Report on financial activity
Qantas Airline Annual 2015 Report
To whom the report is disseminated for
Qantas is one of the major airline companies in Australia. The company usually prepares annual reports in order to inform the stakeholders of the performance of the company. The 2015 annual report targets the shareholders as well as the stakeholders. The shareholders include the investors who have shares in the company. They require the information in order to known the financial performance of the company (Rahman, 15). The annual report also targets the stakeholders such as the members of the public who may be interested in investing in the company. The employees of the company are also targeted in the annual report. The authorities in Australia are interested in understanding whether or not the company is in compliance with the legal regulations. The annual report therefore targets the authorities through the provision of information involving taxation or environmental issues.
Why the recipient may be in need of the information
The nature of information provided in the annual report is quite useful to the recipients. The information is required by the recipients to make decisions regarding whether or not to invest in the company. Such a decision is based on the financial performance of the organization. Most of the investors would only invest in a company that is making profits or is financially stable. The employee may also make a decision of whether or not to continue working for the organization. Most of the employees will not continue working for an organization that is making loses as it may collapse rendering them jobless (Rahman, 15). The authorities are mainly in need of the information about the taxes. It is mandatory for all the organizations to be tax compliance. Other stakeholders are interested in the measures that the company is putting in place to ensure that there is an improvement in the provision of services to the customers.
Information contained in the report
The annual report has different set of information that gives an overview of the company. The report has financial information which highlights the performance of the company. The financial information indicates that the company made a profit of $ 560 million after tax (Qantas, 6). This was an improvement from the previous year as it had made a statutory loss of $ 2.8 billion after tax. The report however indicates that the cost of operation at the company during the year $ 2 billion which is quite high. This is an indication that the company is making improvements financially. A review of operations has also been made in the annual report. The review indicates that the company is developing strategies to ensure that it improves on its financial position. This is through the reduction of costs associated with operations (Qantas, 6). Information about the corporate governance has also been provided in the report. It indicates that the company has a strong leadership team with highly qualified personnel.
Procedures used to analyze the financial information
There is evidence to indicate that the conversion and consolidation methods were used in the analysis of the financial data. Unit cost has been used in the financial analysis which is an important aspect of conversion. The unit cost for various items has been considered in the financial analysis of the data. There is evidence that spreadsheets were used in the analysis of the financial information. The use of spreadsheet in analyzing the financial data is a common aspect that is applied during the consolidation process (Pashang & Johansson, 22). The use of standardized variable as well as moving averages is common in the consolidation and conversion methods. This is therefore an indication that the methods were applied in analysis of the financial information. The use of the methods is useful in terms of ensuring that accuracy is enhanced.
Disclosure of assets and liabilities valuation
The financial report has fully disclosed the assets and liabilities of the company. The value of the assets owned by the company including the aspects of depreciation has been disclosed. The disclosure of the asset valuation indicates that the company is also set to dispose some of the assets. The total assets of the company are valued at $ 17.530 billion while the total liability is $ 14.083 billion (Qantas, 13). This is therefore an indication that the total assets are higher than the liabilities. This information indicates that that the company is in a good financial position and it is also steady. The disclosure of assets and liabilities is considered as a good practice in terms of financial reporting. The financial disclosure plays an important role in terms of ensuring that the stakeholders are able to obtain adequate information. The report is also indicating that it intends to acquire mores assets and offset some of the assets.
Indications of discrepancies and queries about the financial data
The financial report does not indicate any signs of discrepancies. Detailed explanations have been provided regarding the financial information that has been provided. The report has also highlighted the importance of ethics in financial reporting. This is therefore an indication that the company is committed to the provision of accurate information that reflects the actual financial position of the company. In the financial report of the previous year, the company has been bold to admit that it suffered losses. Other organizations may be tempted to hide such information so as to avoid bad publicity. Organizations such as Enron Corporation in USA falsified the financial reports in order to portray the company as financially healthy (Penman, 159). This is considered unethical and it is also amounts to fraud. The information provided therefore indicates that the company is ethical.
Benefits and allowances
The benefits as well as the allowances of the executive and directors have been indicated in the report. The allowances of the CEO have been highlighted with the report indication that it is a reduction from the previous year due to the implementation of new policies. The report indicates that the allowances and benefits of the CEO are based on performance (Qantas, 33). It is a common practice for the allowances to be based on performance as a means of ensuring that the CEO is motivated. This is also important in ensuring that the CEO put more efforts on the performance of the company in order earn more allowances. The measure ensures that the CEO does not continue earning hefty allowances even in the event that the organization is not performing well. The allowances that each director earned during the period has also been highlighted in the report. The company has a remuneration plan for the executive which stretches to 2017.
