ACT450 Colorado State PharmaCorp Planning Analytical Procedures Paper

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ACT450

Colorado State University Global Campus

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Option #1: Data Analytics and Excel

Reference the Excel file containing financial information from footnote disclosures and substantive analytical procedures using data analytics from your instructor.

PharmaCorp will be used as the main analytical procedure tasks you will want to focus on for this assignment. The other companies, Novartell and AstraZoro, will be used as industry comparisons.

The opportunity exists in this case to perform planning and substantive analytical procedures for accounts in the revenue cycle. You may assume that the 2015 financial information is unaudited, but the information from 2014 has been audited. Consider the following trends and characteristics of the pharmaceutical industry and for PharmaCorp in particular as you work on this case:

  • Following many years of dominant financial performance by companies in the United States, Europe and Canada, increased competition is arising from organizations in emerging economies such as Brazil, India, and China.
  • Significant uncertainty exists in the industry due to regulation covering health-care and government reimbursements related to certain procedures and prescribed pharmaceuticals.
  • Policy makers in the industry and governments increasingly:
    • Mandate necessary prescripts for patients
    • Focus on prevention instead of treatment regimes, thereby leading to changes in demand for some products
  • Anticipated growth in the industry is expected to be 5% to 7% in 2016 compared with 4% to 5% in the prior year as stated by leading industry analysts.
  • Pharmacorp started and executed a significant cost reduction initiative aimed at improving efficiency, reducing research and development costs, and eliminating corporate overhead in 2014.
  • PharmaCorp’s credit policies has remained the same over the past several years. Their credit policies are considered stringent in their industry, and they have been criticized on occasion for these policies in relation to their competitors.
  • Two of the companies most popular pharmaceuticals, Sistosis and Vigarvox, are no longer patented as of the last quarter of 2015 and are now facing competition from generic alternatives.

Required:

Part I: Planning Analytical Procedures

  1. Step 1: Identify Proper Analytical Procedures. The senior auditor suggests you should use these ratios (on the financial statement level) for planning the analytical procedures as part of the revenue cycle at the company:
    1. Gross margin: (revenues-cost of sales)/revenues
    2. Turnover of receivables: (revenues/average accounts receivable); use the ending accounts receivable
    3. Receivables as a percentage of current assets: (accounts receivable/total current assets)
    4. Receivables as a percentage of total assets: (accounts receivable/total assets)
    5. Allowance for uncollectible accounts as a percentage of accounts receivable: (allowance/accounts receivable)
    6. Identify other relationships or trends that are relevant as part of the planning analytics. Discuss your reasons for your choices.
  2. Step 2: Evaluate the Data Reliability When Developing Expectations. The data you will use to develop expectations in the revenue cycle has been deemed reliable by the audit staff.
    1. Discuss the likely factors the audit team will consider when making this determination.
  3. Step 3: Develop expectations for accounts in the revenue cycle and for the ratios from Step # 1 that you deem as relevant. Since this is a planning analytical procedure, the expectations are not set at a high a high level of precision. Indicate if you expect a ratio to rise, fall, or remain the same, and explain the level of any anticipated rises or falls, or the range of the ratio. Pharma Corp’s financial information is in the first tab of the Excel worksheet, while the information for Novartell and AstraZoro is available in the last two tabs of the file.
    1. Consider both historical trends of Pharmcorp and the industry on the whole.
  4. Step 4 and Step 5: Define and Identify Substantial Unanticipated Variances. Refer to the text for guidance on materiality.
    1. Apply those guidelines to Step 4 of planning the analytical procedures as part of the revenue cycle for Pharmacorp. Define the meaning of a significant difference. Discuss your reasons for these choices. Discuss the qualitative materiality considerations in relation to this case.
    2. Once you have determined the levels of difference you would consider noteworthy, calculate the Step 1 ratios (and any additional trend or ration analysis you deemed necessary), based on Pharmacorp’s financial statement figures. Identify the ratios where you expect a significant difference.
