Enforcement of Accounting Standards †Free Samples to Students

Question: Discuss about the Enforcement of Accounting Standards. Answer: Introduction: Analysing over the financial terminology and techniques are required for every organization. It assists the company to analyze various aspects and the position of the comapny in terms of finance. Financial analysis could be done by the chief financial officer of an organization through using the various methods and the techniques. According to the Higgins (2012), financial analysis could be done through trend analysis, horizontal analysis, ratio analysis, capital budgeting analysis, capital structure analysis, cost of company analysis, WACC analysis etc. Further, it has also been found that analyzing the market and making a better decision according to the economy position is also required for a business. In this report, it has been analyzed that how the financial terminology and techniques assist an organization to make various better decisions. Further, it has also been analyzed that how the audited financial statements affects the decisions and the choices of the investors and financial analysts about the investment in the company. More, for preparing this report, Unilever Limited has been taken into consideration. The study of management and financial accounting has been done over the company to make better decision about the performance and the position of the company (Fulin, 2011). Firstly, the audited financial statement of the company has been analyzed and further, the study has been conducted over the various strategies and policies to analyze the performance of the company. This report would depict about the various problems which has been faced by the company and the way through which, these problems could be overcome by the company. Further, it has also been found that the management and financial accounting evaluation assist a company to make various better choices. Company and industry overview: Unilever N.V. is a consumer goods company. Headquarter of the company is in Britain. This company has various subsidiaries companies which are performing their operations into various other countries. The main products of the Unilever are beverages, food products, personal care products, cleaning agents etc. According to the current report, it has been found that this company is the largest company in segment of consumer goods. This company is one of the oldest global companies (Morningstar, 2017). Currently, this company is performing in 190 countries and the diversification of the company is still ongoing. Further, it has also been analyzed that the 400 brands are owned by this company and the turnover of the company was Euro 50 billion in 2016 (Engle and Hunton, 2015). Further, the study has been done over consumer goods industry of company and it has been found that this industry is continuously enhancing its business. Growth rate of consumer goods industry is quite attractive. F uture trends of the industry explain that position of the industry would be superior in near future. Further, the study has been done over financial statement of the company to analyze the performance and stability and profitability position of the company. This study has been done to analyze the position and the strategy of the company. In this report, various managerial accounting and financial accounting methods have been conducted over the company to analyze the performance and the position of the company (Elmuti and Kathawala, 2001). Following are the audited financial statement of the company: UNILEVER NV ADR (UN) CashFlowFlag INCOME STATEMENT Fiscal year ends in December. EUR in thousands except per share data. 2014-12 2015-12 2016-12 Revenue 48436000 53272000 52713000 Cost of revenue 30229000 Gross profit 48436000 53272000 22484000 Operating expenses Sales, General and administrative 14683000 Total operating expenses 14683000 Operating income 48436000 53272000 7801000 Interest Expense 568000 Other income (expense) -40790000 -46052000 236000 Income before taxes 7646000 7220000 7469000 Provision for income taxes 2131000 1961000 1922000 Net income from continuing operations 5515000 5259000 5547000 Other -344000 -350000 -363000 Net income 5171000 4909000 5184000 Net income available to common shareholders 5171000 4909000 5184000 Earnings per share Basic 1.82 1.73 1.83 Diluted 1.79 1.72 1.82 Weighted average shares outstanding Basic 2841209 2837572 2840200 Diluted 2888827 2854070 2853900 EBITDA 7980000 7515000 9501000 UNILEVER NV ADR (UN) CashFlowFlag BALANCE SHEET Fiscal year ends in December. EUR in thousands except per share data. 2014-12 2015-12 2016-12 Assets Current assets Cash Cash and cash equivalents 3382000 Short-term investments 599000 Total cash 3981000 Receivables 5310000 5034000 3329000 Inventories 4278000 Deferred income taxes Other current assets 7037000 7652000 2296000 Total current assets 12347000 12686000 13884000 Non-current assets Property, plant and equipment Gross property, plant and equipment 21207000 Accumulated Depreciation -9534000 Net property, plant and equipment 11673000 Equity and other investments 760000 Goodwill 17624000 Intangible assets 22174000 25059000 9809000 Deferred income taxes 1286000 1185000 1354000 Prepaid pension benefit 694000 Other long-term assets 12220000 13368000 631000 Total non-current assets 35680000 39612000 42545000 Total assets 48027000 52298000 56429000 Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt 5266000 Capital leases 9000 Accounts payable 13788000 8591000 Taxes payable 1081000 1127000 1312000 Accrued liabilities 3655000 Other current liabilities 18561000 5104000 1723000 Total current liabilities 19642000 20019000 20556000 Non-current liabilities Long-term debt 10933000 Capital leases 134000 Deferred taxes liabilities 2061000 Accrued liabilities 159000 Pensions and other benefits 3947000 3254000 3867000 Minority interest 612000 643000 626000 Other long-term liabilities 10175000 12943000 1739000 Total non-current liabilities 14734000 16840000 19519000 Total liabilities 34376000 36859000 40075000 Stockholders' equity Common stock 484000 Additional paid-in capital 134000 Retained earnings 23179000 Accumulated other comprehensive income 13651000 15439000 -7443000 Total stockholders' equity 13651000 15439000 16354000 Total liabilities and stockholders' equity 48027000 52298000 56429000 UNILEVER NV ADR (UN) Statement of CASH FLOW Fiscal year ends in December. EUR in thousands except per share data. 2014-12 2015-12 2016-12 Cash Flows From Operating Activities Net income 5547000 Depreciation amortization 1464000 Stock based compensation 198000 Inventory 190000 Accounts payable -281000 Other working capital 142000 Other non-cash items 5543000 7330000 -213000 Net cash provided by operating activities 5543000 7330000 7047000 Cash Flows From Investing Activities Investments in property, plant, and equipment -1804000 Property, plant, and equipment reductions 158000 Acquisitions, net -1701000 Purchases of investments -208000 Sales/Maturities of investments 173000 Purchases of intangibles -232000 Other investing activities -341000 -3539000 426000 Net cash used for investing activities -341000 -3539000 -3188000 Cash Flows From Financing Activities Debt issued 6761000 Debt repayment -5248000 Common stock repurchased Dividend paid -4081000 Other financing activities -5190000 -3032000 -505000 Net cash provided by (used for) financing activities -5190000 -3032000 -3073000 Effect of exchange rate changes -146000 -541000 284000 Net change in cash -134000 218000 1070000 Cash at beginning of period 2044000 1910000 2128000 Cash at end of period 1910000 2128000 3198000 Free Cash Flow Operating cash flow 5543000 7330000 7047000 Capital expenditure -2036000 Free cash flow 5543000 7330000 5011000 Through analyzing the above statement of the company, it has been found that the position of the company has been enhanced in last 3 years. Through the analysis over the statement of the company, it has been found that various changes have taken position into the performance of the company. Through the income statement of the company, it has been found that the revenues of the company have been highest in 2015. Further, it has also been found that the net income of the company is highest in 2016 (Dyckman and Zeff, 2014). More, through this study, it has also been found that the earnings of the company are highest in 2016. Through the entire evaluation over the income statement of the company, it has also been found that the performance and the profitability position of the company have been enhanced in last 3 years. For analyzing the performance of the company in a decent way, trend analysis and vertical analysis study has also been done over company. (Calculations have been given in appendix). Through the vertical analysis calculations, it has been