Category: Accounting

We have to do this project using quick books. please check attachments

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We have to do this project using quick books. please check attachments

We have to do this project using quick books. please check attachments
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Need instant help with an assignment. Cannot send full assignment need help as I

Posted on | by Laureen

Need instant help with an assignment. Cannot send full assignment need help as I

Need instant help with an assignment. Cannot send full assignment need help as I’m doing the assignment
Important Info

The order was placed through a short procedure (customer skipped some order details).
Please clarify some paper details before starting to work on the order.

Type of paper and subject
Number of sources and formatting style
Type of service (writing, rewriting, etc)

Purpose: Part of this course includes the understanding of basic financial info

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Purpose: Part of this course includes the understanding of basic financial info

Purpose: Part of this course includes the understanding of basic financial information for lending and investment activities. This project allows you to show this knowledge.
Objective: Choose a publicly traded company to analyze. Write a recommendation memo for a nonprofit organization that is considering whether to include this company’s stock in its portfolio. Assume that this nonprofit prefers to invest in socially responsible companies.
Additional Information
• Your recommendation memo should consider both the value of the investment from a financial perspective and the ethics of the investment.
• Please upload your project and any supporting documents to Moodle.
• Please append the financial statements (Income Statement, Statement of Stockholder’s Equity, Balance Sheet, and Cash flow statement) for your company to the back of your report.
• This project is worth 25% of the grade for the semester.
• Consider the following list of questions in your analysis (you are not required to answer every question; use your discretion to determine what information is the most relevant to support your recommendation).
1. Company website review
a. What does the website say about the company’s commitment to corporate social responsibility initiatives?
b. How many members are on the Board of Directors? Are they independent directors or are they associated with the company? How diverse is the Board?
c. Look up the company’s stock performance (you can use the stock ticker and look up the historical performance on Yahoo finance). Has the stock price been rising or falling? Why do you think this is?
d. What does the website say about the company’s ESG (Environmental, Social, and Governance) initiatives? What evidence do they provide about whether they are meeting their goals?
2. 10-k review: Item 1A – Risk Factors
Go to the Table of Contents for the company’s 10-K. Go to Item 1A – Risk Factors. Answer the following questions.
a. Describe three of the company’s risk factors?
b. Are the listed risks the only risks the company faces? Identify other risk factors that would concern you as a manager or investor.
3. Code of Conduct/ethics
Go to the Table of Contents for the company’s 10-K. Now go to Item 10 – Directors, Executive Officers and Corporate Governance. Answer the following questions.
a. Does the company have a written code of conduct? If so, to whom does it apply?
b. Where can the code of conduct be found?
c. What are the main components of the code?
d. How effective do you think this code is in providing guidance for corporate actions. Explain.
4. Item 7: Management Discussion and Analysis (MDA) – for your information management provide a detailed discussion about the company’s operations. It may help with discussion of risk factors for item 2 above.
5. Management Evaluation and Compensation
Most companies incorporate information on executive compensation from their proxy statement into their annual report. To access the definitive proxy statement, go to the main filings page for the company. If you do not see a recent filing of DEF 14A, you can enter it in the Filing Type box and search for it. Make sure you leave a space between DEF and 14A. Also be sure you are selecting the documents for the DEF 14A and not DEFA14A. Click on the red link for the Definitive Proxy Statement. Now go to the Executive Compensation section. Since executive compensation information is only one component of the definitive proxy statement, you will probably have to look in the Table of Contents for the appropriate section. (Or, you can google proxy statement for your company and gain access through the company’s shareholder website.). Answer the following questions for the most recent year.
a. How much is the CEO’s annual base salary? How much is annual cash incentive/bonus award? They difference between these and total is (most likely) the value of stock options. What percentage of the person’s compensation is in cash?
b. How much is the CFO’s annual base salary? How much is annual cash incentive/bonus award? They difference between these and total is (most likely) the value of stock options. What percentage of the person’s compensation is in cash?
c. Beginning 2018, U.S. public companies are required to disclose the ratio of annual total compensation of the CEO to the annual total compensation of the median employee (excluding the CEO). Report the pay ratio for your company for the most recent year and the trend of years reported. Justified? Not justified? Explain.
6. Report of Independent Registered Public Accounting Firm (look at noninteractive statement to find the report): The PCAOB (Public Company Accounting Oversight Board) is the organization in charge of auditing standards (and other items) for publicly traded companies. For extra information: https://pcaobus.org/oversight/standards/auditing-standards/details/AS3101
