Business - WRTG-2 Assignment Essay Example | Topics and Well Written Essays - 1000 words

Business - WRTG-2 Assignment - Essay Example However, at the end of the day, one needs to work for the purpose of earning their livelihood. This is the reason why an individual gets paid for doing work. In simple words, work is defined as the process by which an individual accomplishes some activities against some financial offerings. Traditionally, there have been concepts that if one does not work, he/she may get indulged into some illegal activities. In that case work is important for every individual. Now, in the context of the study, I have been in the field of steel industry. From the graduation days I have decided that I will be getting into a sector that has global opportunities. Also, I had a feeling that I should be working for an industry that offers continuous learning and allows me to showcase my talent. Hence, I decided to work for the steel industry. Steel industry has a worldwide scope. A large number of companies operate within the steel industry. However, the steel industry does not exist alone; it collectivel y exists with iron and is known as iron and steel industry. Steel industry is also important for the economy of a country. It acts as an indicator of the national economy. The demand of steel is continuously rising. To cite an example, during the early 2000 the demand for steel increased by 6%. It is mainly due to the massive economic boom in countries such as India and China. Some of the evident players of the steel industry are Tata Steel, Shagang Group and Shanghai Baosteel Group Corporation. In the context of the steel manufacturing industry, it has a mixture of both skilled and unskilled labor force. As the industry needs high precision in the tasks, skilled labors are important. The process of manufacturing steel is complex, and there are various scientific ways of production. The industry has a diverse group of workforce; starting from engineers, it has personnel from marketing, sales and other fields of business. However, the task of different departments differs accordingly . Discussion There are eminent personalities who work in the steel industry. Some of them include Ratan Tata, who is the owner of Tata Group and Tata Steel from India. According to Ratan Tata, the demand of steel is hugely increasing in the western part of the world; therefore, the trade fall in the parts of Europe and US has diminished. However, he has also highlighted that steel is yet to get out of trouble. According to him, the financial crunch and high cost of raw material have severely affected the profit of the first quarter. Yet, the signals are encouraging, according to him. Also, according to Prasad Baji of Tata Steel, the industry is witnessing a booming period. Consumption of steel has increased by 5–6 % in the 1st quarter; moreover, it is also estimated that the demand will further increase in the present quarter by about 8–10 % (â€Å"Steel Industry Thinks the Worst Is over and Signals Are Cheery†). Some of the other eminent personalities of this i ndustry include Xu Lejiang, the chairman of Baosteel. According to him, the present situation of the Chinese steel industry is witnessing historic transformations. Nonetheless, in order to transform it for the betterment, it requires the transformation of both the steel and iron industries. He also believes that the key factor towards the development of the industry lies in its system of operation. In addition, he stated that innovation in the most

The Nature Versus Nurture Debate Sociology Essay

The Nature Versus Nurture Debate Sociology Essay Throughout the history of human existence, there have always been questions that have plagued man for centuries. Some of these questions are what is the meaning of life and which came first, the chicken or the egg. Within the past 400 years a new question has surfaced which takes our minds to much further levels. The question asked is whether nature or nurture has more of an impact on the growing development of people. It is a fact that a combination of nature and nurture play important roles in how humans behave socially. However, I believe that nature has a more domineering role in the development of how people behave in society with regards to sexual orientation, crimes and violence and mental disorders. Height, hair color, eye color and sex are just a few examples of ways our DNA has shaped us. But could it be possible that our DNA also affects the way we behave in society. It is possible that genetics affect us is more ways that we may have imagined. Dr. Peter B. Neubaur believes that shyness, eating disorders, obsessive behavior and psychological illness can all be traced back to our genetics.  Sexual orientation  is also believed to be derived from genes in our body which determine what sexual preference we prefer. Violence and other types of crimes can be linked back throughout a persons lineage to witness that other family members have been committed similar crimes without ever meeting one and other. Throughout our lives we have all been influenced by our environment and other outside forces. Our environment may change the way we think, act and behave in life. Since we are all products of our environment, it comes to no surprise that we, as humans, tend to behave in a society the same way others around us behave but at the same time we strive to find who we really are (Schaefer 73). Since birth, humans have always analyzed the world around them. With each day that passes, humans take in more and more information from the outside world. The information which humans obtain through their environment subconsciously influences the decisions people make throughout their daily life (Neubauer 16). On the other hand, our genetics also play a vital role in determining what type of person we are and what will we become.   Ã‚  Ã‚  Ã‚  Ã‚  The sexual orientation of a person has been a critical debate over the past several centuries. For several decades many people believed that nurture had a more profound impact on the sexuality of humans than did nature. Even the famous psychologist Sigmund Freud believed that sexual orientation was derived from nurture. Freud developed a theory which explains that at birth till the age of four every child is bisexual. When the child reaches the age of around four, he/she begins to learn to withhold their feeling for members of the same sex and start expressing those sexual feeling to members of the opposite sex. Freud proposed the idea that male homosexuality originates when this crucial developmental stage is hindered by some outside force also known as nurture. According to Freud, this can occur when either a chided is raised in a fatherless household or with an overbearing mother figure. However, when this idea was actually tested, it did not fall through as ma ny would expect it would (Steen 185). Since many years after Freuds passing, it has become apparent that nature holds a strong role in the development of sexual orientation of humans.   Ã‚  Ã‚  Ã‚  Ã‚  If nurture isnt the cause for sexual orientation then nature must be. According to Grant Steen, a professor at the University of California, Los Angeles, a large study was recently conducted which gathered gay males who have either identical or  fraternal twins  or adopted brothers. The goal of the study would be to see if genetics played a role in twins. At the end of the survey more than half of the  identical twins  of gay men were also found to be homosexuals. At the same time only about 22% of the fraternal twins were found to be gay and only 11% of the adopted brothers were gay. What these statistics show is that DNA plays a very important role in determining sexual orientation. Nature seems to have such a large impact on the sexual orientation of individuals that I feel that nurture has almost little or no effect on whether a person is homosexual or not.   Ã‚  Ã‚  Ã‚  Ã‚  If homosexuality is genetic then there should be a dramatic occurrence of homosexuality with families who have many homosexual relatives than to families in the general public who do not have homosexual relatives. Another survey was conducted in which 114 openly homosexual men were asked questions about the sexual orientation of their relatives. The study showed that homosexuality is indeed strongly clustered in some families; among the brothers of men in this study, the incidence of homosexuality was nearly seven-fold higher than in the population at large (Steen 197).  Homosexuality  can be considered hereditary because families with one gay relative are more likely to have others somewhere in their family lineage. Some skeptics may begin to raise the question that if homosexuality is genetic then there should be a gay gene in our DNA. After many studies, scientists have found that there is at least one gene which is responsible for homosexuality. Though this is not conclusive evidence because scientists still havent unlocked all of the DNA strands, scientists figure that with time and the advancement of technology we one day might be able to actually pin point this gay gene in DNA (Plomin 337).   Ã‚  Ã‚  Ã‚  Ã‚  Reporter  Jeff McMullen  of ABC interviewed  David Reimer  in May of 2000 who fell victim of a botched circumcision when he was only eight months old. The doctors at the time felt that David would be better off living the rest of his life as a girl. The doctors believed that the nurturing of a child and not nature would determine their psychological make-up. David explained to McMullen that throughout his entire childhood he felt out of place. It seemed that even though David grew up as a woman, inside he felt something was wrong. This interview strongly supports the idea that nature plays a vital role in determining sex. No matter how much of an effort was put in to surround Davids environment with feminine characteristics, it would not be strong enough to over come the resilient power of nature. From the time of conception, nature has already planed out many important factors which will effect our lives in so many ways. If nature does control our sexual preferences then it is possible that it could control many other facets of human existence. In the United States about twenty million crimes occur each year and most of the time the criminals are repeat offenders. One may begin to speculate whether society in the United States promotes crimes or are criminals born with the desire to commit these heinous crimes. According to Steen there is evidence from a large study of adopted children which shows that there is a tendency for children to reenact the criminal behavior of their biological parents. So even if a child was adopted and was raised in a house which had no  criminal activities, the child would be more likely to commit the same crimes as their biological parents which they have never met. This obviously disproves the notion that people are taught and raised to commit crimes. The East Coast sniper John Lee Malvo would hide in remote places all along the east coast and would shoot and kill people when the opportunity arose. Doctor Patricia Haensly believes that the DNA of John Lee Malvo differed from most peoples DNA. She came to the conclusion that most criminals are born with the genes that allow them to not think about the actions that they are coming are immoral. This is a very true statement because most people commit some type of crime, granted not murder but more along the lines of littering, but we tell ourselves that its not a problem and forget about it moments later. Murderers may feel the same way about killing as some people feel about littering. Nature also has a strong impact on domestic violence. In the United States over 18% of all homicides involved family members killing each other (Steen 228). This can lead to the deduction that just as the households which have one gay member are more likely to have other homosexually oriented family m embers; households which have one member who commits violent acts are more likely to have other family members who commit similar acts of violence. Sometimes nature cannot explain all the crimes committed in the United States. Some may feel that simply living in such an environment places young people at special risk of falling victim to aggressive behavior (Ferguson 81). For example, if a person is constantly surrounded by crimes and violence, then that person is more likely to commit the same crimes. However it may just be that people who live in bad areas would still commit those same crimes even if they resided in a low crime environment. Never-the-less your environment should not allow youre to commit the same crimes no matter how much crime is going on. If a person keeps committing crimes in a bad neighborhood then it is most likely that the DNA of that person convinces them that it is all right to commit murders. This explains why many people in jails in the United States are repeat offenders. One may begin to wonder if there is more to these criminals than what is on the surface Many mental disorders have been scientifically proven to be heritable. Manic-depression is a trait which is inheritable through family lineage. Many separate studies have arrived at the conclusion that identical twins are more likely to acquire manic-depression than do fraternal twins. In fact four out of every five twins tend to share the same types of mental disorders (Steen 141). One study found that risks of clinical depression are much higher in certain families than in others. Close relatives of those who are depressed are three times more likely to suffer from depression than people who dont have depression in their family history (Steen 147). This further secures the fact that nature plays such a crucial role over nurture in our lives and within our own families. There are some mental diseases such as  schizophrenia  which adults may suffer from which some people believed is cause from various problems in a persons childhood. This leads many so speculate that the roots of schizophrenia extend far back into childhood. Within the past ten years a discovery was made which scientists were able to link a gene on our chromosome to schizophrenia. This schizophrenic gene would be a dominant gene which means that if any person had this gene in their DNA then it is likely that he/she would suffer from schizophrenia. Even though more research needs to be done on the schizophrenic gene, it still provides us information which could one day lead to the solving of schizophrenia and many other devastating diseases (Steen 151). It has become clear that nature and nurture both play very important roles in how humans behave in a society. I feel that nature plays the more domineering role in the foundation of human existence. All though every day we are bombarded with outside forces, it is our internal make up that determines how we would react to our environment. Our environment only adds to what nature has given to us. If we use it in the correct ways then it will be beneficial to society and our selves. However, once the environment starts to turn to the ways of violence and crimes we can only assume that it will only have negative effects from any point you look at it.

