step 3: restating firm’s financial statements · web viewi wish i had written more detailed notes...

ACCT11059 ACCOUNTING, LEARNING & ONLINE COMMUNICATION

ASSIGNMENT TWOSTEP 3: RESTATING FIRM’S FINANCIAL STATEMENTS

I decided to restate my firm’s financial statements before completing my Chapter 4 reflections. I think that the process of doing this helped in my understanding of many of the concepts in the chapter.

I expected the process of restating the financials to be quite challenging (and it was) but was surprised to also find it enjoyable. Physically dividing items into operating and financial gave me a clearer picture of the nature of PVCS’ operations. I spent quite a lot of time reading footnotes in the Annual Reports to check that I had correctly allocated items and this was quite enlightening.

I ensured that I took the time to link all of my restated items to my original spreadsheet. This made checking everything much easier. I also found the formulas provided by Maria invaluable in checking that I had restated everything correctly.

Statement of Changes in Equity (SOCIE)

I have always struggled with SOCIE so was relieved to find that the restatement of this part of my financials was relatively straightforward. Following Maria’s video to the letter I transferred the information from my original statements and performed the following checks (for all years but 2018 used as examples):

Total CI = OCI + Profit / Loss, ( 700 = -663 + 1,363)

Closing balance (SOCIE) = Total equity (Balance Sheet), (52,338 = 52,338)

Operating C I (O CI) SOCIE = O CI Income Statement, (663 = 663) (except for 2016 where there is a discrepancy. I have explained this below).

Financial CI (F CI) SOCIE = F CI Income Statement, (0 = 0)

Total CI (SOCIE) = Total CI (Income Statement), (700 = 700)

I found that O CI (SOCIE) = O CI (Income Statement) balanced for every year except 2016 where there was a discrepancy of €4,887,000. This is the amount of currency translation adjustment that is evident in the original income statement.

I have checked my annual reports and found that although €4,887,000 was entered as a currency translation adjustment in the Income Statement for 2016 it does not appear in the SOCIE as a currency translation adjustment (as with other years). Instead it has been categorised as a currency translation reserve and is used to calculate profit/loss.

The only way I can see to amend this is to remove the currency translation reserve, re-calculate profit and loss and add the amount to the currency translation adjustment column. I have made the assupmtion that the figure was incorrectly entered into the SOCIE in the Annual Report.

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Once I made these changes I was able to balance O CI for both SOCIE and the Income Statement. I have explained this in my workings in my restated financial statement.

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Balance Sheet

Moving to the Balance Sheet I continued to play and pause Maria’s video to ensure that I performed each step correctly. To separate financial and operating assets and liabilities I delved into the footnotes. I found myself becoming more comfortable with understanding why items are operational or financial. With my firm, PVCS, the overwhelming majority of items are operational with only cash and cash equivalents falling into the category of financial assets.

I had originally assumed tax liabilities would be financial items but remembered that Martin specified that these are operational.

I attributed 1% of revenue to operational assets and feel comfortable that this was a sensible decision. PVCS had liquidated many assets over the past few years so the amount of cash on hand changed significantly each year. The percentage of cash out of operating revenue was 19.7% in 2015 and a whopping 855% in 2018.

Again, I completed checks to ensure I had restated my balance sheet correctly. The following proved to be true:

NOA = NFO + E

OA + FA= Total assets in original statement

OL + FO = Total liabilities in original statement

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Equity = Restated CI equity

At first I couldn’t get OL + FO = Total liabilities in original statement to balance for 2016 and 2015. I had a discrepancy for each year that equalled the total of the non-current liabilities for that year. I pulled my hair out trying to understand why this wasn’t working then realised that I was calculating based on current liabilities rather than total liabilities. I added a row for total liabilities in my original financial statements.

Income Statement

I had been powering through the restating process when I hit the Income Statement. I must admit, that Maria’s warning about the difficulty of this part did cause me some anxiety. I decided to pause for a coffee break and a psych-up before tackling it.

