Department of Finance & Accounting Prepared By:

School of Business Dr Chng Chee Kiong &

National University of Singapore A/P Mak Yuen Teen

FNA1002 FINANCIAL ACCOUNTING

Semester 2, 2005/2006

Group Project

(A) Learning objectives of project

The project is the integrative component of the course. Over the course of the module,
accounting for significant categories of assets, liabilities and shareholders’ equities were
covered largely in isolation. In addition, some key financial ratios were also discussed. This
project requires students to apply the knowledge they have gained in the classroom to analyse
an actual company. The objectives of this project are to:

1. familiarise students with reading real published financial statements contained in

Singapore corporate annual reports

2. provide students with an opportunity to integrate the various topics covered during the
lectures;

3. require students to apply what they have learnt during lectures to search for, analyse and
interpret information presented in annual reports;

4. encourage students to self learn and discover further aspects of accounting not covered in
the module; and

5. develop skills in working as a team and writing effectively.

(B) Project group size

This project is to be done on a group basis, with 4 students per group (unless otherwise agreed
to by your tutor). The project group must comprise members of the same tutorial group.

(C) Assessment

Each group will have to hand in a project report. The project report constitutes 15% of the
assessment for the FNA1002 module. The assessment of the project report is based on the
substantive answers to the project questions (see section (E) below), organisation of report
and standard of writing.

The written report should be printed on one side of plain (white) A4 paper, with 1.5 spacing,
and be no more than 20 pages including any tables and annexes but excluding the cover page.
Please number the pages. Note that extra pages will not be marked. On the cover page,
indicate the project group members (name and matriculation number), your tutorial group and
your tutor’s name. Each group should also submit on a CD-ROM a soft copy of the annual
report of the company used in the project.

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All members of the group will get the same marks for the project, unless there is clear
evidence of free-riding. In this regard, each member of the project group is to separately
complete and submit the Group Project Peer Review Form in Annex A of this handout.

(D) Due date

The project report and the peer review forms are to be submitted to your tutor by 5.00 pm on
10 April 2006 (Monday). Late submissions will not be accepted. Your tutor will inform you
of the submission location.

(E) Requirements of project

1. Form your project group, select a company and register the group and company which
you have selected with your tutor by 27 Feb 2006 (Monday). Your tutor will have to
approve your choice of company before you proceed further.

2. The company you select should be a Singaporean company which is incorporated and
listed in Singapore (and not a company that is listed here but incorporated overseas) and
which is either a manufacturing or trading company. The broad industry sector of the
companies can be obtained from the Singapore Exchange website at the following link:
http://info.sgx.com/webstocks.nsf/revamp+new+all+stocks+by+sector?OpenView
(trading companies are included under “Commerce”). You may not choose The Hour
Glass Ltd, the main company which is used in your textbook. Note that no two project
groups within the same tutorial group may use the same company, so your tutor’s
approval of the selected company is on a first-come-first-served basis.
3. Download the latest annual report (Financial Statements) for the selected company from
the website of the company or from the Singapore Exchange website at
http://info.sgx.com/listprosp.nsf/newSitemap?openview. This will most likely be annual
reports for financial year-ends between November 2004 to October 2005 (most
Singaporean companies have year-ends in March and December). Please note that you
should use the full annual report, and not the summary annual report, for the project.

4. Read the entire annual report, including the non-financial reports (e.g. chairman’s
statement), the financial statements, and notes to the financial statements.

5. In your project report, answer the project questions listed in Annex B of this handout.
Note that some of the project questions are based on topics to be covered in later lectures
and so you are advised to attempt them only after those lectures are over. On the other
hand, there are some questions which require you to self learn topics that will not be
directly covered in this module.

In answering your questions, please do so in the order given and be concise. Write your
answers in your own words. If you simply cut and paste (with quotes) from the annual
report, you will score low marks for the project. If you provide additional relevant
information over and above that in the annual report, you can be rewarded with bonus
marks.

6. Submit the project report and the peer review forms by the due date stated earlier.
Remember to keep within the page limit for the report.

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7. If there are any questions regarding the requirements of the project, please consult your
tutor as soon as possible. Late consultation is not an excuse for late submission. Note that
your tutor can only provide guidance and not direct answers to the project questions; this
is supposed to be your project and it is graded.