Defining Lolita: the Novel and the Name Essay -- Essays Papers

Defining Lolita: the Novel and the Name In his essay, "On a Novel Entitled Lolita," Vladimir Nabokov tries to answer the age-old question, "What is the objective of the novel?" He quickly replies, "...I happen to be the kind of author who in starting to work on a book has no other purpose than to get rid of that book..." (311). There is more to his response than this, however. He goes on to say that his book was not written to celebrate pornography or pedophilia, nor was it written to promote Anti-Americanism (313 - 315). What's the purpose of his novel then? Well, Nabokov writes, "For me a work of fiction exists only insofar as it affords me what I shall bluntly call aesthetic bliss, that is a sense of being somehow, somewhere, connected with other states of being where art (curiosity, tenderness, kindness, ecstasy) is the norm" (314 - 315). He sees his novel in simple terms: art. Whether it be the novel Lolita or the name Lolita, a sexual meaning has been given to the word Lolita, and this is largely due to the str ong sexual overtones used by the novel's main character Humbert to describe his character of obsession Lolita; thus resulting in different and confusing interpretations of the novel and the author's intentions. In his essay, "On a Novel Entitled Lolita," Vladimir Nabokov tries to answer the age-old question, "What is the objective of the novel?" He quickly replies, "...I happen to be the kind of author who in starting to work on a book has no other purpose than to get rid of that book..." (311). There is more to his response than this, however. He goes on to say that his book was not written to celebrate pornography or pedophilia, nor was it written to promote Anti-Americanism (313 - 315). What's the... ... purpose behind the book, even though it is not the purpose the writer intended. This is the less common interpretation of the novel, as is apparent by the modern definition of the name Lolita. Because Humbert Humbert defines Lolita in such a sexually explicit way, her name has become a symbol of sex and seduction; this resulted in the widely misunderstood purpose of the novel. Humbert Humbert explained it the best when before his death he wrote: Thus, neither of us is alive when the reader opens this book...and one wanted H.H. to exist at least a couple of months longer, so as to have him make you live in the minds of later generations. I am thinking of aurochs and angels, the secret of durable pigments, prophetic sonnets, the refuge of art...(309). Leave it up to the main character of Lolita to sum up Nabokov's purpose for writing the novel. Defining Lolita: the Novel and the Name Essay -- Essays Papers Defining Lolita: the Novel and the Name In his essay, "On a Novel Entitled Lolita," Vladimir Nabokov tries to answer the age-old question, "What is the objective of the novel?" He quickly replies, "...I happen to be the kind of author who in starting to work on a book has no other purpose than to get rid of that book..." (311). There is more to his response than this, however. He goes on to say that his book was not written to celebrate pornography or pedophilia, nor was it written to promote Anti-Americanism (313 - 315). What's the purpose of his novel then? Well, Nabokov writes, "For me a work of fiction exists only insofar as it affords me what I shall bluntly call aesthetic bliss, that is a sense of being somehow, somewhere, connected with other states of being where art (curiosity, tenderness, kindness, ecstasy) is the norm" (314 - 315). He sees his novel in simple terms: art. Whether it be the novel Lolita or the name Lolita, a sexual meaning has been given to the word Lolita, and this is largely due to the str ong sexual overtones used by the novel's main character Humbert to describe his character of obsession Lolita; thus resulting in different and confusing interpretations of the novel and the author's intentions. In his essay, "On a Novel Entitled Lolita," Vladimir Nabokov tries to answer the age-old question, "What is the objective of the novel?" He quickly replies, "...I happen to be the kind of author who in starting to work on a book has no other purpose than to get rid of that book..." (311). There is more to his response than this, however. He goes on to say that his book was not written to celebrate pornography or pedophilia, nor was it written to promote Anti-Americanism (313 - 315). What's the... ... purpose behind the book, even though it is not the purpose the writer intended. This is the less common interpretation of the novel, as is apparent by the modern definition of the name Lolita. Because Humbert Humbert defines Lolita in such a sexually explicit way, her name has become a symbol of sex and seduction; this resulted in the widely misunderstood purpose of the novel. Humbert Humbert explained it the best when before his death he wrote: Thus, neither of us is alive when the reader opens this book...and one wanted H.H. to exist at least a couple of months longer, so as to have him make you live in the minds of later generations. I am thinking of aurochs and angels, the secret of durable pigments, prophetic sonnets, the refuge of art...(309). Leave it up to the main character of Lolita to sum up Nabokov's purpose for writing the novel.

