AssignmentExample_2_ratios.pdf - Influence of Accounting Practices on performance Of AstraZeneca and Eli Lilly 2011 Table of Contents PART A.p.2

AssignmentExample_2_ratios.pdf - Influence of Accounting...

This preview shows page 1 - 5 out of 22 pages.

Influence of Accounting Practices on performance Of AstraZeneca and Eli Lilly 2011
Image of page 1
Table of Contents PART A ................................................................................... p.2 Accounting policies of AstraZeneca and Eli Lilly PART B ................................................................................................. p.5 Disclosure of voluntary reports PART C ...................................................................................... p.9 Financial Statement Ratios P A R T D . . p . 1 6 International Corporate Reporting PART E ............................................................................................... p.18 Non-Financial Performance Indicators 1
Image of page 2
Introduction This report aims to analyse the financial performance of two pharmaceutical companies, the companies under study are AstraZeneca A United Kingdom Based Pharmaceutical Major and Eli Lilly- An American Company. This report covers the influence of different accounting and reporting practices adopted by the two companies on the financial position and overall performance of the company. On comparing the two company’s annual reports some key financial information could be obtained. Part A Accounting policies of AstraZeneca and Eli Lilly AstraZeneca prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) while Eli Lilly prepares its statements in accordance to Generally Accepted Accounting principles (GAAP). Some differences in the accounting policies of these two companies which may affect the evaluation of the performance of the company are as follows: Revenue The revenue of AstraZeneca is mainly from sales, earnings from co-promotion and co-development agreements while income for Eli Lilly include earnings from sales, co-promotion, out-licensing agreements, Collaboration agreements, co- development agreements and royalty revenue from licenses. S a l e s o AstraZeneca They consider income from sales of product only after the risks and reward of ownership is completely transferred to the buyer i.e. on delivery of the product. These revenues do not include value added taxes, and represent net invoice which is after settlement discounts, returns and rebates. o Eli Lilly In contrast Lilly, for 85% of its sales recognizes the revenue once the product is shipped to its customers and the rest sales are recorded once product is delivered. Discounts and rebates are recorded as a part of this revenue. Co-Promotion and Co-Development o AstraZeneca This is recognized once the income is earned i.e. upon the sale of the co-promoted/ developed product. 2
Image of page 3
o Eli Lilly This is based on net sales recorded by the company’s co - promotion partners and the amount of sales calls. Licensing Agreements Eli Lilly is known to earn an income from advance payment received from out- licensing agreement. This includes the license to market and sell the product and is considered in the net product sales as per the conditions stated in the supply agreement. Cash Equivalents Eli Lilly All highly liquid investments having a maturity of 3 months or less from date of purchase are considered as cash equivalents.
Image of page 4
Image of page 5

You've reached the end of your free preview.

Want to read all 22 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes