ACC6050 ACCOUNTING AND FINANCIAL

REPORTING

Final Project

BY

ZULAIHA IZE USMAN

July 12, 2024

 Part 1
INTERNATIONAL ACCOUNTING FRAMEWORKS
American Company:

APPLE INC. - Apple Inc. is a Silicon Valley-based multinational corporation and

technological company based in Cupertino, California. It creates, develops, and markets

internet services, computer software, and consumer gadgets.

Nigerian Company:

DANGOTE CEMENT - Originally established by Aliko Dangote as a trade company in

1981, Dangote Cement is a division of Dangote Industries, which was first focused on the

importation of bagged cement along with other commodities including rice, sugar, wheat, and

salt. It is a Nigerian company with its headquarters based in Lagos, Nigeria (Dangote, n.d.).

Dangote Cement adopts IFRS (International Financial Reporting Standards) while

Apple Inc. adheres to GAAP (Generally Accepted Accounting Principles. The Dangote

Cement report is organised as follows: noncurrent assets, current assets, current liabilities,

noncurrent liabilities and equity while for Apple Inc., the report is organised as follows:

current asset, noncurrent assets, current liabilities, noncurrent liabilities and shareholders

equity.

Part 2

FINANCIAL REPORTING REQUIREMENTS

When recording transactions and compiling them into financial accounts, Dangote Cement

and Apple Inc. would use a comparable process. This process usually entails:

1. Identifying and documenting financial transaction

2. Recording the transactions in the accounting journal such as the general journal

3. Posting journal entries to ledger accounts

4. Preparing the trial balance

Examples of Recording Business Transactions:

The liabilities for Apple Inc. are recorded as Accounts payable, Other current liabilities,

Deferred revenue, Commercial paper, Term debt while for Dangote cement liabilities are

recorded as Trade and other payables, Lease liabilities, Current tax liabilities, financial

liabilities, Other current liabilities.

Assets are recorded as Cash and cash equivalent, Marketable securities, Accounts receivable,

Vendor non-trade receivables, Inventories, Other current assets, Marketable securities,

Property, plant and equipment, net, Other non-current assets for Apple Inc. while for Dangote

Cement they are recorded as Property, plant and equipment, Intangible assets, Right-of-use

assets, Investments in subsidiaries, Investment in associate, Lease receivables, Deferred tax

assets, Prepayments, Receivables from subsidiaries.

Equity for Dangote Cement is recorded as Share capital, Share premium, Treasury Shares,

Capital contribution, Currency translation reserve, Retained earnings, Equity attributable to

owners of the Company, Non-controlling interest while for Apple Inc. Equity is recorded as

Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares

authorized; 15,550,061 and 15,943,425 shares issued and outstanding, Accumulated deficit,

Accumulated other comprehensive loss.

Part 3

ACCOUNTING ANALYTICS

The analysis of a company's success requires the use of financial statements to assess the

financial health of a firm and decide what must be improved, management use a number of

methods. (Woodruff, 2018). Ratio analysis, horizontal/trend analysis, and vertical

analysis/common-size financial statements are accounting techniques frequently used to

evaluate financial statement data.

Ratio analysis is used to examine the individual line items in the financial statement of a

company. It is useful in examining several aspects of a company, including profitability,

liquidity, solvency, and overall business efficiency.

Horizontal Analysis is a comparison of financial data from previous reporting periods. It aids

in evaluating a business's expansion and financial standing in relation to rivals. A base year

and a comparative year are used in the horizontal analysis approach to calculate the growth of

a corporation (CFI Team, n.d.).

Vertical Analysis is a technique for analysing financial statements which involves listing each

line item as a percentage of a base amount in the statement.

Horizontal Analysis for Apple Inc.

2023 2022 Net % of

change change
Current assets:
Cash and cash equivalent $ 29,965 $ 23,646 6,319 26.7
Marketable securities 31,590 24,658 6,932 28.1
Accounts receivable, net 29,508 28,184 1,324 4.7
Vendor non-trade receivables 31,477 32,748 (1,271) (3.88)
Inventories 6,331 4,946 1,385 28
Other current assets 14,695 21,223 (6,528) (30.76)
Total current assets 143,566 135,405 8,161 6.03

Non-current assets:
Marketable securities 100,544 120,805 (20,261) (16.77)
Property, plant and equipment, net 43,715 42,117 1,598 3.79
Other non-current assets 64,758 54,428 10,330 18.98
Total non-current assets 209,017 217,350 (8,333) 3.83
Total assets $ 352,583 $ 352,755 (172) (0.005)