a. Who is the auditor?
b. Did the auditors express an unqualified opinion? This is the desired opinion! If the opinion is qualified (and this is not good) language might include “except for,” “do not present fairly”, or “not express an opinion.” https://pcaobus.org/oversight/standards/auditing-standards/details/AS3105
c. The auditors also should have provided an opinion about the internal control over financial reporting. Some auditors include this opinion with the first one. Was the auditor’s opinion about controls unqualified? (Note – companies can have an unqualified opinion about the financial results but a qualified opinion about internal controls.)
d. There should be a section “Critical Audit Matters” as part of the opinion. What items did the auditors list as critical?
e. Notice how much after year end the report was issued. Does this make the opinion less useful? Explain.
f. At the end of the opinion, the auditors provide how long they have audited the company. What date is listed? If it has been an extended period, do you think this presents any problems with the independence of auditor from company? Explain.
7. Income Statement – use the income statement from the SEC Form 10-K for the most recent fiscal year.
a. If their fiscal year end is not December 31st, why do you believe they chose to use the date they did?
b. Calculate the gross profit percentage ratio for each of the years reported (one of the ratios required in the Excel document). Briefly evaluate the trend of these results.
c. Explain whether operating income is increasing or decreasing for the years reported. Explain the difference between operating income and net income. (not in terms of dollars but in terms of meaning)
d. Describe the primary source of revenue for this company. What might that say about the ability of this company to do well in the future? Don’t just say, “sales”. Sales of what?
e. In the footnotes, what does the company say about its policy for revenue recognition? Use your words. Don’t cut and paste.
f. In the footnotes, what does the company say about depreciation expense? What method(s) of depreciation does the company use? What estimates does the company make to compute this expense?
g. Convert the income statement to a common sized income statement (in other words, restate everything as a percentage of total revenues. You will need to export the income statement to Excel for this). Based upon the common size income statement, is there anything surprising to you?
8. Statement of stockholder’s equity
a. Identify what caused your company’s retained earnings to change during the years of the statement. Discuss the pattern over the period.
b. Describe any stock issuances this year.
c. Does your company use par value? How do you know?
d. Does your company have more than one class of stock? Explain.
e. Has the company repurchased any stock? This year? In past years? How do you know?
9. Balance Sheet
a. What is the asset mix?
b. Compute the current ratio. What does this say about your company?
c. How does your company measure accounts receivable? How do they account for Bad Debt?
d. Compute AR turnover for the past two years. Analyze the turnover.
e. Read the footnotes related to inventories. What method does your company use to report inventories? If they were to use a different method, what impact do you think it would have on the balance sheet and income statement (greater, less, no impact). Explain.
f. Calculate the inventory turnover ratio for the past two years. Comment about the change – good news? Bad news? No news?!
g. Does the company report any inventory write down? (perhaps discussed in notes).
h. What types of investments does your company own?
i. What types of capital assets (PPE) does your company recognize on the balance sheet?
j. Does your company have any intangible assets? What are they? How are they valued on the balance sheet? Are they amortized and if so over what period of time? If not, why not?
k. How many shares of common stock are authorized? Issued? Outstanding?
l. Prepare a common size balance sheet,
i. What is the percentage of current assets to total assets for the most recent year?
ii. What is the percentage of current liabilities to total assets for the current year?
iii. What is the percentage of total liabilities to total assets for the most recent year?
iv. What is the percentage of stockholders equity to total assets?
m. How did capital expenditures compare with depreciation? Why is this an interesting comparison?
10. Cash flow statement
a. In your opinion, which is more important –income statement or cash flow statement?
b. Describe the three primary sections of this statement.
c. Where is the source of most of your company’s cash? What does this say about the company’s financial health?
d. What is the primary use of your company’s cash? What does this say about the company’s priorities?
11. Liquidity
a. Calculate the following ratios for years presented in the financials.
i. Working capital
ii. Current ratio
iii. Quick ratio
iv. Accounts receivable turnover
v. Inventory turnover
b. Based on your calculations above, assess the company’s overall liquidity position. Explain which ratios indicate particular strengths and / or weaknesses.
12. Solvency
a. Calculate the following ratios for years presented in the financials.
i. Debt to assets ratio
ii. Ratio of liabilities to Stockholder’s equity
iii. Times interest earned
b. Analysis: How is leverage used by the business? What is the effect on business risk? In your opinion, does the company have too much debt?
13. Profitability
a. Calculate the following ratios for years presented in the financials.
i. Gross profit percentage ratio
ii. Net profit margin ratio
iii. Return on assets
iv. Return on common stockholder’s equity
v. Return on stockholder’s equity
vi. Earnings per share
vii. Price earnings ratio
viii. Dividend yield
 
