CORPORATE ACCOUNTING

ABSTRACT
 CONTENTS
Abstract.......................................................................................................................................2
Introduction.................................................................................................................................4
Different Sources of Fund..........................................................................................................5
Evolution of the Sources of fund over the last three financial years..........................................5
Internally and Externally generated Fund Percentage...............................................................5
Merits and Shortcomings of the Different Sources of Fund.......................................................5
Interest & Non-Interest-Bearing Liabilities in the Balance Sheet...............................................6
Analysis of the key provisions under the AASB 137 ‘Provisions, Contingent Liabilities and
Contingent Assets’......................................................................................................................6
Reference made to AASB in Annual Reports............................................................................6
Records of Different Category of Assets....................................................................................6
The Measurement Basis used for each class of Assets Recorded...........................................7
Conclusion..................................................................................................................................7
List of References.......................................................................................................................7
INTRODUCTION
This report will focus on mapping the sources of funds used by two renowned companies
located in Australia, Wesfarmers and Transurban Corporation. Evaluation of newly adjusted
funds as well as the previous ones will be discussed here over a time period of last 03 years.
Why these companies are using these funds, the merits and demerits of the funds etc. will be
described here to have a rational view at the company’s actions. How Wesfarmers and
Transurban have used the standards under the AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets’ will be analyzed here to focus on their strategies of
recording assets and explain the measurement basis used by these organizations.
DIFFERENT SOURCES OF FUND
Specific sources of liabilities and equities have been clearly identified. Demonstrate a clear
understanding of each sources.
Companies use multiple sources of funding to grow customer numbers as well as their
business area. To grow a business a company must accept some risks and opportunities as
well to have a bigger inventory and service options. For explaining ease, here is some
funding options that been used by Wesfarmers and Transurban Corporation in Australia.
As Wesfarmers is a retail chain in the Australian Market, their Source of funding can be
explained in three segments:

WESFARMERS

On the basis of period:

 Long Term Equity : Equity share, Preference Share
 Short Term Equity : Trade Credit, Commercial Paper, Banks

On the basis of Ownership:

 Owners Fund : Equity Shares, Retained earnings
 Borrowed Fund : Lease Financing, Loans from Banks

On the basis of Source of Generation:

 Internal Sources : Equity share capital
 External Sources : Factoring, Trade Credit, Commercial Papers

TRANSURBAN CORPORATION

On the basis of period:

 Long Term Equity : Equity share, Preference Share, Financial Institutions
 Short Term Equity : Commercial Paper, Banks

On the basis of Ownership:

 Owners Fund : Equity Shares, Retained earnings
 Borrowed Fund : Lease Financing, Loans from Banks, Public Deposits
On the basis of Source of Generation:
 Internal Sources : Equity share capital
 External Sources : Share Issue, Debenture, Public Deposit

EVOLUTION OF THE SOURCES OF FUND OVER THE LAST THREE FINANCIAL

YEARS

The evolution of different sources of funds within the company (with specific focus on their
changes) has been discussed comprehensively.
For both of the institutions there were no change of Fund Sourcing over the past three years,
though some changes in Assets and Liabilities Segment.
During 2019, Wesfarmers has increased their inventory resulting in Cash decrease. They
Issued less shares in 2019 than previous years. Last year, their retained earnings faced a
negative balance of 304 million. Which was normal and positive before. Reserves also went
down in 2019 and the balance was 3702 million in negative which was 702 million in positive
balance in the previous year. Liabilities from the internal and external sources were lessened
to 8762 million. Interest bearing loans and borrowings were paid off and lessened to 350
million from 963 million. So, as a result of these activities during 2019, the total asset
decreased to 20,484 million from 33,292 million. Lease financials were received at the end of
the year 2019.

Transurban Corporation, on the other hand increased their total assets as well as their
liabilities. They increased their term debts by borrowing more to perform their activities. U.S.
private placement debt rose up to 2686 million from 1726 million dollars. Term debts were
less than the previous years. Construction obligation provision was newly added to the debt
list costing 133 million dollars. But after all these increases and decreases, their total
liabilities remained almost the same. Their issued units for equity increased to 15,954 million
dollars from 12,243 million dollars. Cash flow hedges from their reserve kept increasing in
negative balance comparing to previous three years which resulted in 239 million dollars in
2019. Share of other comprehensive income of equity accounted investments, net of tax
decreased to negative balance of 67 million dollars. After all these internal and external
sourcing, Transurban’s net asset increased to 11,220 million to 8,950 million dollars in 2019.
INTERNALLY AND EXTERNALLY GENERATED FUND PERCENTAGE
Has shown the percentage of each sources of funds used by the company distinguishing
between externally generated funds and internally generated fund.