Lessons Learned and to be learned

Background: Managing Total Technology was the first simulation course I have ever enrolled for. From the very beginning of the course, I knew that it will a very interesting course and indeed, I find it to be a successful, memorable and exciting way of education. Part 1: Honestly speaking I took the simulation very easy in the beginning. But as we move in to week 3, I started to realize that we really need to imply ourselves if we need to do better in the simulation. There are several key learnings that I take from this simulation course, such as; 1. Fundamental Knowledge: First of all, I would say, to do a business or to make a decision, one should seek knowledge regarding that business or position. One should do homework before thinking about playing any role in the business scenario. Seeking fundamental knowledge is the first step. 2. Do not Limit yourself: It is pivotal to know your business environment well and remember, business understanding it is not limited to the area you are responsible for. One should know the overall strategy of the company and the circumstances in which the company is working. The manager, regardless of his/her role in the company should be aware of the challenges company is currently facing in achieving its goals and objectives. 3. Be a Guru: When you are responsible for making decision in one of the area of the company, it is of utmost important that you acquire all the technical and non-technical expertise in that area. Ideally, nobody should be more aware than you in that particular field so that you can make the decision confidently and that people respect your decision and don’t challenge it without knowing the depth of it. 4. Competitve Intelligence is Key Always make well informed decisions. Look for the weaknesses of the competition. Consistently track their performance and their financial situation so that you are well aware in advance if they are in a situation where you can take advantage and consolidate your position in the market place. 5. Be a Visionary You cannot be a successful manager or CEO if you are unable to look in to the futu re and make decision according to the future challenges. You have to keep one eye at the long term objectives of the organization and plan accordingly. Learn from the mistakes and make tactical changes but never alter your long term strategy because you fail in achieving one or two of your short term goals. Part 2: Key Take Aways: A. Strategic Thinking: One of the top learnings from the simulation is the importance of strategic thinking. When we started the simulation, we thought that only one segment, High-Tech, will be good enough to become leader in the overall simulation and it proved wrong. We knew in the middle of the simulation but stuck to our initial strategy which I guess was the right thing to do because eventually High-Tech market is the future. B. Leadership Qualities It sounds like an extension of the first point Strategic Thinking, but it is actually not. I have learned from this simulation that a company is defined by the definition of its CEO. Leadership plays an important role in driving all the areas of business and it requires special capabilities to perform as a leader. Leadership is not about making final decisions it is about making the right decision at the right time. I want to learn how I can be a successful leader in the field of marketing and sales, which is my passion.

Acca F7

Answers Fundamentals Level – Skills Module, Paper F7 (INT) Financial Reporting (International) 1 (a) December 2008 Answers Pedantic Consolidated income statement for the year ended 30 September 2008 $’000 98,000 (72,000) ––––––– 26,000 (3,000) (7,600) (500) ––––––– 14,900 (5,400) ––––––– 9,500 ––––––– Revenue (85,000 + (42,000 x 6/12) – 8,000 intra-group sales) Cost of sales (w (i)) Gross profit Distribution costs (2,000 + (2,000 x 6/12)) Administrative expenses (6,000 + (3,200 x 6/12)) Finance costs (300 + (400 x 6/12)) Profit before tax Income tax expense (4,700 + (1,400 x 6/12)) Profit for the year Attributable to:Equity holders of the parent Non-controlling interest (((3,000 x 6/12) – (800 URP + 200 depreciation)) x 40%) (b) 9,300 200 –––à ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œ 9,500 ––––––– Consolidated statement of financial position as at 30 September 2008 Assets Non-current assets Property, plant and equipment (40,600 + 12,600 + 2,000 – 200 depreciation adjustment (w (i))) Goodwill (w (ii)) Current assets (w (iii)) Total assets Equity and liabilities Equity attributable to owners of the parent Equity shares of $1 each ((10, 000 + 1,600) w (ii)) Share premium (w (ii)) Retained earnings (w (iv)) 55,000 4,500 ––––––– 59,500 21,400 ––––––– 80,900 ––––––– 11,600 ,000 35,700 ––––––– 55,300 6,100 ––––––– 61,400 Non-controlling interest (w (v)) Total equity Non-current liabilities 10% loan notes (4,000 + 3,000) 7,000 Current liabilit ies (8,200 + 4,700 – 400 intra-group balance) 12,500 ––––––– 80,900 ––––––– Total equity and liabilities Workings (figures in brackets in $’000) (i) Cost of sales Pedantic Sophistic (32,000 x 6/12) Intra-group sales URP in inventory Additional depreciation (2,000/5 years x 6/12) $’000 63,000 16,000 (8,000) 800 200 ––––––– 72,000 ––––––– The unrealised profit (URP) in inventory is calculated as ($8 million – $5 ·2 million) x 40/140 = $800,000. 