ASS#2 - Step 2 - Restating your firm's spreadsheet - Statements of changes in equity
KCQ - answers

• My company SEEK have purchased shares on-market for employee share option schemes & treasury shares. I know that purchased shares are not a transaction with shareholders, I believe they would be classified as financial comprehensive income as they're purchased for the economic benefit of a firm at a future date. 

• Tax associated with employee share scheme - Upon closer inspection this amount doesn't even show on the annual report, I just read the heading. Silly me!

• Conversion of preference shares to ordinary shares. 
  They are fixed-income security shares that the investor can choose to convert into a certain amount of shares of a company. These include a previously determined timespan or certain date that needs to mature before the conversion. This option gives the investor security, and allows for the investor to cash in on a price rise in shares whilst avoiding the price drop. Conversion of preference shares to ordinary shares therefore means that the investor has decided to convert these shares, which is a transaction with shareholders in the statement of changes in equity spreadsheet. 

• Non-controlling interests acquired on acquisition. "An ownership stake in a company where the investor has absolutely no influence over how the company is run.  The majority of investor positions are deemed to be a non-controlling interest because their ownership stake is so insignificant relative to the total number of outstanding shares. For smaller companies, any position that holds less than 50% of the outstanding voting shares is deemed to be a non-controlling interest."
• Excerpt - Investopedia"http://www.investopedia.com/terms/s/sharepurchaseright.asp"

ASS#2 - Step 2 - Restating your firm's spreadsheet - Statements of changes in equity
KCQ - mostly questions

After submitting my SPA#1 earlier than the due date last week, I felt relieved that it was over, accomplished and finished. Done and dusted! Now to tackle ASS#2.
Therefore today I got stuck into trying to tackle what I feel is going to be the most difficult part of the assignment, which is the restating my firm's spreadsheet.

I'm really glad that we've been provided examples and have quite thorough instructions on what needs to be done and how to do it, but I may be missing the brief as I'm finding it quite difficult.

1) I'm having difficulties deciphering which are the operating and which are the financial comprehensive income from my statement of changes in equity.
- Is anybody else having issues here?

• My company SEEK have purchased shares on-market for employee share option schemes & treasury shares. Would these be transactions with shareholders?
• Tax associated with employee share scheme other operating income?
• Conversion of preference shares to ordinary shares. This is where Martin claimed that preference shares should be excluded from equity and placed as a liability instead. However, what about 'conversion of preference shares to ordinary shares', where does this fit in? Is it essentially the same thing and should be still included as a liability?
• Non-controlling interests acquired on acquisition. I seem to think of this as other financial comprehensive income

I would greatly appreciate other students weigh in on these questions, and also to hear about your experiences with your firms reports. I'm sure that some people are finding it a breeze, but I also wonder if the difficulty of these restatements vary with the complexity of your firm's annual report. For example, my company has very little to know plant & equipment, however a lot of shares, acquisitions of other companies, tax debts due to those other companies etc. ASS#1 now seems like it was an absolute breeze, oh how I wish we were again simply transferring information from the annual report straight to the spreadsheet. However, that seemed difficult once too.

Okay! Please submit your opinions or your findings of your company. I feel like I'm brimming with questions and no one to answer them.

Closure of ASS#1 - reflections

I'm sure I won't be the only one to comment that I'm glad that part is over. Although my brain is about to spontaneously combust, I have learn't a tremendous amount of information about my company, about other peoples companies and also from the study guides. I'm glad that I was assigned "SEEK" to research. After moving to Brisbane from the Whitsunday Coast about a month ago, SEEK literally was my best friend for quite some time. I found the ease of access for finding jobs, and applying for jobs fantastic. It was so convenient to have SEEK. I enjoyed getting to learn more about the company, about it's acquisitions of other companies, it's financial state and it's future goals. I really look forward to seeing how SEEK does within the coming years.

So after the panic, the temper tantrums, the brain shut-downs, I've learnt quite a bit about myself. The last two weeks in particular have been stressful. Upon commencing full time employment of a 8:30-5:30 job, coming home and trying to manage 4 subjects per week on top of other commitments, was not going to work. I had a melt down! I commend those students that are working full time, and managing a family, my hat goes off to you as I don't know how you do it! Well, I left the full time job due to personal reasons, have now got employment where I'm working shift work, and have cut my study time back to two subjects a week. I'm relieved. It means that I can focus my time to two subjects, and do my best in those subjects as opposed to being flustered with four. Now that my work schedule has settled down, and that I know I have to pay better attention to my studies, I'm sure that I won't be submitting my next assignment two hours before it's due. But it's a learning curve, and I'm better off for it. Now, we're on to the next stage. All the best!

Answers to my questions


I found that "EBITDA" stands for "earnings before interest, tax, depreciation and amortisation" - I found this definition whilst reading through study guide chapter 3, and also on Jade Thomas' blog

I now know that "NPAT" stands for "net profit after tax", I found this definition by googling it, and came across the meaning on the ASX website

I learnt that "fully franked" dividends means when the company pays the taxes on the dividends before they're given to the investors. The investors are then eligible to claim for a credit of the taxes.

In regards to short-term incentives (STIs) I found that Megan Thompson company uses STIs, offering cash and share-based component incentives for both executives and other employees, and offers another bonus for exceptional work from their employees. Karina Kaiser's company offers reward packages to encourage the employees to work harder, however she's found that her company has received bad reputation regarding it's senior authorities actions and behaviour towards the companies employees.

