Disclosures of the discontinuing operations include: revenues, expenses and pre-tax profit, gain or loss on measuring assets at fair value, net cash flows from operating, investing and financing activities Reporting on Equity A complete set of general purpose financial statements consists: 1. Statement of Comprehensive Income (Statement of Financial Performance is included here) 2. Statement of Changes in Equity 3. Statement of Cash Flows 4. Statement of Financial Position Statement of Comprehensive Income - Changes in equity (retained earnings) result from transactions and other events - Statement of CI classifies changes in equity into:  transactions reflected through the profit and loss (revenue and expenses) and  other transactions (gain on revaluation, foreign currency translations) The equity section of the Statement of Financial Position of a corporation includes 1. Share capital: contributed equity (paid and any outstanding amounts) - The amount of share capital must be shown on the face of the balance sheet - Other information on share capital may be found in the notes to financial statements
- For each class of shares, a company must provide:  the number of fully paid shares,  the number of partly paid shares and  an explanation of any changes in number of shares during the year 2. Retained earnings: prior profits kept within company and not distributed as dividends - Retained earnings represent accumulated profits that have not been distributed to shareholders as dividends - On the Statement of Changes in Equity, companies must report:  the opening amount of retained earnings,  changes to retained earnings during the year and  the amount of retained earnings at balance date 3. Reserves: changes in equity not created through transactions with owners - Most reserves of Australian companies are classified as revenue reserves and can be distributed as dividends - Companies must:  show the aggregate amount of reserves on the face of the balance sheet,  disclose the nature and purpose of reserves and  provide a reconciliation that explains movements in each reserve during year - Journal entry to transfer to general reserve: Statement of Changes in Equity - Must show for each equity account a reconciliation between opening and closing balances - Reflects the net changes in equity accounts for the period - E.g. of an extract of a Statement of Changes in Equity:
Financial Statement Analysis & Decision Making Dividend record: - Dividend payout rate: measures the % of profit distributed in the form of cash dividends to ordinary shareholders Earnings performance: - Return on shareholders’ equity: shows how many dollars of profit were earned for each dollar invested by ordinary shareholders Debt v Equity Financing Decisions
Accounting for transactions in a company WEEK 11: Analysing, Managing and Reporting Cash Flows – Direct Method The Statement of Cash Flows Purpose of the Stmt of CFs: 1. To provide information about: - Cash receipts - Cash payments - Net change in cash resulting from operating, investing and financing activities
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- Balance Sheet, Financial Position