Analyse report Essay Example

ANALYSIS REPORT

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INTRODUCTION

The process of managing a business or a company requires a strict adherence to the regulatory framework put in place to govern such a management process. Usually, established corporate and business entities tend to work within the auspices of the regulatory framework such as the Companies Act. Besides, the reporting of the transaction requires a strict adherence to the reporting policies enclosed within the Financial Reporting Standards for the preparation of the financial statements. This paper intends to develop an analysis of the financial report of Pfizer Australia PTY LTD. Besides, it seeks to analyze the related party transactions as provided in the accounting standards.

The rationale for coming up with AASB 124 was to ensure that all the related party transaction be disclosed in the financial statements and made known to members and the shareholders. The related party transactions have the ability to influence the financial position of any entity. Therefore, these standards are premised on the need of making risks and opportunities within the reach of the entity known to users of the financial statements. (Enriques 2009).

Definition of Related Parties

A Related Party, as provided in AASB 124, refers to one which has a direct or indirect ability to influence another party. It usually refers to an entity which has a direct or indirect relationship with the entity in charge of preparation of its financial statements. The kind of relationship can have a conflicting interest to the activities within an organization (Kun 2005).

Definition of Related Party Transactions

A Related Party Transaction is defined as the transfer of obligations, activities, resources and even services between parties which are deemed as related. This kind of transaction occurs regardless of the payment of consideration of the activity involved (Gordon et al. 2004).

Some of the examples of related party transactions include:

• Lease Agreements

• Purchase/sale of goods

• Guarantee provisions of collateral

• Finance Transfers e.g. loan contributions

• Sale/purchase of property

The following are the related part transactions in the case study provided

The above examples are intergroup transaction of various companies with Pfizer Australia PTY LTD. It indicates the amount owed by the company and those owed to the company by various related parties.

The disclosure made in this case is consistent with AASB 124 which provides for the need to disclose the type of transaction, nature, amount and the time of occurrence. The financial statements clearly provide this information as concerning the related party transaction.

Conclusion

The accounting standards have made clear provisions for cases of related party transaction which may occur in the life of an entity. These are a transaction which is likely to influence the activities of the company. This paper focused on describing the general case of related party transaction and also focused on analyzing the financial report of Pfizer Australia PTY LTD.

References

Enriques, L. (2009). Related party transactions. In The Oxford Handbook of Corporate Law and Governance.

Gordon, E. A., Henry, E., & Palia, D. (2004). Related party transactions and corporate governance. In Corporate Governance (pp. 1-27). Emerald Group Publishing Limited.

Kun, C. X. W. (2005). Related Party Transactions. Corporate Governance And State Ownership Reform, 4.