Turner talks about trusts and whilst I do not totally understand a trust, not much more than what was explained in this document, I had heard of them before. The company that employs me pays their employees bonuses at Christmas time and that bonus comes from a trust named after the director’s late father who also founded the business. Woah, maybe this isn’t too bad after all, I know of most of this stuff!

When reading about trial balances previous to this document, I could never get my head around what that would be? After all, how do you ‘trial’ a balance? But now I understand and in an essence, when I look at my credit card statement online, this is shown in a trial balance format. Please correct me if I am wrong but this is definitely how I understand it.

One thing I am still confused on is the double entry accounting and it is here that I wish this chapter concentrated less on typewriters and keyboards and explained more thoroughly what this was. I understand that this is obviously a double handling at some stage but I feel this is something I am going to need to research more thoroughly to completely understand. Any insight on this would be appreciated also.

Question 1 – Why do we have double entry accounting? Why do we put everything in twice? Why not just once?

I feel quite nervous answering this question as I do not feel I totally understand this concept. I feel the only reason that the double handling of information is done to rule out human error upon the entering of the data.  Computers may pick up some errors made during entry but not all. Is this all this is, a "quality assurance" process?

Question 1-2

For your firm, identify three Assets, three Liabilities and three items of Equity. Describe what each item means to you (you may find some footnotes in your firm’s financial statements may help you to make more sense of these items). Put on your blog your answer to this question and comment on the answers to this question of at least three other people. Include links to your blog and also to your comments in other people’s blogs.

Three assets that I have identified in Caltex Australia Limited’s 2014 Annual Report include

1. Cash and cash equivalents – whilst there is no note on this asset and I am not entirely sure what is, a quick google search informs me it could include petty cash, cheques not yet deposited and currency (2004-2015, p. 1).
2.  Receivables @ $837,672.00 – according to their notes this includes trade debtors, allowance for impairment, associated entities, other related entities and other debtors.
3. Inventories @ $1,118,084.00 – this figure includes, according to their notes, crude oil and raw material, inventory in process, finished goods and materials and supplies.

Three liabilities that I have identified on the Caltex Australia Balance Sheet from their 2014 Annual report include;

1. Payables @1,175,515.00 – this includes, according to their notes, trade creditors – unsecured, related entities and other corporations and persons.
2. Interest bearing liabilities @ $110,000.00 – this includes, according to their notes, US notes, hedge payable and lease liabilities.
3. Employee benefits @ $163,200.00 – this includes, according to their notes, annual leave, long service leave, employee bonus, redundancy and retirement benefits.

A question that came to mind when identifying these liabilities was what is a hedge payable? This was listed in their notes under interest bearing liabilities.

Three equity items identified on the Caltex Australia Balance Sheet from their 2014 Annual report include;

1. Issued Capital @ $543,415.00 – this includes, according to their notes, ordinary shares.
2. Treasury Stock @ -$607,000.00 – I am not certain what this is and there are no notes to assist me in understanding. I believe, from a quick google search, that this includes shares acquired (2004-2015, p. 1).
3. Reserves @ -$3,498,000.00 – again I am not certain what this is and there are no notes to assist me in understanding. Again, according to a quick google search I believe this relates to capital investment projects or any other large and anticipated expense(s) that will be incurred in the future’ (2015, p. 1). 

Reference List

Accounting Coach 2004-2015, Q&A, viewed 5^th December 2015, http://www.accountingcoach.com/blog/item-in-cash-and-cash-equivalents

Accounting Coach 2004-2015, Stockholders equity, viewed 5^th December 2015, http://www.accountingcoach.com/stockholders-equity/explanation/4

Investopedia 2015, Capital reserve, viewed 5^th December 2015, http://www.investopedia.com/terms/c/capitalreserve.asp

My Spreadsheets.... aannnnddd a few questions too

Ok, phew! A little behind the timeline but I got there in the end. The following are snapshots of my spreadsheets so far and I do have some questions!!

I noticed whilst entering the data for my companies Consolidated Income Statements that, especially in 2012, the data changes from the 2012 Annual report to the 2013 Annual report for the year of 2012. So when looking at the figures on both reports, they are slightly different. Pretty stoked I picked this up just quietly :). My question is, do I use the figures from the 2012 report as the assignment asks OR do I use the figures in the 2013 Annual Report? For these spreadsheets I have used the 2012 Annual Report information, after all this is what the assignment asks for. However, logic tells me that I should use the figures from the 2013 report as obviously there has been some corrections made. What is everyone's thoughts on this? My gut tells me that the answer is possibly in one of the lectures but I thought I'd throw it out to me peers first.

Also, from year to year, lines in the statements have been added, so in my spreadsheets I too added these and left blank those years that did not have anything for this. Is this correct?