Appendix – Financial Statement Ratios
I. The formulas for most ratios are listed in the summary table listed on page 382. Ratios also are covered earlier in the text but these ratios are summarized again in chapter 9.
1. Working capital (page 369)
2. Current ratio (page 369)
3. Quick ratio (page 370)
4. Gross profit (page 144)
5. Gross profit percentage (page 145)
6. Profit margin (page 145)
7. Return on investment (page 609)
8. Return on assets (page 377)
9. Return on common stockholder’s equity (page 378)
10. Return on equity (page 377)
11. Debt / assets (page 382)
12. Debt / stockholder’s equity (page 382)
13. Earnings per share (page 379)
14. Dividend yield (page 381)
15. Price / earnings (page 380)
16. Accounts receivable turnover (page 371)
17. Inventory turnover (page 372)
18. Times interest earned (page 375)
II. Prepare a common sized income statement and a common sized balance sheet. (page 367-368, and also covered in chapter 2).
this is the website to use: Use the company Apple please
https://www.sec.gov/cgi-bin/viewer?action＝view&cik＝320193&accession_number＝0000320193-23-000106&xbrl_type＝v

Cloud Accounting Software: Types And Methods

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Cloud Accounting Software: Types And Methods

Executive Summary

The purpose of this report is to see whether the firm would be better off switching to cloud accounting software instead of staying with the traditional accounting methods. It includes a comparison of both cloud and traditional software and various cloud options. Different research was done to find out which accounting software was the better of the two. Different types of cloud accounting software were researched online to find out about what they included and prices. SWOT analysis was also done on both cloud accounting software and traditional accounting methods.

Introduction

A report has been requested by Martin Moir, Chief Accountant at North East Scotland Financial on Cloud Accounting and whether the firm would be better off switching to Cloud Accounting software instead of the traditional accounting software. This report includes a comparison between the two types of software and a comparison between the different Cloud options. A recommendation will be included on whether the firm should:

(a) approve and use the Cloud Accounting Software

(b) the reasons behind the recommendation if approved.

The report comprises of the following research methods:

  • Internet research was conducted to find out more about Cloud Accounting and traditional accounting methods
  • Different types of Cloud Accounting software were researched on the internet
  • SWOT Analysis on both Cloud Accounting Software and traditional accounting methods.

Conclusions and recommendations will be made on which type of software the firm should choose.

Findings

The research found on Cloud Accounting and traditional accounting software revealed the following:

Cloud accounting software

Cloud accounting software can be accessed from anywhere if an internet connection is provided to log in to the accounts. It allows accounting teams to access each other’s documents and files, with them all being in the one place. Costs are usually monthly or annually and this includes as much storage as needed. It also provides automatic software updates.

Traditional accounting software

This software needs a company to have a hard drive where the software is installed, and data is recorded on it. The user accesses their data through an app on their desktop, which can not be accessed from any other device, which restricts a person’s mobility. Companies are responsible for maintaining the servers and increasing their own storage capacity with investing in new servers. Software needs to be updated manually too. It is very secure as companies have control over who access their financial data.

2.2 The research on cloud accounting providers revealed that:

Xero

Xero offers a wide range of accounting features including invoicing, payroll, financial statements etc. Tasks are done in an automated style. There is an app available to smartphone users. There are different packages available to choose from depending on the type of business you have.

The standard package costs £22 per month which includes sending invoices and quotes, entering bills, reconciling bank transactions and submitting VAT to HMRC. It only handles one currency. It offers optional extras, which includes payroll which is free for the first three months and then £5 per month after that for up to 5 employees. Every employee after that adds an additional £1 onto the package.

The premium package costs £27.50 per month which includes sending invoices and quotes, entering bills, reconciling bank transactions and submitting VAT to HMRC. It can handle multiple currencies. It also offers the same optional extras as the standard package at the same prices.