One of the first things I did was identify my company tax rate. I noticed that the tax rate had dropped from 20% in 2015 & 2016 to 19% for the following years. Lucky PVCS! I also noticed that the tax benefit for PVCS was a negative amount. I considered adjusting the wording and reached out to peers on my blog for advice. Rebecca Bamford completed a peer feedback sheet for me and mentioned that she had the same query with her own financials. We both decided to leave the wording as Tax Benefit.

Similarly, I found that instead of Net Financial Expenses PVCS had a Net Financial Income. Knowing that NFE is needed for future steps of our assignment I decided to leave it as NFE. I reached out on Facebook and my blog to see if this was OK. I was relieved to get the green light from Maria (below).

Once again, I performed checks to ensure I had correctly entered my restated figures:

OI + NFE = CI (in original statement) (648.2 + 51.8 = 700)

O CI + F CI = SOCIE CI (663 + 0 = 663)

Overall, I found restating my financial statements to be quite cathartic. I definitely encountered some problems but the process of solving these was incredibly satisfying. I hope that my decision to re-classify currency translation reserve as a currency translation adjustment for 2016 was correct.

I definitely couldn’t have done it without such detailed notes in the study guide and Maria’s video. The video, in particular really walked me through the process and made

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http://thedailyamy.home.blog/2019/12/22/step-3-restating-the-financial-statements/


me much more confident that I had correctly allocated items. I also couldn’t have completed this task without noise cancelling headphones and my Mum’s babysitting!

I wish I had written more detailed notes while completing the restating as I found the process of reflection a bit tricky. I restated my financial statements well before the due date to make Step 2 easier but left the reflection until much later. This has meant a lot of mental re-hashing and walking myself through the process again. The benefit of this has been a deeper understanding of my statements and how they are linked, but I would have appreciated the extra time I could have saved by completing the restating and reflection together.

Below is my blog post reflecting on the process of restating my financials, and peer comments.

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I also reached out for feedback on our Facebook page:

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STEP 4: PROVIDING PEER FEEDBACK

I chose to complete feedback forms for Sally, Deyana and Rebecca. I had hoped to complete more feedback forms but unfortunately ran out of time!

Feedback From: Amy McClelland

Feedback To: Rebecca Bamford .

My Comments

Step 3 SOCIE – Your formatting looks spot on and you have linked well to your original financial statements. You have made good use of formulas and I agree that the figures for “Revaluation of available for sale financial assets” should have been allocated to financial comprehensive income. You had a lot more info to sort than I did but it looks like everything has been correctly divided into operating and financial income.

You had mentioned that your TCI in your restated financials is a few dollars different than in your original financials and I did see this but can’t find any errors in your calculations. I agree that it is probably due to rounding.

Balance Sheet – Your attention to detail is evident in the balance sheet with everything formatted well, linked to the original statements and clearly laid out.

Your formulas ensured that your totals are all correct.

I noticed that NFO + Equity = NOA for 2017 but is a few points out for the other years. I am guessing that this is due to rounding as I can’t find any errors in your calculations.

I checked the following and all were correct:

OA + FA = Total Assets in original statement

OL + FL = Total liabilities in original statement

E = restated CI

I see that you used a 1% cash allocation to operating and the balance to financial. I did the same and think that it made sense when looking at your firm’s position.

Income Statement – You have correctly applied your companies tax rate to calculate tax expenses. I agree that ‘net sales’ constitutes revenue and is correctly restated as operating income.

Restated Statement of Changes in Equity

Balance Sheet

Income Statement

Commentary and discussion with others

(Note: You may wish to give some comments

on their Excel spreadsheet)

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Again, you have followed Maria’s advice and used formulas and links throughout. Formatting is consistent and the statement is easy to follow.

I worked through the following formulas:

OI + NFE = CI

O CI + F CI = SOCIE CI

These were all correct

Step 4

Individual feedback with other students

I am thankful for the feedback you have provided for me in this assignment. You have obviously taken quite a lot of time to complete checks and have communicated your insights well in your peer feedback sheet. I see that you have also been proactive in providing feedback to others in the form of feedback sheets, blog comments and via our unit Facebook page.

I enjoy following your progress and reading about your thoughts on your blog. You are honest and open in your writing and always helpful in your communication with others. The quality of your work and time management is impressive.

Overall ASS#2 Steps 3 & 4 Overall, your restated financial statements show your incredible attention to detail. They are concise, easy to follow and accurate. You should be very proud.

