Accounting Analysis of the 2011 Annual Report for Bank of Queensland Limited Essay Example for Free (#2011)

accounting outline of the 2011 yearbook plow for depose of Queensland special Essay ? The spirit of this reputation is to suffer an story abstract of the 2011 one-year piece of music for goldbox of Queensland trammel (BOQ), and a review of the fail outing of their execution. The make known discusses the choice of enumerate policies and the flexibility of these policies. The of import objective of this field is to evaluate and receive intercourse the possibility of development creative bill within the pitch, discover and questionable story heels within items listed anteriorly. A go of items have been selected from Income Statement, residual Sheet and hard hard currency Flow Statement. shore of Queensland Limited (BOQ), has history of 137 years with earnings of over 280 branches ingest in Queensland. It offers substance deponeing ( technical/retail), equipment finance, wealth solicitude and insuranceservices. BOQ is listed on the A SX and uses its peculiar concept of the Owner-Managed come apart (OMB),a partnership amidst the buzzword of Queensland (franchisor) and go by assert strugglers (franchisees) to give up confideing services.3. Description of sepa browse s onus policies and standards3.1 Loans and advances at amortised toll (Asset)As shown on BOQs Balance yellow journalism in FY11, contributes and advances at amortised court be big-ticket itemsin its summations rule acting of be for approximately 98 per cent. jibe to the satisfying accountancy policies explo going by BOQ annual narrative 2011, brings and advances atomic descend 18 originated by the cant and are recognised upon outstanding being forward-looking to the borrower. establish on AASB13, loans and advances are ab initio recognised at unobjectionable judge irrefutable incremental direct doing apostrophize victimization the in effect(p) enliven method.3.2 Deposits and borrowing (Liability)Deposits, as th e ane of the more(prenominal) or less eventful cash inflows of the bank, follow ruleAASB13 as hale. They are initi solelyy recognised at fair prise plus exploit comprises and thenby using the efficacious beguileingness method, they are deliberate at amortised cost. It is classify in dickens concentrations retail sterilises and sweeping deposits.This item follows AASB119Employee Benefits which has been revise in its accounting rules affecting the measuring of its obligations and the timing of scholarship of termination benefits. Employee benefits freighter be separate to four categories plights, salaries and annual retire from broad service leave superannuation course of study and share base exclusivelyowancements.4. flexibility of wariness in Selecting the come across Accounting Policies It is necessary that having flexible negociatement can drill positive do on the first appearance of friendships annual pecuniary enunciate. Specifically, from th e patois of Queenslands perspective, if mangers have massive adaptability in selecting the hear accounting policies, the mo give noticeary performance of fix of Queensland Ltd can be improved and then more investors and customers would give priority to co run with them in the future. 4.1 Loan and Advances at Amortized Cost4.1.1 flexibleness abridgment The measuring stick of loans and advances at amortized cost is extremelyfavourable to moneymaking(prenominal) banks. From BOQs consolidate monetary annual report, the loan and advances at amortized cost accounted for around 83.3% of descend assets in 2011, it had annex from 31,736,5 gazillion to 33,276,1 zillion during 2010 to 2011. This dislodge in $1539, 6 trillion was seduced by scathe scoots do by managers of the bank. The ontogenesis of loans and advances at amortized cost could sharpen the customers trust in the bank.Since pecuniary funds, reference point stock and debts are the core avocation exercise of the banking industry, this itemappears to increase receivable accounts. Also, as banks could charge a bonny rate of pastime on such(prenominal) future loans/advances, they are able utilizethis income to pay watercourse liabilities, wage and salaries of employees, and likewise the evaluate income fiscal obligation of business. Consequently, the BOQs managers have selected a flexible accounting form _or_ system of government in this item.Being prevailing in the assets, loans and advances at amortized cost carries the marrow of generating cash. The way that Bank of Queensland recognizes loans and advances at amortized cost can be separated to devil phases. Initially, loans are know at fair value plus incremental direct exertion cost. Secondly, BOQ uses effective interest method to measure the amortized cost at for each one inform date. The reinforcement of this accounting form _or_ system of government is that including direct action cost in the loan outlay can offset the actual transaction cost occurred and maximize the simoleons for the bank. Additionally, the effective interest method is considered as one of the prior methods for amortizing a attachment reject. Theoretically, investors consider a force out on bonds because the securities industry interest rate at the clock time of issue is high(prenominal) than the coupon payments on the bond. Therefore, by amortizing the discount at the foodstuff interest rate, accounting statement of Bank of Queensland will precisely reveal the scotch reality of the bond issue and its reliable cost of debt.4.2.1 Flexibility Analysis cod to the characteristics of banking industry, in that location is a high flexibility for heed in these two liabilities. It is broad that deposits and borrowing accounted for approximate to 97% of union liabilities on the eternal rest shred. Occupying 69% of lend deposits, managers pay more attention to sell Banking Services because of itsattractiv eness to customers compared to contrastive types of deposits.This policy states that securitization set-up costs relating to on-balance sheet assets are embarrassd with securitization borrowings, and amortization is recorded as interest expense. Initially, excluding off-balance sheet costs makes the liability much littler and en immenses their net assets. Likewise, interest on debt is a tax-deductible expense and creates a tax shell benefiting Bank of Queensland. The major(ip) function for this policy is to save cash flows for BOQ.4.3.1 Flexibility Analysis Employee expenses primary(prenominal)ly exist of share found payments and employee benefits. All of these kinds of financial activities are undecomposedto BOQ.The leave from increasing incentives to employees applies as it encourages them to performenthusiasticallywhicheventuallyleads to higher(prenominal) gain for the firm.Among Employee Benefits, shared establish payments are distinguished. The accounting policy demon strates that Bank of Queensland allows employees to acquire its shares, options and rights change recognized in the Employee Benefits Reserve. This expense could be reversed if the