2.2.2 QuickBooks

QuickBooks offers a program which businesses can use to manage sales and expenses and keep track of day to day transactions. It can be used for invoices, paying bills, reports, tax filing etc. QuickBooks offers a free 30-day trial of a fully functional version of the software. It is used to generate month and year end financial reports. There are different packages available to choose from depending on the type of business you have and what features you need.

The essential package costs £18 per month and it includes sending unlimited invoices on the go, storing receipts, managing bills and payments, calculating and filing tax. It is available for 3 users, can support multiple currencies and track employee time. There is also a free mobile app for on the go management of finances.

The plus package costs £27 per month and it includes all the same features as the essentials package with some added on extras. Some of these include a feature that can create budgets and purchase orders, manage stock and track costs by project, location or budget. It is also available for 5 users.

There is also a package for the self-employed, this costs £8 per month. This package includes sending invoices on the go, storing receipts, downloading bank transactions, estimating tax payments, sorting business and personal transactions, tracking mileage automatically and it is available for 1 user.

Sage 50

Sage accounting systems are computerised packages that have several different features to process a company’s finances. The system collects data, classifies it and then summarises it to let the user see their financial information in a simple way. Sage systems can print out invoices, updating customer and supplier records, making payments, automatic update of the general ledger, valuation of stock, VAT returns etc.

The standard package costs £60 per month plus VAT and is available for one user to use and up to two companies. For an extra £20 per month this package can be upgraded to ten users and up to ten companies. It can manage cash flow, income and payments, create invoices and quotes, connect to your bank, manage VAT, cloud access and backup, track and manage stock, manage multiple departments and budgets.

The professional package costs £125 per month plus VAT and is available for one user and up to ten companies. For an extra £55 per month, this package can be upgraded to 20 users and an unlimited amount of companies. This package does everything that the standard package does and also can track income, expenses and profit, it can create sales and purchase orders and can trade in multiple currencies.

SWOT Analysis on both cloud accounting software and traditional accounting methods

Cloud Accounting Software

Strengths Weaknesses

  • Easy access 1. Internet access needed
  • Costs are low 2. Data security
  • Easy use 3. Limitations in security
  • High data storage
  • Easy transfer of data
  • Easy backup

Opportunities Threats

  • Mobile apps 1. Data Protection
  • Growth in cloud services

Traditional Accounting Methods

Strengths Weaknesses

  • System errors 1. Hard copies
  • Access is quick 2. Costs are high
  • Easily understood 3. Labour intensive

Opportunities Threats

  • Internet access not required 1. Data can be lost
  • Business own the software

Conclusions

Cloud Accounting Software

Since it can be accesses from anywhere, it is helpful for doing accounts on the go when travelling for business or otherwise. However, since internet access is needed, it makes it hard for businesses to access accounts if the internet is down. Updates are done automatically therefore the business do not have to do it themselves. Costs are split over the monthly of yearly basis therefore costs are usually not too high, allowing the business to spend money on other costs.

Traditional Accounting Methods

All the data is stored on a hard drive therefore if the hard drive is lost or destroyed then there is no backup. The data can only be accessed through an app on desktop, so the accountant’s mobility is restricted which makes it harder for on the go accounting. Since the company must increase their own storage, costs will increase the more space needed and they also must update software manually which increases labour time. The companies have control over who accesses their financial data therefore very unlikely that there would be a breach of security.

Xero

The costs of both these packages are of a reasonable price, however if the company deals with international businesses then the standard package is not good enough as it does not deal with multiple currencies, but the premium package does. Xero also gives the option of increasing the package to more employees therefore it gives the option to companies to have more than one employee working on accounts. The app available for smartphone users is useful for on the go updating of data.

QuickBooks

The costs for these packages are also of reasonable price, with the most advanced package costing only and extra £9 per month which is not steep. QuickBooks is good as it also offers a 30-day free trial so if after the 30 days a company is not fully satisfied with the service, it does not have to go along with this accounting software. It also has a free mobile app for on the go management of finances which is great for a company’s mobility. The self-employed package is at a great price and includes the essentials for a self-employed person.

