Step 1: Evaluating Inventory Processes
In this paper an assessment of the financial reports of Ansell Plc, with the intention of having knowledge about their inventory processes and this is a key element of the business activities of the firm. The inventory valuation has been addressed in the financial report with respect to which the scenario of the firm is disclosed. The inventory treatment and the full disclosure is given out in the accounting notes of the organization. The value of the inventory has been laid down in the balance sheet of the company and the value comes to $331.9 in the year 2017, and the value has been lower in the year 2016 as the value was $322.8. The provision that is maintained has lowered as well in accordance to last year and the figures related to inventory have indicated that there has been a rise in the level of inventory in accordance to 2016.
The organization in their annual report has not published the process that they have used in order to evaluate the inventory and therefore nothing regarding the same has been observed in the notes to accounts section in the annual report. Furthermore, in the section that is related to the risk management and the principle of risk, indicates that the company does not have an effective level management process of their inventory. Hence, it becomes tough for the financial report users to gain an understanding regarding the process that is used by the company during the valuation of their inventory. It can be recommended that the organizational management undertakes the initiative to undertake necessary changes within the management system of the inventory. As there is no explanation of the process of valuation of the inventory, it is not possible to explain the inventory system management of the firm.
The first step towards the construction of the financial reports have been to record the journal entries. The journal entries are recorded just after the transactions are taking place and these entries are posted in the ledger account of the respective items. The over amount of the ledger accounts are recorded in the financial statements. Hence, it can be concluded that the entire accounting method initiates with the transactions being journalised. If any manipulations are made within the ledge and the journal balances, then it can have a significant amount of impact on the financial statements of the firm. The wrong entry in the journal that is done by mistake or intentionally would have an impact on the financial reports and the outcome that would be obtained can be misleading to inappropriate decisions and judgments.
Figure 1: (Journal Entries of S&S Chemical ltd)
Source: (Created by Author)
Figure 1: (Profit and Loss A/c of S&S Chemical ltd)
Source: (Created by Author)
Figure 1: (Balance Sheet of S&S Chemical ltd)
Source: (Created by Author)
Figure 1: (Cash Flow Statement of S&S Chemical ltd)
Source: (Created by Author)
In accordance to the policy of depreciation for Ansell Limited, the amount of depreciation that is levied by the firm has shown a rise by undertaking an analysis of the annual report of the firm. The property, plant and equipment depreciation is segregated according to the products they manufacture. The results have indicated that the amount of depreciation has increased in the year 2017 in accordance to the last year and the value has been $30.7 in 2017 and the value had been $29 in the year 2016. The results have indicated that the firm has incorporated new assets within their businesses.
The notes to accounts in the annual report of the firm comprises of all the data which is associated to the depreciation that is levied on each asset categories of the firm. It can be assumed by looking at the assessment of the financial report of the firm that the management prepares depreciation based on the straight line method for the asset of the organization. The notes part in the annual report explains that in case of equipment, property and plant, the effective asset life are found after the subtraction of the residual value from the asset costs and this is helpful in attaining equivalent amount for depreciation.
Additionally, I have the opinion that the financial report users should be disclosed with clear and precise information regarding any sort of alterations in the process of depreciation charging is taking place and even in circumstances if the process remains unaltered. The disclosure statement regarding depreciation has been provided properly in the annual report which makes it easier for the users to understand. The organization has accumulated depreciation that has been disclosed in the profit or loss statement of the firm.
The depreciation related journal entries are a result of the treatment of depreciation within the business and this even has an impact on the asset values in case these values are not presented properly. This would have an impact on the entire financial report. This would even have an impact on the net profit of the company. It is seen that these journal entries can be changed in case the management decides to transform their process of depreciation charging with any kind of authentic reasons. This would lead to a misstatement of the financial reports.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