You identified issues in restating your financials and posted about these on your blog. The decisions you made in allocating operating and financial items shows a good knowledge of the concepts that we are learning and an ability to make sense of financial statements.

Your feedback to others is consistently insightful, thorough and extremely helpful.

I have enjoyed looking at your work and providing feedback. I can see many areas of improvement for myself when I see the high quality of your submissions.

Keep up the great work!

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Feedback To: Sally Howard

My Comments

Step 3 I wasn’t able to check your use of links or formulas in the spreadsheet as a pdf was attached to your blog instead of the original excel document. I manually calculated formulas to check your totals and referred to your original financial statements in an earlier post.

SOCIE – You have formatted your restated financials differently to mine. It might be easier to clearly see the separation of operating and financial income if you had these separated under headings. I found it a bit tricky to work out which item was your total comprehensive income as this was listed twice. I completed the following checks:

Closing balance (SOCIE) = Total equity (Balance Sheet), (63,482 = 63,482)

Operating C I (O CI) SOCIE = O CI Income Statement, (0 = 0)

I had difficulty completing other checks because I am unsure of the Total Comprehensive Income amounts or Financial CI amounts in your SOCIE and Income Statements. I know that NZX is a very different company to my own firm so this could have resulted in the need for a different layout.

Balance Sheet – I found your balance sheet to be quite well laid out although I couldn’t find your Net Financial Obligations (NFO) or Net Operating Assets (NOA). I could not get the following checks to balance

NFO + Equity = NOA



I noticed that your total equity matches the restated CI equity in your SOCIE

E = restated CI equity

It is tricky to follow where the information is linked, and which formulas have been used without access to your excel spreadsheet.

Income Statement – You have correctly identified your companies tax rate of 28% to calculate tax expenses but I


Balance Sheet

Income Statement




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cannot see where you have calculated the NFE before tax and the tax benefit or your comprehensive operating income after tax. I would have liked to see your workings on the allocation of cash to operating and financial activities. This might not have transferred well from your excel spreadsheet.

I enjoyed reading your thoughts on completing Step 3. You are always honest and open in your reflections.

Step 4


I know that you were (unfairly) blocked from Facebook by a business competitor recently and this has affected your ability to interact on our unit FB page. However, I notice that you have still been active on our forums, email and blogs. You have also assisted me in Messenger chats and I really appreciate your support.

Overall ASS#2 Steps 3 & 4 I commend you for tackling the restating of NZX LTD financial statements. I recommend checking over your equations in the restated financial statements to ensure that everything balances. I hope my feedback helps in your submission. I am learning much more in this feedback process than I am able to impart! Thanks.


Feedback To: Deyana Erickson .

My Comments

Step 3 SOCIE – You have formatted well and your SOCIE is easy to follow and well laid out. I can see that you have linked some of your figures to your original financial statements. You have used formulas as per Maria’s instructions to calculate your totals.

I would recommend adding a row for Total Operating Comprehensive Income, and Total Financial Comprehensive Income. I calculated these to help me perform these checks:

Total CI = O CI + Profit / Loss

This formula didn’t balance for me. I had a close look and the discrepancy is the amount of the cash flow hedges in each year.


Balance Sheet

Income Statement




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Closing balance (SOCIE) = Total equity (Balance Sheet)

Operating C I (O CI) SOCIE = O CI Income Statement

Financial CI (F CI) SOCIE = F CI Income Statement

Total CI (SOCIE) = Total CI (Income Statement)

Balance Sheet – Again, you have formatted the balance sheet well and I can easily see your links to your original financial statement and your workings.

I performed the following checks:

Your formulas ensured that your totals are all correct.

NFO + Equity = NOA



E = restated CI equity

It looks like you have correctly allocated all of your operating and financial activities.

I see that you used a 1% cash allocation to operating and the balance to financial and I can see your workings to calculate this separation. I did the same and think that it made sense when looking at your firm’s position.

Income Statement – You have correctly identified your companies tax rate to calculate tax expenses.

Your formatting is consistent, and I can easily follow your workings.

