Plant and equipment is depreciated on a straight line basis which means that the depreciation amount is written off from the original cost of the asset over its expected useful life (Sirtex 2011). What is the underlying assumption of this method in relation to the usefulness of plant and equipment? By assuming this straight line basis method, the actual value of the plant and equipment is then inaccurate due to the fact that it is done over a formulated straight line method. To determine the actual value of the assets, this accounting method of depreciation is not a choice. Q5.
What do the long-term provisions relate to? Long term provisions is more or less related to the non-current liabilities of the company as Sirtex mentioned that it ‘has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. ’ (Sirtex 2011, p. 31) What were the amounts of additional provisions AND amounts used with respect to this item in 2011? The amount of additional provisions for the long-term is ‘$105,000’ for 2011 and for short-term
The closing balance for long-term provision total is ‘$360,000’, and a short-term provision is ‘$5,084,000’. (Sirtex 2011, p. 45) Q6. Describe the purpose of the external auditor’s report (that is, the Independent Auditor’s Report To the Members of Sirtex Medical Limited). The purpose of the external auditor’s report is for the business to be able to evaluate their own company upon outsider’s views and reports of the current financial position of Sirtex for more accurate and non-bias point of view. Name the audit firm engaged by Sirtex in 2011.
On to comparing profitability. Sirtex has a better average inventory turnover over Company X, this puts them on a better profitability if we only look at the AIT itself, but considering the ROA, GPM similarities from the company, it only comes down to the net profit margin and company X shows that they are doing a great job in maintaining their net profit over sales while Sirtex has shown a big reduction in the net profit margin.