ACCT13017 - Assignment One - Step Five DRAFT

Note: Restated financial statements submitted in separate Excel spread sheet.

Martin Turner wrote in chapter four of the study guide that restating our firm’s financial statements should be a much more straightforward task this time around (as compared to ACCT11059 – Accounting, Learning and Online Communication) as we should now have a better understanding of what the items are in our firm’s account. He was correct. The first time I restated a firms financial statements in ACCT11059 I had no idea what I was doing. It was my first accounting subject in University, and I had come from a work background that was not accounting related at all so I was quite lost. Even though this has only been the second time I have restated financials, I did end up finding it much easier as I now have a broader understanding of what some of the accounts are and how they are treated and how they should be allocated. However, that is not to say that it was completely smooth sailing and that there were no challenges as there certainly were.

In the video titled ‘entering your financial statements’ Maria Tyler made it very clear and mentioned several times that it was necessary to separate our operating income from our finance income. My issue, however, is that I could not find ANY finance income at all in the financial statements. I searched under other income (which turned out to be patent renewal fees and foreign exchange gains) and also under associate charges (which turned out to be revenue from recharging, as Principal, the cost or arranging for intellectual property protection in other jurisdictions). I headed to the unit’s Facebook page only to find that another student had posted a very similar question to what I had:

“Does anyone else not have Finance income? I have read through my notes on revenue and nothing seems to be for finance. All just normal revenue but listening to the video has made me nervous. Am I not reading it right? Should we all have Finance income?”

In one of the comments under this question Martin had given us a very good tip: “Here is a tip: If your firm has cash in its Balance sheet, then it should have some Finance income. If it has no cash, for example it might have a bank overdraft, then it should have no Finance income. If your firm does not have much cash, then it will not have much Finance income and so it may not be material and your firm may not disclose it as a separate item; and it will simply be part of Other income … and may not be shown as a separate item in Other income in the footnotes. I hope this helps.” My firm did have cash on their balance sheet however I still could not find any interest received or finance income in the notes to the financial statements. This is something that I am hoping to discuss more with students in step eight when we review and discuss each other’s work. For the time being, I am going to assume that QANTM has not disclosed their financial income as it is immaterial.

I found that I have learnt quite a bit about my company while restating their financial statements as instead of just looking at the Income Statement and Balance Sheet, I was really having a more detailed look at the notes in their financial statements and what some of their broader headings, such as ‘provisions’ actually consisted of. In the case of QANTM, the line item ‘provisions’ consisted of employee benefits (both current and non-current) and lease incentives.

Overall, I found it much easier to restate the financial statements this time around. I am hoping that when it comes time for me to do this in the future (perhaps at work) I will be in an even better position to do so as I am constantly gaining a broader understanding of the fundamentals of accounting, including the items on the Income Statement and Balance Sheet.

Link to excel work paper:

https://www.dropbox.com/s/wcwre4877b7a6as/ACCT13017%20-%20Company%20Spreadsheet.xlsx?dl=0