Current liabilities:
Accounts payable $ 62,611 $ 64,115 (1,504) (2.35)
Other current liabilities 58,829 60,845 (2,016) (3.31)
Deferred revenue 8,061 7,912 149 1.88
Commercial paper 5,985 9,982 (3,997) (40.04)
Term debt 9,822 11,128 (1,306) (11.74)
Total current liabilities 145,308 153,982 (8,674) (5.63)

Non-current liabilities:
Term debt 95,281 98,959 (3,678) (3.72)
Other non-current liabilities 49,848 49,142 706 1.44
Total non-current liabilities 145,129 148,101 (2,972) (2.01)
Total liabilities 290,437 302,083 (11,646) (3.86)

Shareholders’ equity:
Common stock and additional paid- 73,812 64,849 8,963 13.82
in capital, $0.00001 par value:
50,400,000 shares authorized;
15,550,061 and 15,943,425 shares
issued and outstanding, respectively
Accumulated deficit (214) (3,068) (2,854) (93.02)
Accumulated other comprehensive (11,452) (11,109) 343 3.08
loss
Total shareholders’ equity 62,146 50,672 11,474 22.64
Total liabilities and shareholders’ $ 352,583 $ 352,755 (172) (0.005)
equity

Horizontal Analysis for Dangote Cement Company

2022 2021 Net % of

₦’million ₦’million change change
Non-current assets:
Property, plant and equipment 498,893 554,883 (55,990) (10.09)
Intangible assets 114 147 (33) (22.45)
Right-of-use assets 1,628 1,365 263 19.27
Investments in subsidiaries 249,262 162,268 86,994 53.61
Investment in associate 1,582 1,582 0 0
Lease receivables 17,085 5,980 11,105 185.7
Deferred tax assets _ _
Prepayments 211 211 0 0
Receivables from subsidiaries 959,639 968,000 (8,361) (0.86)
Total non-current assets 1,728,414 1,694,436 33,978 2.00

Current assets:
Inventories 132,704 88,421 44,283 50.08
Trade and other receivables 16,842 15,798 1,044 6.61
Prepayments and other current assets 577,474 504,786 72,688 14,4
Lease receivables 5,981 3,752 2,229 59.4
Current tax assets 911 2,542 (1,631) (64.16)
 Cash and cash equivalents 196,137 272,563 (76,426) (28.04)
Total current assets 930,049 887,862 42,187 4.75
Total assets 2,658,463 2,582,298 76,165 2.95

Current liabilities:
Trade and other payables 154,463 214,411 (59,948) (27.96)
Lease liabilities _ 261
Current tax liabilities 156,940 146,517 10,423 7.11
Financial liabilities 327,331 315,090 12,241 3.88
Other current liabilities 137,106 161,579 (24,473) (15.15)
Total current liabilities 775,840 837,858 (62,018) (7.4)

Non-current liabilities:
Deferred tax liabilities 112,691 126,226 (13,535) (10.72)
Financial liabilities 263,171 147,789 115,382 78.07
Lease liabilities 148 110 38 34.55
Provisions 6,834 5,573 1,261 22.63
Deferred revenue _ 298
Employee benefit obligations 8,244 2,972 5,272 177.39
Total non-current liabilities 391,088 282,968 108,120 38.21
Total liabilities 1,166,928 1,120,826 46,102 4.11
Net assets 1,491,535 1,461,472 30,063 2.06

Equity
Share capital 8,520 8,520 0 0
Share premium 42,430 42,430 0 0
Treasury Shares (45,156) (9,833) 35,323 359.23
Capital contribution 2,828 2,828 0 0
Currency translation reserve _ _
Retained earnings 1,482,913 1,417,527 65,386 4.61
Equity attributable to owners of the 1,491,535 1,461,472 30,063 2.06
Company
Non-controlling interest __ _ ____
Total equity 1,491,535 1,461,472 30,063 2.06
Total equity and liabilities 2,658,463 2,582,298 76,165 2.95

Ratio analysis for Apple Inc.

For 2023

1. Current Ratio = Current Assets/Current Liabilities

143,566/145,308 = 0.99

2. Net Profit Ratio = Net Income /Revenue

 = 96,995/383,285

= 0.253 = 25.3%

3. Return on Assets = Net Income / Total assets

= 96,995 / 352,583

= 0.275 = 27.5%

4. Inventory Turnover = N/A average inventory not provided in the report

5. Gross Profit Ratio = (Gross Profit / Revenue) * 100

= (169,148 / 383,285) * 100

= 44.13%

From the above current ratio of 0.99, it is indicative that Apple Inc. Struggled to meet its

short-term (offset current debts) obligations in the year 2023. The company’s net profit ratio

of 25.3% is good and this shows that they have a very good and strong pricing strategies in

addition to low operational costs. The 27.5% ROA shows that the company can turn profit on

all its assets and is profitable. However, these ratios need to be compared with the ratios of

previous years to fully ascertain the company’s profitability.