  5. Step 6 and Step 7: Investigate Substantial Unanticipated Variances and Ensure Appropriate Documentation.
    1. Discuss the accounts or relationships you feel should be investigated further using substantive audit procedures. Discuss your reasons for these choices.
    2. Describe the information that should be a part of the auditor’s report or files.

Part II: Substantive Analytical Procedures

  1. You will see three tabs in the Excel file that should be reviewed: the Pharmacorp Segment Information, Pharmacorp’s Geographic Information, and Pharmacorp’s Other Revenue Information. These tabs display excerpts from Pharma Corp’s footnote disclosures regarding segment, geographic, and other revenue information. Examine these disclosures and discuss the operating segments and geographic regions where the company does business.
  2. Which operating segments generate the most revenue for the company and may be considered the most important? Which regions are the most important to the organization from geographic standpoint? List the three most important products manufactured by Pharmacorp? Discuss any trends you notice in relation to revenue generation for each of these different categories.
  3. Explain the different types of ratio analysis that could be conducted in substantive analytical procedures using the data from the segment, geographic, and other revenue information. An example would be the R&D expenses as a percentage of revenues. How would these substantive analytics be different from the planning analytics? Discuss the trends and relationships that are relevant, and what are the implications in relation to further substantive testing?

Your written response paper should be 8-10 pages in length. It should be completed in Word and Excel. The Word portions should follow the APA format, according to CSU-Global Guide to Writing and APA Requirements (Links to an external site.)Links to an external site.. Include a title page and reference page. Use four (4) outside academic sources other than the textbook, course materials, or other information provided as part of the course materials.

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A 1 2 3 4 5 6 7 8 10-K FILINGS 9 10 11 12 13 14 Accounts receivable, less allowance for doubtful accounts, 2015—$374; 2014—$226 Inventories Taxes and other current assets Assets of discontinued operations and other assets held for sale Total current assets Long-term investments PharmaCorp Consolidated Balance Sheets (USD $) In Millions, except Share data, unless otherwise specified 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 D Dec. 31, 2015 ASSETS Cash and cash equivalents Short-term investments Identifiable intangible assets, less accumulated amortization Taxes and other noncurrent assets Total assets LIABILITIES AND EQUITIES Short-term borrowings, including current portion of long-term debt: 2015—$2,449; 2014—$6 Accounts payable Dividends payable Income taxes payable Accrued compensation and related items Other current liabilities Liabilities of discontinued operations Total current liabilities Long-term debt Pension benefit obligations Postretirement benefit obligations Noncurrent deferred tax liabilities Other taxes payable Other noncurrent liabilities Total liabilities Preferred stock, without par value, at stated value; 27 shares authorized; issued: 38 2015—967; 2014—1,112 Common stock, $0.05 par value; 12,000 shares authorized; issued: 2015—8,956; 39 2014—8,902 40 Additional paid-in capital 41 Employee benefit trusts 42 Treasury stock, shares at cost: 2015—1,680; 2014—1,327 43 Retained earnings 44 Accumulated other comprehensive loss 45 Total shareholders’ equity 46 Equity attributable to noncontrolling interests 47 Total equity 48 49 Total liabilities and equity E Dec. 31, 2014 (audited) (unaudited) 15 Property, plant and equipment, less accumulated depreciation 16 Goodwill 17 18 19 20 21 B $10,489 22,219 12,478 6,963 9,196 70 61,415 14,249 14,361 44,572 46,113 5,088 185,798 $3,282 23,170 13,158 6,510 9,480 5,217 60,917 9,914 15,921 44,669 51,284 5,697 188,002 6,524 4,116 4,164 1,834 910 2,146 13,041 0 28,719 30,936 7,930 3,393 21,593 6,610 4,939 104,120 3,578 1,896 909 2,220 15,066 1,124 28,909 34,826 6,455 3,244 18,861 6,886 6,100 105,381 39 45 448 445 72,608 -1 -40,121 54,240 -5,953 81,260 418 81,678 71,423 -3 -31,801 46,210 -4,129 82,190 431 82,621 185,798 188,002 F G 50 51 52 53 54 A B PharmaCorp Consolidated Statements of Income (USD $) In Millions, except Per Share data, unless otherwise specified Dec. 31, 2015 D E Dec. 31, 2014 F G Dec. 31, 2013 $58,886 $65,159 $65,065 57 Cost of sales 11,234 14,176 14,888 58 Selling, informational and administrative expenses 16,516 18,632 18,873 59 Research and development expenses 60 Amortization of intangible assets 7,770 5,275 1,880 4,031 12,080 9,074 5,644 2,830 2,499 12,304 9,583 5,264 3,245 3,841 9,571 2,462 9,618 3,809 8,495 1,153 8,318 55 Revenues 56 Costs and expenses: 61 Restructuring charges and certain acquisition-related costs 62 Other deductions––net 63 Income from continuing operations before provision for taxes on income 64 Provision for taxes on income 65 Income from continuing operations 66 Discontinued operations: 67 Income/(loss) from discontinued operations––net of tax 68 Gain/(loss) on sale of discontinued operations––net of tax 197 250 -19 4,873 1,404 -11 69 Discontinued operations––net of tax 5,080 1,654 -30 70 Net income before allocation to noncontrolling interests 14,598 10,049 8,288 71 Less: Net income attributable to noncontrolling interests 72 Net income attributable to PharmaCorp Inc. 28 40 31 $14,570 $10,009 $8,257 74 Income from continuing operations attributable to PharmaCorp Inc. common shareholders $1.27 $1.07 $1.03 75 Discontinued operations––net of tax $0.68 $0.21 $0.00 76 Net income attributable to PharmaCorp Inc. common shareholders 77 Earnings per common share––diluted: $1.96 $1.28 $1.03 78 Income from continuing operations attributable to PharmaCorp Inc. common shareholders $1.26 $1.06 $1.03 79 Discontinued operations––net of tax $0.68 $0.21 $0.00 80 81 82 83 84 $1.94 7,442 7,508 $0.88 $1.27 7,817 7,870 $0.80 $1.02 8,036 8,074 $0.72 73 Earnings per common share––basic: Net income attributable to PharmaCorp Inc. common shareholders Weighted-average shares––basic Weighted-average shares––diluted Cash dividends paid per common share 85 86 87 88 A B PharmaCorp Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified Dec. 31, 2015 D (unaudited) 89 Operating Activities 90 Net income before allocation to noncontrolling interests 91 Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating activities: 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 Depreciation and amortization Share-based compensation expense Asset write-offs and impairment charges (Gain)/loss on sale of discontinued operations Deferred taxes from continuing operations Deferred taxes from discontinued operations Benefit plan contributions (in excess of)/less than expense Other non-cash adjustments, net Other changes in assets and liabilities, net of acquisitions and divestitures: Accounts receivable Inventories Other assets Accounts payable Other liabilities Other tax accounts, net Net cash provided by operating activities Investing Activities Purchases of property, plant and equipment Purchases of short-term investments Proceeds from redemptions and sales of short-term investments Net proceeds from redemptions and sales of short-term investments with original maturities of 90 days or less Purchases of long-term investments Proceeds from redemptions and sales of long-term investments Acquisitions, net of cash acquired Proceeds from sale of businesses Other investing activities Net cash provided by/(used in) investing activities Financing Activities Proceeds from short-term borrowings Principal payments on short-term borrowings Net payments on short-term borrowings with original maturities of 90 days or less Principal payments on long-term debt Purchases of common stock Cash dividends paid Other financing activities Net cash used in financing activities Effect of exchange-rate changes on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents, beginning Cash and cash equivalents, ending Cash paid during the period for: Income taxes Interest E F G Dec. 31, 2014 Dec. 31, 2013 (audited) (audited) $14,598 $10,049 $8,288 7,711 381 1,199 -7,123 839 1,459 135 -203 8,809 519 1,298 -1,688 207 147 -1,769 -172 8,299 505 3,386 111 2,109 -156 -677 -49 375 -731 93 569 -3,438 1,190 17,054 -66 1,184 801 -367 1,498 -8 20,240 -708 2,917 -718 -401 1,214 -12,666 11,454 -1,327 -24,018 25,302 1,459 -11,145 4,990 -1,050 11,850 93 6,154 -1,660 -18,447 14,176 10,874 -4,620 2,147 -3,282 2,376 279 1,843 -1,513 -11,082 5,699 5,950 -4,128 4,737 -273 0 118 -492 7,985 7 -8,304 -1,413 -8,228 -6,534 488 -15,999 -2 7,207 3,182 10,389 12,910 -3,926 -7,540 -6,896 -9,100 -6,134 169 -20,607 -29 1,447 1,735 3,182 6,500 -9,349 -1,197 -106 -1,000 -6,088 66 -11,174 -31 -243 1,978 1,735 2,430 $1,873 2,938 $2,085 11,775 $2,155 H 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 I J K H 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 I J K PharmaCorp Operating Segments We manage our operations through five operating segments —Primary Care; Specialty Care and Oncology; Established Products and Emerging Markets; Animal Health; and Consumer Healthcare. As of the third quarter of 2012, the Animal Health and Consumer Healthcare business units are no longer managed as a single operating segment. Each operating segment has responsibility for its commercial activities and for certain research and development activities related to in-line products and in-process research and development (IPR&D) projects that generally have achieved proof-of-concept. On November 30, 2015, we completed the sale of our Nutrition business to Choco and recognized a gain on the sale of this business in Gain/(loss) on sale of discontinued operations––net of tax in the consolidated statement of income for the year ended December 31, 2015. The operating results of this business are reported as Income/(loss) from discontinued operations––net of tax in the consolidated statements of income for all periods presented. We regularly review our segments and the approach used by management to evaluate performance and allocate resources. Generally, products are transferred to the Established Products business unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity. A description of each of our five operating segments follows: • Primary Care operating segment —includes revenues from human prescription pharmaceutical products primarily prescribed by primary-care physicians, and may include products in the following therapeutic and disease areas: Alzheimer’s disease, cardiovascular (excluding pulmonary arterial hypertension), erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. All revenues for these products are allocated to the Primary Care business unit, except those generated in emerging markets and those that are managed by the Established Products business unit. • Specialty Care and Oncology operating segment —comprises the Specialty Care business unit and the Oncology business unit. · Specialty Care—includes revenues from human prescription pharmaceutical products primarily prescribed by physicians who are specialists, and may include products in the following therapeutic and disease areas: anti-infectives, endocrine disorders, hemophilia, inflammation, ophthalmology, pulmonary arterial hypertension, specialty neuroscience and vaccines. All revenues for these products are allocated to the Specialty Care business unit, except those generated in emerging markets and those that are managed by the Established Products business unit. · Oncology—includes revenues from human prescription pharmaceutical products addressing oncology and oncology-related illnesses. All revenues for these products are allocated to the Oncology business unit, except those generated in emerging markets and those that are managed by the Established Products business unit. • Established Products and Emerging Markets operating segment —comprises the Established Products business unit and the Emerging Markets business unit. · Established Products—includes revenues from human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this business unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity. However, in certain situations, products may be transferred to this business unit at a different point than the beginning of the fiscal year following loss of patent protection or marketing exclusivity in order to maximize their value. This business unit also excludes revenues generated in emerging markets. · Emerging Markets—includes revenues from all human prescription pharmaceutical products sold in emerging markets, including Asia (excluding Japan and South Korea), Latin America, the Middle East, Eastern Europe, Africa, Turkey and Central Europe. PharmaCorp Geographic Information Revenues exceeded $500 million in each of 16 countries outside the U.S. in 2015 and 2014, and in each of 17 countries outside the U.S. in 2013. The U.S. and Japan were the only countries to contribute more than 10% of total revenue in 2015. The U.S. was the only country to contribute more than 10% of total revenue in 2014 and 2013. The following table provides revenues by geographic area: Year Ended December 31, (MILLIONS OF DOLLARS) Revenues 2015 2014 2013 $ 23,086 $ 26,933 $ 28,855 Developed Europe 13,375 16,099 16,156 Developed Rest of World 10,554 10,975 9,891 Emerging Markets 11,971 11,252 10,263 $ 58,986 $ 65,259 $ 65,165 United States Revenues 013. The U.S. than 10% of PharmaCorp Other Revenue Information Significant Customers: We sell our products primarily to customers in the wholesale sector. In 2015, sales to our three largest U.S. wholesaler customers represented approximately 12%, 9% and 7% of total revenues and, collectively, represented approximately 16% of total accounts receivable as of December 31, 2015. In 2014, sales to our three largest U.S. wholesaler customers represented approximately 13%, 11% and 9% of total revenues and, collectively, represented approximately 14% of total accounts receivable as of December 31, 2014. For both years, these sales and related accounts receivable were concentrated in our three biopharmaceutical operating segments. Significant Product Revenues The following table provides revenues by product: Year Ended December 31, 2015 2014 ) 2013 51,214 57,747 58,523 Animal Health 4,299 4,184 3,575 Consumer Healthcare 3,212 3,028 2,748 261 300 319 (MILLIONS OF DOLLARS) Total revenues from biopharmaceutical products Revenues from other products: Other ) Revenues $ 58,986 $ 65,259 $ 65,165 Top Five Products in Terms of Revenue (all biopharmaceutical products) Year Ended December 31, (MILLIONS OF DOLLARS) Lyran 2015 $ 4,158 2014 $ 3,693 2013 $ 3,063 Lipco 3,948 9,577 10,733 Enbing (Outside the U.S. and Canada) 3,737 3,666 3,274 Prevnent 3,718 3,657 2,416 Selebrax 2,719 2,523 2,374 PharmaCorp. Long-Term Debt The following table provides the components of senior unsecured long-term debt: As of December 31, Maturity Date 2015 $ 3,427 2014 6.20% March 2022 $ 3,348 5.35% Mar-18 2,965 2,969 7.20% Mar-42 2,803 2,848 4.75% Jun-19 2,738 2,683 5.75% Jun-24 2,734 2,581 Jun-16 — 2,392 6.50% Jun-41 2,307 2,206 5.95% Apr-40 2,086 2,188 5.50% February 2017 1,832 1,893 Mar-16 — 1,564 4.55% May-20 1,394 1,425 4.75% December 2017 1,274 1,166 5.50% Feb-19 1,048 1,061 6.51% 2028 3,403 3,345 5.28% 2019 2,254 2,402 2.48% 2018 771 865 3.625% (At December 31, 2015, the note has been reclassified to Current portion of long-term debt .) 