BE210-TMA: The Financial Accounting Case Assignment

Financial Accounting Case- BE210-TMA
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PART (1): VIVA CASE STUDY
1] What are the main components of the VIVA’s “Consolidated annual financial statements and independent auditor’s report 31 December 2014”? The financial statements of VIVA are prepared in conformity with which standards?
In year ended 31 December 2014, the main consolidated financial statements include the statement of financial position, statement of profit or loss and comprehensive income, statement of changes in equity and statement of cash flows in the financial.
Viva prepared the statement of accounts in accordance with the International Financial Reporting Standards (IFRS). Kuwait companies with global operations comply with IFRS required disclosures when preparing books of accounts (Alanezi & Albuloushi, 2011, p. 149). Currently, when reporting the interim financial statements in the year 2015, would be prepared in accordance with IAS 34.
2] Compare the EBITDA (KD million) & Net Profit (KD million) for the years of 2012, 2013 &2014 of VIVA, mentioning the increase OR decrease in both.
201220132014KD millionKD millionKD millionEBITDA22.765.6112.6Net Profit 3.924.240.3
The earnings before interest, taxes, depreciation, and amortization (EBITDA), indicates the difference between revenue and expenses but excluding the taxes, depreciation interest payments and amortization charges. The EBITDA helps to determine the level of profitability in a business entity. The net profit is the EBITDA less the interest, taxes, depreciation interest payments and amortization charges, In the years 2012 to 2014 the EBITDA increased from 22.7 Kuwait Dinar (KD), million to 112.6 KD million, and the Net profit increased from 3.9 KD million to 40.3 KD million in the same period.
3] Go through “Independent auditor’s report to the shareholders” and answer the following questions:
a. Who is responsible for the preparation of financial statements?
The management is responsible for preparation of the financial statements complying with the International Financial Reporting Standards (IFRS), and provisions Companies law No 25 of 2012 (VIVA, 2014). This is consistent with the Kuwait’s government requirement to comply with the Commercial Companies Law and an organization’s Articles of Association (Alanezi & Albuloushi, 2011, p. 151).
b. What’s the independent auditor’s name and what’s their responsibility?
There are two independent auditors
KPMG Safi Al-Mutawa & Partners
(Al Hamra Tower, 25th Floor)
(Abdulaziz Al Saqr Street,)
And
Deloitte & Touche, Al-Wazzan & Co.
(Ahmed Al-Jaber Street, Sharq)
(Dar Al-Awadi Complex, Floor 7 & 9)
The auditors’ responsibility is to express their opinion that the financial statements comply with the International Standards on Aiding and give reasonable assurance that they are free from material misstatements (VIVA, 2014, p.22). Kuwait requires companies to have two external auditors after the adoption of global accounting standards (Alfraih & Alanezi, 2015, p. 5).
4] What were VIVA’s total assets at 31 December 2013 and At 31 December 2014? Write VIVA’s accounting equation at 31 December 2014, by filling “Assets=Liabilities + Stockholders’ Equity”
31-Dec-1431-Dec-13KD’000KD’000Assets213,962178,990Liabilities164,016169,408Stockholders’ Equity49,9469,582
2014
Assets= Liabilities+ Stockholders’ Equity
213,962= 164,016+ 49,946
2013
Assets= Liabilities+ Stockholders’ Equity
178,990= 169,408+ 9,582
5] Identify Revenues for the year ended 31 December 2014. How much did Revenues increase or decrease from 2013 to 2014? How much net income or net loss did VIVA earn for 2014 and for 2013? Based on net income, was 2014 better or worse than 2013?
In the financial year ended 31 December 2014, the revenue at VIVA was 239 Kuwait Dinar, while the 31 December 2013, the revenue was KD 182.4 million (VIVA, 2014, p. 19). Hence, the revenue increased by KD 56.6 million being the difference of 239 million Kuwait Dinar, and 182.4 million Kuwait Dinar (VIVA, 2014, p. 19).
The net profit in 2014 was 40,364,000 Kuwait Dinar while in the year 2013 it was 24,252,000 Kuwait Dinar, and the company performed better as there was net income increase of KD16.112 million (VIVA, 2014, p. 19).
6] For 2014 calculate the following ratios for VIVA (Show your work in calculating this ratio):
A. Identify net cash from operating activities for the year of 2014 & 2013.
20142013KD'000KD'000 Cash from operating activities 87,17283,600Payments towards employees’ end of service benefits (148)(114)Net cash from operating activities 87,02483,486
B. Identify net cash used in investing activities for the year 2014 & 2013.
20142013Cash flows from investing activitiesKD'000KD'000Acquisition of property and equipment (17,122)(41,395)Acquisition of intangible assets(50,968)(48,652)Finance income17...