Its Accrual World | Blogging my way through ACCT11059 and ...



Step 3Blog post #1BlueScope under the microscope? Oh man, I’m so punny. Not going to lie, I was reluctant to jump onto Moodle and find out what company I had been given this term. Last term I was lucky enough to be allocated a simple(ish) company called Ebiquity that trades in marketing analytics, however, I came across a few students who had been allocated companies in the advanced tech sector with services that blew my mind. Although its probably not vital to understand fully what goods or service a firm deals in to understand the financial reports, it definitely helps! To my relief, I found BlueScope Steel next to my name on the ‘Find Your Company’ spreadsheet. BlueScope is a company I have heard more than a few times, mostly on the radio when the ABC Sunshine Coast presenter switches to the finance report at about 4.45pm which is always on my way home from work. It’s really annoying me that I can’t think of the finance guys name!! Obviously, BlueScope Steel deals in steel products, but steel is everywhere so I needed to do some more research to find out who BlueScope’s customers were, where they come from, etc. A quick visit to their website () and as always, I headed to the ‘About Us’ page. I quickly learned that BlueScope supply painted and coated steel products globally and originated in Australia (which should have been obvious seeing as how often they are referred to in the stock reports). But here’s a name that everyone will know – Colorbond! (Why it’s spelt Color and not Colour seeing as its Australian is questionable, but I suppose that’s not important.) A quick Google search led me to a website which gave me a brief history of Colorbond itself, and a few cool facts (). The first Colorbond product came out of Woollongong in 1966, and these days 9 out of 10 new houses in Australia are built using Colorbond in some way (whether it be roofs, fences, gutters etc). Seems like it’s probably a good business to be in!BlueScope have products other than Colorbond though. These are LYSAGHT, COLORSTEEL, ZINCALUME, GALVABOND, GALVASPAN, BlueScope Zacs, and SuperDyma. But that’s not all, they also have other brands overseas which are modified to accommodate for different climates (much like Colorbond is made for the Australian climate). What I found most interesting about BlueScope’s ‘About Us’ page, was how it read as if it was written by an accountant. Certain buzz words jumped out at me like growth, value creation, balance sheet and capital. Straight away I feel as though BlueScope not only have a good product, but they must also have a great business plan which has led to their successes. With this in mind, I was eager to have a browse through their latest annual report. First impressions are as expected, the company has a strong focus on financial growth via a smart business plan as well as a good product. This is evident as soon as the financial report begins with the key focus points for the business being 6 factors clearly split between product and business strategy. I found it important to gain an understanding of the business structure of BlueScope before proceeding so I headed back to their website where I had come across a page with a bit of a rundown (). BlueScope is divided into 5 main sectors which are; Australian Steel Products, Buildings North America, Building Products Asia and North America, New Zealand and Pacific Islands and North Star BlueScope Steel. Each sector is treated as a separate entity in the initial pages of the annual report and the results are broken up accordingly. Of course, I haven’t had a lot of exposure to annual reports, but I have to say that comparing BlueScope to Ebiquity PLC (my firm from ACCT11059), BlueScope are leaps ahead. I find their reports easier to read, like they’ve been written for the average investor, rather than someone who needs a university degree in economics. But I guess it’s a lot easier to write a financial report when the company is as successful as BlueScope. A few basic year on year facts from 2018 vs 2017:2018 $m2017 $mIncrease/Decrease %Net Profit after Tax1569.10715.9119%Total Assets10931.09575.414%Total Liabilities4043.44036.70.16%Total Equity6887.65538.724%Net Profit Margin13.64%6.79%100%Return on Assets14.34%7.47%91%Of course, there is so much information in an annual report, it can be hard to take it all in, but a few things that stuck out for me were;2017-2018 financial year was highly successful for BlueScopeA large share buy-back which appears to be due to a desire to increase net cashThe company has put a lot of time into anticipating risks that may occur and making plans on how to combat themThe business strategy, while well thought out and logical, is also simple. There isn’t any smoke and mirrors (or so it appears?)Australian Steel Products is the highest revenue sector, followed by Building Products Asia & North AmericaI think this is where I will leave it for now. If you’ve made it this far then I hope you’ve found this little introduction to BlueScope as interesting as I have. Better go now, I need to work out how to buy shares…. Blog post #2Taking a look through a different lens Over the past couple of days, I have spent a bit of time searching the web to find some alternative sources of information on BlueScope. Although I appreciate being allocated a well-known company it has made this process a bit difficult. When searching for news articles on BlueScope a single event could have several articles from different sources who have covered the story. A good example of this is the recent wage increase demands which have been made by BlueScope Steel workers. After announcing the result for the 2018 financial year, the employees at BlueScope began demanding a wage increase which was promised to them in 2015 