Sage 50

The cost of the Sage 50 packages are very expensive monthly, starting at £60 per month and going as high as £180 per month. Although these packages are quite expensive they do a variety of different tasks and can be made available for up to ten employees and up to ten companies for added cost to the standard packages, which is very useful for bigger companies who manage various companies and employ more than just one employee. The professional package which costs £125 per month is essential for companies who deal with clients who have international customers and suppliers as they would need to deal with multiple currencies. This is a great tool to have however it does add quite a huge cost on to the package.

Recommendations

It is recommended that the company go with cloud accounting software instead of traditional accounting software as with cloud software it works out cheaper, is easy to use, has high data storage and can be accessed from anywhere in the world if an internet connection is provided. Overall cloud accounting has more advantages as it is more modern and more on course with new technology as all companies nowadays need more mobility when it comes to management of finances.

The recommendation is that the company goes with the plus package from QuickBooks for £27 per month, as it includes sending invoices, storing receipts, managing bills and payments, calculating and filing tax, can store multiple currencies, track employee time, create budgets and purchase orders, manage stock and track costs by project, location or budget. It also provides a free mobile app for on the go management of finances. The plus package is available for five employees which is essential for companies with multiple clients and employees. The 30-day free trial with QuickBooks therefore if the company is not 100% satisfied with the software after this trial they are not tied in to the package.

The Benefits Of Outsource Accounting

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The Benefits Of Outsource Accounting

Why try to complete all the tasks on your own when you can receive additional help from others? It can be a hassle when everything is done on your own. Fortunately, there is a solution to that problem. In accounting, some companies have outsourced accounting tasks to other countries. In an article in Forbes magazine, Joe Mullich describes how companies “are exploring fresh ideas and seeking new answers” as well as “expanding outsourcing to new areas of finance and accounting, new industries, and new sizes of companies than in the past” (2). This states how companies are more willing to consider other options that they have not explored before. As an accounting major, I was interested in how outsource accounting works and learning more about the process. When companies send outsource accounting tasks overseas, this can create benefits and limits that can be the ultimate decision-maker for whether it may be suitable for them or not.

Before talking about the importance of outsourcing accounting tasks overseas, it is crucial to understand what exactly outsource accounting is. According to J. Anderson and Richard Vita, outsource accounting has been around for a long time in the American business environment and has become popular only recently. The CPA Journal describes outsource accounting as, “leveraging accounting data to provide meaningful insight that allows client businesses to run more efficiently and effectively”. Many countries are contributing to the process of outsourcing: India, China, Philippines, Brazil, and Mexico. Only up until recently, companies have pushed towards allowing third parties to help with contributing to reducing the amount of stress put on by businesses. Beginning in the 1970s, the movement of payroll accounting, accounts payable, and accounts receivable have gone up about 10 percent. As described in, “Should you outsource accounting and finance?”, the main goal businesses want to achieve is “an eventual reallocation of limited internal resources (particularly managerial time and investment dollars) into areas more directly related to profit making” (11). Rebecca Pomering and Larry Kammerer define and explain outsource accounting. J. Anderson and Richard Vita explain the history and the trend of where it is going. By taking the educational and historical approach, it is now clear to see that it is important to know what outsource accounting is and the background history of how it all began.

J. Anderson, Richard Vita, Yahya Kamyabi, Susela Devi, H. Höglund, and D. Sundvik all take a business and technological approach to talk about how outsource accounting is becoming more and more common among many small and medium-sized businesses. According to the Studies in Business and Economics, small and medium businesses use accounting outsourcing because “accounting is time consuming and difficult” (124). This source from Romania explains how it makes the process of accounting more manageable for businesses to handle by involving external accountants to handle the tasks. Many small and medium-sized businesses lack the resources and skills needed to run on their own which is one of the biggest reasons for companies to outsource. It is difficult for small and medium enterprises to succeed and grow especially without the skills and resources needed. Small and medium-sized enterprises compared to large firms cannot compete with others as effectively. Yahya Kamyabi and Susela Devi states, “SMEs face with resource gap and competitive pressures, they are forced to lessen their costs and create new opportunities” (81). Fortunately, technological advancements have allowed accounting tasks to be useful for CPA firms to be a part of the transaction process. Even though there are sources that took the business and technological approach in discussing how outsource accounting is becoming more acceptable in the business environment, there were others that took the economic approach.