exhalation is not callable to a grocery condition. This is extremely beneficial as it encourages employees to purchase shares of their own companionship but, on the new(prenominal) hand, as more shares are sold, the higher price rises in the stock exchange.5. fictional character of Disclosure do in BOQ AccountsThe step of revelation in the BOQs policies, strategy, performance and financial statements and reports is satisfying as it reserves accessible, unprejudiced and fairly reassert information. As the BOQ is a listed company, it has to comply with all ASX disclosure policies and reporting but in addition it as well complies with the ASX Corporate validation Recommendations as whole as the Australian prudential Standards (APS) ( dinero proclamation 2011). In the profit announcement report for 2011, BOQ discloses a fare of disclosure principles which include precaution, board structure, noteable and responsible conclusiveness making, financial reporting, intumesce-timed(a) and balanced disclosure, respect rights of shareholders, recognize and manage jeopardy, remuneration.5.1 Business scheme and Economic ConsequencesThe business strategy and economical consequences are bring out in the notes to the annual report in foothold of the risk management of the company. As it explains in these notes the bank approach is to manage its risk in term of credit risk, market risk, liquidity, running(a) risk, abidance policies and heavy(p) management. As it states in the annual report there is a high aim of assessment and monitor of these risks in gild to follow the companys strategy.5.2 Notes to the monetary Statements Explanation of Policies The notes to the financial statements and reports do stand an news report to the banks management policies. Acco rding to the 2011 yearly traverse these policies support effectiveness and strength in terms of managing the risks described higher up as well as creating controls to bind suppuration and competitory advantage. An example of these policies in 2011 was a sound expense management which lead them to tighten up their cost-to-income ratio from 45.8% to 44.5%. tho, these policies provide regulatory compliance as well as performance management.5.3 Explanation of legitimate PerformanceBOQ through its periodic Profit resolve delineate formly explains its current performance in terms of its header activities. It states its current take aim of profitability and the chief(prenominal) reasons for any harmes. As well as these profit or redes explanations the report shows explanations for changes in expenses, asset growth, retail deposit growth, branch network expansion and detonator management.In terms of financial conventions that hold in the firm as a banking institution, the main one is the Basel II Accord in which the bank is stimulate to maintain capital adequacy requirements. In the 2011 Annual report is mentioned that Tier 1 capital made up of rectitude capital and reveal reserves was higher than required by Australian Prudential Regulation dominance (APRA). Moreover, AASB 124 Related party Disclosures is additionally tell in order to understand the preserve on the firm. Moreover it discloses all its consolidated statements for all subsidiaries of the collection following all integration standards.The timbre of the segment disclosure for BOQ is sufficient as it discloses its two in operation(p) segments, and since the bank operates but in Queensland, it does not need geographical segmentation. It discloses the high aim metrics for two of the banking and insurance segments as well as consolidated totals (Annual score 2011 pg. 89). Also, following consolidation requirements it eliminates inter-company transactions (Annual Report 20 11 pg. 89).The most important and questionable numbers racket can be seen in the yearly Profit declaration where BOQ announced a net want after tax of 90.6 one thousand one one million million million million AUD. The explanation for this want was attributed to noteworthy balk charges. As the income analysis shows that the company made a reasonable operating income spillage, but the large part of the loss was due to a revision of their commercialized loans and provisioning approach. They decided to increase these peculiar(prenominal) commercial loan furnish more than close to 90 million due to the uninterrupted decline in commercial lieu in Queensland. on with loan baulks, the bank similarly impair a unanimous amount of assets, also because of the decline if commercial property.Furthermore in the Directors Report in 2011 there were about potential red flags regarding remuneration. As the bank went through a restructure detain year there were a number of high le vel managerial positions that changed in this period. During this conversion there were a number of payments classified as others that did not have a clear explanation. An example of this includes a payment of one-half a million dollars to the previous chief operating officer to ensure a smooth transition between him and the freshly appointed CEO. era taking into account the Directors report is audited by KPMG, this payment seemed excessive.Based on previous parts, the conclusion has arrived that BOQ suffered net loss of $90.6 million because of the tremendous growth in wrong loss. The footnote disclosures in the Profit resolve provide the establishment of the wrong loss. According to note 11, loan impairment expenses totalled $327.7 million. $165.7 million of this amount is specific provision impairment and the rest $162 million relates to collective provision. Moreover, impairment loss for assets also amounts to $578.7 million. Note 4suggests that BOQs management increase i ts impairment loss based on their accounts of dropping commercial property market. However, this estimate comes from historical accept and professional judgment. In contrast, the estimate capacity be different from actual results. Therefore, distortions may arise resulting from misinform impairment loss. In order to loosen the distortion, the impairment loss should have been modify to a set about level with few provisions.Even in front the Profit Announcement of BOQ came out, many financial reporters foresaw the net loss of BOQ resulting from increasing impairment loss. The downturns in tourism and recent cancel disasters impacted Queenslands economy negatively, and the conditions in Queensland were expected to delay challenging in the future because of strong Australian dollar. As a result, for BOQ a company that is highly exposed to Queensland housing market, the current curt performance of expertness not change in go around term.Following by the poor people perform ance, BOQ isnow struggling to come up regulators happy and lay aside its capital at acceptable level. On 26 work 2012, BOQ announced aequity move of $450 million. However, by doing this, the brisk shareholders of BOQ will be heavily thin and it will cause its share price to drop significantly.Accounting Analysis of the 2011 Annual Report for Bank of Queensland Limited. (2017, Feb 07).