5.50% (At December 31, 2015, the note had been called and is no longer outstanding.) Long-term debt $ 31,036 $ 34,926 20-F FILINGS NOVARTELL GROUP CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (At December 31, 2015 and 2014) 2015 (unaudited) $m 2014 (audited) $m Assets Non-current assets Property, plant & equipment Goodwill Intangible assets other than goodwill Investments in associated companies Deferred tax assets Financial assets Other non-current assets 16,839 31,190 30,431 8,940 7,190 1,117 505 15,727 29,843 31,869 8,722 5,957 938 456 Total non-current assets 96,212 93,412 Current assets Inventories Trade receivables Marketable securities and derivative financial instruments Cash and cash equivalents Other current assets 6,844 10,051 2,667 5,652 2,990 5,830 10,432 1,466 3,609 2,756 Total current assets 28,004 24,084 124,216 117,496 1,001 (92) 68,184 1,016 (121) 64,949 69,093 65,844 126 96 Total equity 69,219 65,940 Liabilities Non-current liabilities Financial debt Deferred tax liabilities Provisions and other non-current liabilities 13,881 7,186 9,879 13,955 6,861 7,792 Total non-current liabilities 30,946 28,408 Current liabilities Trade payables Financial debt and derivative financial instruments Current income tax liabilities Provisions and other current liabilities 5,693 5,845 2,070 10,443 4,898 6,274 1,706 10,079 Total current liabilities 24,051 23,148 Total liabilities 54,997 51,556 124,216 117,496 Total assets Equity and liabilities Equity Share capital Treasury shares Reserves Issued share capital and reserves attributable to novartell AG shareholders Non-controlling interests Total equity and liabilities NOVARTELL GROUP CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENTS (For the years ended December 31, 2015, 2014 and 2013) 2015 (unaudited) $m 2014 (audited) $m 2013 (audited) $m Net sales Other revenues Cost of goods sold 56,773 988 (18,756) 58,666 909 18,983 50,724 837 (14,488) Gross profit Marketing & Sales Research & Development General & Administration Other income Other expense 38,805 (14,353) (9,432) (2,837) 1,287 (1,959) 40,392 (15,179) (9,483) (2,870) 1,254 (3,116) 37,073 (13,416) (8,970) (2,481) 1,234 (1,914) Operating income Income from associated companies Interest expense Other financial income and expense 11,511 652 -824 ) (96 ) 10,998 628 -851 (2 11,526 904 -792 64 Income before taxes Taxes 11,243 (1,625 ) 10,773 (1,528 11,702 (1,733 Net income 9,618 9,245 9,969 Attributable to: Shareholders of novartell AG Non-controlling interests Basic earnings per share ($) Diluted earnings per share ($) 9,505 113 3.93 3.89 9,113 132 3.83 3.78 9,794 175 4.28 4.26 NOVARTELLGROUP CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENTS (For the years ended December 31, 2015, 2014 and 2013) 2015 (unaudited) $m 2014 (audited) $m 2013 (audited) $m Net income Reversal of non-cash items Dividends received from associated companies and others Interest received Interest paid Other financial receipts Other financial payments Taxes paid 9,618 7,938 326 149 (594 ) 114 (22 ) (2,022 ) 9,245 9,200 304 66 (640 ) 9,969 6,262 471 180 -535 ) (47 ) (2,435 ) (145 ) (2,616 ) Cash flows before working capital and provision changes Restructuring payments and other cash payments from provisions Change in net current assets and other operating cash flow items 15,507 (1,173 ) (140 ) 15,893 (1,471 ) (113 ) 13,586 (1,281 ) 1,762 Cash flows from operating activities 14,194 14,309 14,067 Purchase of property, plant & equipment Proceeds from sales of property, plant & equipment Purchase of intangible assets Proceeds from sales of intangible assets Purchase of financial assets Proceeds from sales of financial assets Purchase of other non-current assets Proceeds from sales of other non-current assets Acquisitions of interests in associated companies Acquisitions and divestments of businesses Purchase of marketable securities Proceeds from sales of marketable securities (2,698 92 (370 263 (180 121 -157 118 Cash flows used in investing activities (5,675 ) Acquisition of treasury shares Disposal of treasury shares Increase in non-current financial debt Repayment of non-current financial debt Change in current financial debt Proceeds from issuance of share capital to third parties Acquisition of non-controlling interests Dividends paid to non-controlling interests and other financing cash flows Dividends paid to shareholders of novartell AG (505 ) 514 1,879 (704 ) (1,737 ) Cash flows used in financing activities Net effect of currency translation on cash and cash equivalents ) ) ) ) (1,741 ) (1,639 ) 516 (6 ) (2,167 161 (220 543 (139 49 (48 15 (12 (569 (1,750 3,345 ) ) ) ) ) ) ) (792 ) (3,628 59 381 (28 (3,054 4 (3,187 ) ) ) ) (1,678 46 (554 535 (124 66 -25 13 ) ) ) ) (26,666 ) (40,569 ) 53,200 (15,756 ) (311 ) 811 5,574 (5 ) 2,610 19 (32 ) (86 ) (203 ) (64 ) (6,030 ) (5,368 ) (4,486 ) (6,675 ) (15,024 ) 4,116 (1 ) (103 ) (2 ) Net change in cash and cash equivalents Cash and cash equivalents at January 1 1,843 3,709 (1,610 ) 5,319 2,425 2,894 Cash and cash equivalents at December 31 5,552 3,709 5,319 20-F FILINGS AstraZoro Consolidated Balance Sheet at 31 December 2015 (unaudited) $m 2014 (audited) $m 2013 (audited) $m 6,189 9,798 16,348 489 299 452 1,111 34,486 6,525 9,762 10,880 442 201 – 1,514 29,324 6,957 9,871 12,158 324 211 – 1,475 30,996 2,061 7,629 823 31 803 7,701 19,048 53,534 1,852 8,754 4,248 25 1,056 7,571 23,506 52,830 1,682 7,847 1,482 9 3,043 11,068 25,131 56,127 Assets Non-current assets Property, plant and equipment Goodwill Intangible assets Derivative financial instruments Other investments Other receivables Deferred tax assets Current assets Inventories Trade and other receivables Other investments Derivative financial instruments Income tax receivable Cash and cash equivalents Total assets Liabilities Current liabilities Interest-bearing loans and borrowings Trade and other payables Derivative financial instruments Provisions Income tax payable Non-current liabilities Interest-bearing loans and borrowings Deferred tax liabilities Retirement benefit obligations Provisions Other payables Total liabilities Net assets -801 -9321 (3 -816 (2,862 (13,903 ) ) ) ) ) ) -1890 (8,975 -109 (1,388 (3,390 (15,752 ) ) ) ) ) ) (125 (8,661 (8 (1,095 (6,898 (16,787 ) ) ) ) ) ) -9309 -2676 -2165 -538 (1,001 ) ) ) ) ) -7438 -2635 (2,674 (474 (385 ) ) ) ) ) (9,097 (3,145 (2,472 (843 (373 ) ) ) ) ) (15,679 ) (29,582 ) 23,952 (13,606 ) (29,358 ) 23,472 (15,930 ) (32,717 ) 23,410 302 3,604 253 533 1,374 17,961 23,737 215 23,952 423 2,978 239 533 1,379 17,894 23,246 226 23,472 352 2,672 107 433 1,377 18,272 23,213 197 23,410 Equity Capital and reserves attributable to equity holders of the Company Share capital Share premium account Capital redemption reserve Merger reserve Other reserves Retained earnings Non-controlling interests Total equity AstraZoro Consolidated Statements of Income for the year ended 31 December 2015 (unaudited) $m Revenue Cost of sales Gross profit Distribution costs Research and development expense Selling, general and administrative costs Profit on disposal of subsidiary Other operating income and expense Operating profit Finance income Finance expense Profit before tax Taxation Profit for the period 2014 2013 27,963 -5383 ) 22,580 (320 ) (audited) $m 33,581 -6016 ) 