Step 7: Inventories and KCQs

Informa has their Inventory listed at the lower of cost and net realisable value. Pre-publication costs are included in their inventory, which represents costs that are incurred in the origination of content prior to publication.

In the financial statement notes of 2016 and 2017, Inventory is included in the cost of sales (note 7, operating profit). It states that cost of sales includes inventory recognised as an expense including pre-publication amortisation (in 26, there was £47.6m and in 2017 there was £42.8m that was included).

Note 22 (2016, 2017) and note 25 (2018) explain what is included in inventory, these are:- Work in progress- Finished goods and goods for resale- A total

Then in the note below the table displaying these values, it says “write down of inventory during the year for 2016, amount to £2.1m (2015: £2.1m)” (there are different values for the other financial reports.

Work in progress is essentially the Inventory of Informa that are awaiting completion and resale and the finished goods are the products that have been completed and are ready of sale. Informa has both of these and does not have any raw materials which is the materials that are unprocessed and are used to create the goods.

Inventory totals for each year, 2016, 2017, and 2018, respectively were £52.4m, £54.1m and £50.9m. These numbers are rather large in size, this shows that Informa has rather large amounts of Inventory.

The way in which Informa lists its Inventory has not changed over the three years that have been looked at, and in each annual report it has got the same information just different values for each year.

TO BE ANSWERED STILL:Informa does not disclose what type of inventories system they use however, I believe that Informa is

Informa uses the weighted average basis of recording their Inventory. This can be seen as Informa states its Inventory at the net realisable value and the lower of cost. The net realisable value shows the estimated selling price less marketing and distribution costs expected to be found.

What are some of the associated issues and costs that your firm might be facing with its inventories management?

Why might this be the case?

Are there any areas where you think your firm could improve its inventories management?

How did you identify these areas?

Step 8: Using MYOB

In this step, I have used the example company that has been used in the tutorial videos for MYOB essentials. The company is IckyLeaks. I used this so I could easily follow along and get used to using the software package.

Here are a few screenshots of the information I have put into MYOB essentials:

Here are my results for the Quiz:

Step 9: Financial Statements in MYOB

Transactions being used:1. Business cards (3/1/20)2. Hire of event facilities (7/1/20)3. Marketing merchandise (9/1/20)4. Promotional banners (9/1/20)5. Hiring of AV equipment (13/1/20)6. Accommodation for presenter (13/1/20)7. Monthly internet subscription (15/1/20)8. One month of online advertising (17/1/20)9. Stationery – pens, notepads, etc. (28/1/20)10. Presenter Jerry Springfield (28/1/20)

These transactions are all for purchases made by Informa in preparation for an upcoming event or exhibition.

I am using MYOB essentials on a Mac and so I struggled with some of the instructional and tutorial videos and the differences between the PC version and the Mac version, until I stumbled across tutorials specific to MYOB Essentials.

All Journals Report:

Income Statement:InformaAccrual mode1 Jan 2020 to 31 Jan 2020

    TotalIncome    Total Income   0.00     Less Cost of Sales    Total Cost of Sales   0.00          Gross Profit   0.00     Less Expense    6-1200 Advertising 4,799.996-3000 Internet 90.006-4200 Printing & stationery 4,909.106-5000 Sub contractors 454.556-5200 Sundry expenses 318.18Total Expense   10,571.82          Operating Profit   -10,571.82     Plus Other Income    Total Other Income   0.00     Less Other Expense    9-1000 Other expenses 436.36Total Other Expense   436.36          Net Profit   -11,008.18

Balance Sheet:InformaAccrual mode1 Jan 2020 to 31 Jan 2020

    TotalAsset    Banking    Total Banking   0.00     Current Assets    Total Current Assets   0.00     Fixed Assets    Total Fixed Assets   0.00     Total Asset   0.00     Liability    Credit Card    2-1400 Visa 12,109.00Total Credit Card   12,109.00     Current Liabilities    2-2400 GST paid -1,100.82Total Current Liabilities   -1,100.82     Long Term Liabilities    Total Long Term Liabilities   0.00     Total Liability   11,008.18     Net Assets   -11,008.18     Equity    Current Earnings    3-1800 Current year earnings -11,008.18Total Current Earnings   -11,008.18     Retained Earnings    Total Retained Earnings   0.00     Total Equity   -11,008.18

