Financial Reporting Disclosures in Australian Corporate Sector

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Introduction

According to (Deegan, 2009), corporate entities, financial statements are documentary reports which they prepare to track and evaluate the amount of money in regards to profit or loss an organization is realizing from the investment operations. Financial statements and reports are intended to express this information piece to the shareholders and investors of an organization. As a result, financial report is a critical contract between the investment and the outside (external) investors because they have right to be sufficiently informed if their fiscal investment is being utilized perceptively and at a significant return.

This paper purposes to establish a report of 2 identified Australian companies. The paper provides disclosures analysis established in the two selected companies financial reports in view of the following subjects 1) the Joint venture investments; 2) related party disclosures and transactions and 3) reportable segments.

The two companies that are being analyzed are Mirvac Group and Fairfax Media Ltd. Mirvac deals in real estate investment, investment management and hotel operations, while Fairfax on the other hand deals in media industry.

The financial statements of both Mirvac group and Fairfax Media Ltd. have been developed in compliance to the policies and practices of accounting adopted by the previous annual fiscal statement, for the periods ending December 31, 201, though did not integrate the adoption of AASBs 2010 developments. The AASBs 2010 established various trivial developments to the AASBs. The improvements that were significant and the effect of the current or earlier financial periods are illustrated.

The financial periods of the two Companies ending 31 December 2011, have been developed in conformity with the procedures of the Corporations Act 2001 and Australian Accounting Standards AASB 134: The disclosure of the financial reports as stipulate in the AASB 134 ensures that the fiscal statements and notes also abide by the International Financial Reporting Standards.

AASB 101 improvements in financial statement production

The improvements does provide an option in developing the reconciliation of every element of other comprehensive proceeds, such could either be done by way of notes of the fiscal reports or in the reports of alterations of equity (Deegan, 2009). Both the corporate groups “consolidated statements” have opted to retain reconciliation within their consolidated statements in equity as earlier disclosed, hence no significant discrepancy regarding their accounting procedures.

Joint venture Investment

Joint venture is an agreement through a contract between two or more companies (or parties) where they consent to undertake an investment which is operated through joint control. AASB 128 describes the requisites for the investment disclosure in joint ventures or associates. The joint venture or associate incorporates IAS 28, established by the International Accounting Standards Board (IASB). The guideline has describes the accounting procedures in joint venture and outlines the particulars for the equity-based approach to be applied in associated or joint investment. The procedure is used on entities that have joint control of investment or have important impact over the investees. The guideline requires that the below factors be considered when making public the financial statement;

Acknowledgement of liabilities incurred and assets controlled, and share of revenue gotten alongside expenses obtained by a venture in a joint controlled investment.

Acknowledgement of shares of liabilities incurred, assets jointly controlled, collectively incurred share of liabilities, sales revenue and all other expenses realized as a result of joint venture interest.

Describing all the investment interest in collectively controlled entities by the application of equity method, cost method or fair value approach.

Mirvac group financial report indicates its joint venture in Mirvac property trust and Mirvac Limited. Their joint investment was arrived at in March 2011. In their financial statement for the period ending 31 Dec 2011, they have indicated that $1.2 billion expenditure is projected on Mirvac property trust and Mirvac Limited joint venture investment. The report did not cover the particulars of AASB 128, for instance, the liabilities incurred and the assets controlled have not been acknowledged. In addition, the share of assets jointly controlled was not outlined. This may be so because they have not implemented the AASB 128 since the projected venture operations will materialize in course of 2012 financial year.

In respect to Fairfax, they gave disclosed their operations in joint investment venture in their financial year ended 31 Dec 2011. The joint venture is referred to as Fairfax Digital Media. Within joint venture, Fairfax holds 70% interest and has realized a margin of $87.8 million in the year ended 2011 (Fairfax Media Limited Annual Repor 2011).

In a similar operation to Marvic ltd, Fairfax financial report did not disclose information concerning the liabilities incurred and jointly controlled assets in their joint investment.

Reportable Segments

AASB 8 outlines the requirements of reportable segments, which requires corporate organizations to disclose materials that will enhance the users of financial reports to examine the fiscal effects and position of investment activities which they are engaged in and the economic setting of the operations.

In addition, this principle requires investment entities to separately report information concerning each of their business segments. The reportable segments have to be the geographical and business segments whereby a considerable portion of the corporation’s income earned from, particularly the sales from the external customers.

The financial statement of Mirvac indicates that this standard has been applied, for instance; the segment information has been outlined in their page 62 of their financial statement. Marvic illustrates two of its investment entities in Northern Territory and Western Australia. The profits, costs and revenue for their segments have been illustrated in conformity with the AASB 8 according Mirvac Group Annual Report, (2011).

Fairfax on the other had outlined the information concerning its business segments in form of notes on the financial statement. Fairfax has three reportable segments namely; Australian Radio, Independent Newspaper limited and Fairfax Digital (Fairfax Media Limited Annual Report, 2011). The fiscal information of the segments which comprises; financing costs, segment revenue, profits, liabilities and assets has been illustrated. Both the two companies have disclosed information pertaining to their segment liabilities and assets, and their financial statements have omitted the investment value in joint ventures within their segments.

3. Related Party Transactions and Disclosures

The related party transactions are obligations, resources transfer which occurs between related parties not considering if a price has been charged or not. A look at the Marvic’s financial statements indicates that the related party’s particulars have adequately been disclosed (Mirvac Group Annual Report, 2011). They have been disclosed within the financial statements notes particularly the ones linked to the interests in associates, financial guarantees of the parent company and joint venture interest.

Similarly, Fairfax has also disclosed particulars linked to interests in associates, financial guarantees of the parent company and joint venture interest (Fairfax Media Limited Annual Report, 2011).

References:

Deegan, C. (2009). Australian International Merketing (6th ed.). Spring Hill, QLD: Irwin/McGraw Hill.