Question:

Discuss the Management Accounting for International Companies.

Answer:

Introduction

Telstra is an international company that provides digital telecommunication services to the people. It compromises of mobile, internet and other cloud computing services. The company ahs the highest market share with the level of growth improving every quarter. It is one of the leading companies in the telecommunication sector. The company is now fully privatized and has operations in all the parts of the world. It is having a global approach which it wants to manifest through its quest of expansion. The company has it’s headquarter in Australia. The annual reports of the company have been extracted and analyzed and all the important point related to the same has been put in details (Abbott & Kantor, 2017).

Analysis

The 2016 annual report of the company have been prepared by the management of the company and all the accounts are properly audited for the use of the stakeholders. The books of accounts have been prepared on the basis of the AASB and the same is based on the concept of IFRS. The books are audited to show that the accounts are relevant and are showing a true and fair view of the business. The auditor has stated its views in the audit report that is duly signed by the same. The annual report of the company consists of 91 pages. In the director declaration the director have stated that the company has prepared its statements as per the applicable reporting framework and appropriate disclosures regarding the overall policies of the company has been given. The books are prepared with the objective of showing true and fair view of the overall financial statements. The company has followed the basic of historical costing for all its relevant items, except the assets and liabilities that are valued on the basis of fair value costing method. These are the accounting assumptions and estimates that are undertaken by the company and the details of the same have been provided in the financial statements of the company. The auditor has given an opinion that the books of the company are prepared with all the relevant details and all the relevant disclosures have been given in the notes of account of the company. The financial statements have been prepared on the basis of consolidation where all the important details related to the subsidiaries and the holding company is taken into consideration for the preparation of the accounts. Extracts from the auditor’s report and the director declaration is given below (Birt, Muthusamy, & Bir, 2017).

Details from the financial statements of the company has been undertaken to do the necessary ratio analysis and comment on the liquidity of the company. Extracts from the same has been given below, along with the necessary explanations (Malone, Tarca, & Wee, 2016)

In case of Telstra we see that return on assets, return on equity all have reduced that shows that the company is not performing well. The gross profit ratio, the current ratio and the liquidity ratios are much better than TGP that shows that the company having strong internal control measures. Also the company is taking advantage of its trading on equity and hence it is also the master leader in the Australian economy. The ratios show that the company is making good use of its equity position making the most of its share in the market. Even if the return on shares is not that good, the company is performing very well given to its strong liquidity position that is reflected in its current and liquidity ratios (Maynard, 2017).

From the disclosure perspective, again Telstra is on positive side as it has almost mentioned the entire possible break up and their method of valuation. From the profitability perspective, inventory can have major impact on the assets side when technological essence is taken into consideration and estimation of inventory value is done. Profits can be declined in case inventory is impaired materially due to huge technological changes and innovations, due to which the taxes will also have a downward increase resulting in less cash flow for the organization (Minnis & Sutherland, 2017).

In case of valuation of the intangibles it can be seen that the company does not have that clear policies that may support overall transparency of the system. In case of Telstra most of the policies are dependent on the decision of the management and the management governs the same. It is thus important that the company must clearly state all its policies and should be free from the overall judgement of the people and the outsiders. It is important that consistency should be maintained so that the accounts are free from any kind of errors and glitches. Any changes in the overall accounting methods like in this company the method of valuation of the fixed assets is continuously changing so companies should try to maintain proper uniformity. All the necessary assumptions must be stated, expert opinion must be taken before undertaking any new policy by the management. Overall the annual reports of the company have been able to showcase and provide a snapshot of the policies that governs the company (Venezia, 2017).

Conclusion

Telstra is a big player in the industry and have been in the business for long. It should focus on the fact that it makes strong use of its market share position and tries to get the best returns for its shareholders who are dependent on the company. These are the few ways by which the company can improve its overall financial position and make the best of the resources that it has. Overall the annual reports are accurate and up to the mark (Werner, 2017).

Refrences

Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review .

Birt, J., Muthusamy, K., & Bir, P. (2017). “XBRL and the qualitative characteristics of useful financial information”. Accounting Research Journal , 30 (1), 107-126.

Malone, L., Tarca, A., & Wee, M. (2016). IFRS non-GAAP earnings disclosures and fair value measurement. Accounting and Finance/ , 56 (1), 59-97.

Maynard, J. (2017). Financial accounting reporting and analysis (second ed.). United Kingdom: Oxford University Press.

Minnis, M., & Sutherland, A. (2017). Financial Statements as Monitoring Mechanism: Evidence from small Commercial loans. Journal Of Accounting Research , 55 (1), 197-233.

Venezia, I. (2017). Behavioral Finance: ‘Where Do Investors” Biases Come From?’. Singapore: WORLD SCIENTIFIC.

Werner, M. (2017). Financial process mining – Accounting data structure dependent control flow inference. International Journal of Accounting Information Systems , 25, 57-80.