Wesfarmers 2019
5%

96%

Internally generated Externaly Generated

Wesfarmers 2018
0%

100%

Internally generated Externally gnerated

Wesfarmers 2017

10%

90%

Internally generated Externally generated

 Wesfarmers 2019

15%

85%

Internally generated Externaly Generated

Transurban 2018

14%

87%

Internally generated Externally gnerated

Transurban 2017

13%

87%

Internally generated Externally generated

MERITS AND SHORTCOMINGS OF THE DIFFERENT SOURCES OF FUND
explained with particular reference to the context of the selected companies
There will be shortcomings with some merits for a particular activity that a company does.
Some sources of finance offer special benefits. Selling stock is among the fastest ways to get
access to a large amount of cash, and its money you'll never need to pay back directly.
Internal sources of finance keep control within the company and don't subject you to interest
payments on loans. Finally, non-ownership capital is a vote of confidence from the investor or
agency that issues a loan or grant. Grants are especially valuable because they don't require
repayment, and might be available on a recurring basis.
Each source of finance also has its own limitations. Ownership capital makes you responsible
to a group of shareholders who have partial ownership rights. Loans cost interest, which the
lender will demand back on schedule whether you've turned a profit or not. Internal sources
are limited and once you sell off your assets or spend your savings, you'll need to turn to a
new source of external finance anyway.
The amount of money your business needs, along with how soon you need it and how long
you expect to need before you can pay it back, will impact which sources of finance work
best. For example, a bank loan comes with a fixed repayment schedule, but you'll need to
begin making payments relatively soon. Ownership capital gives your company a sudden
influx of cash, but you can only take advantage of it once before you need to give up even
more control by selling your own shares. If you need a long-term investment that might not
show returns any time soon, selling assets or dipping into savings are likely better
alternatives.
Both Transurban Corporation and Wesfarmers’ funding techniques have some advantages
and some drawbacks:
• Bank Loans:
Banks do not require to take position of the business while borrowing money from them. They
offer a fixed rate of interest to pay along with the main annuity. This interest rate remains the
same for the rest of the loan life cycle. But, there are also some disadvantages. Obtaining the
money without track record can result in seizure of assets in some cases. Also, sometimes
business can not cope up with the growing rate of interest of the bank.

• Government Assistance:
Government can provide the business owner with a huge amount of invest money with a
minor interest. It gives the organization the exact exposure it needs to obtain its target market
segment. but It is very hard to obtain and due to its complicacy in rendering tenders and
offerings, it is hard to do business with the complex regulations. It seems to be based on a
reimbursement system.

• Business Angels:
These are the people who helps the entrepreneurs to grow and to sustain in the competitive
job market. Fast investment decisions can be made with the money that angels provide. This
money requires no type of hidden interests or collaterals. Besides, the business angels share
their experiences so that the particular firm can grow more conveniently. but this has some
demerits too. They require a percentage of share from the business ownership. They provide
less structural help than an investor company in the market.

• Cash at Bank:
This type of asset is highly liquid and can be used in any type of transaction. But inflation rate
can hamper the liquid money. Besides, a company loses its buying power if it keeps its
money in the bank.

• Debentures:
In case of debentures there is no different voting rights for the shareholders. But it incurs a
high cost of capital raising. change in Profit can be proven fatal for the company. Besides, a
company needs to pay the interest whether it profits or not.

• Issuing Share Capital:

It helps to raise the long-term capital the firm needs for their expansion or investing in assets
that will grow in the future. In this method, the firm does not need to repay its share capital,
but a percentage of the future profits among the stockholders. But in this scenario, owners do
not have the full control over the business. Plans are needed to be informed to the
stockholders and they have the right to block any plan to be executed.

• Trade Credit:
Reduced capital requirements boost cash flows. In this way businesses can buy now and pay
later for the product. Businesses can concentrate on their sales and research. But if the
payment is not paid by the deadlines, businesses have to incur a poor credit rating which will
damage the ability of taking further loans from other banks. Thus, it will become difficult to
grow, especially for a new business.

INTEREST & NON-INTEREST-BEARING LIABILITIES IN THE BALANCE SHEET

All different types of liabilities have been identified. Has correctly identified interest bearing
and non-interest-bearing liabilities.
The business should pay off notes, bonds and other debts that require it to pay interest first. If
a liability is not interest bearing, the business does not have an incentive to pay it off quickly.
If the business has 30 days to send in a water bill payment before it is late, the business can
benefit by waiting 29 days to make the payment, leaving the cash in a money market account
or other short term investment in the meantime.
Interest Bearing Liabilities Non-Interest-Bearing Liabilities
Transurban Lease financing, bank Accrued Interests, Shares
Corporation Loans, Bank overdrafts,
Commercial paper

Wesfarmers Lease financing, bank Public Deposit, Business Angels

Loans, Debentures investment, Common Shares

ANALYSIS OF THE KEY PROVISIONS UNDER THE AASB 137

Has shown an excellent grasp of the concepts under AASB 137

REFERENCE MADE TO AASB IN ANNUAL REPORTS

Has been able to identify and explain the areas where the selected companies have made
reference to AASB 137
RECORDS OF DIFFERENT CATEGORY OF ASSETS
Has completely identified all different classes of assets recorded by the company. The focus
is on classes of assets, not on individual assets

THE MEASUREMENT BASIS USED FOR EACH CLASS OF ASSETS RECORDED

Has comprehensively examined the measurement basis used by the company with
demonstration of excellent level of understanding of the concepts of historical cost and fair
value

CONCLUSION
LIST OF REFERENCES