I found that there are other companies that include what population of their workforce is occupied by females. Megan Thompson company does, however they don't have as much of a population as my company, and are making it one of their focuses. None of the senior roles or board roles are filled by women in her company. Shrestha Anill's company doesn't have any information about it at all. After looking around at other's blogs I also found that Josh McNamara company had the same Corporate Governance Statement as my company, and also commented on how many women fill positions in his company. 

Key Concepts & Questions

Chapter 3

Reading through this chapter, I was quite intrigued when I learnt that a firms annual report are marketing documents. I never seen my companies reports this way, but in retrospect I definitely understand it. The reports were simple, with brightly chosen colours, a clean and concise set up, appealing to the eye and engaged the reader.

I never knew before that New Zealand’s end of financial year is on the 31^st of March. How interesting! I like that the author compared balance sheets to that of a persons eyes, nose and mouth. As I was looking through my own companies balance sheet, I found it relatively easy to understand, however when browsing through other peoples I found they were somewhat jumbled up, a lot different to mine and they used some similar words, some words I had never heard of. However when it all boils down to it, each firm have similar expenses, similar assets and similar liabilities, (like faces we all have similar eyes, noses & mouths)I can definitely understand how having a hard copy version of an annual report would be a lot easier to use. Taking footnote numbers, and scrolling away to hunt down those numbers, then going back to the balance sheet was tiring, and at times confusing.

I found that it was quite a bit easier to understand my companies balance sheets because they had provided the previous years financial numbers, which allowed me to compare how well or poorly they had done this year as compared to last, and it allowed me to understand where all these figured had developed from. I think that if balance sheets only provided one year (which was the current year) of financial figures of the company, it could be quite misleading.

Statement of changes in equity was difficult for me to understand because I do not fully understand what equity means.

I understand the term trust, and what it means in the world of business. I understand trust as providing a business with equity such as resources that will be used to generate future value and be able to repay its equity.

I really enjoyed that this study guide provided more than just information on our annual reports. The addition of works by experienced practitioners was quite valuable. As I learnt about Warren Buffet, I found myself really interested in knowing more, and once this assignment is submitted I’ll be hunting down his annual Chairman’s letter.

I always thought that annual reports were just a breakdown for those interested of what had happened in that particular company, on the financial side for that year. However, the statement “we should use a firm’s financial statements to help us engage with key aspects of our firm’s economic and business realities”  changed my idea, and enabled me to understand that these reports are much more than that, they should be used to help us engage and better understand what’s happening in a business. Like in chapter 1, my views are changing quite substantially from just seeing the numbers of the business, to understanding why we have these numbers, what do they mean, where did they come from, what can they tell us about that business, and what does this mean for the future of the business. I’ve found that this course has certainly got me asking a lot of questions!

Shares and dividends has certainly always been an area of difficulty for me. I’m still struggling to understand the full information. My company pays full franked dividends to its investors, which I found out means that the company pays the tax on these shares, and that the investors can claim a credit for the money paid in tax. So, I’ve learnt a little about shares, but I’d like to delve deeper into the information behind dividends to make my own assumptions, maybe even look into investing. It is an exciting world that I’m interested to learn more about.

Key Concepts & Questions

Chapter 1

Before I started this course, if you asked me “what is accounting”, I probably would’ve given some answer such as “the finance of a business” or “all the businesses accounts”. However, it’s after reading such an insightful chapter such as “A way of viewing business” that I took all these misconstrued ideas I had, and tossed them out the window. Because accounting so much more than just numbers. Yes, it still involves the numbers of a business, but I believe that accounting is the heart of a business. It gathers information on a firm’s economic and business realities, and allows us to deconstruct, and decipher what’s happening in the business, what’s especially happening with the financial side.

Personally, I don’t see how accounting could in any way hinder a business. I can definitely see how it would help to connect us to the firm better.

I did find it quite interesting that half of the directors of companies within Australia and New Zealand have accounting qualifications, which made me question, why? Is it so that they’re able see a business differently, that they understand the economic and business realities of a firm, and can look at them with a different outlook than just an unqualified person? Or are they sourced particularly because they’ve got accounting backgrounds? I’m interested to research further and know the answer, it’s a bit like which came first the chicken or the egg.

Reading through, I’m still a bit fuzzy on a trust type of business. I guess if there was an example it possibly could’ve helped, but I think I’ll need to do more research to simplify my idea of what a trust is when it comes to business.

Reading about ledgers and journals drummed up accounting years in high school, where I would enter any asset entry into the books, with a corresponding opposite entry. I smiled reading through this part of the book, because it was something I understood and was familiar with! Also really helped knowing a bit of the background of how double-entry book keeping was thought up.

I’m still to gain a firmer understanding on the term equity. At the moment I’ve got ideas floating around my head of what equity is, but I still need to learn a bit more about it to concrete those words in. However, assets, liabilities, revenue & expenses, I understand all those elements quite well.

Key Questions

- Whilst reading through SEEK's financial reports, I notice the acronym "EBITDA" is used quite frequently.
What is this abbreviated from?

- Also in the financial reports, I noticed that the acronym "NPAT" is also used frequently.
What is this abbreviated from?


- In the annual report for 2012, declared total dividends are fully franked?
What does this term mean? How does it affect it's shareholders and what affect does it have on the company?

- SEEK has chosen to not issue short-term incentives (STIs) as part of the new remuneration framework for executives. The company is of the opinion that these incentives are detrimental to the long term sustainability, and that the link between effort and outcome cannot be satisfied at short notice.
Does anybody else's company offer STI's? Or has your company chosen to scrap these as well?

- SEEK has included in the report under Diversity, that the overall female employee representation for 2013 is 54%. Why do they include this? It's under the Corporate Governance Statement and I wonder if this is something they have to comply with, or is it part of SEEK's own diversity policy?