Rebecca Pomering, Larry Kammerer, Joe Mullich, J. Anderson, and Richard Vita all take an economic approach to discuss both the pros and cons of handling tasks to other countries. Outsource accounting can reduce the cost of operating and allow efficiency to provide more towards getting positive results such as providing good service and money. When companies are focusing on helping clients, they can provide good business service which means they are not paying attention to accounting. Most authors agree that there are many things to be gained from outsource accounting, however, only a few sources have presented the limits. On the other hand, companies must think about whether they want to give up having the power to control over the tasks that they are given. According to the Studies in Business and Economics, some of the limits include, “the organization resistance; lack of acceptance within the company, cooperation risk (cooperation can fail); loss of control and know-how and dependency on an external provider; the appearance of suspicions in what concerns the information confidentiality;” (127). All the sources have different approaches to this topic because even though there are many benefits to outsource accounting, there are also downsides that can greatly affect whether businesses and firms decide to or not.

To conclude, many of the authors had similar thoughts on outsource accounting by saying that there are ways for companies to benefit from outsourcing. However, there were only a few that have touched on the problem with deciding to outsource. “Studies in Business and Economics” has proved that there are issues that hinder the company’s decision to outsource. It is important to look at both sides before thinking about implementing something to see if it would be the best decision. With that in mind, there are pros and cons to outsourcing companies overseas which companies must think about before choosing to begin giving tasks overseas. As technology is improving, we should take advantage of those opportunities to grow and enhance companies to become even more efficient than they already are. I am pleased that there are changes that are made in the accounting industry where I plan to be working in.

Financial Accounting And Reporting Policies: Impacts And Consequences

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Financial Accounting And Reporting Policies: Impacts And Consequences

Executive Summary

This report undertakes analysing the effects of the changes in retail industry on the operations of Shopping Centres Australia Property Group (SCP). This report sheds light on the requirements of AASB 140 related to the investment properties. The discussion on management flexibility is another major aim of the report. Analysis shows that these changes in retail industry have certain negative impact and economic consequences on the financial statements of these two companies.

Introduction

The presence of certain changes in the Australian retail industry can be seen in the recent years leaving certain negative financial as well as economic impacts on the companies operating in this industry. The main aim of this report is to analyse as well as evaluate the impact of the changes in retain industry on the business operations of Shopping Centres Australia Property Group (SCP). First part of the report identifies as well as summarizes the standards of AASB 140 Property Investment. The next part discusses about the flexibility of the management in the determination of the investment property value. The last two parts of the report analyses the impact and economic consequences of the changes in retail industry on the financial reports of SCP.

Accounting Policies related to Investment Properties

The management of SCP has certain obligations to follows certain standards and principles related to the investment properties and their regulations. In Australia, the ASX listed companies are needed to comply with the principles of AASB 140 Investment Properties related to the investment properties and the same is applicable for SCP (aasb.gov.au, 2019). Different parts of this standard are discussed below.

According to AASB 140, Section 2, the management of SCP is needed to apply this standard for the recognition, measurement and disclosure of investment property. As per AASB 140, Section 3, among the other things, SCP can apply this standard in the lease financial statements of investment property. As per AASB 140, Section 5, Investment Property can be considered as the property that the companies held for earning rentals or for capital appreciation or both rather than for utilization in the supply or production of goods or services or for administrative purposes and for the sales in the ordinary business course (aasb.gov.au, 2019).

As per AASB 140, Section 6, a property interest that a lessee holds under an operating lease can be classified as well as accounted for an investment property in case the property meets the definition requirement of investment property and leases uses in the fair value model mentioned in paragraph 33-55 for the recognized assets. For the management of SCP, recognition of the investment properties is a crucial aspect that they needs to consider (aasb.gov.au, 2019). According to AASB 140, Section 16, the company is needed to recognize as asset as investment property when there is a probability that the associated future economic benefit associated with the investment property will flow to the company and it is possible to reliably measure the cost of the investment property (aasb.gov.au, 2019).

At the same time, measurement of the recognition of investment property is considered as another crucial aspect for the management of SCP. According to AASB 140, Section 20, the company is needed to measure an investment property initially at cost. In addition, it is needed to include the transaction costs in the initial measurement (aasb.gov.au, 2019). At the same time, AASB 140, Section 32A (a) states that SCP can chose either the cost model or the fair value model for their all investment property. Under the fair value model, after the process of initial recognition, SCP will be needed to measure all of their investment property at fair value and gain or loss due to the alteration in the fair value of investment property needs to be recognized in the profit or loss statement. As per AASB 140, Section 56, under cost model, the company is needed to measure all of their investment property at cost model (Yao, Percy & Hu, 2015).

