The stock seems to be holding steady....noticed the stock has a per of just over 9 now and should start heading up to a 10-11 soon or slowly and the tree conversion accounts for approximatly 4% dilution of the shares if completly taken up but then GTP keeps the csah and goes from debt to an equity account.
Check out part of my new assignment for uni in regards to the new IFRS's and let me know what you think
Bank Income & Balance Sheet Volatility
Firstly, why would the Chief Financial Officers at some of Australia’s biggest banks (and remember it is only some and Australia only has four big banks) warn of greater volatility of earnings in financial reports for banks due to new International Financial Reporting Standards taking effect?
As of January 1 2006 most of Australia’ reportable entities will deliver their interim financial reports and mostly on the Australian Stock Exchange via compulsory ASX listing rules or face suspension from quotation on the actual market.
Companies will be required to report their financial reports under the new IFRS via the new and adopted Australian Accounting Standard Board (AASB) adoption of I FRS’s, for banks this means the adoption of the new specific AASB 130 “Disclosures in the Financial Statements of Banks and Similar Financial institutions” or the equivalent International Accounting Standard (IAS) 30 and superseding of old AASB 1032 as well as AASB 130 taking precedence over AASB 132 Financial Instruments: Presentation in regards to banks.
The new AASB 130 now instructs banks and similar financial institutions new ways that they must present contingencies (allowances made for expected losses although they have not actually happened) and loan write offs in the company accounts, these affect the balance sheet and the statement of performance differently than under AASB 1032 and more so with the change over to IFRS’s.
Under old AASB 1032 the estimated, probable and historical identification of losses in regards to loans and advances was put through as an expense in the performance statement and deducted from the appropriate assets and put into a provision account (old AASB 1032 S7.2.1) However under new AASB 130 the estimated, probable and historical identification of losses in regards to loans and advances is to be adjusted and recognized as retained earnings appropriations account as well as the excess over the estimated, probable and historical identification of losses in regards to loans and advances for the period accounted for and to be credited to retained earnings accounts. It is only when it can be fully determined legally that the write offs of loans and advances can be expensed through the statement of performance. (New AASB 130 S43-S49)
In regards to the volatility of the balance and performance statements of banks this means that once a bank or similar financial institution changes over to the new IFRS’s it will have to expropriate the old AASB regime accounts of what was actually expensed to performance if any at the time and post it to the retained earnings account as a deduction if it did not match the legal requirement to be written off and expensed and to now only expense legally titled written off debts to the performance statement.
Dividend Percentage
Firstly let us clear up the matter of the dividend being a percentage of the net profit payout as compared to the payout being a percentage of the underlying cash earnings. Usually a company has its dividend published as a percentage of its net profit in the Statement of Performance which is an accrual accounting based report, but if a company was to use the Cashflow Statement this may make things a little more complicated as AASB 107 using the direct method format for the cash flow statement which the majority of ASX listed companies use reports cash flow from operating activities, investing activities and finance activities and discloses the total net increase/decrease in cash.
Reporting the dividend as a percentage of the net increase/decrease in cash could actually distort this payout percentage as companies use the accrual method for the actual net profit reporting and using all three subheadings from the cash flow would not present a true picture as financing and investing activities would not be the usual cash increases/decreases that make a company’s usual earnings, cash flows from operating activities are and due to the accrual method this cash flow would not present all the operating revenues and expenses for that accounting period.