found that income statement of the company expresses that the level of expenses of the company has been lower from 2015 and 2014 in 2016 in context of total revenues of the company. Further, the analysis explains that net income of the company has also been enhanced in 2016. The current net profit margin of the company is 9.83% which used to be 9.21% in 2015 (Deegan, 2017). Further, the horizontal analysis of the company explains that the changes are quite higher in the income statement of the company. The gross profit of the company has been lower in 2016 by 57.79%. Though, the expenses of the company has also been lower and lastly, the analysis over net profit of the company explains that the total profit of the company has been enhanced by 5.90% in 2016. And it expresses that the position of the company has been superior from last 2 years. Further, the balance sheet of the company has been evaluated and it has been found that the total assets of the company have been highest in 2016. Further, it has also been found that the total liabilities of the company are highest in 2016 (Du and Girma, 2009). More, through this study, it has also been found that the total stockholders equity of the company is highest in 2016. Through the entire evaluation over the balance sheet of the company, it has also been found that the performance and the profitability position of the company have been enhanced in last 3 years (Deegan, 2013). In addition, for analyzing the performance and worth of the company, trend analysis and vertical analysis study has also been done over company. (Calculations have been given in appendix). Through the vertical analysis calculations, it has been found that balance sheet of the company expresses that the level of current assets of the company has been enhanced from 2015 and 2014 in 2016 in context of total assets of the company. Further, the analysis explains that shareholder equity of the company has been lowered a bit in 2016. On the other hand, total liabilities of the company have also been enhanced and depict about a better position of the company. Further, the horizontal analysis of the company explains that the changes are quite higher in the balance sheet of the company. The total assets of the company have been enhanced in 2016 by 7.9% (Appendix). Though, the total liabilities of the company have also been enhanced by 8.73% and lastly, the analysis over total shareholder equity of the company explains that the enhancement rate of equity of the company is 7.90% in 2016. And it expresses that the position of the company has been superior from last 2 years (Deegan, 2013). Lastly, the cash flow statement of the company has been evaluated and it has been found that the total operating cash flow of the company have been highest in 2016. Further, it has also been found that the investing cash flow of the company is lowest in 2016. More, through this study, it has also been found that the total financing activities of the company is lowest in 2016 (De Haan and Amtenbrink, 2011). Through the entire evaluation over the cash flow statement of the company, it has also been found that the performance and the profitability position of the company have been enhanced in last 3 years. Evaluation of financial performance: Further, the evaluation study has been done over the financial data of the company to evaluate the performance of the company and it has been analyzed that the following changes have taken place into the position of the company in last 3 years: Financial Data Description Unilever Limited (Euro) 2014 2015 2016 Revenue 4,84,36,000 5,32,72,000 5,27,13,000 Cost of goods sold - - 3,02,29,000 Gross profit 4,84,36,000 5,32,72,000 2,24,84,000 Operating profit 4,84,36,000 5,32,72,000 78,01,000 Net profit 51,71,000 49,09,000 51,84,000 Inventory - - 42,78,000 Current assets 1,23,47,000 1,26,86,000 1,38,84,000 Receivables 53,10,000 50,34,000 33,29,000 Current liabilities 1,96,42,000 2,00,19,000 2,05,56,000 Payables - 1,37,88,000 85,91,000 Equity 1,36,51,000 1,54,39,000 1,63,54,000 Total liabilities 3,43,76,000 3,68,59,000 4,00,75,000 Total assets 4,80,27,000 5,22,98,000 5,64,29,000 Description Formula Unilever Limited 2014 2015 2016 Profitability Net margin Net profit/revenues 10.68% 9.21% 9.83% Return on equity Net profit/Equity (Arnold, 2013) 37.88% 31.80% 31.70% Liquidity Current ratio Current assets/current liabilities 0.63 0.63 0.68 Quick Ratio