1 (ii) Goodwill in Sophistic Investment at cost Shares (4,000 x 60% x 2/3 x $6) Less – Equity shares of Sophistic (4,000 x 60%) – pre-acquisition reserves (5,000 x 60% see below) – fair value adjustment (2,000 x 60%) $’000 (2,400) (3,000) (1,200) –––––– Parent’s goodwill Non-controlling interest’s goodwill (per question) Total goodwill The pre-acquisition reserves are: At 30 September 2008 Earned in the post acquisition period (3,000 x 6/12) Alternative calculation for goodwill in Sophistic Investment at cost (as above) Fair value of non-controlling interest (see below) Cost of the controlling interestLess fair value of net assets at acquisition (4,000 + 5,000 + 2,000) Total goodwill Fair value of non-controlling interest (at acquisition) Share of fair value of net assets (11,000 x 40%) Attributable goodwill per question $’000 9,600 (6,600) –––––– 3,000 1,500 –––––– 4,500 –––––– 6,500 (1,500) –––––– 5,000 –––––– 9,600 5,900 ––––––– 15,500 (11,000) –à ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œ 4,500 ––––––– 4,400 1,500 –––––– 5,900 –––––– The 1 ·6 million shares (4,000 x 60% x 2/3) issued by Pedantic would be recorded as share capital of $1 ·6 million and share premium of $8 million (1,600 x $5). $’000 16,000 6,600 (800) 200 (600) –––––– 21,400 ––––––– (iii) Current assets Pedantic Sophistic URP in inventory Cash in transit Intra-group balance (iv) Retained earnings Pedantic per statement of financial position Sophistic’s post acquisition profit (((3,000 x 6/12) – (800 URP + 200 depreciation)) x 60%) (v) Non-controlling interest (in statement of financial position) Net assets per statement of financial position URP in inventory Net fair value adjustment (2,000 – 200) Share of goodwill (per question) 12 $’000 35,400 300 ––––––– 35,700 ––––––– 10,500 (800) 1,800 ––––––– 11,500 x 40% = 4,600 ––––––– 1,500 –––––– 6,100 –––––– (a) Candel – Statement of comprehensive income for the year ended 30 September 2008 $’000 297,500 (225,400) ––––––––– 72,100 (14,500) (21,900) (1,400) ––––––––– 34,300 (11,600) ––––––––– 22,700 Revenue (300,000 – 2,500) Cost of sales (w (i)) Gross profit Distribution costs Administrative expenses (22,200 – 400 + 100 see note below) Finance costs (200 + 1,200 (w (ii))) Profit before tax (Income tax expense (11,400 + (6,000 – 5,800 deferred tax)) Profit for the year Other comprehensive income Loss on leasehold property revaluation (w (iii)) (4,500) ––––––––– Total comprehensive income for the year 8,200 ––––––––– Note: as it is considered that the outcome of the legal action against Candel is unlikely to succeed (only a 20% chance) it is inappropriate to provide for any damages. The potential damages are an example of a contingent liability which should be disclosed (at $2 million) as a note to the financial statements. The unrecoverable legal costs are a liability (the start of the legal action is a past event) and should be provided for in full. (b) Candel – Statement of changes in equity for the year ended 30 September 2008 Balances at 1 October 2007 Dividend Comprehensive incom eBalances at 30 September 2008 (c) Equity shares $’000 50,000 Revaluation reserve $’000 10,000 ––––––– 50,000 ––––––– (4,500) –––––– 5,500 –––––– Retained earnings $’000 24,500 (6,000) 22,700 ––––––– 41,200 ––––––– Total equity $’000 84,500 (6,000) 18,200 ––––––– 96,700 ––––––– $’000 $’000 Candel – Statement of financial position as at 30 September 2008 Assets Non-current assets (w (iii)) Property, plant and equipment (43,000 + 38,400) Development costs 81,400 14,800 –––––––– 96,200 Current assets Inventory T rade receivables 20,000 43,100 ––––––– Total assets Equity and liabilities: Equity (from (b))Equity shares of 25 cents each Revaluation reserve Retained earnings 63,100 –––––––– 159,300 –––––––– 50,000 5,500 41,200 ––––––– Non-current liabilities Deferred tax 8% redeemable preference shares (20,000 + 400 (w (ii))) Current liabilities Trade payables (23,800 – 400 + 100 – re legal action) Bank overdraft Current tax payable Total equity and liabilities 13 6,000 20,400 ––––––– 23,500 1,300 11,400 ––––––– 46,700 –––––––– 96,700 26,400 36,200 –––––––– 159,300 â⠂¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œÃ¢â‚¬â€œ Workings (figures in brackets in $’000) (i) Cost of sales: Per trial balance Depreciation (w (iii)) – leasehold property – plant and equipmentLoss on disposal of plant (4,000 – 2,500) Amortisation of development costs (w (iii)) Research and development expensed (1,400 + 2,400 (w (iii))) (ii) $’000 204,000 2,500 9,600 1,500 4,000 3,800 –––––––– 225,400 –––––––– The finance cost of $1 ·2 million for the preference shares is based on the effective rate of 12% applied to $20 million issue proceeds of the shares for the six months they have been in issue (20m x 12% x 6/12). The dividend paid of $800,000 is based on the nominal rate of 8%. The additional $400,000 (accrual) is added to the carrying amount of the preference shares in the statement of financial position.As these share s are redeemable they are treated as debt and their dividend is treated as a finance cost. (iii) Non-current assets: Leasehold property Valuation at 1 October 2007 Depreciation for year (20 year life) 50,000 (2,500) –––––––– 47,500 (43,000) –––––––– 4,500 –––––––– Carrying amount at date of revaluation Valuation at 30 September 2008 Revaluation deficit Plant and equipment per trial balance (76,600 – 24,600) Disposal (8,000 – 4,000) Depreciation for year (20%) Carrying amount at 30 September 2008 Capitalised/deferred development costs Carrying amount at 1 October 2007 (20,000 – 6,000) Amortised for year (20,000 x 20%)Capitalised during year (800 x 6 months) Carrying amount at 30 September 2008 $’000 52,000 (4,000) –––––––– 48,000 (9,600 ) –––––––– 38,400 –––––––– 14,000 (4,000) 4,800 –––––––– 14,800 –––––––– Note: development costs can only be treated as an asset from the point where they meet the recognition criteria in IAS 38 Intangible assets. Thus development costs from 1 April to 30 September 2008 of $4 ·8 million (800 x 6 months) can be capitalised. These will not be amortised as the project is still in development. The research costs of $1 ·4 million plus three months’ development costs of $2 ·4 million (800 x 3 months) (i. . those incurred before 1 April 2008) are treated as an expense. 