BUACC 5930 Accounting Concepts and Practices Assessment Answer
Answer to the question – 1
Lendlease is a multinational construction, property and infrastructure company established in the year 1958 in Sydney, Australia. The major operating segment of the company is development, Construction, Investments, and others. This business is indulged in the business operation which is indulged in the commercial program and handling the construction management program. The company measures it at the unit level as well as on the regional level and is reported annually to the respective team and shows the indulged program for the construction work program.
Lendlease is operating in all the geographical locations for the development segment. The company is involved in developing apartments, commercials and retail infrastructure, social and economic infrastructure (Loosemore, & Phua, 2010). The margin of the construction is to be recognized in this segment.
For the construction segment, the company operates in all locations across the globe. The company provides services in this segment such as project management, design, and construction services in the commercial and retail sectors majorly working in the defense sectors (Loosemore, & Phua, 2010).
The company operates for the investment company in all the geographic locations the company is located. This includes in the group ownerships interest in property and infrastructure company as investments.
The financial results of any company include the Statement of the Financial Position, Income Statement, and Other Comprehensive Income, Cash Flow Statement, and Statement of Change in Equity (Martel, 2019).
As per the income statement, the revenue from the operation has decreased from the year ended in 30 June, 2018 at the year ended 30 June, 2019. The revenue from the development segment has increased from $ 71.1 billion from the year ended in 2018 to $ 76.1 billion for the year ended 2019. The revenue from the Construction Segment has increased from $ 15.2 billion to $ 15.6 million from the year ended 2018 to the year ended 2019. The revenue from the investment segment has increased from $ 30.1 billion from the year ended 2018 to $ 35.2 billion for the year ended 2019 (Loosemore, & Phua, 2010). The profit before the taxes has been reduced by over 40% for the company from the year ended 2018 to the year ended 2019; it has decreased from $ 794 million for the year ended 2018 to $ 467 million for the year ended 2019 (Lease, 2017).
The basic earning per share for the year ended 2018 is $ 100.2 and has decreased around 45% and has reduced to $ 55.6. Through this, we can understand the company has decreased the value of the net worth of the shareholders.
The statement of the financial position shows the financial conditions such as liquidity, the financial structure of the entity, and the assets owned by the shareholders of the company and liability a shareholder is owing to the outsiders (Martin, & Perry, 2019). This helps in managing the handling business program and managing the financial program in handling the financial structure.
There has been an increase in the total assets of the business. The assets increased from $ 16,964 million from the year ended 2018 to $ 17,178 million from the year ended 2019. There has been a significant improvement in the asset side of the business in the equity-oriented investments. There has been a decline in the value of shareholders of the company. The value for the shareholders has decreased from $ 6,414 million for the year ended 2018 to $ 6,357 million for the year ended 2019 (Loosemore, & Phua, 2010).
Cash flow statements present the cash outflows and inflows of the company about the Operating, Investing, and Financing Activities. The total of the various cashflows is to be presented in the cash flow statement (Whitla, Walters, & Davies, 2016).
In the present scenario of the Lendlease Group, there has been more of a cash inflow than the outflow. For the year ended 2019 the cash and cash equivalents are $ 1,290 million whereas for the year ended 2018 the balance was $ 1,177 million (Loosemore, & Phua, 2010).
|Description||FY 18||FY 19||Target|
|Total Group Metrics|
|Return on Equity (ROE)||12.70%||7.40%||10-14%|
|Dividend Pay-out Ratio (DP Ratio)||50%||51%||40-60%|
|Core Business EBITDA Mix|
|Core Business Segment Returns|
|Construction EBITDA Margins||3.30%||2.20%||2-3%|
|Segment Invested Capital Mix|
|Regional Invested Capital Mix|
From the above taken from the annual report of the Lendlease Group, the Company had obtained the target they required for the financial year ended 2018 but not been able to achieve the targets for the year ended 2019. The company has maintained the dividend pay-out ratio between the targets for both the financial years. However, as per the gearing ratio the company has not been achieving the targets for both the financial years (Walker, 2010).
The Lendlease Group has achieved in their targets in the EBITDA in both the years for the development and construction segment of the company. While the company achieved EBITDA for the investment segment for the year ended 2018 but there has been a slight decline in the achieving the targets as set by the management for the financial period 2019 (Goulding, Pariante, & Albanese, 2012).
