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Ansell Limited (ANN) is a global provider in protection solutions, with operations in the Americas, Europe and Asia. Ansell limited designs, develops, manufactures and markets a wide range of surgical, examination, industrial and household gloves, protective clothing and condoms. Ansell limited's operations consist of four global business units including medical, industrial, specialty market and sexual wellness. Ansell limited is listed in the Australian Security Exchange (ASX) since 22 August 1985 and has several subsidiaries. She presents consolidated financial statements.
Presentation of Financial Statements (IAS 1)
The financial reports have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standard Board ("AASB") and the corporation Act 2001.Ansell ltd presents consolidated financial statements in compliance with IAS 1: presentation of financial statements. Her statements are presented on the 30th of June each year and comprise of five components. Her currency of reporting is the Australian dollar although she does her transactions in US Dollars. The components of the financial statements presented by Ansell limited are the consolidated income statement and consolidated statement of comprehensive income which is presented separately, the consolidated balance sheet or consolidated statement of financial position, consolidated statement of changes in equity, consolidated cash flow statement and notes to the financial statement. All the line items or minimum line items are present in the financial statement presented by Ansell limited (ANN).
In addition to these statements, Ansell limited equally presents her Business and Regional Segments in compliance with IFRS 8: Operating Segments.
The income statement is presented according to function and contains all the line items in compliance with IAS 1.
Total revenues include revenue from the sales of goods and Interest Received or Due and Receivable from others, seen in note 2 of the statements. Financing costs according to note 3 is the total of Interest paid or due and payable to others and other financing costs.
The income tax is calculated at 30% which is consistent with the percentage used in 2010 as seen in note 6 of the financial statement although other permanent differences includes utilisation of tax losses not previously brought into account.
In the income statement, profits for the period are separated into those attributed to the share holders of Ansell and those to the non-controlling interest (IAS 27, paragraph 27: Non-controlling interests shall be presented in the consolidated statement of financial position within the equity, separately from the equity of the owners of the parent).
Included below the income statement are the earnings per share (IAS 33) both basic and diluted earnings per share seen in note 28.
Statement of Comprehensive Income
The statement of comprehensive income which is presented separately from the income statement is similar to the income statement with the profits for the period of A$125.9 millions. Ansell limited presents its statement of comprehensive income in compliance with IAS 1 paragraph 104 which states: An entity classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.
The balance sheet presented by Ansell limited shows all the minimum line items in compliance with IAS 1 paragraph 54.
Statement of Changes in Equity
The statement of changes in equity is presented in compliance with IAS 1 paragraph 106: statement of changes in equity. Given that there are no changes in accounting policies affecting the current year, this line item is absent in the consolidated statement of changes in equity.
Cash Flow Statement
The cash flow statement is presented in accordance to IAS 1 paragraph 10(d), following the rules laid down in IAS 7: Statement of Cash Flow. Equally, the cash flow statement of Ansell limited is reported from operating activity using the indirect method.
The company has identified a series of standards, amendments to standards and interpretations available for initial adoption at 30 June 2011. These may have an influence on the entity in the period of initial application. They have not been taking into consideration in the preparation of the 2011 financial report. The accounting policies presented in the notes relative to the basis of accounting, the principles of consolidation, foreign currency, revenue recognition, interest income, financing costs, goods and services tax, income tax, trade debtors and other receivables, inventories, investments, property, plant and equipment, recoverable amount of non-current assets, valued on the cost basis have been applied consistently by all entities in the group. Equally, no material errors were reported by the group.
Revenue (IAS 18)
The main activities of Ansell limited or group that lead to revenue based on the report to the directors are the development, manufacturing, sourcing, distribution and sales of gloves and protective products in the industrial and medical gloves market, as well as the health and well-being category worldwide.
According to framework, "revenue should be distinguished from gains. Revenue is income that arises in the course of ordinary activities of an entity where as gains include items like profits on the disposal of noncurrent assets, or on the retranslating balances in foreign currencies or fair value adjustments to financial and nonfinancial assets".
In the case of Ansell limited, revenue is recognized at the fair value of the consideration received net of any goods and service tax (IAS 18 paragraph 9: "Revenue shall be measured at the fair value of the consideration received"). Sales revenue comprises revenue earned (net of returns, discounts and allowances which are accrued at expected levels as sales occur) from the provision of products to entities outside the group.
Equally, in Ansell limited sales are only recognized in the income statement when the significant risks and rewards have been transferred to the buyer.
Inventory (IAS 2)
Inventory is measured as follows:
Stock on hand and work in progress are valued at the lower of cost and net realisable value.
The methods used in determining cost throughout the group are:
Raw materials and other stock: actual costs, determined on a first in, first out basis or standard costs approximating actual costs.
Finished goods and work in progress are valued at standard cost which approximates actual costs and include an appropriate allocation of manufacturing overheads where applicable.
