ACC 303 Company Accounting

Write a memorandum to the board of directors (the members of the board have varying degrees of accounting knowledge or understanding) as noted in the assignment details Make an oral presentation to the board of directors as noted in the assignment details 

 

Why did the parent entity have to prepare consolidated financial statements when the subsidiary company is a separate legal entity in its own right How is the group of companies funded Share capital, debentures Any options, bonus issues etc. Who owns the group Does the published set of group financial statements reveal the company’s policy on corporate governance Audit committees Sustainability Solvency Should it If so, where and why.

The non-controlling interest – where would you find it in the financial statements and what does it represent Details of any direct and indirect non-controlling interest  Has there been any goodwill on acquisition Or any gain on bargain purchase Where would you find it in the financial statements and what does it mean Any impairment Does the group have any foreign currency transactions Any foreign subsidiary companies How have they been accounted for in the financial statements.

Qantas Group is a group of companies with many subsidiaries across various industries in Australia and Asia Pacific. Qantas Group is a privately owned company. The company was privatized fully in the year 1995. The company’s ownership is restricted by law during privatization to a maximum of 49% foreign share ownership(Morrell,2013).The Qantas sale Act further restricts the ownership of Qantas by a foreign airlines combined to 35% shares at maximum. The Qantas Group is funded through various channels.

The major source of funding for the airline is through share capital (Peoples, 2014).Share capital ownership model is where a company is divided into small units referred to as shares and whose value is determined by the company. The shares are then sold out to various persons who have the right to transfer them to a third party. The issued capital for Qantas for the year 2016 was $4,630M. Of the total issued capital, the treasury shares were worth $7M.The reserves accounted for $66M and the retained earnings value accounted for $1,115m. This consequently means that the total equity that can be attributed to the members of Qantas $3,442.This means that the members of the company with various shares in the company contributes to more than 70% of the companies` capital. The company does not depend much on debentures to raise its capital (Easton, 2016).

The capital of Qantas Group is also boasted by retained earnings from the company. Retained earnings are the portion of the companies` net profit that remains and is invested back into the company after dividends have been paid to shareholders. Another source of funding for Qantas is through debt capital. The companies takes short term and long term loans from various financial institutions. The long term loans are mainly used for carry out large investment projects and to acquire assets for the company. The company mainly considers the cost of financing when deciding their sources of funding to ensure that the funds generate good value for the business. The Qantas group is owned by various shareholders among them Alan Joseph Joyce who is the current CEO of Qantas Group. The following are some of the shareholders of Qantas Group.

The Qantas Group set of published financial statements indicates the corporate governance policy of the company. The corporate governance policies of the company are addressed in the seventh section of the financial report of Qantas 2016 for the year ending 2016. The statement on corporate governance states that corporate governance is core to ensuring creation, protection and enhancing of shareholder value. The board of Qantas Group maintains and encourages the highest levels of corporate ethics.

The companies` board of directors is mainly composed of independent Non-Executive Directors who help to ensure there is a balance of skills, knowledge, independence, diversity and experience which is important in management of the company. The board has four committees which plays various important roles in the company. The Audit committee is one of the most important of the four since it audits the firm’s activities and financial statements and advises the board accordingly. The audit committee ensures accountability and openness among the directors and the rest of the management team (Palepu et al., n.d.). Another important role played by audit committees is that they help in internal control. They usually evaluate and revise internal control processes and procedure and ensures they are in line with set standards. They are also in charge of appointment, compensation and supervision of auditors work. The financial statements of Qantas group also discuss sustainability of  the company.

Sustainability reporting helps a company to communicate with various stakeholders about the economic, environmental, and social impact of the companies` daily activities. This demonstrates the values of the organization and communicates the risks taken by the organization. Sustainability reporting also helps organizations to increase efficiency in resource use and in reducing wastage. This in turn simplifies the decision making process of the company. It communicates both positive and negative effects of the companies` operations. Solvency reporting is contained in the financial reports of Qantas Group. The solvency report helps to communicate to shareholders and future investors the correct and true financial position of the company (Singleton-Green, 2012).

The company demonstrates to the shareholders the ability to meet its short term and long term financial obligations. This is important to give more confidence in the financial systems of the company. It also aims at ensuring that there are checks and balances between various core units and functions in an organization.. This is important in making decisions for various stakeholders. The report should identify and outline the risks faced by the business, the capital structure, and the management of the company. The company should publish all the above reports in its financial reports since it is a requirement under the Corporations Act of 2001.

Qantas airlines have a concrete community relations policy. The policy defines the relationship between the company and the community that the company is operating. Qantas has a community investment program which is under the following partnerships. The first is the spirit of Arts. This is a program by the company that`s supports cultural events and organizations across Australia. The program nurtures and encourages the growth of art in the country especially through young people. The other program is the spirit of community that supports charitable and community organizations in Australia. This includes support for organizations offering the support for orphaned children. Qantas encourages a strict adherence to the code of conduct for the company regarding community rules. The employees of the organization are expected to maintain a professional relationship with members of the community. This will help to maintain good relationship between the company and the community. Qantas also ensures environmental sustainability within the community it is operating.

 References

Qantas Group website :https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf

Berk, al, j. E., harford, j., ford, g., mollica, v., & finch, n. (2013). Fundamentals of corporate finance. Sydney, p.ed australia. Http://public.eblib.com/choice/publicfullrecord.aspx?P=4980368.

Cunningham, b. M. (2011). Information for business decisions. South melbourne, vic, cengage learning australia.

Easton, p. (2016). Financial reporting: An enterprise operations perspective. Journal of financial reporting, 1(1), pp.143-151.

Hawley, j. P., williams, a. T., kamath, s. J., & hawley, j. P. (2011). Corporate governance failures: The role of institutional investors in the global financial crisis. Philadelphia, university of pennsylvania press. Http://public.eblib.com/choice/publicfullrecord.aspx?P=3441747.

Morrell, p. S. (2013). Airline finance. Farnham, surrey, england, ashgate.

Palepu, k., healy, p., bernard, v., wright, s., bradbury, m. And lee, p. (n.d.). Business analysis & valuation.

Peoples, j. (2014). The economics of international airline transport. Bingley, u.k., emerald. http://public.eblib.com/choice/publicfullrecord.aspx?P=1766272.

Singleton-green, b. (2012). Commentary: Financial reporting and financial stability: Causes and effects. Australian accounting review, 22(1), pp.15-17.