Analysis Of Medibank Private Limited Annual Report: Part A

Qualitative characteristics of the annual report of the corporate entity

The particular factor that has been represented in the question indicates the fact that the analyzing of the corporate statements of a business entity can be carried out in order to understand the business performance of the company. Moreover, the understanding of the business operations that have been carried out by the business entity in a particular financial year can also be understood by the annual report that has been prepared by a corporate entity. This means that the corporate accounting statements of a business entity are the primary source from which the buisness performance of the firm  has been assessed.

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The business organization that has been selected for this particular study is the Medibank Private Limited. The accounting statements of the business firm has been analyzed and scrutinized for the purpose of answering the issues that have been raised in the question. The financial report of the  selected business organization that has been evaluated for the purpose of the study belong to the financial year of 2017.

Qualitative characteristics of the annual report of the corporate entity

The qualitative characteristics of an annual report refer to those characteristics that define the quality of the annual report. The annual report of a corporate entity should be complete and clear. This refers to the fact that the accounting information that has been represented in the annual report of the business entity should be easily interpreted and understood by the third party investors and the other stakeholders of business. The qualitative characteristic of relevance refer to the feature in which the business information, which is represented in the annual report of the firm, is such that it can be used to take the economic decisions. This means that the financial information should be relevant enough for the investors and the stakeholders of business. This means that the financial information should be useful in nature and should have a confirmatory and predictive value. The predictive value of the financial information refers to that value that makes the users of the financial statements predict the future outcomes of the business. The confirmatory value of the financial information refers to the financial information that might be confirmed by the stakeholders of the business on the basis of the predictions or the forecasts that have been carried out by them (Barth 2013).

The particular instance of unearned premium liability included in the corporate statement of the business entity refers to the fact that that there has been unearned premium that has been included in the accounting statements particularly in financial position statement of the firm. Furthermore, the accounting disclosure that has been included in the books of accounts of the business firm states the fact that the unearned premium is recognized as revenue and has been included in the income statement of the firm. This is a particular instance of qualitative characteristic of relevance as because the investors can use this information to make the potential economic decisions (Barth 2013).

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Another instance of the qualitative characteristic of relevance can be found in the accounting disclosure that has been provided in the case of property, plant and equipment that has been included in the balance sheet of the company. The accounting disclosure that has been included in the corporate statement defines the particular method which has been adopted for the valuation of the fixed asset of property, plant and equipment. The accounting policy that has been utilized for the valuation of the financial component of property, plant and equipment has also been mentioned in the accounting disclosure of the corporate entity. This financial information can be utilized by the investors of the corporate entity for the purpose of determining the effective economic decisions. Thus, reflecting the qualitative feature of relevance.

Information disclosed by the company

The qualitative characteristic of comparability indicates that the financial report of a corporate firm  has to be prepared in that particular way that the business information which is reflected in the annual report of the firm provides a common platform. This common platform provides a basis upon which the business information which is reflected in the annual report of the other corporate entities can be compared with the annual report of the particular business entity. This means the qualitative characteristic of comparability refers to the extent up to which the financial performance of a firm can be compared with the financial performance of the other corporate firms. In case of Medibank, the case has been that the financial report have been prepared in accordance to the particular accounting standards that have been established by the Australian Accounting Standards Board. This reflects the fact that the financial report prepared by the firm can be compared to the business information of that has been represented in the financial report of the corporate organization. This is due to the fact that the financial report has been prepared on the basis of the accounting standards established by the International Financial Reporting Standards. This enables the corporate entity to prepare the financial statements that consists of a satisfied degree of comparability.

Another instance of the qualitative characteristic of comparability can be referred to the fact that the financial report that have been included in the financial report of the company has been prepared in accordance to the internationally accepted format. This further helps in the interpretation of the business information that has been reflected in the corporate statements of the business firm.

It must be noted here that there has been no disclosure in regards to the environmental reporting practices in the financial report of the corporate entity. This means that there has been no duties in regards to the corporate social responsibilities that have been carried out by the firm. Adequate care should be taken by the management of the corporate entity for the purpose of taking the initiative to carry out the corporate social responsibilities in regards to the environment in which it operates (Barth 2013).

Information disclosed by the company

The information that has been disclosed by the corporate entity in the accounting disclosures have been proper and to the point. This means that the financial information that can be obtained from the annual report of the corporate entity will help the stakeholders and the other investors of the corporate entity to make the business decisions in regards to the investment strategies that are carried out by these entities (Newberry 2015).

