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Financial Accounting And Reporting

Introduction

In this paper two companies named as PPB Group and PETRONAS Chemicals Group get used for the purpose of discussion the effect of the MFRS 101. PETRONAS Chemicals Group is functioning in the sector of petro chemicals & chemicals and considered under the industrial sectors. It is located in Kuala Lumpur, Malaysia and the address of their head office is “Tower 1, PETRONAS Twin Towers, KLCC, 50088, Kuala Lumpur, Malaysia, Contact number + 60 3-2051 5000”. In Malaysia they are considered as the leading integrated chemical producers. Along with this they are considered one of the largest chemicals producers in Southeast Asia. Their main functionality is manufacturing, marketing as well as selling a large range of chemical products. The wide range of products includes olefins, polymers, methanol, fertilisers, and other chemical products. In the year 2014 there is reduction in their profit share in comparison to the profits of year 2013. Like the profit share there is effective decrease in their liquidity share as compare to the 2013.

Another company named as PPB Group they perform their activities under the sector of food and beverages. It is located in the Kuala Lumpur, Malaysia and their headquarters are located at the UBN Tower Jalan P Ramlee, Kuala Lumpur, Malaysia. They are engaged into various activities such as food production, agriculture, waste management, film distribution, property investment and development. Along with these activities they attain 18% stake in Wilmer International and considered as single largest shareholders and with this they considered among the leading producers of the palm oil. They fall under the trading sectors. As per their financial statements there is increase in their revenues by 4.0 billion in the year 2015. There is decrease in their operating income by 0.2 billion but there is increase in their net income by 1.1 billion in 2015. They attain total assets of 21.9 billion and having total equity of 20.6 million in the year 2015. 

Requirements of MFRS101 in the statement of financial position

Financial Accounting And ReportingThe MFRS 101 is the presentation of the financial statements which get prescribed for the presentation basis for the general purpose in order to make the financial statements comparable for both the conditions such as comparing it with previous figures as well as comparing it with other entities of same period. The requirements in order to make comparison are presentation or preparation of the financial statements, set guidelines, etc. There is effective need of the financial statements in order to give a structured representation of their financial position along with their performance (101, 2014). With the use of the financial statements information related to the liquidity, profitability and the financial position get extracted in an effective manner. Financial statements include the statement of financial position, statement of comprehensive income or income statement or profit and loss account, cash flow statement, statement of change in equity and notes. All these statements get prepare for a specific period of time or for a financial year (Adebisi, 2013).

In the statement of financial position there is effective requirement of MFRS101 as there is need of representing the statement in the distinguish form among the current and non-current items such as current assets and non-current assets and current liabilities and non-current liabilities. The other formats are also appropriate equally and render the clear distinction. There are various line items motioned by the MFRS 101 which shows the amount (Collins & Cameron, 2011). Some of the line items get discussed below such as:

Property, plant and equipment: These are considered as the fixed assets of an organisation. Under this head the equipment which gets used for executing the activities get included under it. For the PPB Group the amount of this line item is

Property, plant and equipment = 2,629,000

Investment properties: These are such properties which get help by the company in order to earn revenues in the form of rentals or can be used for capital appreciation or it get used for both purposes (Farser & Ormiston, 2011). For the PPB Group the amount of this line item is:

Investment properties = 312,836,000

Trade and other receivables: These are such receivables which get rendered at the time of the sales by the debtors against the cash payment. These get considered as legal for a specific period of time and at the time of the maturity it gets paid by their respective debtor. For PPB group the amount of this line item is:

Trade and other receivables = 385,000

Cash and cash equivalents: Mostly it is the balance of the cash in hand and cash at bank. The balance of the cash gets obtained by recording the transactions related to the cash only (Garnaut & Hoge, 2013). For PETRONAS Chemicals group the amount of this line item is:

Cash and cash equivalents = 9,807

Trade and other payables: These are such payables which get rendered at the time of the purchases by the company against the cash payment. These get considered as legal for a specific period of time and at the time of the maturity it gets paid by the company to their respective creditors. For PETRONAS Chemical group the amount of this line item is:

Trade and other payables = 2,395 (PPB, 2014) 

MFRS101 Standard compliance and format of disclosure of the selected companies

There are set of standard compliance render by the MFRS 101 such as:

  • Financial statement of the companies such as PPB Group and PETORNAS Chemicals Groups must get present fairly so that it represents their financial position, their performance and flows of their liquid funds.
  • Under the notes PPB Group and PETORNAS Chemicals Groups need to represent the effect of transactions, measuring the amounts of the assets, liabilities, income and expenses in order to follow the conceptual framework(Penman, 2010).
  • The preparation of the financial statements includes or strictly follows the set rules and regulations of the accounting standards, accounting policies, etc. These should be included in order to make the information more reliable, relevant, comparable and understandable.
  • The disclosure of information in the notes or rendered as the additional information helps in reducing the compliance issues and with this users are able to understand the impact of some transactions or events over organisational performance(Petronas, 2014).
  • There are some set of rules such as going concern, accrual basis of Accounting, materiality and aggregation and offsetting which need to be followed by PPB Group and PETORNAS Chemicals Groups while preparing the financial statements in order to render adequate and reliable information which get used by the users.
  • PPB Group and PETORNAS Chemicals Groups strictly needs to prepare their financial statements which helps in evaluating their performance for a set period of time and with this information they make evaluation, comparison with other entities, etc(Collins & Cameron, 2011).
  • The adequate preparation of the financial statements helps in getting the comparative information which can be narrative and descriptive.
  • PPB Group and PETORNAS Chemicals Groups needs to present and classify various items under their financial statements in order to follow them regularly.

The formats of statement of financial position followed by the PBP group are as follows:

Statement of financial position as at 31st December xxxx:

Particulars Note 2xxx RM ‘000 2xxx RM ‘000
ASSETS      
Non-Current assets
Property, plant & equipment X ——- ——-
Investment properties Xx ——— ———
Other investments Xx ——– ———-
Total Non-current assets   ——- ———-
Current asset      
Trade receivables Xx ——– ————
Other receivables Xxx ————— ————-
Cash and bank balances Xx ———- ————-
Total current assets   ———— —————
TOTAL ASSETS   —————- —————
EQUITY AND LIABILITIES      
Equity      
Share capital Xx ———- —————–
Share premium Xxx ————- —————–
Total Equity   ————- —————–
Non–current Liability
Deferred tax liabilities Xx ——- ——–
Current liabilities
Trade and other payables Xxx ——– ———-
Bank overdrafts Xx —— ———
Total current liabilities
Total Liabilities
TOTAL EQUITY & LIABILITIES

(Garnaut & Hoge, 2013)

The formats of statement of financial position followed by the PETRONAS Chemicals group are as follows:

Statement of financial position as at 31st December xxxx:

Particulars Notes Group Company
ASSETS 2014 RM Mil 2013 RM Mil 2014 RM Mil 2013 RM Mil
Property, plant & equipment X ——— ———- ———- ——
Investment properties X ——– ——– ——- ———
Other investments Xx ——— ——— ——— ———
Total Non-current assets ——— ——— ——— ———
Trade receivables X ——— ——— ——— ———
Trade and other inventories Xx ——— ——— ——— ———
Cash and bank balances Xx ——— ——— ——— ———
Total current assets ——— ——— ——— ———
TOTAL ASSETS ——— ——— ——— ———
Equity ——— ——— ——— ———
Share capital Xx ——— ——— ——— ———
Reserves Xxx ——— ——— ——— ———
Total equity ——— ——— ——— ———
Liabilities
Other long term liabilities Xx ——— ——— ——— ———
Total non-current Liabilities ——— ——— ——— ———
Trade and other payables Xxx ——— ——— ——— ———
Total current liabilities ——— ——— ——— ———
Total Liabilities
Total equity and Liabilities