Ratio analysis for Dangote Cement

For 2022

1. Current Ratio = Current Assets/Current Liabilities

930,049 / 775,840= 1.20

2. Net Profit Ratio = Net Income /Revenue

= 402,857 / 1,205,401

= 0.334 = 33.4%

3. Return on Assets = Net Income / Total assets

= 402,857 / 2,658,463
 = 0.152 = 15.2%

4. Inventory Turnover = N/A average inventory not provided in the report

5. Gross Profit Ratio = (Gross Profit / Revenue) * 100

= (544,990/ 1,205,401) * 100

= 45.2%

From the above current ratio of 1.20, it is indicative that Dangote Cement has enough

liquidity and is able to meet its short-term (offset current debts) obligations in the year 2022.

The company’s net profit ratio of 33.4% is very good and this shows that they have a very

good and strong pricing strategies in addition to low operational costs. The 15.2% ROA

shows that the company is doing very well and can turn profit on all its assets (highly

profitable) and less likely to lose money. However, an investor would be more optimistic

about the company's performance in terms of the profitability of its assets if the ROA % was

greater.

Informed decision-making is made possible by this study, which assists stakeholders

in evaluating the operational efficacy and financial stability of both companies.

Based in Nigeria, Diram Enterprises is a medical supply company that specialises in the
delivery of basic medical goods such surgical masks, gloves, and gowns. In order to maintain
concise and consistent financial reporting as it grows internationally, the company follows
International Financial Reporting Standards (IFRS). This paper describes Diram Enterprises's
setup, including its financial structure, first transactions, and rudimentary financial analysis.
It also discusses the difficulties and tactics involved in managing multiple currencies in
global marketplaces.

Chart of Accounts for Diram Enterprises

Account Type Account Title Beginning Balance (₦)

Assets
Current Assets:
Cash 162,000
Accounts Receivable 50,000
Inventory 20,000

Total Current Assets 232,000

Non-Current Assets:
Property, Plant, &
0
Equipment
Total Non-Current Assets 0
Liabilities
Current Liabilities:
Accounts Payable 20,000
Short-term Loans 0
Total Current Liabilities 20,000

Non-current Liabilities:
Long-term Loans 100,000
Total Non-current Liabilities 100,000
Equity
Common Stock 200,000
Retained Earnings 0
Total Equity 200,000
Revenue
Sales Revenue 0
Expenses
Cost of Goods Sold 0
Operating Expenses 0
Depreciation Expense 0

Accounting Journal for Diram Enterprises

Date Description Debit (₦) Credit (₦)

Dec 1 Cash (investment) 200,000
 Common stock 200,000
Dec 3 Inventory 40,000
Accounts payable 40,000
Dec 5 Operating expense 10,000
Cash 10,000
Dec 8 Cash (Sale of Medical Supplies) 60,000
Sales Revenue (Revenue from Sale) 60,000
Dec 11 Accounts payable 20,000
Cash 20,000
Dec 12 Cash receipt from customers 50,000
Accounts receivable 50,000
Dec 15 Depreciation expense 2,000
Accumulated depreciation 2,000
Dec 20 Salaries expense 4,000
Accrued expense 4,000
Dec 22 Cash (loan from bank) 100,000
Notes payable 100,000
Dec 24 Dividends 6,000
Cash 6,000

Diram Enterprises
Consolidated Income statement as of December 31, 2023

Amount (₦)
Sales revenue 60,000
Cost of goods sold 40,000
Operating Expenses 12,000
Depreciation Expense 2,000
Total expense 54,000
Net Income 6,000
 Diram Enterprises
Consolidated Statement of Financial Position as of December 31, 2023

Amount (₦)
Current Asset:
Cash 162,000
Accounts receivable 50,000
Inventory 20,000
Total Current Assets 232,000
Non-Current Assets:
Property, Plant & Equipment 0
Total Non-Current Assets 0

Total Assets 232,000

Equity and Liabilities

Current liabilities:
Accounts Payable 20,000
Short-term loans 0
Total Current Liabilities 20,000

Non-current liabilities:
Long-term loans 100,000
Total Non-Current liabilities 100,000
Total liablities 120,000
Equity:
Common stock 200,000
Retained Earnings 0
Total Equity 200,000

