ACCT 2105 ACCOUNTING IN ORGANIZATION AND

SOCIETY
ASSIGNMENT - SEMESTER 2,2017

Lecturer: Marlehan Bin Mohamed

Group Members:
Nguyen Hai Khanh - s3634982
Nguyen Tran Quoc Dang - s3651996
Vo Viet Anh - s3628820
Do Viet Quan - S3653005

Table of Content

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Question 1: Principal Activities 3

Question 2: Company values all classes of property, plant

and requirement 3

Question 3: Audit Partnership 3,4

Question 4: Revenue recognition criteria 4,5

Question 5: Regulations 5,6

Question 6: Business sustainability practices 6,7

References 7

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Question 1:

Principal activities
Fletcher Building is a New Zealand company with the headquarter located in Auckland, New
Zealand which operated in 5 different divisions: Building Products, International Businesses,
Distribution, Construction and Residential and Land Developments. Established in the early
1900s, through time, they have had 34 businesses, with more than 20,000 employees
operated in 40 countries across the world.

Question 2:

Describe how the company values all classes of property,

plant and equipment? Identify the note (number) this is stated?

As stated in Fletcher Building Annual Report 2016 (p. 65), all classes property, plant and
equipment are calculated using straight line depreciation method. Main depreciation assets
are:
● Buildings: 30 years.
● Plant and machinery: 13 years.
● Fixture and equipment: 5 years.
● Leased assets capitalised: 10 years.
● Intangible assets: 5 to 10 years.

Question 3:

Name the Audit partnership responsible for performing the

audit of the financial statements of the company.
Ernst & Young (EY) is the auditor that is responsible for performing the audit of the financial
statements of Fletcher Building (FBU).
Explain why the auditor must declare their independence.
The auditor must declare their independence because the annual report must be an
objective, public document to ensure the clarity of company’s actions. In addition, the use of
an external auditor is more reliable and proves that there are no background activities
among the company and its auditors.

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Explain why the financial statements must be audited by an external party.
The financial statements must be audited by an external party because it is expected to be
an unbiased, independent document. The use of an external auditor who has no common
interest in company’s performance will ensure the clarity of the financial statement. While
internal auditors are often employees of the company who are under the management of
staffs, external auditors are often appointed by shareholders and have the rights to look at
every aspects of the company, which results in a more clarified financial statement.

Question 4:

Define the revenue recognition criteria of the company and

identify the note (number) that deals with it.
Revenue is the increase in economic benefits or total income gained from the firm’s
business during the accounting period. The income can be generated from mainly sales of
goods or sales of services, or any other use of assets that associated with the main
operations of the firm.
Revenue recognition criteria of the company:

Sales of goods: is recognised when (AASB 118):

- The firm transfers risks and rewards of ownership of goods to the clients
- The company stops continuing to control or involve in goods management
- The amount of revenue shall be measured reliably
- The economic benefits that have the involvement of the transaction may flow to the
firm
- The incurred costs shall be measured.
Statistics: Fletcher Building’s sales of goods in 2016 was NZ$ 9,004,000,000 compared to
the 2015’s figure which was NZ$ 8,661,000,000.

Rendering of services: is recognised by the reference to the phase when the transaction is
completed at as the reporting period ends. Moreover, the outcome of the transaction that
has the involvement of rendering of services shall be estimated to be reliable (AASB 118).
Statistics: NZ$ 854.000.000 vs NZ$ 490.000.000 are two figures of rendering of services
from the firm in 2016 and 2015, respectively.

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Interest: is recognised using the effective interest method ( a calculation measure of the
financial asset or liability amortised cost as well as the allocation of the interest income or
interest expense over the relevant period) (AASB 139)
Statistics: Fletcher Building’s interests was NZ$ 11,000,000 in 2016 compared with the
figure in 2015 which was NZ$ 10,000,000

Dividends: is recognised when the right of receiving payment of the shareholder is formed
(AASB 118)
Statistics:There’s an increase in the total dividend for the year from 37 cents per share
previous year to 39 cents per share, and also the growth is consistent with this increase in
net earnings before significant items for the year. The dividends paid to shareholders by
Fletcher Building in 2016 was NZ$ 262.000.000 and in 2015 was NZ$ 248.000.000.

