Posted: February 3rd, 2015

Prepare Financial Reports for Corporate Entities

Paper, Order, or Assignment Requirements

 

 

Unit : Prepare Financial Reports For Corporate Entities

Assessment Task : 2

Sonic Healthcare has performed with distinction over the 2011 financial year, despite the challenging global financial markets and the headwind created by the strong Australian dollar. All Sonic divisions have delivered strong results, a credit to the expertise and dedication of our pathologists, radiologists, managers and staff around the world.

 

Their Values

 

Commit to Service Excellence: To willingly serve all those with whom we deal; with unsurpassed excellence. Treat each other with Respect & Honesty. To grow a workplace where trust, team spirit, and equity are an integral part of everything we do. Demonstrate Responsibility & Accountability

To set an example, to take ownership of each situation to the best of our ability, and to seek help when needed. Be Enthusiastic about Continuous Improvement. To never be complacent, to recognise limitations and opportunities for ourselves and processes; and to learn through these. Maintain Confidentiality. To keep all information pertaining to patients, as well as professional and commercial issues, in strict confidence.

 

1.Board of Directors

 

Principal activities:

During the year the principal continuing activities of the Group consisted of the provision of medical diagnostic services and the provision of administrative services and facilities to medical practitioners.

 

Review of operations

 

Key highlights

• Net profit growth in line with guidance given in February 2011.
• Strong second half performance in Australian pathology with the return of volume growth, market share gains and margin improvement.
• Revenue growth, synergies and operational improvements driving margin expansion in all major markets.
• Five synergistic pathology acquisitions completed; and funding available for future acquisitions.
• Positive outlook with EBITDA expected to grow by 10-15% in 2012, excluding additional acquisitions (assuming 2011 currency exchange rates).

 

Non-audit services

 

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important.

The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001. In the opinion of the Directors none of the services provided undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

 

 

Remuneration Report

 

The Directors of Sonic Healthcare Limited present the Remuneration Report for the year ended 30 June 2011 in accordance with section 300A of the Corporations Act 2001. Sonic Healthcare’s remuneration packages are structured and set at levels that are intended to attract, motivate and retain Directors and executives capable of leading and managing the Group’s operations, and to align remuneration with the creation of value for shareholders.

 

 

2. Board of Directors

 

Role of the Board

The Board of Directors is accountable to shareholders for the performance of the Company and the Group and is responsible for the corporate governance practices of the Group. The Board’s principal objective is to increase shareholder value while ensuring that the Group’s overall activities are properly managed. Sonic’s corporate governance practices provide the structure which enables the Board’s principal objective to be achieved, whilst ensuring that the business and affairs of the Group are conducted ethically and in accordance with the law.

The Board’s overall responsibilities include:

• providing strategic direction and approving corporate strategies,
• monitoring management and financial performance and reporting,
• monitoring and ensuring the maintenance of adequate risk management identification, control and reporting mechanisms, and
• ensuring the business is conducted ethically and transparently.

The Board delegates authority for operational management of the business to the Managing Director and senior executives. The Managing Director also oversees the implementation of strategies approved by the Board. The Board uses a number of Committees to support it in matters that require more intensive review and involvement. Details of the Board Committees are provided below. As part of its commitment to good corporate governance, the Board regularly reviews the practices and standards governing the Board’s composition, independence and effectiveness, the accountability and compensation of Directors (and senior executives) and the Board’s responsibility for the stewardship of the Group. The role and responsibilities of the Board, the functions reserved for the Board and those delegated to management have been formalised in the Sonic Board Charter.

 

Composition of the Board

Sonic does not comply with ASX Corporate Governance Council Revised Recommendation 2.1: “A majority of the board should be independent Directors”. On 1 July 2010 two additional independent Directors were appointed creating a five to four majority of independent Directors, however following the retirement of the Chairman on 27 October 2010, the Board now comprises four independent and four Executive Directors. The Board has resolved that the position of Chairman of the Board be held by an independent Director, and the position of Chairman and Managing Director will be held by different persons. The Board has also resolved that the mere fact that a Director has been in office for a period greater than 10 years does not change that Director’s status as an independent. The size and composition of the Board is determined by the full Board acting on recommendations of the Remuneration and Nomination Committee. Sonic’s constitution requires that the Board comprise no more than 12 and no fewer than 3 Directors at any time. Sonic’s constitution also requires all Directors, other than the Managing Director, to offer themselves for re-election at an Annual General Meeting, such that they do not hold office without re-election for longer than three years.

 

 

Board meetings

The Board meets formally at least 10 times a year to consider a broad range of matters, including strategy, financial performance reviews, capital management and acquisitions. Details of meetings (both full Board and Committees) and attendances are set out in the Directors’ Report.

 

Independent professional advice and access to information

Each Director has the right to seek independent professional advice at the Company’s expense.

All Directors have unrestricted access to Company records and information and receive detailed financial and operational reports from senior management during the year to enable them to carry out their duties. Directors also liaise with senior management as required and may consult with other employees and seek additional information on request.

 

Conflicts of interest of Directors

The Board has guidelines dealing with disclosure of interests by Directors and participation and voting at Board meetings where any such interests are discussed. In accordance with the Corporations Act 2001, any Director with a material personal interest in a matter being considered by the Board does not receive the relevant Board papers, must not be present when the matter is being considered, and may not vote on the matter.

