Topic 8 Financial Statements

This is a perennial problem that has been discussed from every angle at sometime on our forum. Interestingly when the RAP started OBU envisaged that mentors would be friends or colleagues who held managerial positions or college tutors who would offer general advice on research skills and report writing and carry out the role for free. Over time it seems students expected more and more from mentors and somewhere along the line someone saw a money-making opportunity – enter the paid mentor!

In some respects using a commercialised mentor should be no different from paying any professional for their services (no one expects accountants/ lawyers/ architects or dentists to work for nothing do they?) – provided of course they are professional and capable. Unfortunately therein lies the problem – too many individuals in certain parts of the world who have little or no practical knowledge of what the RAP entails (beyond what they themselves submitted a few tears back and more than likely for which they got a C grade at the 3rd attempt) have jumped on the band wagon. Then there are those who have introduced a production line procedure where students are channelled into producing a rote piece of work usually for Topic 8 on a company the mentor has preselected. Outside of those stereotypes of ‘cowboy’ mentors there do exist some good mentors but they tend to be few and far between and personal recommendation therefore remains the best way to find one.

The only real solution to the mentor problem would be if OBU used its own staff as mentors. However that is unlikely in the near future so unfortunately as you observe, you are at the mercy of paying someone and hoping they deliver good guidance. At Open Tuition we try with our forums and articles on our homepage to fill the ‘mentor gap’ and have helped many students achieve success in spite of poor mentorship!

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greetings everyone,

please the company i want to study is called Millicom Ghana in the telecom industry and with respect to their financial statements what i had online was the consolidated one for Millicom world wide.
i went forward to the head office of the local company in my country, Ghana but they refused to give me their local financial statements and annual reports because of the issues surrounding confidentiality and keen competition in the industry- the same applies to the other company in the industry

please i want to know if i can do T8 with consolidated financial statements of this company and the comparator considering the time i have, and the wide business factors affecting the companies in the group.

if its possible how should i go about it?
please somebody help me

thank you

@Emmanuel

Yes, you can do analysis on consolidated financial statements and consolidated statements of the competitor. You have enough time from now to work on consolidated financials but ensure that you cover impact of each business on movement in numbers & trend in ratios. Also in both business & financial analysis, you must analyse how each business or subsidiary is doing in overall increase/decrease and adding value to group.

There will be 2 sub areas you need to focus while giving reason for movement in ratios/numbers and business analysis:

1 – What impact the subsidiary, associates are having on profit/loss etc? – At Subsidiary level Or may be you analyse region-wise, country-wise depending on company such as McDonals

2 – How core product(s) of group are doing or effecting. – Product or Basic Level, as you analyse for standalone financial statements.

Rest there is no much difference in the way you analyse, in standalone, you focus on company, in consolidated you are focusing on group.

Regards,
Hammad Ahmed Qureshi

@Emmanuel

Yes, you are right but you need to ensure that you cover movements as follows which have material effects on numbers:

1. Movement in each region/segment/subsidiary of business.
2. Movement due to products, loans, payments, receipts etc.

You don’t need standalone accounts of all companies, you may have breakup in their notes to accounts of IFRS 8 Operating Segments. Please read whole annual report/financial statements including notes. See this example:

If sales of car manufacturing company rose by 10% then reason for movement in consolidated accounts may be:

– there is increase in sales of 75% in area A company. Further, new sports car AXZ also helped group in improving sales.

Regards,
Hammad Ahmed Qureshi.

Hi @Emmanuel,

I would like to add one more point in my answer that if in case your report is not understandable examiner can get confused and frustrated, they can fail.

Make wise decision.

Regards,

Hi @Bakhtawer,

Can you provide further detail about your company and competitor?

it varies case by case suppose if you select Pepsi USA vs. Coca Cola USA so you will not be in trouble.

Regards,
Ali Farooq
OBU Registered Mentor

A quick suggestion would be go for the “Group”.

For the purpose of the RAP, you are not only comparing the numbers, but also supposed to obtain corroborative evidence about the organization’s financial and business performance in order to perform a critical analysis.

In this regard, though in some cases the “Company” numbers are available, the “Consolidated” / “Group” numbers, would be a better choice reason being that the Group numbers are always disclosed and relatively you have more other information about the “Group” than the Company.

Accordingly, looking at the Group numbers would help you to well meet the assessment criteria of critical evaluation and analysis of information.

@trephena said:
Except these companies do not fit the prescribed industry sectors of Pharmaceuticals, airlines or telecommunications that OBU has made mandatory for P32 onwards

sir both the companies are airlines.

Trephena’s reply – you have read my reply totally out of sequence – I was referring to the post immediately above mine that mentioned Coca Cola and Pepsi… and having spent over 8 years working g in the airline industry I am well aware that Quantas is an Australian airline!

BTW – if doing an airline look at the topic I have specifically set up for Using an AIRLINE for Topic 8. As mentioned on other forums don’t attempt an airline for T15 unless you work in the financial department of one – their operations are usually far too complex for anyone outside the industry to understand as stochastic modelling is used (standard cash management models are not appropriate).

I am trying to pick a topic and my first choice had been T8. I did find however like Emmanuel the information for companies in the required sectors in my country were not readily available to the public. I figured using group financials would be abit more complicated due to different locales and different currencies for some.
Considering not only purely financial information is analysed, doing analysis on companies outside your country you may not get enough information. What do you advise?

@namugenze

Yes analysing a company oversease is a good option. Such as of top 2 listed pharmaceutical companies but remember, for multinational company analysis, you must see from bigger perspective & business view is comprehensive which include different products, then population of city & its dynamics, then city itself, country, region and overall world political events & developments.

You may also choose a local company operating in another country that is standalone.

Best site to select a company who have bulk of information available on internet are stock exchanges websites.

Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.

hlo
i have selected cipla (indian pharmaceutical co.) for RAP. but the company has 49 subsidiaries do i need to analyse performance of all subsidiaries as it would be nearly impossible within word limit of 4500.

@sony98

Hi. hope you are doing well.

you can chose different company where you can find individual accounts and make your life easy. If you can find individual accounts of CIPLA then you dont have to discuss about its subsidiaries and write balance report. You can not exceed your word limit it will give very bad impression and will effect on your result..

Anything else I can help you.

Regards,
Ali farooq
BSC registered Mentor

@accadubaistudent

Try to search and find if you can get financials for latest 3 years available if its not, then use comparative and state it under limitation of information gathering section.

Regards,
Hammad Ahmed Qureshi – OBU Registered Mentor.