Income and expenditure
The organization has recorded all the information regarding the income and expenditure during the financial year. The total income earned by the company in 2015 was $15,816 while the expenditure was $ 14,583 (Qantas, 50).This is an indication that the expenditure of the company is quite high which has negative impacts on profitability. This is however a common trend in the Airline industry which is characterized with high operating costs and profitability. The high operating costs can be attributed to maintenance as well as the replacement of the fleet. The revenue of the company however experienced an increase s a result of the policies and strategies that were put in place by the company (Qantas, 51). Detailed information about the income and expenditures is an indication that there is transparency and accountability in the organization. The report enables the stakeholders to fully understand how much the company earned and how it was spent.
Financial status of the company
The company made an underlying profit of $ 975 million before taxes during the financial year. The statutory profit after taxes was $ 560 million which is an indication that the financial performance of the company is good (Qantas, 50). The amount is quite high in the industry and hence an indication that the company is performing well. This is however an improvement from the previous year when the company made a statutory loss of 2.8 billion after taxes. The profitability of the company can be attributed to various factors including the policies and strategies that were put in place. A decrease in the prices of fuel contributed to the profitability.
Recommendations and suggestions for the coming year
The recommendations of the company are mainly aimed at ensuring that it gains competitive advantage in the market. Exploring new markets is one of the recommendations that are aimed at enabling the company to gain competitive advantage. A reduction in fuel expenditure by 10% is recommended for the next year. Closing the unit gap to competitors by 5% is also an important suggestion that is aimed at transforming the prospects of the company (Qantas, 50). It has also been recommended that the company should simplify the fleet and de-leverage the balance sheet. It is recommended that the company should also invest more in customer satisfaction and brand building.
Clarity of the report and recommendations
The annual report is clear and it offers detailed information about the operations and financial performance of the company during the year. Every detail that has been provided in the report is important in terms of informing the stakeholders about the performance of the company. Footnotes have also been used for the purposes of providing further explanations regarding different issues. The possible problem that affects the profitability of the company has been highlighted in the report. The recommendations provide are logical and aimed at ensuring that the problems are addressed. The recommendations are directly related to the key aspects affecting the profitability of the company.
Compliance with statutory requirements
The report is in compliance with the statutory requirements. The requirements require full disclosure of the financial as well as the operational issues. The report provides full disclosure of its financial situation and hence an indication of compliance. The executive pay has also been disclosed in the report. The principle of full financial disclosure has been applied in the report which is an indication of compliance (Rahman, 15). Transparency as well as accountability is an aspect that is clear in the report. This therefore indicates that the report is in compliance with the statutory requirements. The report meets the international standards regarding the financial disclosure.
Comparison with the previous year
The 2014 annual report highlighted some of the aspects that had to be achieved in the 2015 financial year. Accelerating the transformation benefits is one of the recommendations that had been put forward in 2014. This was largely achieved in 2015 as $ 1.1 cost and revenue benefits were realized. The fuel expenditure which was an important recommendation in 2014 was achieved. The company was able to reduce the fuel expenditure in 2015 by 6% (Qantas, 14). This was an important achievement for the company as it contributed to its profitability. The 2014 recommendation required the company to reduce its fleet of aircrafts. This was achieved in 2015 as the number of fleets was reduced from 11 to 9. The company was also able to achieve some successes in terms of improving on the customer satisfaction. The projections that were made in 2014 were accurate regarding different financial as well as operational issues. This is despite the challenges that the company was facing in 2014. The high level of accuracy in terms of projections is an indication that the company has a lot of expertise in financial and well as business matters.
Qantas. A stronger Sustainable future: Qantas annual report 2015. Qantas. Retrieved on 12th July 2016 from, <www.investor.qantas.com/investors/?page=annual-reports>. 2016.
Qantas. Shaping our future: Qantas annual report 2014. Qantas.
Retrieved on 12th July 2016 from, <www.investor.qantas.com/investors/?page=annual-reports>. 2016.
Rahman, Asheq R. The Australian Accounting Standards Review Board (RLE Accounting): The Establishment of Its Participative Review Process. Routledge, 2013.
Pashang, Hossein, Österlund, Urban, and Kjell Johansson. Cost Accounting, Ethical Accountability, and Accounting Principles. Journal of Modern Accounting and Auditing, 10.1 (2014): 20-31.
Penman, Stephen. Accounting standard setting: Thoughts on developing a conceptual framework. China Journal of Accounting Studies, 1. 3-4 (2013): 157-167.