Statement of Changes in Equity
In
restating my Statement of Changes in Equity was quite a task. Going off the
example in the study guide, I saw that none of my headings from Aeffe’s
statements matched those in the example; there were barely any headings at all!
There was a considerable amount of consternation with this one, I can assure
you. While going through the process of restatement I noted:
“SoCiE closing balances different to ASS#1
because total comprehensive income (CI) does not add up to the figures provided
in the actual financial reports
Broken down as per the figures given
in the statements and upon adding up, the total figures given in my excel
document are not the same as those provided on the statements”
I did as
much as I could on my own before I had to ask for help from my tutor, Nova. We
spent most of our two hour tutorial session trying to figure out where we could
find the actual figures we needed for the restatement as on the original
statement, everything was lumped under “other comprehensive income” with no
clarification of what that entailed.
After
going through page after page after page, we managed to find some headings, but
the figures did not add up at all so we had to enlist the head honcho, Martin,
for help.
Turns
out there had been some adjustments that had not been accounted for and Martin
was an absolute peach in helping me sort it out.
In the end
we identified Remeasurement of defined
benefits plans reserve and Gains/(losses) on exchange differences on
translating foreign operations as the items that made up the other
operating comprehensive income.
Balance Sheet
Restating
my Balance Sheet was actually quite easy once I got the hang of it, even to the
point where I could help someone else completely unaided. I was quite proud of
myself. I went through a list of assets and liabilities and placed an “O” next
to operating activities and an “F” next to financial activities.
Some of
the headings I was able to identify and sort through the example given in the
study guide, others required more thought and the occasional Google search. Trademarks tripped me up a little
because being an intangible assets, I thought it might be a more financially
based thing, but with a bit of Google magic and some serious thought it came
under intellectual property and other physical property items such as machinery
and land were operating, so trademarks obviously followed suit as operating
assets.
The vague headings such as other
tangible fixed assets and other
fixed assets required a bit of digging in the financial statement notes
provided in the annual reports.
Other fixed assets specified that: “This item mainly includes a long-term
receivable related to the income recognized by Woollen Co., Ltd. To Aeffe Group
as a result of the reorganization of the Japanese Distribution Network and
receivables for security deposits related to commercial leases.” Seeing as it relates to being a receivable, I was then
able to classify it as an operating asset. Other
tangible fixed assets was also identified to be a receivable and was
classified as an operating asset as well.
Other liabilities consisted of ‘Due to total security organisation,’ ‘Due
to employees,’ ‘Trade debtors – credit balances’ ‘Accrued expenses and deferred
income’ and ‘Other’. As such, with the items consisting of owings to security
and employees, which is obviously a result of operating activities, I
classified other liabilities as an
operating liability.
Everything else specified on Aeffe’s Balance Sheet was fairly
straightforward to classify as operating or financial and I was able to make
the net operating assets equal the net financial obligations and equity.
As a side note, however, the most confusing aspect of restating the
Balance Sheet for me was the constant inclusion in the notes of classifying 0.5
– 1% of cash as operating. It caused a number of headaches for me think that I
had to do that in order for my statement to balance and the stress when it didn’t
was horrendous. I eventually just decided “screw it” and ignored the allocation
of cash and kept it as one lump sum under financial and low and behold, I got
them to equal. I know that a number of other people in the course had the same
stressor when it came to their Balance Sheet because they thought the same as I
did. I don’t know if it was included as a trick aspect of the assignment to
deliberately make people panic or not, but I found it highly unnecessary to include
as it wasn’t relevant.
Income Statement
The
Income Statement was definitely the hardest because it had so many more changes
compared to the other two. The first step of including operating revenue and operating expenses was rather simple as Aeffe
had finally cut me a break and already separated those on the original Income
Statement. As such, profit before income
tax was a breeze to calculate.
The tax expense section at first gave me a
bit of grief as I wasn’t too sure how to find the tax benefit figures. However, after the session with Nova, it
was quite easy as she explained it to me and pointed me in the direction of the
relevant tax rate for my company of 31.4%. Including the other operating comprehensive income was frustrating and set me
back as I had to wait for clarification of my Statement of Changes in Equity in
order to complete this section.
With
these sections completed, I was able to happily find the comprehensive income after tax.
The net financial expenses was easy as well
as the figures were a simple cut and paste from the original Income Statement
and since the tax benefit was
already calculated, I could just slip that in. Other financial comprehensive income was easy as well as it was a
straight zero which led me to being able to find Aeffe’s net financial expense after tax which resulted in the final total
of comprehensive income.
Overall,
the Income Statement seemed the most daunting of the three restatements as a
lot of moving figures around and coming up with the correct ones to fill the
blanks seemed like a lot of work with margin for error. Once it was broken down
though and most segments were filled in with the figures already available,
there wasn’t too much to do really. Finding the tax percentage was the most
complicated aspect of the Income Statement’s completion.
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