(IFRS, 2014)

Similarities and differences in disclosure between the two companies

Similarities in disclosure between the two companies are as follows:

Basis PPB Group Berhad Petronas Chemicals Group Berhad
Statement of financial position This organization is producing the statement of the financial position at the end of the year (PPB, 2014). Same as PPB Group Berhadthis organization is producing the statement of the financial position at the end of the year (Petronas, 2014).
Statement of profit and loss This organization is producing the statement of profit and loss at the end of the year (PPB, 2014). Same as PPB Group Berhad this organization is producing the statement of profit and loss at the end of the year (Petronas, 2014).
Statement of changes in equity This organization is producing the Statement of changes in equity at the end of the year (PPB, 2014). Same as PPB Group Berhad this organization is producing the Statement of changes in equity at the end of the year (Petronas, 2014).
Statement of cash flows This organization is producing the Statement of cash flows at the end of the year (PPB, 2014). Same as PPB Group Berhad this organization is producing the Statement of cash flows at the end of the year (Petronas, 2014).
Notes They are providing requisite notes at the end of the financial statements (PPB, 2014). Same as PPB Group Berhad they are providing requisite notes at the end of the financial statements (Petronas, 2014).
Structure They are following the same structure in preparing the statement of financial position of the organization (PPB, 2014). Same as PPB Group Berhad they are following the same structure in preparing the statement of financial position of the organization (Petronas, 2014).
Reporting In the organization the reporting is done with the proper integrity and adequate compliance in order to make the effective approach for the viable management and effective administration (PPB, 2014). Same as PPB Group Berhad in the organization the reporting is done with the proper integrity and adequate compliance in order to make the effective approach for the viable management and effective administration (Petronas, 2014).
Effective dates The effective dates of the organization are pre disclosed as the bonus declaration and other major events of the organization are planned according to the approval of the majority and hence these are pre disclosed (PPB, 2014). Same as PPB Group Berhad the effective dates of the organization are pre disclosed as the bonus declaration and other major events of the organization are planned according to the approval of the majority and hence these are pre disclosed (Petronas, 2014).
Transition The transition of the process is also structured properly and it is pre disclosed with the business partners and external channels (PPB, 2014). Same as PPB Group Berhad the transition of the process is also structured properly and it is pre disclosed with the business partners and external channels (Petronas, 2014).
Policy disclosures The major policies are disclosed within the organization like accounting concepts, principles and theories usage. The effective dates and transition process and the other frameworks with the regulatory bodies and other prescribed authorities (PPB, 2014). Same as PPB Group Berhad the major policies are disclosed within the organization like accounting concepts, principles and theories usage. The effective dates and transition process and the other frameworks with the regulatory bodies and other prescribed authorities (Petronas, 2014).

(IFRS, 2014)

Differences in disclosure between the two companies are as follows:

Basis PPB Group Berhad Petronas Chemicals Group Berhad
Materiality The group is not considering the materiality factors with the cash equivalents instruments and hence they are not realizing these instruments in their financial records or statements (PPB, 2014). The group is realizing the financial instruments as per the materiality concepts where the cash equivalents are provided a proper space in the financial position (Petronas, 2014).
Aggregation The benefits to the director are recorded on the aggregation method with respect to the financial position statements or other relevant documents like statement of equity and comprehensive income and expenditure statements (PPB, 2014). Cost of acquisition is calculated as per the aggregation concept where the fair value method has been utilized (Petronas, 2014).
Depreciation Freehold land is not depreciated in the organization and hence other plants and equipment’s are depreciated (PPB, 2014). On the contrary the organization is not depreciating the projects in progress and rests all the plants and equipment’s are depreciated (Petronas, 2014).
Structure It is using the collaterisation and is working with the registered titles to make the business comprehensive and adequate with relevancy to address the completion and attract the potential investors (PPB, 2014). Collaterisation or registered titles are not allowed in the structures of the organization (Petronas, 2014).
Statement of compliance The organization is not using any kind of Statement of compliance for their materiality or the sake of the financial position of the accounting (PPB, 2014). The organization is using any kind of Statement of compliance for their materiality or the sake of the financial position of the accounting (Petronas, 2014).
Contingent Liabilities They are using the Goodwill element for the Contingent Liabilities section as possible cause for the impairment in the business (PPB, 2014). They are using the provisions element for the Contingent Liabilities section as possible cause for the impairment in the business (Petronas, 2014).
Non-Financial disclosures They are not disclosing any kind of Non-Financial disclosures as they have been using the approach of not considering the materiality concept (PPB, 2014). They are disclosing somekind of Non-Financial disclosures as they have been using the approach considering the materiality concept. Non-financial disclosures are depreciation of the plants and equipment’s which are working out in their financial position (Petronas, 2014).
Measurement basis They are using this Measurement basis on the basis of the transaction by transaction where all the transactions are keep in a series to make the proper and justified solutions as per the industry requirements (PPB, 2014). They are not using this Measurement basis as they are considering the materiality position of the financial position and its statements (Petronas, 2014).
Accounting policies Their accounting policies are including the basis of consolidation, associates and joint ventures and property, plants and equipment’setc. (PPB, 2014). Their accounting policies are in the direction of taxation, foreign currency transactions, revenues, interest income and financing costs (Petronas, 2014).
Interim financial reporting They are not using Interim financial reporting as per the Amendments to MFRS 134 (IFRS, 2014). They are using Interim financial reporting as per the Amendments to MFRS 134 to contribute to the organization with more adequacy and relevancy (IFRS, 2014).

(IFRS, 2014)

Summary

For the purpose of study two companies such as PPB Group and PETRONAS Chemicals Group get selected. Both the companies prepare their financial statements by following the MFRS 101. They make adequate use of set compliance standards by the MFRS 101 for the purpose of preparing their financial statements. In the preparation of their financial statements such as statement of financial position, income statement or comprehensive income statement or statement of profit and loss, statement of cash flows and notes. For each and every financial statement there areset line items such as trade and other receivables, investment property, intangible assets, inventories, cash and cash equivalents, trade and other payables, etc. These financial statements need to be prepared for a specific period of time such as financial year. In the preparation of the financial statements there are effective similarities as well as differences. The formats followed by both the companies are same but the representation of the statements is different. There is adequate difference among the usage of the set standards, rules or policies. As per the compliance standard of the MFRS 101 there is effective need of fair representation of the financial statements so that it provides effective information which gets used by the different users and that information gets easily understandable.

Works Cited

101, M. (2014). Guidance on Implementing MFRS 101 Presentation of Financial Statements. MFRS 101 IG , 1-24.

Adebisi, I. (2013). Principles and Practices of Financial Accounting. lorin: Rajah Dynamic.

Collins, R., & Cameron, D. (2011). Financial Management System. Journal of financial research and managerment system , 300-320.

Farser, L., & Ormiston, A. (2011). Understanding financial statements. Upper Saddle River,. N.J.:: Prentice Hall.

Garnaut, R., & Hoge, J. (2013). Changing nature of growth’, Financial Review. Journal of Financial Riviews , 188-196.

IFRS. (2014). Disclosure Initiative (Amendments to MFRS 101). Malaysia: IFRS Foundation.

Penman, S. (2010). Financial Statement Analysis and Security Valuation, 4th ed.,. New York.:: McGraw-Hill/Irwin,.

Petronas, A. (2014). PETRONAS CHEMICALS GROUP BERHAD – Annual Report. BERHAD MALAYSIA: PETRONAS CHEMICALS GROUP BERHAD.

PPB, A. (2014). PPB Group – Touching Lives Everyday – Annual Report. Berhad Group: PPB Group.

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