ACCT1501 Accounting and Financial Management 1A
Session 1 2015
Measuring & Evaluating Financial Position & Performance
Dr. Youngdeok Lim
School of Accounting
Session 1, 2015
WEEK 2: Measuring & Evaluating Financial Position &
Every commercial entity engages in transactions with other parties. For example,
Woolworths buys products from suppliers, employs shop assistants, builds new stores, sells groceries and each individual transaction is recorded and reported in the Balance
Sheet and the Income Statement. In this lecture, we will examine the content and use of the statements measuring financial position at a particular date and measuring financial performance over a period.
At the end of this topic, you should be able to:
Understand the terms, format and function of the Balance Sheet & the Income
Identify the components of financial statements
Describe the relationship between the balance sheet and the income statement
Understand the implications of the decision to record expenditure as an asset or as an expense
Understand the differences between cash profit and accrual profit
Trotman, Gibbins & Carson Chapter 2
Session 1, 2015
Tutorial Questions – Week 3
DQ 2.1, 2.2 2.11
DQ 2.6, 2.10
P2.7, P2.9, P2.11, P2.16
Session 1, 2015
Billabong posts $126.3m half-year loss
February 21, 2014,
Troubled surf and skate wear retailer Billabong International is yet to see signs of a turnaround, reporting a net loss of $126.3 million for the six months ending December after booking another $132.6 million in asset writedowns and restructuring costs. The loss compared with a bottom line loss of $536.6 million in the year-ago period. Before one-off costs, underlying net profit fell from $19 million to just $1.8 million, falling short of market forecasts around $6.5 million. Earnings continued to decline in North America and Europe, offsetting gains in Australasia.
"This is a complex, difficult turnaround,” said chief executive Neil Fiske. "We are not daunted by challenges we face, but neither do we underestimate them." Mr Fiske unveiled a major global restructuring of marketing, merchandising, sourcing and HR functions and announced several key appointments. "This is just the beginning - we reiterate the turnaround is difficult and complex and the lag effect of months of turmoil will be with us for a while longer," he said. "But we have confidence in the potential of the brands and know what we need to do and are getting on with it at an aggressive pace," he said.
Billabong shares went into a trading halt after the company launched its previously announced $50 million rights issue. The funds will be used to repay existing debt. Mr
Fiske, who took the helm last September, hopes to restore profits by building Billabong's three biggest brands - Billabong, RVCA and Element - as well as supporting emerging brands and culling those that are cluttering the portfolio.
Mr Fiske also plans to reduce the number of products and stores, develop integrated marketing strategies for each region, and improve Billabong's supply chain - moving to fewer, bigger, suppliers - to reduce costs and improve the quality of its products. Last month, Billabong shareholders approved a $386 million debt and equity rescue package, which handed 41 per cent of the company to US hedge funds Oaktree Capital and
Centerbridge Partners. The company was in danger of collapse last year after posting a
$860 million loss and writing down the value of the Billabong brand to zero. Group sales from continuing operations fell 2.4 per cent.