Statement of Cash Flows:InformaAccrual mode1 Jan 2020 to 31 Jan 2020

    TotalIncome    Total Income   0.00     Less Cost of Sales    Total Cost of Sales   0.00          Gross Profit   0.00     Less Expense    6-1200 Advertising 4,799.996-3000 Internet 90.006-4200 Printing & stationery 4,909.106-5000 Sub contractors 454.556-5200 Sundry expenses 318.18Total Expense   10,571.82          Operating Profit   -10,571.82     Plus Other Income    Total Other Income   0.00     Less Other Expense    9-1000 Other expenses 436.36Total Other Expense   436.36          Net Profit   -11,008.18     Less Asset    Total Asset   0.00     Plus Liability    Credit Card    2-1400 Visa 12,109.00Total Credit Card   12,109.00     Total Liability   12,109.00     Plus Equity    Total Equity   0.00     

Plus GST Movement    2-2400 GST paid -1,100.82Total GST Movement   -1,100.82          Net Cash Movement in (Out)   0.00          Opening Balance   0.00     Plus Cash Movement    Total Cash Movement   0.00          Closing Balance   0.00

For this step, I used a new file on MYOB so that only the transactions for Informa were able to be viewed, without IckyLeaks being a part of the transactions.

I like the use of the journals report as it allows for a company to be able to view all the transactions made within a certain time period and show what account was used and shows important information that can be found within the other financial reports.

The income statement (also known as the profit and loss statement) shows a company’s income, revenue and expenses. The transactions that were used in this step show that Informa has only got expenses. This is because the 10 transactions that were created for this assessment, all related to the company putting on an event or exhibition which meant the company was spending money on the specific things needed for the event, and thus no income is listed here. Only expenses were incurred during the process of putting together the event.

This is also seen in the balance sheet. A balance sheet shows the assets, liabilities and equity of a company and for Informa with the transactions taken into consideration, it only lists them as a liability as it is money going out of the company and there are no assets (or income of any sort) that are going into the company.

Lastly, in the statement of cash flow, this also displays the expenses only and does not have any income or display an opening or closing balance. This is because only expenses were created for this step and so there are only total values for operating expenses, net profit, total credit card, total liability and lastly, total GST movement. These all relate to the 10 transactions which were all expenses made by the company to pay for the equipment and other features they require for an event.

As can be seen when looking at all three statements, they are all related and all show the fact that the company has not got any assets or income due to the 10 transactions that were chosen at the beginning being all expenses. After completing this step the way that I have, I am aware that having some income into the company would show more information in the

financial statements, however I have still gained an understanding on how to use MYOB Essentials and what the statements show.

Step 10: Depreciation and Journal Entries

Depreciation of Informa over the last few years has not changed in terms of the methods they used to record it. Informa uses the straight-line method of recording depreciation which is the process of expensing assets over a set period of time and generally its useful life.

In the annual reports I found that “no amortisation or depreciation is charged on non-current assets (including those in disposal groups) classified as held for sale” by Informa.

During the year 2016, depreciation costs were £33.3m. In 2017 it increased to £41.3m and then again it increased to £44.7m in 2018. However, disposal of assets was £3.3m in 2016, dropped to £2.4m in 2017 and then it increased significantly in 2018 to £10.5m.

In 2018 they may have written off lots of their assets, because they were old assets that may have been replaced or no longer had any useful life.

Although Informa does not have a significant expense for depreciation in the financial statements such as ‘depreciation and amortisation’ in the income statement or ‘accumulated’ depreciation and amortisation in the balance sheet. Informa does have property, plant and equipment listed under the non-current assets in the balance sheet and as of December 2018 it is valued at £31.8m, this equates to less than 1 per cent of the overall non-current assets.