3 (a) Equivalent ratios from the financial statements of Merlot (workings in $’000) Return on year end capital employed (ROCE) Pre tax return on equity (ROE) Net asset turnover Gross p rofit margin Operating profit margin Current ratio Closing inventory holding period Trade receivables’ collection period Trade payables’ payment period Gearing Interest cover Dividend cover 20 ·9% 50% 2 ·3 times 12 ·2% 9 ·8% 1 ·3:1 73 days 66 days 77 days 71% 3 ·3 times 1 ·4 times (1,400 + 590)/(2,800 + 3,200 + 500 + 3,000) x 100 ,400/2,800 x 100 20,500/(14,800 – 5,700) 2,500/20,500 x 100 2,000/20,500 x 100 7,300/5,700 3,600/18,000 x 365 3,700/20,500 x 365 3,800/18,000 x 365 (3,200 + 500 + 3,000)/9,500 x 100 2,000/600 1,000/700 As per the question, Merlot’s obligations under finance leases (3,200 + 500) have been treated as debt when calculating the ROCE and gearing ratios. 14 (b) Assessment of the relative performance and financial position of Grappa and Merlot for the year ended 30 September 2008 Introduction This report is based on the draft financial statements supplied and the ratios shown in (a) above.Although covering many aspects of performance and financial position, the report has been approached from the point of view of a prospective acquisition of the entire equity of one of the two companies. Profitability The ROCE of 20 ·9% of Merlot is far superior to the 14 ·8% return achieved by Grappa. ROCE is traditionally seen as a measure of management’s overall efficiency in the use of the finance/assets at its disposal. More detailed analysis reveals that Merlot’s superior performance is due to its efficiency in the use of its net assets; it achieved a net asset turnover of 2 ·3 times compared to only 1 ·2 times for Grappa.Put another way, Merlot makes sales of $2 ·30 per $1 invested in net assets compared to sales of only $1 ·20 per $1 invested for Grappa. The other element contributing to the ROCE is profit margins. In this area Merlot’s overall performance is slightly inferior to that of Grappa, gross profit margins are almost identical, but Grappa’s operating profit ma rgin is 10 ·5% compared to Merlot’s 9 ·8%. In this situation, where one company’s ROCE is superior to another’s it is useful to look behind the figures and consider possible reasons for the superiority other than the obvious one of greater efficiency on Merlot’s part.A major component of the ROCE is normally the carrying amount of the non-current assets. Consideration of these in this case reveals some interesting issues. Merlot does not own its premises whereas Grappa does. Such a situation would not necessarily give a ROCE advantage to either company as the increase in capital employed of a company owning its factory would be compensated by a higher return due to not having a rental expense (and vice versa). If Merlot’s rental cost, as a percentage of the value of the related factory, was less than its overall ROCE, then it would be contributing to its higher ROCE.There is insufficient information to determine this. Another relevant point may be that Merlot’s owned plant is nearing the end of its useful life (carrying amount is only 22% of its cost) and the company seems to be replacing owned plant with leased plant. Again this does not necessarily give Merlot an advantage, but the finance cost of the leased assets at only 7 ·5% is much lower than the overall ROCE (of either company) and therefore this does help to improve Merlot’s ROCE. The other important issue within the composition of the ROCE is the valuation basis of the companies’ non-current assets.From the question, it appears that Grappa’s factory is at current value (there is a property revaluation reserve) and note (ii) of the question indicates the use of historical cost for plant. The use of current value for the factory (as opposed to historical cost) will be adversely impacting on Grappa’s ROCE. Merlot does not suffer this deterioration as it does not own its factory. The ROCE measures the overall efficiency of manage ment; however, as Victular is considering buying the equity of one of the two companies, it would be useful to consider the return on equity (ROE) – as this is what Victular is buying.The ratios calculated are based on pre-tax profits; this takes into account finance costs, but does not cause taxation issues to distort the comparison. Clearly Merlot’s ROE at 50% is far superior to Grappa’s 19 ·1%. Again the issue of the revaluation of Grappa’s factory is making this ratio appear comparatively worse (than it would be if there had not been a revaluation). In these circumstances it would be more meaningful if the ROE was calculated based on the asking price of each company (which has not been disclosed) as this would effectively be the carrying amount of the relevant equity for Victular. GearingFrom the gearing ratio it can be seen that 71% of Merlot’s assets are financed by borrowings (39% is attributable to Merlot’s policy of leasing its pl ant). This is very high in absolute terms and double Grappa’s level of gearing. The effect of gearing means that all of the profit after finance costs is attributable to the equity even though (in Merlot’s case) the equity represents only 29% of the financing