Current assets-Inventory/current liabilities 0.63 0.63 0.47 Efficiency Receivables collection period Receivables/ Total sales*365 40.01 34.49 23.05 Payables collection period Payables/ Cost of sales*365 103.73 Asset turnover ratio Total sales/ Total assets 1.01 1.02 0.93 Solvency Debt to Equity Ratio Debt/ Equity 2.52 2.39 2.45 Debt to assets Debt/ Total assets 0.72 0.70 0.71 (De Haan and Amtenbrink, 2011) Through, the above analysis of the company, it has been found that the liquidity position of the company has been changed from 2014 in 2016. This analysis depict that the current position of the liquidity of the company has been changed and it has been better in 2016 (Deegan, 2013). Further, it has also been found that the profitability position of the company has been changed from 2014 in 2016. This analysis depict that the current position of the profitability of the company has been changed and the current position of the company has been lowered in 2016 than 2014 and 2015 (Bertomeu, Darrough and Xue, 2017). More, the efficiency position and solvency position of the company has also been analyzed and it has been found that the efficiency position of the company has been better than last years (Davies and Crawford, 2011). The cash conversion cycle of the company has also been better. More, it has been found that the working capital of the company has also been better in 2016. Lastly, the solvency position of the company has also been analyzed and it has been found that the debt position, equity positive, total assets position etc of the company has been improved in 2016 than last 3 years (Brealey, Myers and Marcus, 2007). Through the above analysis, it has been found that the performance and the position of the company on various levels have been better (Borio, 2014). Still, the company is suggested to make few changes into the performance of the company. Further, the strategic position of the company has been analyzed and for analyzing the strategic position of the company, trend analysis has also been done over the company. Following are the calculations of the strategic position of the company: UNILEVER NV ADR (UN) CashFlowFlag INCOME STATEMENT Fiscal year ends in December. EUR in thousands except per share data. 2014-12 2015-12 2016-12 Revenue 48436000 9.98% 53272000 -1.05% 52713000 Cost of revenue 30229000 Gross profit 48436000 9.98% 53272000 -57.79% 22484000 Operating expenses Sales, General and administrative 14683000 Total operating expenses 14683000 Operating income 48436000 9.98% 53272000 -85.36% 7801000 Interest Expense 568000 Other income (expense) -40790000 12.90% -46052000 -100.51% 236000 Income before taxes 7646000 -5.57% 7220000 3.45% 7469000 Provision for income taxes 2131000 -7.98% 1961000 -1.99% 1922000 Net income from continuing operations 5515000 -4.64% 5259000 5.48% 5547000 Other -344000 1.74% -350000 3.71% -363000 Net income 5171000 -5.07% 4909000 5.60% 5184000 Net income available to common shareholders 5171000 -5.07% 4909000 5.60% 5184000 Earnings per share Basic 1.82 -4.95% 1.73 5.78% 1.83 Diluted 1.79 -3.91% 1.72 5.81% 1.82 Weighted average shares outstanding Basic 2841209 -0.13% 2837572 0.09% 2840200 Diluted 2888827 -1.20% 2854070 -0.01% 2853900 EBITDA 7980000 -5.83% 7515000 26.43% 9501000 UNILEVER NV ADR (UN) CashFlowFlag BALANCE SHEET Fiscal year ends in December. EUR in thousands except per share data. 2014-12 2015-12 2016-12 Assets Current assets Cash Cash and cash equivalents 3382000 Short-term investments 599000 Total cash 3981000 Receivables 5310000 -5.20% 5034000 -33.87% 3329000 Inventories 4278000 Deferred income taxes Other current assets 7037000 8.74% 7652000 -69.99% 2296000 Total current assets 12347000 2.75% 12686000 9.44% 13884000 Non-current assets Property, plant and equipment Gross property, plant and equipment 21207000 Accumulated Depreciation -9534000 Net property, plant and equipment 11673000 Equity and other investments 760000 Goodwill 17624000 Intangible assets 22174000 13.01% 25059000 -60.86% 9809000 Deferred income taxes 1286000 -7.85% 1185000 14.26% 1354000 Prepaid pension benefit 694000 Other long-term assets 12220000 9.39% 13368000 -95.28% 631000 Total non-current assets 35680000 11.02% 39612000 7.40% 42545000 Total assets 48027000 8.89% 52298000 7.90% 56429000 Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt 5266000 Capital leases 9000 Accounts payable 13788000 8591000 Taxes payable 1081000 4.26% 