Spectris Financial Statements Reinstated
ASS#2 Step 3 – Theory
Starting chapter 3, I was very anxious! I had to go back and read chapter 4 as a refresher, even then I still felt overwhelmed as filling the Company spreadsheet first of all was quite hard. I went in with an open mind but I knew this whole step would take quite some time. I am still struggling with understanding some of the concepts and still find myself referring to the cheat sheet for abbreviations, but I feel after completing this step, I have a better understanding of what everything means and how they all interact, influence and contribute to each other.
First, I did struggle with separating operating and financial activities. I did have to read some sections within the study guide and do some research to really understand the differences. I found this quite hard. My understanding is that things that contribute directly to the organisation and how it operates is operational, including interactions with the product, customers, suppliers and input markets. This may also include decisions within the firm such as selling products or what assets to acquire. The financial activities of a firm include the firms interactions with debtors and equity etc. But what happens when there’s something that could fall under both, or neither? This is what I struggled with most, especially within the Income Statement and restating it. This section took me the longest out of all of it. It also took me quite some time to understand how to link the records. I was watching the videos by Maria but I was still ensure what she was actually tying, clicking or highlighting. I thought ang assumed I could just simply copy and paste, which was not the case. When I understood you could press ‘=’ and select the cell, I felt more confident with being able to link the records. Also being able to drag the cell across, to have all the totals or records brought over was quite handy knowledge to have. This saved me time in going in and linking every single record. It was helpful to be able to just have the first one linked and the rest would follow.
Restating Changes in Equity
I quickly realised when restating that something wasn’t right. The figures seemed wrong, nothing was totalling, and I had a sense that I was missing something. I went referred to my company’s financial statements again to ensure I had everything right and all the amounts were correct. I quickly found that I had in fact entered things in correctly or missed things. I have no idea how I’ve managed to do that! But the important thing is I had realised it was wrong and fix it. I went back and modified some figures and added things I had missed. I had to pretty much do the whole changes in equity sheet again. I do not know where I got the figures the first time, but it wasn’t right! I thought I may have been looking and referring to the wrong statement. I have no idea what happened. I remember feeling confused with entering the figures for the Company spreadsheet. I can see now that when restating, it also gives you the opportunity to check all the figures again, especially if they don’t total. I was happy restating my changes in equity as it totalled. I was also happy when I went back and changed my company spreadsheet that everything matched and totalled. For example, when I first handed the company spreadsheet in, the figures and totals within the balance sheet did not match my changes in equity. After making the changes, my total within my balance sheet match the SOCIE and I was quite proud of myself that I managed to go back and fix these errors. This spreadsheet I found easier than most as it was smaller records to input and restate. I also understood this section of the study guide, compared to the Balance sheet and Income statement.
Restating Balance Sheet
When beginning to restate the Balance sheet, I quickly realised it was going to be the same situation as with the changes in equity. I had to go back and compare the figures again, as I somehow also managed to enter the records and calculated the totals incorrectly. Again, I was glad that I did that and realised this error as it was then easier to go and restate the balance sheet. I pretty much had to do the whole balance sheet again from the original records. It was a long process, which took me probably longer than most, but I was very satisfied by the end when the totals matched, especially with the SOCIE. I actually enjoyed restating the balance sheet. I still found it hard to separate the operating and financial, however, I had an idea of the differences between the two, so I was slightly confident I was doing it correctly. However, when I went to calculate the NFA and Equity, it was not matching. I referred back to the video to ensure I was completing the right checks. This was a very time consuming and frustrating process. I completed the checks and ensure the OA + FA = Total assets in original financials, OL + FL = Total liabilities in original finances and also confirming the equity matches the restated CI equity. This took some time do complete but I was happy that I did this, as I found the equity was not the same compared to the original financial statement. The whole process was very over whelming at first but surprisingly by the end I was getting used to it. By the end everything did match in 2017, 2016 and 2015 but I did need to change one amount that I had entered, when also going back and referring to the financial statements. I was actually using NFA + Equity, when I should have been using NFA – Equity. After making these changes, the NFA – Equity matched the NOA and I was very happy! I can see how important it is to complete the checks and refer back to the original financial statements to ensure everything is correct.
I had a big of trouble truing to complete the splitting cash section. I did need to refer to the study guide to remember why I was doing this. This section I soon realised, was holding cash for operating usage. Also, within the video, I remembered that up to 1% of cash should be used for operational use. When adding these totals within the working area of the restated financial statements, I felt more confident with that I was doing while following along with Maria. I was happy that I did this section correctly the first time.
Restating Income Statement
I found restating the Income statement extremely difficult and a long process. I didn’t have totals from the Financial Statement to refer to such as ‘total expenses’ etc so I was not sure I was doing it correctly. I found it really hard to differentiate between O and F in the Income statements, especially as mine was very different to Maria’s in terms of lay out. I again went back to ensure all my amounts and records I have entered were correct and that I wasn’t missing anything. Everything seemed in place. I was following the structure that Maria had told us to follow (Operating: Income, Expense, Tax benefit, CI and Financial: Income, Expense, Tax benefit and CI – OI + NFE = Original CI) but I knew I was doing it wrong as I believed I did not have the correct differentiation for operating and financial activities. It was very hard not to have totals and my financial statements not laid out.
I could not get the Total comprehensive income to match. This was very difficult as I couldn’t understand why. I checked it again and again and re read the study guide but I still did not know what I had done wrong. It seemed to me it was different figures and amounts, comparing the comprehensive income to the Income statement and the Changes in Equity. I then went back again and referred to the financial statements. I had a long look at the 2018/2017 information and realised I had put the incorrect operating activity information in. After making these changes, the total was the same as the changes in equity. I found the tax section was quite confusing! It was good to follow along with Maria, however it was still very difficult.
Unfortunately, I could not get the comprehensive income to match, even after going back and re watching sections of the video and comparing records to the original financial statements. I was very upset at this section as I couldn’t understand what went wrong! I am looking forward to some feedback from Maria.
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