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Different Funds of Sources Used in Gpt Group & Dexus Ltd.

University: Regent College London

  • Unit No: 12
  • Level: Post Graduate/University
  • Pages: 17 / Words 4293
  • Paper Type: Assignment
  • Course Code: HI5020
  • Downloads: 49
Question :

This assessment will cover the following questions:

  • Explain different funds of sources which is used in GPT group and Dexus Limited.
  • GPT group is a real Estate investment trust. Determine various types of liabilities which is explained on the balance sheet of the given companies.
  • Dexus Limited is an Australian based real estate company. Generate the relative merits and limitations of the different types of funds which is implemented by the given companies.
Answer :
Organization Selected : Dexus Limited

INTRODUCTION

Corporate accounting is a branch of accounting it helps the business to prepare final accounts, and cash flow statements and further analyze the results to make future decisions. In this type of accounting, organizations only consider the monetary terms and records appropriate for further analysis (Aburous, 2016). This report is based on the two companies which are listed in ASX that is Australian Stock Exchange. GPT Group and Dexus Limited were selected for a better understanding of these concepts. GPT group is a real estate investment company founded in 1971 and its headquarters is situated in MLC Centre, Sydney, Australia. On the other side, Dexus Limited is also a real estate investment company that manages the high profile portfolio of Australian properties valued at $ 31.8 billion.

This assessment covers various topics such as different sources of finance and the proportion of funds which the company generated internally as well as externally. In addition, identify the liabilities and assets of the organizations mentioned in their balance sheet and examine the different key provisions under the AASB 137. Along with this, evaluate the measurement basis at the time of recording assets in the companies.

MAIN BODY

1. Identify the different sources of fund which is used by the chosen organization

There are various sources which is used by the organizations in order to fulfil their financial requirement. Both companies such as Dexus limited and GPT group using below mention source of funds which are as followed:

  • Retained earnings
  • Short term funds
  • Long term funds
  • Common stock
  • Comprehensive income
  • Other equities

2. Evaluate the evolution of sources of fund over the last three financial years and focus on the changes of various sources of fund

GPT group follow the different source of funds which are discussed below:

Short term funds: Company required short terms debt which they had to repay within one year and with the help of it GPT group able to perform their daily basis activities or fulfil the financial requirements (Agrawal and Cooper, 2017). In 2018 company required around $ 20 million and in the previous years they were $ 49 million in both 2017 or 2016. it is observed that company reduces their short term debt around $ 29 million.

Long term funds: Company required long term debt to make necessary changes in the business operations or maximise the productivity. GOT group had long term debt in 2016 was around $ 2948 million, in 2017 it was $ 3281 million and in 2018 it was $ 3599 million (Financial report of GPT Group, 2020). It is clearly mentioned that, company required more finance to perform their operations because long term debt increases every year.

Retain earnings: This earning secure by the company to for the future purpose or any uninvited event. In 2016, GPT retain around $ 124 million, $ 950 million or $ 1945 million in 2017 or 2018 respectively. It is analysed that company raise their earning for for the further actions which is beneficial for the company.

Common stock: With the help of company's balance sheet, it is observed that GPT has $ 8130 million of common stock 2016, $ 8141 million in 2017 and in 2018 it was around $ 8152 million stock. There is not enough difference in the common stock in different period.

Comprehensive income: In the GPT Group, balance sheet shows that company had other income around $ 16 million in 2016. In 2017, it was $ 9 million and ($ 8 million) in 2018 that was loss for the company.

Other equity: With the help of balance sheet of the company, it is observed that GPT Group has $ 13 millions of other equities in 2016 (Atanasov and Black, 2016). In 2017, it was $ 8 million and $ 13 million in 2018. There is a fluctuation in the other equities due to requirement of liquidity in the organizations.

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Dexus limited using below mention source of funds to fulfil their financial requirements:

Short term funds: Company was taken short term loan in 2016 around $ 316 million, $ 149 million in 2017 and in 2018 it was $ 205 million. It has been analysed that Dexus limited borrow different amount of loan in the different years.

Long term funds: With the help of financial statement of the company it is observed that Dexus had long term debt around $ 3371 million in 2016. On the other side, it was reduces in 2017 and remain $ 2698 million and again increases in 2018, it was around $ 3155 million. It is analysed that company depend on long term debts which increases yearly.

Retain earnings: It is analysed that financial performance of company in terms of retain earning was $ 1634 million in 2016 and in 2017 it was around $ 2373 million. In 2018, it was $ 3616 million which continues increases (Financial report of Dexus Limited, 2020). It indicates that company has strong financial position in the market because of high value of their retain earning in every year.

Common stock: In the Dexus limited, there are some common stocks such as in 2016 it was $ 5910 million, in 2017 it was around $ 6402 million and in 2018, it was $ 6404 million. It is observed that organizations increases their stock level through issuing funds.

Comprehensive income: In Dexus Limited, comprehensive income or loss mentioned in the balance sheet and it is settled with the retain earning (Bedford and Ziegler, 2016). In 2016, it was $ 43 million and in the next two years it was constant that is 2017 or 2018. Company does not gain but not occur loss for the same.

Other equity: Equity is the essential source of fund which is used by the organizations and in Dexus Limited its value around $ 9 million in the period of 2016. After that it became negative and having loss around $ 16 million in 2018.

3. Identify the fund's percentage which internally as well as externally generated for each company

Both organizations such as Dexus Limited or GPT Group arrange funds from internal as well as external sources. They also contributed in some proportion which mentioned in the table.

Dexus Limited:

Funds generated from internal sources

Percentage of Funds

Sales of assets

10%

Issue equities

3% of equity

Loan from partners

5%

Insurance recovery

5%

Funds generated from external sources

Percentage of Funds

Leasing

5%

Equity capital

Around 20%

Overdraft

10%

GPT Group:

Funds generated from internal sources

Percentage of funds contributed

Retain earning

5% through selling business assets

Fixed assets of the company

15% In emergency company can sell their fixed assets.

Interest on loan

3% Company provide loans to the other organizations.

Funds generated from external sources

Percentage of funds contributed

Term loan

15%

Venture capital

20%

4. Explain the merits or shortcoming of different sources which used by the selected companies

In order to fulfil the financial requirement organizations use various sources of funds. There are some sources which is used by the selected companies and it discussed below:

Short term fund: It is the financial obligations which company has to pay within one year and it includes the short terms loans which appear in the current liability section of balance sheet (Bhasin, 2015). Some of its benefits or limitations are discussed below:

Benefits

Limitations

Short term loan quickly approved by the financial institutions.

Short term debt have low interest rate which is beneficial for the organizations to borrow and fulfil operational requirements.

If organizations borrow more short terms debts than it will affect their credit score that is the big issue for the business.

Frequent short term loans indicate that company does not have adequate liquidity to perform their operational activities.

Long term funds: It is the money which borrowed by the organizations for more than one year and it help the organization to maximise their production as well as profitability through improving their operational efficiency.

Benefits

Limitations

Long term debt is least costly because interest on debt is tax deductible (Caskey and Laux, 2017).

This source of finance provide the flexibility in the capital structure to organizations and enjoy tax savings on interest on debt.

Interest on debt is the regular obligation which company has to pay their creditors at fixed rate.

Finance managers should build provision to re-pay their debt because they has fixed maturity period.

Retain earnings: It is the part of profit which secure by the organizations for the future in order to meet some requirements which can occur in the coming years. It is the portion of profit which is not distributed among the shareholders. This source of finance has some benefit or drawbacks which mentioned below:

Benefits

Limitations

This source help the organization to avoid the issues related to the cost of financing (Dagwell, Wines and Lambert, 2015).

It is the cheaper sources of finance which is used by most of the organizations.

Management can use this funds as per their requirement which affect the market value of stock.

It does not allowed to the shareholders to enjoy its benefits where it disappoint some investors.

Common stock: It is the security of a form of corporate equity ownership which provide benefits to invest in a company who having high earning potential and have limited liability. These common stocks occur in the liability side of balance sheet of both organizations. It has some advantage & disadvantage which discussed below:

Benefits

Limitations

Investment with limited liability company is the advantage of common stock.

Common stock has potential to pay high earning on their shares (Domino, Wingreen and Blanton, 2015).

It is quite difficult or maintain control over common stocks.

It is quit risky for the organizations because they have to pay dividend.

5. Critically evaluate the types of liabilities which mentioned in the selected company's balance sheet and also identify that which one is interest bearing & which one not

There are various types of liabilities which appear in the balance sheet of both organizations. Some of them interest bearing or some of them not which categorised in the below mentioned table separately.

Dexus Limited:

Liabilities

Interest bearing

Non interest bearing

Short term debts

Long term debts

Deferred income tax

Other long term liabilities

Accounts payable

Deferred tax liabilities

Other current liabilities

GPY Group:

Liabilities

Interest bearing

Non interest bearing

Long term debts

Deferred tax liabilities

Accounts payable

Other long term liabilities

Deferred income tax

Other current liabilities

Short term debts

6. Critically examine the key provision under the AASB 137 such as Provision, Contingency Liability and Contingency Assets

AASB 137 (Australian Accounting Standards Board) is the provision of 13 standards which include the guidelines or instruction to treat any transaction of the business. Some of the key provisions of AASSB 137 are discussed below:

Provisions: It is an liability of uncertain time period which is arises by the organizations on the basis of their actions. In the name of provision, company save the money in order to pay their future liability (Kravet, 2014). It is appeared in the balance sheet and make sure to prepare it with full of effective planning. In both organizations, account payable or accrual liabilities both are obligations for the company which they has to pay. Some of the example of provisions are warrantee or legal constructive obligations .

Contingency assets: These are those assets which arises profit on the basis of future events and it not controlled by the any organizations. These assets are not recognized but disclosed if the inflows are not beneficial for the business. If it will provide benefits than it has to be recorded in the balance sheet of company because further it is not considered as contingent. In both organizations, director of the responsible entity does not aware about any contingency assets.