Flexibility of Management

Management Flexibility is considered as the ability of the management team to adapt investment decisions that includes timing and scale, to the existing market condition as opposed to the existing assumptions and goals. It needs to be mentioned that the retail industry is subject to major volatilities in the prices as well as market demands for various range of products. For this reason, the management of SCP has the flexibility in investing different assets that includes investments in properties because it provides them the scope of diversification in investments (Trigeorgis & Reuer, 2017). Under the presence of this flexibility, the management of SCP has the option to analyse as well as evaluate different types of investment properties with the aim to assess their positive as well as negative impacts on their investment decisions. This particular aspect indicates towards the crucial aspect that there is sufficient freedom lies in the hands of the management of SCP for the determination of the values of different investment properties so that they can invest in those investment properties. These investments will lead to the generation of expected return that is needed for the success of their businesses (Karadag, 2015).

Impacts of the Changes in Retail Industry on the Financial Reports

In the context of this report, it needs to be mentioned that there are certain major changes taking place in the Australian retail industry. Some of the crucial aspects of these changes are increase in global competition, stagnant sales, major rise in the fixed costs and rapid revaluation of online sales (smh.com.au, 2019). It is crucial to mention in this aspect that these changes have certain impacts on the financial statements of SCP that are income statement and balance sheet. In case of the income statement or the consolidated statement of profit or loss of SCP, these changes will make the revenue of the company motionless which means there will neither be increase in sale nor decrease. In addition, increase fixed cost will lead to the increase in the overall expenses of the company in this particular statement (Easton & Sommers, 2018). It can also be observed that these changes in the retail industry will have a negative impact on the investments in the properties, for example, there can be change in the fair value of the investments in property of the company and this will create an impact on the statement of profit or loss of SCP. There will be changes in the EBIT as well as net profit of the company (scaproperty.com.au, 2019).

Certain impacts of these changes will be there on the balance sheet of SCP. Due to the volatility or changes in the investment of the company in the properties, investment properties under the non-current assets will be impacted (Robinson et al., 2015). Since sales revenue is stagnant, there will not be any purchase of fixed assets, moreover, the management may opt for selling their assets to cater to the need for funds. This will have a crucial impact on the balance sheet. The stagnant nature of sales and profit would affect the company’s ability in paying off their liabilities which can lead to the increase in the company’s liability and this will impact the balance sheet of the company. These are the major effects on the income statement and balance sheet.

Potential Economic Consequences of the Changes in Retain Industry

Apart from the impact on the financial statements of SCP, these changes in the retail industry have certain economic consequences on the company’s financial statements. In this context, the name of Positive Accounting Theory needs to be mentioned since it is related to the use of financial reports. The positive accounting theory is concerned with the prediction of the actions by the firms in the accounting policy selection and how the firm is going to respond to the prosed accounting standards (Christensen, Nikolaev & Wittenberg‐Moerman, 2016). This theory has connection with the provided situation of SCP.

It can be seen from the above discussion the revenue under the retail industry becomes stagnant and as a consequence, the revenue of the company will be affected. At the same time, the retail industry is witnessing increase in fixed expenses and the same will happen to SCP. As a consequence of stagnant revenue and increased fixed expenses, the net profit of the company will decrease along with the decrease in earnings per share. The decrease in profitability of the company will have certain other consequences. It needs to be mentioned that decreased profitability of SCP will leads to the cost-cutting activities for the companies. Some of the major consequences of cost-cutting activities are decrease in the quality of products, decrease in the wages of the employees and employee layoffs (Zygmunt, 2013).

At the same time, these changes have certain negative consequences on the balance sheet of SCP. Decrease profitability will lead to the decrease in assets base of SCP since the company would opt for selling their assets for funding the business operations (Zygmunt, 2013). At the same time, increased competition in the retail industry may lead to the decrease in the return from investment properties. In the presence of all these economic consequences, the management of SCP is needed to develop effective strategies to fight with these changes in the retail industry. For example, the company is needed to increase their presence to online market for tapping into the large market because it will provide them with the necessary competitive advantage. In addition, increase in sales and profitability will be possible due to these strategies (Zygmunt, 2013).

References

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