I performed the following check:

OI + NFE = CI

I could only get this formula to match your CI when I changed your NFI figure to NFE (by making it negative). Might be worth checking.

You have been active on our Moodle forums, unit Facebook page and blogs discussing this assignment and asking questions. I commend you for utilising these resources.

I enjoyed reading your reflections on your blog post as you discussed the areas of the restating process that you found most challenging and the areas you were able to complete easily. I haven’t seen your final word submission but imagine that it would be similar. I would recommend adding

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screenshots of your peer discussions in your final reflections.

Step 4


I am thankful for the feedback you have provided for me in this assignment. You performed checks to ensure that my workings were correct and provided me with some valuable insights.

I have found you to be consistently helpful to me and others on our blogs, Moodle forums and Facebook forum.

I enjoy following your blog and find your writing very honest. I particularly enjoy reading your KCQs.

Overall ASS#2 Steps 3 & 4 Overall, I think you have done very well in this assignment. You have identified areas that have challenged you and have reached out for support and clarification as needed. You have demonstrated a good understanding of the task and have followed Maria’s advice in restating your financial statements.

Thank you for your feedback and for giving me the opportunity to provide you with feedback. I hope it has been of some help.

Feedback on Feedback

I am very grateful for the feedback I received from my peers and from Maria. The process of restating the financials was certainly arduous so it is reassuring to have some back-up! A benefit of completing my Step 3 early was that I received a lot of feedback that was helpful in completing my final submission.

I uploaded my draft restated financial statements before completing my final checks. Rebecca Bamford pointed out that I had a discrepancy (the infamous €4,887,000) in her peer feedback sheet. I would have found it eventually but she certainly helped in finding this mistake. I am constantly impressed by her attention to detail in everything she does.

I also received a peer feedback sheet from Deyana Erickson. Deyana took the time to perform checks on my workings and I am indebted to her for the time it took to review my work.

Evan Redward was kind enough to provide me with a peer feedback form also. He advised that I remove the figures alongside my Financial Comprehensive Income heading in my restated SOCIE. I certainly considered this but decided against it as it makes sense to me. I am very aware that I need to have financial statements that I can clearly understand for the next steps of this assignment.

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I also received feedback sheets from Daniella Davenport, Ryan McMahon and Sally Howard. Overall, the feedback I received was positive. The criticisms I received were incredibly constructive and helpful in finalising my submission.

I enjoyed completing the peer feedback forms as it gives me the opportunity to put the information I have learned into practice. As someone who learns by doing, having the opportunity to check my own and others work is an important part of the learning process for me.

I found the process of giving feedback for this step was very time consuming. To give constructive feedback I had to complete the checks that Maria provided. I sometimes had difficulty locating all of the items in my peers spreadsheets and this made completing these checks difficult. I was able to pick up errors but not always able to discern why the error existed. I used the restated financial statements, original financial statements and annual reports in trying to solve any issues. I have tried to provide as much information as possible so that any glitches can be rectified before final submission.

I struggled to provide accurate feedback to one of my peers because I couldn’t access her excel document to check linking and formulas. This made checking the information quite tricky. I hope that the feedback that I was able to provide is useful to her.

When reviewing my peer’s submissions I can see that there are areas that I can improve on in my own work. Rebecca Bamford holds herself to a very high standard and is meticulous. I am constantly impressed by the quality of her work and have trouble providing constructive feedback.

Deyana Erickson showed incredible resilience and determination in restating her financial statements. She identified areas that weren’t balancing and discussed these with peers to identify the reasons behind this. I always enjoy reading Deyana’s reflections on her blog and admire her openness.

Sally Howard is refreshingly open and honest about her experiences in ACCT11059. I know that she doesn’t necessarily enjoy this subject but I commend her for her efforts in making sense of the financial statements and her commitment to engage with others in discussions on our online forums, Facebook and blogs.

As I complete feedback I am incredibly aware that my own knowledge and understanding is minimal. I hope that the feedback I have provided is of assistance. I am disappointed that I have run out of time and won’t be able to complete additional feedback forms as I had originally hoped to do so.

All in all, I have enjoyed these steps in the assignment and am happy with my final submission.

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step 3: restating firm’s financial statements · web viewi wish i had written more detailed notes...

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