Total Equity and Liabilities 320,000

Basic ratio analysis of Diram Enterprises Ltd Financial Statement for 2023

1. Current Ratio:

= Current Assets/Current Liabilibilities

= 232,000/20,000

= 11.6

2. Gross Profit Ratio:

= {(revenue – cost of goods sold)/revenue} * 100

 = {(60,000 – 40,000)/60,000} * 100

= 33.3%

3. Return on Assets:

= Net income/Total Assets

= 6,000/232,000

= 0.026 or 2.6%

4. Debt to Asset Ratio:

= Total Debts/Total Assets

= 120,000/232,000

= 0.5172 * 100

= 51.72%

Based on the calculated ratios, Diram Enterprises has a strong gross profit margin, which

suggests that the business is profitable. And the current ratio also shows that the company has

sufficient current assets to meet short-term commitments. The debt ratio, however, suggests a

comparatively high debt load, which may be dangerous if inadequately handled.

In conclusion, although Diram Enterprises exhibits preliminary indications of profitability

and liquidity, prudent control of its debt levels will be vital for its sustained prosperity. Its

financial health might be further improved with changes to debt management plans and

operational efficiency.
Effects of Using Multiple Currencies in the Operations of Diram Enterprises Ltd

Diram Enterprises adds another level of complexity to its financial statements when it begins

to operate abroad and deal with several currencies. This can affect the company in several

ways such as challenges in financial analysis because the volatility of currency rates can

make comparing financial success across time periods challenging. The influence of currency

fluctuations makes it difficult to separate the real performance of the company.

Furthermore, the success of distinct subsidiaries operating in various economic climates with

fluctuating exchange rates may not be appropriately reflected in consolidated financial

statements.

The risks of operating with multiple currencies can be mitigated by the following ways:

 Forward contracts: An agreement between two parties to purchase or sell money at a

fixed exchange rate and at a future date is known as a forward contract. Provided that

the settlement date falls on a working business day in both countries, forwards can be

tailored by both amount and date. With forward contracts, an investor may lock in the

exchange rate of a certain currency and utilise them as a hedging tool. These contracts

usually demand for a certain amount to be deposited with the currency broker

(Anthony, 2022).

 Invest in Foreign-Operated Businesses: According to (Witkowski, 2024), many big

American companies, like Johnson & Johnson, Netflix, and PepsiCo, do a significant

portion of their business abroad. When translated to dollars, the foreign earnings of

such corporations essentially increase if the value of those currencies rises in relation

to the US dollar.
 Accounting for Business Segment
We will review the success of Diram Enterprises' surgical mask product line, which has been

one of the company's main lines of business. Because surgical masks are so important in

medical settings, there has always been a need for them.

The entire revenue has increased significantly due to the surgical masks product line, which is

an indication of both high market demand and successful sales techniques. The company’s

ability to sustain high profit margins is attributed to the stability of the cost of making

surgical masks. The gross profit margin of 33.3% shows that the product line has a strong

profit margin, and this is as a result of the company’s successful pricing tactics and efficient

production procedures. Also, surgical mask demand has been consistently high due to the

continuous necessity for personal protective equipment (PPE), which establishes this product

line as a reliable source of revenue.

To report the performance of an individual part of Diram Enterprise, the following would be

included in the financial statements:

 Clearly separate and report the income received and expenses spent by each segment

for the purpose of accurately evaluating the financial performance.

 Highlight the gross profit and margin in order to demonstrate the segment's

contribution to total profitability,

 Stress the importance of the segment and highlight its role in the success of the

business in relation to the overall revenue and profit of the business.

Launching a new product line for Diram Enterprises a medical consumables company entails

conducting extensive market research to uncover emerging trends and unmet requirements in

the medical consumables industry. The business ought to create prototypes of cutting-edge

consumables such enhanced wound care items and environmentally friendly syringes, and

work with hospitals to carry out clinical studies. It is imperative to guarantee regulatory

compliance to all pertinent medical standards. Diram Enterprises should also evaluate the

currency risks involved in purchasing and selling goods and services in different currencies

and create efficient hedging plans to reduce these risks.

 References

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Anthony, C. (2022, August 5). Three Strategies to Mitigate Currency Risk (EUFX). Investopedia.

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eufx.asp

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relations/default.aspx

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history/

Fernando, J. (2023, March 25). Current Ratio Explained With Formula and Examples. Investopedia.

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%20the%20Current

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%20to

Witkowski, R. (2024, January 25). How To Cut The Risk Of Investing In Foreign Currencies –

Forbes Advisor. Www.forbes.com. https://www.forbes.com/advisor/money-transfer/how-to-

minimize-foreign-currency-risk/

Woodruff, J. (2018). Financial Statement Analysis Tools. Chron.com.

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