of the net assets. Whilst this may seem advantageous to the equity shareholders of Merlot, it does not come without risk. The interest cover of Merlot is only 3 ·3 times whereas that of Grappa is 6 times.Merlot’s low interest cover is a direct consequence of its high gearing and it makes profits vulnerable to relatively small changes in operating activity. For example, small reductions in sales, profit margins or small increases in operating expenses could result in losses and mean that interest charges would not be covered. Another observation is that Grappa has been able to take advantage of the receipt of government grants; Merlot has not. This may be due to Grappa purchasing its plant (which may then be eligible for grants) whereas Merlot leases its plant.It may be that the lessor has received any grants available on the purchase of the plant and passed some of this benefit on to Merlot via lower lease finance costs (at 7 ·5% per annum, this is considerably lower than Merlot has to pay on its 10% loan notes). Liquidity Both companies have relatively low liquid ratios of 1 ·2 and 1 ·3 for Grappa and Merlot respectively, although at least Grappa has $600,000 in the bank whereas Merlot has a $1 ·2 million overdraft. In this respect Merlot’s policy of high dividend payouts (leading to a low dividend cover and low retained earnings) is very questionable.Looking in more depth, both companies have similar inventory days; Merlot collects its receivables one week earlier than Grappa (perhaps its credit control procedures are more active due to its large overdraft), and of notable difference is that Grappa receives (or takes) a lot longer credit period from its suppliers (1 08 days compared to 77 days). This may be a reflection of Grappa being able to negotiate better credit terms because it has a higher credit rating. Summary Although both companies may operate in a similar industry and have similar profits after tax, they would represent very different purchases.Merlot’s sales revenues are over 70% more than those of Grappa, it is financed by high levels of debt, it rents rather than owns property and it chooses to lease rather than buy its replacement plant. Also its remaining owned plant is nearing the end of its life. Its replacement will either require a cash injection if it is to be purchased (Merlot’s overdraft of 15 $1 ·2 million already requires serious attention) or create even higher levels of gearing if it continues its policy of leasing. In short although Merlot’s overall return seems more attractive than that of Grappa, it would represent a much more risky investment.Ultimately the investment decision may be determ ined by Victular’s attitude to risk, possible synergies with its existing business activities, and not least, by the asking price for each investment (which has not been disclosed to us). (c) The generally recognised potential problems of using ratios for comparison purposes are: – – – – – – inconsistent definitions of ratios financial statements may have been deliberately manipulated (creative accounting) different companies may adopt different accounting policies (e. g. use of historical costs compared to current values) different managerial policies (e. . different companies offer customers different payment terms) statement of financial position figures may not be representative of average values throughout the year (this can be caused by seasonal trading or a large acquisition of non-current assets near the year end) the impact of price changes over time/distortion caused by inflation When deciding whether to purchase a company, Victular should consider the following additional useful information: – – – – – 4 in this case the analysis has been made on the draft financial statements; these may be unreliable or change when being finalised.Audited financial statements would add credibility and reliance to the analysis (assuming they receive an unmodified Auditors’ Report). forward looking information such as profit and financial position forecasts, capital expenditure and cash budgets and the level of orders on the books. the current (fair) values of assets being acquired. the level of risk within a business. Highly profitable companies may also be highly risky, whereas a less profitable company may have more stable ‘quality’ earnings not least would be the expected price to acquire a company.It may be that a poorer performing business may be a more attractive purchase because it is relatively cheaper and may offer more opportunity for improving efficienci es and profit growth. (a) A liability is a present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow of economic benefits (normally cash). Provisions are defined as liabilities of uncertain timing or amount, i. e. they are normally estimates. In essence provisions should be recognised if they meet the definition of a liability.Equally they should not be recognised if they do not meet the definition. A statement of financial position would not give a ‘fair representation’ if it did not include all of an entity’s liabilities (or if it did include, as liabilities, items that were not liabilities). These definitions benefit the reliability of financial statements by preventing profits from being ‘smoothed’ by making a provision to reduce profit in years when they are high and releasing those provisions to increase profit in years when they are low.It also means that the statement of financial po sition cannot avoid the immediate recognition of long-term liabilities (such as environmental provisions) on the basis that those liabilities have not matured. (b) (i) Future