INTERPRET COMPANIES' FINANCIAL STATEMENTS

Interpret companies' financial statements

Interpret companies' financial statements

Executive Summary

Anglo American plc, with its subsidiaries, joint ventures and associates, is a international foremost in the excavation and natural resource parts. It has significant and concentrated concerns in gold, platinum, diamonds, coal, groundwork and ferrous metals, developed minerals and plantation products, as well as economic and technical strengths. The Group is geographically diverse, with operations in Africa, Europe, North and South America and Australasia. We do not cover in this report independently managed companies including our subsidiary, AngloGold, and our associate, De Beers, both of which publish their own Safety, Health and Environment (SHE) reports. Financial highlights‡ Total Group turnover decreased by 6% to $19,282 million. Headline profit declined by 12% to $1,770 million. Capital expenditure amounted to $1,787 million. $637 million was paid in taxes. $101 million was expended on exploration. ‡These financial data are derived from the audited Anglo American plc Annual Report and Accounts for the year ended 31 December 2001, and are aggregated from Anglo American plc subsidiaries (together with joint ventures and other interests) using the accounting and consolidation principles of Anglo American plc. SHE data are reported Meanwhile, they are important to decision makers who use the financial information they provide to evaluate the performances of the firm and themselves. Thus, inaccurate economic statements may falsify the portrayal of economic position and functioning results of a business. For this cause, money basis of accounting, as one of the accounting methods, is argued if it is unquestionable and can be used in preparing economic declarations or it is imperfect and may deceive the comprehending of the economic statements by conclusion makers. However, in this term paper, I will investigate that cash basis of accounting is defective and economic declarations arranged on a cash cornerstone of accounting may distort the portrayal of financial place and functioning results of a business.

Nowadays, there are two forms of accounting used by business, cash cornerstone of accounting and accrual cornerstone of accounting. The money basis procedure of accounting is based on real-time money flow. (Website: American Express Company, 2000, p1) In such procedure, you report an expense when it is paid, and record income when it is received. So expenses do not appear on the economic declarations until they have been paid. So incomes do. With accrual accounting, you record earnings when it is earned, not when it is paid. Similarly, you record your costs when the obligation arises, not when you pay it. (Website: American Express Company, 2000, p1) So the rudimentary difference between the two procedures is the timing of earnings and total cost recording.

For one enterprise, financial data, especially earnings and total cost, are exceedingly important. The snare income of the business, which can be considered as the differences between earnings and expense, exactly connects to that company's earnings and loss. Therefore, distinct procedures of accounting selecting in organising economic statements will cause distinct results on that business's earnings and loss ...