Another question is, when entering my balance sheets I had noticed that whilst the total figures of sections were the same, they had moved figures and adjusted them throughout other categories. For example Annual Report for 2012 and Annual Report for 2013, talking of figures for the year 2012 only. I noticed that under current liabilities, figures were noted for current tax liabilities and provisions but in the 2013 Annual Report a new category of employee benefits was added and they split the figures up to be included here also. This comes back to my first question, do I enter on my spreadsheets the figures from the 2012 Annual Report or 2013 Annual Report.

My other question is what is the consolidated statement of comprehensive income? This obviously isn't required for this assignment and I may be getting ahead of myself but I am interested to know!

Your thoughts and feedback would be appreciated!

My Top 3 Blogs

I must admit, I have had a lot of fun having a look at everyone's blogs. Its been incredibly interesting and its been awesome to meet so many people from all over the world.

My top 3 favorite blogs are as follows; 

Sharon Andreason by Sharon Andreason- https://sharonandreassen.wordpress.com/
She had me at "Hooroo"!! Hooroo was how Sharon signed off on her first blog post and as this is something my mum often says also, it put a smile on my face and I was all ears (or eyes) from that point on. I was drawn to Sharons blog straight away, its easy on the eye, well structured and details of her company are communicated well. I was very interested in the company she had been assigned and I believe she offered enough information on her blog to give me great insight into who they are and what they do.

Is it all numbers and no fun? Tiff's accounting journey by Tiffany Hill - http://isitallnumbersandnofun.blogspot.com.au/ 
Is it all numbers and no fun?? I was leaning towards yes when enrolling in this subject however I have, so far, been proven wrong. Tiff's blog is very informative. She has communicated her company in a way that is interesting and capturing. You can tell Tiff is actually very interested in her company as well, she isn't just competing for marks, there seems to be genuine interest in her company involved as well.

Lady of Ledgers by Renae Gordon - http://ladyofledgers.blogspot.com.au/
I must admit, I was trying to avoid adding this to my top 3 but for no other reason than that she has made it into nearly everyone's top 3. However, I must give credit where credit is due and it definitely is here. Renae has not only jumped straight onto this assignment and almost completed all tasks but she has done it thoroughly and with humor. It is a really enjoyable blog and I look forward to following it.

Like some other bloggers have mentioned, it was sad to see so many students hadn't uploaded much on their blogs and therefore, were left out of this review. I wish everyone the best of luck in this course and I am sure we are all going to have fun blogging!

Bye (Hooroo) for now :)

My Company - Caltex Australia Limited

We received our companies a little over a week go now which proved to be very exciting. The company I am to review is Caltex Australia.

So, why is this so exciting for me? Caltex Australia are fuel suppliers and retailers, who have service stations and refineries across Australia and they have a refinery just up the road from where I reside with my husband. Now, before you go thinking how unfortunate that might be, let me come straight to their defense! The Caltex Refinery, and Caltex Australia themselves do so much for our little community here in Kurnell. Kurnell is a little peninsula, a small suburb south of Sydney. Everyone should, however often aren't familiar with Kurnell, after all it is the birth place of Australia. Captain Cook first landed in Botany Bay (Kurnell) on 29th April 1770 and discovered Australia. Now, I am getting off track talking about the suburb I have come to love so much and not Caltex Australia. Although, part of the reasons I love this suburb and am proud to call it my home actually has a lot to do with Caltex Australia. Caltex Australia give a lot back to our little community, they make donations to the local primary school which allows them to update their facilities. They also assist in running a Santa visit for the kids every Christmas Eve in conjunction with the local Fire Station. Using their funds, Santa comes around in a decorated fire engine handing out lollies and visiting the kids. They drive the whole way around the suburb and every child waits enthusiastically outside their home for Santa to come past. Its very special and something that they need not organise and it isn't at all promoted by them to anyone outside of the suburb. Its not the type of information you'll find on their website or in their annual report but it certainly impacts the community and there is so much more that they do for Kurnell.

For those of you who aren't familiar with Caltex Australia, they are fuel suppliers and convenience retailers who, according to their company profile, feature the very best operational excellence in supply, refining, logistics and marketing. I am sure that most of the Australian based students have used a Caltex service station before, I know there are two service stations local to me which I have used in the past and there are many more across Sydney and Australia.They are also one of Australia’s largest convenience retailers and franchises, with over 85% of its stores operated by franchisees. According to their Company History page, their "roots" go back to 1900 however Caltex first opened refineries in the 1950's and 1960's with Ampol being their largest competitor however both companies were small in the market. In 1995 Caltex and Ampol merged and became the largest refiner-marketer in Australia. If you would like to learn more about Caltex, check out their website here http://www.caltex.com.au/Pages/default.aspx.