1127000 16.42% 1312000 Accrued liabilities 3655000 Other current liabilities 18561000 -72.50% 5104000 -66.24% 1723000 Total current liabilities 19642000 1.92% 20019000 2.68% 20556000 Non-current liabilities Long-term debt 10933000 Capital leases 134000 Deferred taxes liabilities 2061000 Accrued liabilities 159000 Pensions and other benefits 3947000 -17.56% 3254000 18.84% 3867000 Minority interest 612000 5.07% 643000 -2.64% 626000 Other long-term liabilities 10175000 27.20% 12943000 -86.56% 1739000 Total non-current liabilities 14734000 14.29% 16840000 15.91% 19519000 Total liabilities 34376000 7.22% 36859000 8.73% 40075000 Stockholders' equity Common stock 484000 Additional paid-in capital 134000 Retained earnings 23179000 Accumulated other comprehensive income 13651000 13.10% 15439000 -148.21% -7443000 Total stockholders' equity 13651000 13.10% 15439000 5.93% 16354000 Total liabilities and stockholders' equity 48027000 8.89% 52298000 7.90% 56429000 (Brigham and Ehrhardt, 2013) Through the above analysis, it has been found that this company is required to enhance the total current assets to manage the liquid position of the company (Brigham and Michael, 2013). Further, the chief financial officer of the company is required to evaluate the internal and external aspect and the market situation to make a better position of the company in the market. The costing of the product must be enhanced by the company to manage the revenues of the company (Brigham and Houston, 2012). Further, it has also been analyzed that the cash flow of the company is negative and thus the financial officer of the company must make the new strategies and policies to manage the cash conversion cycle of the company (Bromwich and Bhimani, 2005). This would help the comapny to enhance the cash flow of the comapny as well. More, through the above analysis, it has also been found that the various positions of the company have been changed in last 2 years (Brown, Preiato and Tarca, 2014). More, it has been found that the new policies and strategise are required to be done by the chief financial officer to manage the position of the company and this new policies would also help the company to make the performance of the company better (Bui, Petersen, Poulsen and Gazerani, 2016). Conclusion: Further, through this study, it has also been found that this company is required to enhance the total current assets to manage the liquid position of the company. Further, the chief financial officer of the company is required to evaluate the internal and external aspect and the market situation to make a better position of the company in the market. The costing of the product must be enhanced by the company to manage the revenues of the company. Further, it has also been analyzed that the cash flow of the company is negative and thus the financial officer of the company must make the new strategies and policies to manage the cash conversion cycle of the company. This would also help the comapny to enhance the cash flow. More, through the above analysis, it has also been found that the various positions of the company have been changed in last 2 years. More, it has been found that the new policies and strategise are required to be done by the chief financial officer to manage the position of the company and this new policies would also help the company to make the performance of the company better. Uniliver NV is managing its business and the performance in improved manner and few changes into position of the company would help the company more t increase the position of the company in the market. References: Arnold, G., 2013.Corporate financial management. Pearson Higher Ed. Bertomeu, J., Darrough, M. and Xue, W., 2017. Optimal conservatism with earnings manipulation. Contemporary Accounting Research, 34(1), pp.252-284. Borio, C., 2014. The financial cycle and macroeconomics: What have we learnt?. Journal of Banking Finance, 45, pp.182-198. 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Fulin, S. 2011. Preface by SHANG Fulin. Corporate Governance of Listed Companies in China, 9-10. Gitman, L.J. and Zutter, C.J., 2012.Principles of managerial finance. Prentice Hall. Higgins, R. C., 2012.Analysis for financial management. McGraw-Hill/Irwin. Morningstar. 2017. Unilever NV. Retrieved from https://financials.morningstar.com/income-statement/is.html?t=UNregion=usaculture=en-US available as on 26th Nov 2017.