Question 5:

Identify the regulations for which the financial statements

should comply with? Give at least 2.

❖ Some regulations of financial statements:

● Uniform System of Accounts (USOA): defines how managers are to report
their financial records for regulatory purposes. The report includes balance
sheets, income statements, cash flows statements and operating statistics.
The USO helps to decrease opportunities for abuse and overcome the
manager’s information advantage which can be beyond the regulator.
● Accounting separation: is applied when the manager has other types of
business which the regulators does not require.
● Financial Reporting Act 1993
● Companies Act 1993

❖ The reasons for regulating public companies:

● Based on regulations, the regulators will know accurately the records for
ratemaking, assets and assets values, manager earnings, performance on
investment, etc. According to that, some external stakeholders such as
investors or lenders will make decision to invest or lend out capital to public
companies. Such thing will make the business more efficient.

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 ● Regulations will protect the smaller companies against the big companies or
groups of companies that can work together to fix prices as they want.
● Regulations make companies have appropriate framework for ethical
business behaviors.

Question 6:

Provide any evidence of the company’s initiative or

commitment to business sustainability practices.

According to the Annual Report, Fletcher Building are applying Corporate Social
Responsibility (CSR) model to ensure the sustainability of the business, which could be
classified into three groups:
● Environment: The company will protect and minimize the impact on the environment.
● Employees: Employees’ health and wellbeing will be protected by the company.
● Communities: The company will support and invest on local communities in which
they are operating.
Give specific examples of how your company reports their sustainability practices.
● Employees’ safety: 80% of Fletcher Building employees confirmed that they were
regularly involved in conversations about critical safety issues.
● Community: In New Zealand, Fletcher Livings has helped building grassroots hockey
and soccer at high school and high level representatives.
Community: The sponsorship of The Prostate Cancer Foundation of New Zealand
has raised $1.7 million for research and education programs.
● Environment: The involvement in environmental initiatives such as relocating
endangered geckos, introducing new environmental-friendly construction methods as
well as rehabilitating former quarry sites that has significantly reduce wastes helps
Fletcher Building to be nominated for many environmental awards.
Why are businesses concerned about sustainability?
● Brand image: By being sustainable, the company’s image will be improved. Taking
part in actions such as preserving environment or sponsoring local events will attract
more investors as well as customers’ awareness. (The is4profit team 2015)
● Employees’ loyalty: By making employees believe what they are doing is good, the
motivation to contribute will be much higher than companies that do not engaged in
social activities. (The is4profit team 2015).

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 ● Resource limitation: Resources are not limitless. By being sustainable, not only does
the company can have plentiful of resources but also not worry about finding
alternate resources for their resources. (Spector D. 2012).

References:
Australian Accounting Standards Board (AASB) 2010, ‘Revenue’, AASB 118, viewed 2
August 2017, <http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-
04_COMPoct10_01-11.pdf>
Australian Accounting Standards Board (AASB) 2010, ‘Financial Instruments: Recognition
and Measurement’, AASB 139, viewed 2 August 2017,
<http://www.aasb.gov.au/admin/file/content105/c9/AASB139_07-04_COMPdec09_01-
11.pdf>
Business Case Studies n.d, ‘Reasons for regulating business activity’, Business Case
Studies, viewed 2 August 2017, <http://businesscasestudies.co.uk/business-
theory/external-environment/reasons-for-regulating-business-activity.html>
Fletcher Building Inc 2016, ‘Annual Report 2016’, Fletcher Building, viewed 2 August 2017,
<http://www.fbu.com/assets/incoming/annual-report-2016-final-website-version-1.pdf>
Is 4 Profit 2011, ‘Why Businesses Should Care About Sustainability’, Is4Profit, viewed 2
August 2017, <http://is4profit.com/why-businesses-should-care-about-sustainability/>
Spector, D 2012, ‘10 More Reasons Companies Should Care About Sustainability’, Business
Insider, viewed 2 August 2017, <http://www.businessinsider.com/the-top-10-benefits-of-
convincing-your-company-to-care-about-sustainability-2012-3>