I have found and identified where Caltex Australia has their annual reports available and I have downloaded the past three years of these for review, I have included the links below if you would also like to have a look at these;

2014 Annual Report 
http://www.caltex.com.au/InvestorCentre/Documents/2014/2014%20Annual%20Report.pdf 

2013 Annual Report 
http://www.caltex.com.au/InvestorCentre/Documents/2013/2013%20Annual%20Report.pdf

2012 Annual Report
http://www.caltex.com.au/InvestorCentre/Documents/AnnualReports/Caltex%202012%20Annual%20Report.pdf 

With just a brief look over the 2014 annual report I have learnt some new facts about Caltex Australia which I have included briefly below;

• Caltex Australia are the only major brand listed on the Australian Securities Exchange
• Their financial year runs from 1st January through 31st December, funnily enough this interests me as I have only ever been involved in companies with the financial year beginning 1st July-30th June.
• They're share price increased by 71% from 31st December 2013 ($20.05) to 31st December 2014 ($34.21).
• They will be discontinuing the refining of oil at the Kurnell Refinery and it will instead be a fuel import terminal. This conversion commenced in 2012. 
• Their statements are set out in narrative format. 
• All of Caltex Australia's statements are consolidated statements. When researching what a consolidated income statement was, I came across this definition found on the Investor Guide website as 'an income statement for a group of enterprises and its parent company as a whole'. 
• According to their consolidated income statement their revenue is down in comparison to 2013.In 2013 their revenue was $24,676,383.00 in 2014 however it was recorded at $24,231,200.00. When 
• The consolidated income statement for the year ended 31 December 2014 includes significant losses of $160,163,000 which, as stated in the notes, were impacted largely by the conversion of the Kurnell Refinery which included remuneration payments, consulting fee's etc.

At this early stage of investigation into my companies annual reports, the following are some questions I have. Please bare with me, I am new to accounting and am totally intimidated by numbers, I feel like I almost become illiterate when it comes to accounting and mathematics.

• Caltex Australia Limited states that they are a company limited by shares, incorporated and domiciled in Australia. What does this mean? 
• Caltex only use consolidated statements, there are no separate statements. Are they not required to submit statements per entity? Is this because they are also franchised? 
• Within the consolidated income statement, and other statements for that matter, under the revenue figure all the other figures are shown in brackets i.e. Product Duties and Taxes. Are they shown in brackets because they are a loss? Are brackets replacing the minus symbol? 

I hope these are not stupid questions, as I mentioned, this is my first accounting subject and I am like a fish out of water. 

Being a local to the Kurnell Refinery I was aware of its conversion, we often receive mail about it from them, however, I was not aware of the costs involved. Many of the workers live locally, in fact, my neighbour was one staff member who was made redundant and after over 25 years service, I was aware that he was given quite a generous redundancy. I did a little research for news articles and came across the following.

This one article published in the Sydney Morning Herald explains how up to 630 jobs will be lost, both direct and contracting roles, as a result of the Kurnell Refinery Conversion.

 http://www.smh.com.au/business/caltex-axes-up-to-630-jobs-with-refinery-closure-20120725-22sd6.html 

This next article on the other hand says the 58 year old refinery will cost $270 million dollars over the two year process. They also state that BP were to close their Brisbane refinery this year, in 2015. 

http://www.heraldsun.com.au/business/breaking-news/caltex-shuts-kurnell-refinery/news-story/04effca75ca7f10efc2c627aaef64536?= 

Its understandable that the closure of the Caltex Refinery in Kurnell had a big impact on their figures which is shown in their 2014 report. 

I look forward to receiving feedback on my blog. I also hope that someone can enlighten me by answering my questions that I have listed above. 

Wishing everyone the best of luck with their studies. 

About me

Hi all and welcome to my blog, Outnumbered by Numbers.

My name is Emma Walker, I am 28 years old from Sydney. I currently study by distance, even though there is a campus 40 minutes from me, as I work full time also. I am married and live in a quiet suburb south of Sydney CBD.

I am currently studying my Bachelor of Business majoring in Marketing and am completing course 'Using Accounting for Decision Making' this term, term 3 2015.  I only have 5 more subjects to complete, if all goes well this term, and I intend on graduating early 2017.

I am not a numbers person, in fact, numbers scare me hence my blog name, I often feel outnumbered when it comes to numbers. Any mathematical problem I ever encounter is resolved with Excel, a calculator or my husband. I fear this term is going to be a long one with many late nights and sleepless ones at that. 

I look forward to sharing my journey with you on accounting and hope that I can change my flustered state when approached with numbers to one of confidence. 

Fingers crossed.