costs associated with the acquisition/construction and use of non-current assets, such as the environmental costs in this case, should be treated as a liability as soon as they become unavoidable. For Promoil this would be at the same time as the platform is acquired and brought into use. The provision is for the present value of the expected costs and this same amount is treated as part of the cost of the asset.The provision is ‘unwound’ by charging a finance cost to the income statement each year and increasing the provision by the finance cost. Annual depreciation of the asset effectively allocates the (discounted) environmental costs over the life of the asset. Income statement for the year ended 30 September 2008 Depreciation (see below) Finance costs ($6 ·9 million x 8%) Statement of financ ial position as at 30 September 2008 Non-current assets Cost ($30 million + $6 ·9 million ($15 million x 0 ·46)) Depreciation (over 10 years) Non-current liabilities Environmental provision ($6 ·9 million x 1 ·08) (ii) $’000 3,690 552 36,900 (3,690) –––––– 33,210 ––––––– 7,452 If there was no legal requirement to incur the environmental costs, then Promoil should not provide for them as they do not meet the definition of a liability. Thus the oil platform would be recorded at $30 million with $3 million depreciation and there would be no finance costs. However, if Promoil has a published policy that it will voluntarily incur environmental clean up costs of this type (or if this may be implied by its past practice), then this would be evidence of a ‘constructive’ obligation under IAS 37 and the required treatment of the costs would be the same as in part (i) above. 6 5 Year ended/as at: Income statement Depreciation (see workings) Maintenance (60,000/3 years) Discount received (840,000 x 5%) Staff training Statement of financial position (see below) Property, plant and equipment Cost Accumulated depreciation Carrying amount Workings Manufacturer’s base price Less trade discount (20%) Base cost Freight charges Electrical installation cost Pre-production testing Initial capitalised cost 30 September 2006 30 September 2007 30 September 2008 $ $ $ 180,000 270,000 119,000 20,000 20,000 20,000 (42,000) 40,000 –––––––– –––––––– –––––––– 198,000 290,000 139,000 ––––––– –––––––– –––––––– 920,000 (180,000) ––â €“––––– 740,000 –––––––– 920,000 (450,000) –––––––– 470,000 –––––––– 670,000 (119,000) –––––––– 551,000 –––––––– $ 1,050,000 (210,000) –––––––––– 840,000 30,000 28,000 22,000 –––––––––– 920,000 –––––––––– The depreciable amount is $900,000 (920,000 – 20,000 residual value) and, based on an estimated machine life of 6,000 hours, this gives depreciation of $150 per machine hour. Therefore depreciation for the year ended 30 September 2006 is $180,000 ($150 x 1 ,200 hours) and for the year ended 30 September 2007 is $270,000 ($150 x 1,800 hours).Note: early settlement discount, staff training in use of machine and maintenance are all revenue items and cannot be part of capitalised costs. Carrying amount at 1 October 2007 Subsequent expenditure Revised ‘cost’ 470,000 200,000 –––––––– 670,000 –––––––– The revised depreciable amount is $630,000 (670,000 – 40,000 residual value) and with a revised remaining life of 4,500 hours, this gives a depreciation charge of $140 per machine hour. Therefore depreciation for the year ended 30 September 2008 is $119,000 ($140 x 850 hours). 17Fundamentals Level – Skills Module, Paper F7 (INT) Financial Reporting (International) December 2008 Marking Scheme This marking scheme is given as a guide in the context of the suggested answers. Scope is given to markers to award m arks for alternative approaches to a question, including relevant comment, and where well-reasoned conclusions are provided. This is particularly the case for written answers where there may be more than one acceptable solution. Marks 1 (a) (b) Income statement: revenue cost of sales distribution costs administrative expenses inance costs income tax non-controlling interest 11/2 3 1/ 2 1 1/ 2 1/ 2 2 9 Statement of financial position: property, plant and equipment goodwill current assets equity shares share premium retained earnings non-controlling interest 10% loan notes current liabilities Total for question 2 (a) (b) (c) Statement of comprehensive income: revenue cost of sales distribution costs administrative expenses finance costs income tax other comprehensive income 2 5 11/2 1 1 2 2 1/ 2 1 16 25 1 5 1/ 2 11/2 11/2 11/2 1 12 Statement of changes in equity: rought forward figures dividends comprehensive income 1 1 1 3 Statement of financial position: property, plant and equipmen t deferred development costs inventory trade receivables deferred tax preference shares trade payables overdraft current tax payable Total for question 19 2 2 1/ 2 1/ 2 1 1 11/2 1/ 2 1 10 25 3 (a) (b) 1 mark per valid comment up to (c) Marks 8 Merlot’s ratios 1 mark per relevant point 12 Total for question 4 5 25 (a) 1 mark per relevant point 5 (b) (i) explanation of treatment depreciation finance cost non-current asset provision 2 1 2 1 7 (ii) figures for asset and depreciation if not a constructive obligation what may cause a constructive obligation subsequent treatment if it is a constructive obligation Total for question 5 1 1 1 3 15 Total for question 2 1 1 3 1 1 1 10 initial capitalised cost upgrade improves efficiency and life (therefore capitalise) revised carrying amount at 1 October 2007 annual depreciation (1 mark each year) maintenance costs charged at $20,000 each year discount received (in income statement) staff training (not capitalised and charged to income) 20