when wages were frozen due to the Global Financial Crisis. The dispute has been a lengthy one, involving strikes at the Port Kembla site, which has been covered in countless media articles. Just one example can be found here; . The most recent update I can find on this can be found here; where it states that BlueScope have agreed to a 11% increase for their workers. Photo above shows the Port Kembla Steelworks siteSeeing as I was finding it so difficult to sift through the endless repetitious news articles on Google, I decided to steer to the ABC website and do a search on their website alone. I came across this article; . Interesting it has raised the point that although BlueScope have made a considerable profit in the recent financial year, they have not paid any corporate tax due to “carried-forward tax losses”. This article also touches on external factors which have impacted BlueScope during the recent year, such as global steel prices and the rate of the Australian Dollar. To wrap it up, I did a quick YouTube search to see if I could find anything published by BlueScope themselves. I came across a clip which gives an in-depth description of the steel making process, while recognising the 90th anniversary of the Port Kembla Steelworks site. Video link here; Step 4When compiling my bank statements into one excel file, the first issue arose when I realised that my different accounts will show transactions different ways. For example, in my everyday debit account, a charge is shown as a credit, however in my home loan account a charge is shown as a debit. To combat this, I simply converted the account with the lessor number of transactions (loan accounts) to reflect my debit account. I also did it this way so it would match the example in the study guide. Once I had put everything in, I began to question whether I should have included my loan accounts. Because of the interest charge, my overall total is a credit, or indeed a loss for the period. I referred to the assignment outline and confirmed that loan accounts should be included, which left me confused. The easiest way I can explain the situation is that the nature of that account is different, and although the interest charge is an expense, it does not actually use up any cash until a repayment occurs to offset. This doesn’t change the fact that I am running at a loss though! It’s a bit of a scary thought, but I guess that is mortgage life. At a glace by expenses probably don’t look great to an outsider, but I am here to tell you they are a lot better than they used to be. Up until about a month ago I was about a pack-a-day smoker which would cost me approx. $25 per day. So, let’s say that March is the best-looking month I have had in a while. Things might look a little off balance too, but this is because my partner and I share our expenses. For example, I look after the mortgage and he looks after most of the other bills like electricity, water, rates and vehicle registration. a) What is the chart of accounts so far, as illustrated in this example? What is your own chart of accounts? Is it like the one shown here? Remember, you can add to your chart of accounts as you classify more of your own transactions.I have used a very similar chart of accounts style. At my workplace we use a complex chart which consists of 4 letters and 4 numbers, each pointing to different things, but for something as simple as my own income and expenses, I thought the chart of accounts used in the study guide was perfect. I had to change a few labels but maintained the general style which is; 1-x – Revenue, 2-x – Expenses, 3-x – Assets, 4-x – Cash at Bank and 5-x – Equity.b) What level of detail could you change in the chart of accounts shown in this activity? Why might you want to do this?I think that if I were going to go through a period any longer than a couple of months, I would need to re-evaluate the chart as it would become too large with such specific classifications for expenses. Perhaps a good approach in this case would be to classify expenses by whether they are house, car or personal expenses. c) How might you analyse your Income Statement? Has this exercise of recording your transactions through to the financial statements been useful for you? If so, why; if not, why not?I have touched on this in the comments prior, but it was a bit of a shock to see a loss when I consider myself a standard middle-class individual. I wouldn’t say that I was surprised to see that almost 90% of my expenses relate to the mortgage though, as this is the main purpose of my income. Health has been higher in the month of March due to a bit of illness which is uncommon for me. d) Did you identify any transactions that you could apply the accrual basis of accounting to? Describe how treating a transaction under the accrual basis of accounting might differ from the cash basis of accounting. (Hint: these sorts of transactions commonly appear in personal accounts as lump sum payments in advance for a year’s worth of ‘expense’ – e.g. house insurance, car registration).As described above, as a general rule my income goes into the mortgage and my partner pays for the other bills. However, prior to the mortgage, I would try to accrue for expenses as much as I could. For example, when I was feeling organised, I would map out all my known expenses for the year (eg, car insurance, registration, phone bills, rent etc) divide them by the number of pay days for the year, then each pay day I would put that money aside into a different sub-account. I made sure all my direct debits came out of that sub-account so I could clearly see how much I had left over each fortnight as spending money. Ah, the simpler days!! Step 5Reflections and comments from discussions with others ................
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