The Lendlease Group has achieved in the three core segments reporting of the Development, Construction, and Investments. The company has been able to achieve the targets for both the financial year ending 2018 and 2019 (Loosemore, & Phua, 2010).
The Lendlease limited has been maintaining the sufficient capital structure mix in both the segments of the development and investment segment and is similar and maintained throughout both the period (Johnston, & Clegg, 2012).
The Lendlease limited has invested capital mix in both the years for all the continents in both financial ended 2018 and 2019 within the targets as it was expected to be. However, there has been the overcapitalization in the continent of Europe by the company and undercapitalization in the continent of Australia (Loosemore, & Phua, 2010).
Answer to the question – 2
Integrated reporting is the process that results in the communication of the creation of the values over the period. This report sets out how the strategy, governance, policies, and practices which tend to create values for the organization over the period. The six capitals for the integrated reporting are financial, intellectual, human, manufactured, social relationship, and natural.
Financial Capital – It is a traditional way of measuring the performance of the company. It includes the capital funds obtained through financing from the outsiders or from the generating from the operations.
Intellectual Capital – These accounts for the intangibles creates the brand and the reputation of the company. In addition to these the creation of the goodwill, patents, copyrights, trademarks, and others (Kudyba, 2015).
Human Capital – The skills and know-how of the professionals of the organization which is affected by the ability to fulfill their roles.
Manufactured Capital – This is the physical and the infrastructure built within an organization using the technical equipment’s and tools.
Social Relationship Capital – These are the relationship build in between the organization and all the stakeholders which includes shareholders, government, suppliers, customers.
Natural Capital – These are the natural resources that include water, fuels, electricity, crops, and others which are limited in nature but are useful for the functioning of an economy.
In the given case of Lendlease limited, the company is managing for the health and safety, financial, customers, and human (Girmscheid, & Brockmann, 2016).
Lendlease limited is measuring values for the above as-
Health and safety – The major challenge involved here is to maintain the proper safety and physical well-being of the employees who are engaging themselves with the assets of the company and working on site. There are global Minimum requirements that have to be met across all the countries they are operating are uniform and standardized. The global minimum requirements are extended for the physical health and well-being of those who interact with the assets and are working at sites. The value the company created by operating safely helps the employees that they are being cared and felt comfortable within an organization. This builds the strong fundamental relationship with the company and makes the employees reliable, consistent, and efficient. The company is measuring value through (Graham, & Thomas, (2015).
- Percentage of project with no critical incidents – A critical incident is an event that causes the reasons for and the death or permanent disability.
- Critical incident frequency rate – Indicating measuring rates of critical incidents.
- Lost time injury frequency rate – These are the standard measures that prevent the worker from joining the workplace the next day for returning to his duty.
Financial – The major challenge involved in this is to deliver the shareholders return along with maintaining a strong relationship with the management to support investments for the future of the organization. The company adopts a prudent to capital management to have a strong balance sheet and build a relationship with the investors. The company are measuring values through (Merrett, 2007).
- Return on Equity – The annual profit attributable to shareholders of the company
- Earnings per share – The profit earned after tax attributable to the average number of the shareholders.
Customer – There is a process of continuous improvement based on the customer insights and actions which can be identified through market research by the development of the new products. This approach is used to measure customer satisfaction and advocacy. These are measured by customer satisfaction – The company measures it at the unit level as well as on the regional level and is reported annually to the respective team. Action plans are being formed and developed based on the customer experience, supporting and developing as per the needs of the customers (Harris, 2014).
Human – The Company attracts, develops, and retains the diverse talent for building a culture and through continuous learning where the people are recognized in the organization and they are being awarded for their success. The Lendlease measures them through:
- Retention of the Key Talents – The company is the belief of that retention the key leaders would benefit the organization and the workforce capabilities.
- Succession Strength – This measurement shows the capable talent who can be held responsible for the team and the workforce.
- Leadership Position Held by Women – This measurement demonstrates the diversity of the company making the scope of the commitments wider through the inclusion of the female representations across the organizations (Minton, 2012).
Sustainability – The Lendlease limited is measuring at a 20% reduction by 2020 across the various non-renewable resources for the nature across water, waste, and energy involved in the Natural capital of the integrated reporting.