27,565 (346 ) (audited) $m 33,269 (6,389 ) 26,880 (335 ) -5233 ) -5533 ) (5,318 ) -9849 ) – -11061 ) 1,483 (10,445 ) – 970 8,148 528 (958 ) 7,718 (1,391 ) 6,327 777 12,795 552 (980 ) 12,367 (2,351 ) 10,016 712 11,494 516 (1,033 ) 10,977 (2,896 ) 8,081 Other comprehensive income: Foreign exchange arising on consolidation Foreign exchange differences on borrowings designated in net investment hedges Fair value movements on derivatives designated in net investment hedges Amortisation of loss on cash flow hedge Net available for sale gains taken to equity Actuarial loss for the period Income tax relating to components of other comprehensive income Other comprehensive income for the period, net of tax Total comprehensive income for the period 6,405 9,470 8,106 Profit attributable to: Owners of the Parent Non-controlling interests 6,297 30 9,983 33 8,053 28 Total comprehensive income attributable to: Owners of the Parent Non-controlling interests 6,395 10 9,428 42 8,058 48 $4.99 $7.33 $5.60 $4.98 $7.30 $5.57 1,261 1,361 1,438 1,264 1,367 1,446 3,752 3,494 Basic earnings per $0.25 Ordinary Share Diluted earnings per $0.25 Ordinary Share Weighted average number of Ordinary Shares in issue (millions) Diluted weighted average number of Ordinary Shares in issue (millions) 106 (60 ) 26 -56 ) 24 101 86 – – 1 2 1 72 (85 ) 31 (741 ) 4 (46 ) (46 ) 198 (61 ) 78 (546 ) 25 Dividends declared and 3,619 paid in the period All activities were in respect of continuing operations. $m means millions of US dollars. AstraZoro Consolidated Statements of Cash Flows for the year ended 31 December 2015 (unaudited) $m Cash flows from operating activities Profit before tax Finance income and expense Depreciation, amortisation and impairment Decrease/(increase) in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables and provisions Profit on disposal of subsidiary Non-cash and other movements Cash generated from operations Interest paid Tax paid Net cash inflow from operating activities Cash flows from investing activities Acquisitions of business operations Movement in short-term investments and fixed deposits Purchase of property, plant and equipment Disposal of property, plant and equipment Purchase of intangible assets of intangible Disposal assets Purchase of non-current asset investments Disposal of non-current asset investments Net cash received on disposal of subsidiary Dividends received Interest received Payments made by subsidiaries to noncontrolling interests Net cash outflow from investing activities Net cash inflow before financing activities Cash flows from financing activities Proceeds from issue of share capital Repurchase of shares Repayment of obligations under finance leases Issue of loans Repayment of loans Dividends paid Hedge contracts relating to dividend payments Movement in short-term borrowings Net cash outflow from financing activities Net increase/(decrease) in cash and cash equivalents in the period Cash and cash equivalents at the beginning of the period Exchange rate effects Cash and cash equivalents at the end of the period 2014 (audited) $m 2013 (audited) $m 7,718 530 12,367 528 10,977 517 2,528 2,650 2,741 765 (1,108 ) 10 -160 ) (256 ) 88 (1,311 ) – 467 (1,483 ) (16 ) – (424 ) (597 ) (463 ) 9,536 (545 ) (2,043 ) 12,368 (548 ) (3,999 ) 13,854 (641 ) (2,533 ) 6,948 7,821 (1,187 ) 3,719 – 10,680 (348 ) -2843 ) (125 ) (672 ) -739 ) (791 ) 99 (3,947 ) – 102 (458 ) – 83 (1,390 ) 210 (46 ) (11 ) (34 ) 43 – 5 – 7 145 1,772 – 171 – – 174 (20 ) (16 ) (10 ) (1,859 ) (2,022 ) (2,226 ) 5,089 5,799 8,454 429 (2,635 ) 409 (6,015 ) 494 (2,604 ) (17 ) 1,980 (1,750 ) (3,665 ) – – – (3,764 ) – – (1,741 ) (3,361 ) 48 3 687 46 (4,923 ) (114 ) (8 ) (9,321 ) (7,334 ) 166 (3,522 ) 1,120 7,434 (4 ) 10,981 (25 ) 9,828 33 7,434 10,981 7,596
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