Contingency liabilities: It is the possible obligations which company has to pay in future and it is not recognised due to reliably or settlement is not likely (Maas, Schaltegger and Crutzen, 2016). It does not include any provisions as well as not mentioned in the statement of financial positions. Dexus limited of GPT group, both companies does not aware about any contingency liability.

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7. Evaluate the selected company made any reference regarding AASB 137 in their annual report

AASB 137 is the standard of regarding provision, contingency assets or liability which followed by the organizations and further perform their activities accordingly. It includes the various principles and standards which implemented by both organizations to develop provisions, maintain their assets or liability in well manner.

Contingency liabilities are not similar to the common liability of business. There are two type of obligations such as possible or present which mentioned below: 

Present obligations: It is the obligations which has proper evidence and it appear in the balance sheet. Also ensure that, it will meet the criteria which specified in the mentioned standards (Raiborn and Sivitanides, 2015). Company settle the outflow of resources which provide economic benefits.

Possible obligations: It is the liability which can be generated in the future and it largely depend on the present obligations. It provide the economic advantage to make provisions for this.

It is also observed that selected organizations does not have any provisions regarding contingency liabilities. On the other hand, there is no contingency assets but these selected organizations made different provisions.

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8. Identify different categories of assets which recorded in the company's balance sheet

As per the balance sheet of both organizations such as GPT group of Dexus limited, all the identified assets mentioned in the below table as per their nature or appear in the financial statements. There are both companies assets divided into current and non current categories which mentioned below:

GPT group:

Current Assets

Non Current Assets

· Cash

· Receivables

· Inventory

· Deferred income tax

· Prepaid expenses

· Other current assets

· Property, plant & equipment

· Investments

· Intangible assets

· Deferred income tax

· Other long term assets

Dexus Limited:

Current Assets

Non Current Assets

· Cash and cash equivalents

· Inventories

· Derivative financial instruments

· Other current assets

· Investment properties

· Plant and equipment

· Other financial assets at fair value through profit or loss

· Intangible assets

· Other non current assets

9. Critically examine the measurement which followed by the organizations to record their assets

Financial assets of the organizations reported or measured either at fair value or amortized cost. These are classifies into current or non current assets categories which are discussed below:

Current assets:

  • Cash & cash equivalence: It is the overall cash balance which company have in hand or in bank accounts. These are highly liquidated which help the business to perform their operational activities in order to complete their task.
  • Marketable securities: It includes the investment which is done by the organizations into debt or equity (Schaltegger, Etxeberria and Ortas, 2017). These securities are traded in the public sector market and this asset mentioned in the financial statement of the company.
  • Inventories: It is the raw material for the organizations or the physical goods which intended to sell finished goods or generate. As per USGAAP, inventories measured at lower cost or market value.
  • Trade receivables: It is the value or amount which owned to company by its consumers where they receive the services but not yet paid. Company will measure their assets in various terms which maximise the overall worth of the business.

Non current assets:

  • Property plant & equipment: It is the tangible assets which appear assets side of balance sheet which include the land, machinery, building etc. All are used to improve the operational performance and provide economic benefits. It is recorded under the IFRS, cost model or revaluation model.
  • Intangible assets: This category include the trademark, patent, license and other non monetary (Watson, 2015). According to GAAP principle, they allow intangible assets to measure only with the help of cost model.
  • Goodwill: It is the most important assets of the company because each and every action will affect the goodwill and its value. It is based on the economic performance of corporation and also ensure that company will follow every accounting standard or not. It will further impact on market value of shares.

Above mention measurements used by the organizations and divide their assets in current or non current assets categories. Every element of balance sheet should be treated or recorded by using some common standards such as GAAP, IFRS, AASB etc.

CONCLUSION

From the above discussion, it has been concluded that corporate accounting is essential for the organizations to prepare financial reports. At the time of reporting, management should ensure that company follow every appropriate standards to avoid the government interference. Organizations has various source of funding which make them capable to fulfil their operational activities. Also ensure that it maximise the productivity as well as profitability in the organizations. It further helps in improving market image that is most beneficial to attract potential investors.

Related Sample: Management Accounting System in KPMG

REFERENCES

  • Aburous, D., 2016. Understanding cultural capital and habitus in Corporate Accounting: A postcolonial context. Spanish Journal of Finance and Accounting/Revista Española de Financiación y Contabilidad. 45(2). pp.154-179.
  • Agrawal, A. and Cooper, T., 2017. Corporate governance consequences of accounting scandals: Evidence from top management, CFO and auditor turnover. Quarterly Journal of Finance. 7(01). p.1650014.
  • Atanasov, V. A. and Black, B. S., 2016. Shock-based causal inference in corporate finance and accounting research. Critical Finance Review. 5. pp.207-304.
  • Bedford, N. M. and Ziegler, R. E., 2016. The contributions of AC Littleton to accounting thought and practice. Memorial Articles for 20th Century American Accounting Leaders. 49. p.219.
  • Bhasin, M. L., 2015. Contribution of Forensic Accounting to Corporate Governance: An Exploratory Study of an Asian Country. International Business Management. 10(4). p.2016.
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