Two recommendations to the top management of the company

Two important recommendations that can be provided to the top management of the corporate entity can be listed down as follows:

  • The first recommendation is that in spite of the fact that the firm belongs to the particular sector of healthcare. There must be corporate social responsibilities that must be carried out by the corporate entity for the purpose of the fact that the business entity belongs to a certain environment and it has the duty to carry out certain responsibilities in regards to the environment in which it operates. Therefore, the management of Medibank should take enough initiative to incorporate the corporate social responsibilities within the corporate structure of the firm.
  • The next recommendation that can be provided in case of the corporate entity of Medibank is that the accounting disclosures that has been provided in the financial statement of the corporate entity should be more precise in nature. This can be further understood with the help of the term disclosure overload. The length of the annual report has incessantly increased. This has also resulted in the unwanted complexity of the accounting statements of the corporate entity.

The purpose of the pre-acquisition entries that have been included while the consolidated financial statements have been prepared can be listed down accounting statements follows:

  • The pre-acquisition entries should have been included in the consolidated financial statements for the purpose of preventing the issue of double counting of the assets that belong to the economic entity
  • The pre-acquisition entries should have been included in the consolidated financial statements for the purpose of preventing the issue of double counting of the equity that belong to the economic entity
  • The pre-acquisition entries should have been included in the consolidated financial statements for the purpose of any kind of gain or bargaining in regards to the issue of purchase

The shares that have been acquired on the basis of the cum-dividend refers to the fact that the acquirer in regards to the right that has been presented on the dividend that has already been declared. In regards to the effect, the acquirer has been able to purchase the dividend that has to be received in regards to the receipt of the cash. Therefore, this is the condition that should exist for the purpose of taking the dividend into consideration in regards to the preparation of the pre-acquisition entries (Newberry 2015).

It is necessary to distinguish between the pre-acquisition dividends from the post acquisition dividends because both the dividends are received at the different times. This means that the dividend that has been declared from the pre-acquisition profits and will be received by the purchaser of the investment. Then such an amount will be subtracted from the cost of investment. The dividend that has been received from the pre-acquisition profit refers to the pre-acquisition dividend. The post-acquisition dividend on the other hand refers to the dividend that if received will be credited to the profit and loss statement or the income statement of the corporate entity. Thus, this means that the dividend that has been paid out of the profits of the firm is referred to as the post-acquisition dividend. Therefore, this is the difference between the pre-acquisition and the post-acquisition dividend (Mardini, Crawford and Power 2015).

The pre-acquisition dividend refers to the receipt of the recovery of the cost and the post acquisition dividend is treated accounting statements revenue.

The purpose that has been represented in the question indicates that if the subsidiary records the goodwill in its accounting records or financial statements. This might affect the pre-acquisition entries in such a way that if the dividend turns out to be a loss then the goodwill of the firm will be affected by the highest degree. This means that the goodwill of the firm will be affected if the dividend is not received or the firm fails to acquire the desired amount of profit. This means that the goodwill of the parent firm will be affected, which will further result in the goodwill that has been recorded in the books of the subsidiary to be affected. This means that the goodwill of the firm result in a significant impact over the pre-acquisition entries (Mardini, Crawford and Power 2015).

The purpose that has been represented in the question  indicates that if the parent company acquires a controlling interest in a subsidiary and the carrying amounts of the assets of the subsidiary are not equal to the fair value then the assets then subsequent adjustments will be required in the preparation of the consolidated financial statements. This is due to the fact that it has been mentioned in the accounting standards that have been established by the Australian Accounting Standards Board state that the assets of a firm has to be measured on the basis of the fair value method (Mardini, Crawford and Power 2015).

Conclusion

Thus, it can be inferred from the above discussion that the chosen corporate entity of Medibank has prepared its financial report in a proper way and has prepared the accounting statements in accordance to the provided accounting standards of AASB. Moreover, the issue that has to be taken care of by the management of the corporate entity is that the firm should engage in corporate social responsibilities and should reduce the effect of the disclosure overload.

References

Barth, M.E., 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons, 28(2), pp.331-352.

Barth, M.E., 2015. Financial accounting research, practice, and financial accountability. prAbacus, 51(4), pp.499-510.

Caltex. (2017). Caltex Australia | Fuels, Convenience Retail & Lubricants. [online] Available at: https://www.caltex.com.au/

Chand, P., Patel, A. and White, M., 2015. Adopting international financial reporting standards for small and medium?sized enterprises. Australian Accounting Review, 25(2), pp.139-154.

Crawford, L. and Power, D.M., 2015. Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8. Journal of Applied Accounting Research, 16(1), pp.2-27.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Mardini, G.H., Crawford, L. and Power, D.M., 2015. Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8: Evidence from Jordan. Journal of Applied Accounting Research, 16(1), pp.2-27.

Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public Money & Management, 35(5), pp.371-376.