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 ANNEX A
FNA1002 Group Project Peer Review Form (2005/06 semester 2)

My name: ______________________ (must be filled in)

My assessment of the efforts put in by my group members are as follow:

Name of group member Contribution to project in terms of

(including yourself) effort and final output

TOTAL 100%

EG: If you think all four group members (including yourself) contributed more or less
equally in terms of effort and final product, then indicate 25% for each member. The
instructor will use all ratings to decide if everyone in the group gets the same marks.

Please exercise your judgement responsibly and fairly.

If you assign very high or very low contribution to any particular member, you must
explain your ratings:

In the interest of confidentiality, please submit the forms separately (or in separate
sealed envelope if you prefer).

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 ANNEX B
Project Questions

With reference to the latest annual report of the selected company, answer the following
questions. Where the company has presented both “company” and “group/consolidated”
financial statements, you should use the group/consolidated financial statements in
answering the questions below. Unless otherwise stated, use the figures from the latest
financial year presented by the company (rather than the comparative financial statements
presented).

Wherever applicable, indicate which page/note of the annual report you obtained information
from to answer the questions. Failure to do so will result in difficulties for the tutor to verify
your answers and this will be penalised accordingly.

1. What is the nature of business of the company? What are the company’s main types of
revenues and expenses?

2. What is meant by the term “revenue recognition”? When does the company recognise
revenue? Explain concisely if the method(s) adopted is/are appropriate.

3. What percentage of total assets does the company hold as accounts receivable at the end
of the financial year? How does this compare to the previous year? How does the
company account for its bad debts? How would you evaluate the appropriateness of the
company’s bad debt policy?

4. (a) What are the types of inventories carried by the company? In general, why must
companies use cost flow assumptions to cost their inventories? What cost flow
assumption does the company use to cost its inventories? Is the assumption
appropriate?

(b) Compute the total historical cost of the company’s inventories as at the latest
balance date. If you think it is not possible to compute, explain why.

5. (a) How does the company depreciate its property, plant and equipment (fixed assets)?
Does this policy look reasonable? In answering the latter question, explain concisely
the tradeoffs management makes in choosing a depreciation policy, and how an investor
can assess the reasonableness of the depreciation policies of a company.

(b) Did the company dispose of any property, plant and equipment during the latest
financial year? Was there any gain or loss on such disposals? What would be the
journal entry to record such disposals? (Where applicable, use one of the disposals
made by the company to illustrate how the gain/loss should be recorded.)

6. Does the company have any intangible assets? What are these? What are the accounting
policies regarding amortisation or impairment of these intangible assets?

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7. Besides the stated liabilities on the balance sheet, state and (if possible) quantify other
possible future obligations that the company has as at the latest balance date. What is
the importance of such information to investors? (Note: If the company reports more
than three other possible future obligations, pick any three to explain.)

8. What are the transactions that are reported in the company’s statement of changes in
equity? In your own words, explain as completely as possible the nature of each of
these transaction(s). (Note: If there are more than three transactions reported, pick any
three to explain.)

9. Refer to the balance sheet. Are there any investments in other companies or entities
made by the company? How are they accounted for?

10. Is there a “minority interests” item on the balance sheet and, if so, what does this refer
to? Is there a “goodwill” item on the balance and, if so, how did this arise?

11. Did the cash and cash equivalents of the company increase or decrease during the latest
financial year? What are the causes of this increase or decrease? Is this positive or
negative for the company? Explain.

12. Who are the company’s external auditors? What sort of audit opinion did the company
receive in its latest financial year? In your own words, what does the opinion mean to
external users?

13. The Council on Corporate Disclosure and Governance (CCDG) has issued a Guide on
the Operating and Financial Review (OFR)
(http://www.ccdg.gov.sg/news/press_release_14012004.htm). In your own words,
explain why an OFR can be useful to an investor. Does the company provide
information recommended by the OFR guide?

14. Refer to the Corporate Governance Statement (or equivalent) in the company’s annual
report. In your own words, explain why this statement can be useful to an investor.

15. Compare the performance of the company for the latest two years. If you are a
shareholder, will you be happy? Support your answer with appropriate ratio and
percentage analysis. Show computations of the ratios and percentages.

16. If you are a potential investor, would you use your own money to buy shares of the
company? Why?

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