Obsolete and slow moving stocks are written down to net realisable value where such value is below cost. Net realisable value is determined on the basis of each inventory line's normal selling pattern.(as seen in the notes to the financial statement)
The company used the straight line method of depreciation in order to write off the net cost of each item of property, plant and equipment, over its useful life span. This excluded land
There were no changes in the depreciation methods used and the expected useful lives in the current and prior years where as follows:
Freehold buildings............................20-40 years
Leasehold buildings........................... life of lease
Plant and equipment............................ 3-20 years
Equally, the depreciation and amortisation rates were reviewed annually for appropriateness.
Lease (IAS 17)
According to IAS 17 paragraph 8: "A lease is classified as a finance lease if it transfers substantially all the risk and rewards incidental to ownership.
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership".
Ansell limited expenses operating lease as incurred on a straight-line basis over the term of the lease.
Intangible assets (IAS 38)
Items can be recognized as intangible assets if they meet the definition of an intangible asset as set by IAS 38. Some intangible assets recognized in Ansell limited are: Good will and brand names, development cost, soft ware cost. According to paragraph 74: "after initial recognition, an intangible asset shall be carried at its cost less any accumulated amortization and any accumulated impairment losses"
Goodwill and brand
Goodwill and brand names are measured at cost being the excess of cost of acquisition over the fair value of the group's share of net identifiable assets required (This is clearly stated in note 14). Goodwill is not amortized.
On the other hand brand names have indefinite lives as a result of the impossibility to make an arbitrary assessment that the brand names have a finite useful life quantifiable in terms of years. Goodwill and brand names are reviewed frequently to test for impairment. An impairment loss in terms of goodwill is not reversed.
Expenditure in R&D is written off in the period in which they are incurred. But, development expenditure on new products or substantially improved existing products is capitalized only when future recoverability is reasonably assured.
Capitalized cost are usually reviewed and written off when the criteria for capitalization are no longer met. This can be seen in the notes.
Given that the group is applying recently acquired software, expenditure on software licenses and cost directly attributable to the design, development and testing of the system are capitalized as they are incurred. This cost shall be amortized over its estimated useful life immediately the system is installed and ready for its intended use.
Impairment of assets (IAS 36)
"Paragraphs 8-17 specify when recoverable amounts shall be determined". According to the notes to the financial statements, the carrying amounts of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at the balance sheet date.
Equally, an impairment loss is recognized as an expense in the income statement each time the carrying amount of a non current asset exceeds the recoverable amount.
Based on notes 14, "The recoverable amount of the CGUs are determined based on a value in use calculation utilizing five-year cash flow projections based on budgets for the next financial year as approved by the Board and internal forecasts for the 2013/2014 and 2014/2015 financial years.
A zero growth rate has been assumed for the subsequent two years. The terminal value is based on the cash flows for year five and a zero growth rate. The pre-tax discount rate applied is 10 per cent (2010 - 10 per cent) which equates to the Group's pre-tax weighted average cost of capital. The results of the impairment testing indicated that the value in use of each of the CGUs was significantly in excess of the carrying value of its net operating assets (inclusive of goodwill and brand names) and no impairment charge was necessary."
Provisions, contingent liabilities and contingent assets (IAS 37)
Based on the notes to the financial statement, a provision would be recognized when there is a legal, equitable or constructive obligation as a result of a past event and it is likely that economic benefits may be sacrificed to settle the obligation, whose timing or amount is uncertain.
The deferred tax came from deductible temporary differences and accumulated tax losses. These were attributed to trading stock tax adjustments, provisions, accruals, plant and equipment and capital allowances, and accumulated tax losses. As recognized in the notes, the group did not recognize deferred tax assets in respect of trading tax losses since it is not probable that future taxable profits will be available against which these losses can be utilized. The reported tax expense is A$8.8 million, the profits before income tax is A$134.7 million, as shown on the income statement.
To calculate the effective tax rate, we use the following formula:
Effective tax rate = (tax expense ÷ taxable income) Ã- 100
=(8.8 ÷134.7) Ã- 100 = 6.5 %
The income tax expense of A$8.8 million in the income statement includes utilization of tax losses not previously brought to account, as seen in note 6.
These employee benefits include; wages, salaries and annual leave, long service leave and post- retirement health benefits, and retirement benefit obligations.
Based on the components of remuneration, the fixed salary included base salary with contributions to pension plans in accordance with relevant legislation.
According to IAS 32 paragraph 11, "A financial instrument is any contract that gives rise to a financial liability or equity instrument of another entityâ€¦". Some financial assets of Ansell limited are; the currency or its medium of transaction(cash) by which all her transactions are recorded in the financial statement, payables (recognized for amounts to be paid in future for goods and services received billed or not to the group), interest bearing liabilities (recognized at fair value less attributable cost), the equity instruments (disclosed in note 24 which are options, performance rights, performance share rights granted as compensation), Hedges of investment in overseas subsidiaries (Based on the group's involvement in hedging activities, the group tends to mitigate financial risk).
Ansell limited in addition to its financial statement reported in Australian dollars, equally discloses in its notes financial information in US Dollars (note 32).
The effect of Ansell limited dealings with its subsidiaries (note 30) were eliminated when preparing the consolidated financial statements.
Equally, the international accounting standards where adapted to the Australian context by the Australian Accounting Standard Board ("AASB"). Hence, it can be concluded that Ansell limited complies with the International Accounting Standards.