 

Securities trading

Under Sonic’s Securities Trading Policy, all Sonic employees are prohibited from buying or selling or otherwise trading Sonic Healthcare securities (including shares, options, debt securities) at any time they are aware of any material price sensitive information that has not been made public, and are reminded of the laws against “insider trading”. Certain “Designated Officers”, including all Directors and senior executives (and specified related parties), are also prohibited from trading in periods other than in 8 week windows following the release of half year and full year results, and 2 week periods following the provision to the market at any time by Sonic of definitive guidance regarding the next annual result to be released. Exceptions to this prohibition can be approved by the Chairman (for other Directors) or the Managing Director (for all other employees) in circumstances of severe financial hardship (as defined in the Policy). All trading by Designated Officers must be notified to the Company Secretary. Prohibitions also apply to trading in financial instruments related to Sonic’s securities, including products which limit the economic risk of option or share holdings in Sonic, and to trading in the securities of other entities using information obtained through employment with Sonic. In addition, the Managing Director and Finance Director are required to obtain approval from the Chair of the Sonic Board before selling any shares. All Sonic securities dealings by Directors are promptly notified to the Australian Securities Exchange (ASX).

 

Board Committees

To assist the Board in fulfilling its duties, there are currently three Board Committees whose terms of reference and powers are determined by the Board. Details of Committee meetings and attendances are set out in the Directors’ Report.

 

Audit Committee

The principal role of the Audit Committee is to provide the Board, investors, owners and stakeholders with confidence that the financial reports for the Company represent a true and fair view of the Company’s financial condition and operational results in all material respects, and are in accordance with relevant accounting standards. The responsibilities of the Audit Committee are set out in its Charter and include:

• assisting the Board in its oversight responsibilities by monitoring and advising on:

the integrity of the financial statements of the Company, the Company’s accounting policies and practices in accordance with current and emerging accounting standards, the external auditors’ independence and performance, compliance with legal and regulatory requirements and related policies, compliance with the policy framework in place from time to time, and internal controls, and the overall efficiency and effectiveness of financial operations.

• providing a forum for communication between the Board, executive management and external auditors.
• providing a conduit to the Board for external advice on audit and internal controls.

 

Identifying and managing business risks

Sonic recognises that risk management is an integral part of good management and corporate governance practice and is fundamental to driving shareholder value across the business.

Sonic views the management of risk as a core managerial capability. Risk management is strongly promoted internally and forms part of the performance evaluation of key executives.

 

Responsibilities

The Board determines the overall risk profile of the business and is responsible for monitoring and ensuring the maintenance of adequate risk management policies, controls and reporting mechanisms. To assist the Board in fulfilling its duties, it is aided by the Audit Committee and the Risk Management Committee.

The Board has delegated to these Committees responsibility for ensuring:

• the Company’s material business risks, including strategic, financial, operational and compliance risks, are identified,
• systems are in place to assess, manage, monitor and report on those risks, and that those systems

are operating effectively,

• management compliance with Board approved policies,
• internal controls are operating effectively across the business, and
• all Group companies are in compliance with laws and regulations relating to their activities.

 

The Audit Committee and Risk Management Committee update the Board on all relevant matters.

Management is responsible for the identification, assessment and management of business risks. During the year, management reported on these matters, including the effectiveness of the management of Sonic’s material business risks, to the Audit Committee and Risk Management Committee, who then reported these matters to the Board.

 

Risk management policies, systems and processes

Sonic’s activities across all of its operating entities are subject to regular review and continuous oversight by executive management and the Board Committees. The Chief Executive Officers of the individual operating companies are responsible for the identification and management of risk within their business. To assist in this, executive management has developed an effective control environment to help manage the significant risks to its operations, both locally and overseas. This environment includes the following components:

• clearly defined management responsibilities, management accountabilities and organisational structures,
• established policies and procedures that are widely disseminated to, and understood by, employees,
• regular internal review of policy compliance and the effectiveness of systems and controls, in particular, through Sonic’s Business Assurance Program, an internal audit function,
• comprehensive training programs for staff in relation to operational practices and compliance requirements,
• strong management reporting framework for both financial and operational information,
• creation of an open culture to share risk management information and to continuously improve the effectiveness of Sonic’s risk management approach,
• benchmarking across operations to share best practice and further reduce the operational risk profile,
• Sonic Core Values, a uniting code of conduct embraced by Sonic employees,
• centrally administered Group insurance program ensuring a consistent and adequate approach across all operating areas, and
• the employment of a professional Risk Manager to co-ordinate the Company’s approach to material business risk management.

 

The role of shareholders

 

The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the Group’s state of affairs.

 

External auditors

The Company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually. Sonic requires its external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the auditor’s report. It is the policy of the external auditors to provide an annual declaration of their independence to the Audit Committee.

 

Performance evaluation of the Board, its Committees and Directors, and key executive officers

 

The Board and its Committees

The Board carries out an annual evaluation of its own performance in meeting its key responsibilities in accordance with the Board Charter, by undertaking the following activities:

• the Chairman discusses with each Director their individual performance and ideas for improvement based on surveys completed by each Director assessing their own and each other Directors’ performance, and
• the Board as a whole discusses and analyses its own performance, including suggestions for change or improvement and assessment of the extent to which the Board has discharged its responsibilities as set out in the Board Charter.

 

Performance criteria include:

• economic results of the Group,
• fulfilment of objectives and duties,
• personnel and resource management,
• personal conduct and Sonic Core Values,
• corporate governance and compliance,
• risk management, and
• feedback from clients and investors.

 

Performance evaluation results are considered by the Remuneration and Nomination Committee in determining the level and structure of remuneration for the Managing Director and Finance Director.

 

 

 

Key executives

The Managing Director evaluates key executives at least annually with qualitative and quantitative measures against agreed business and personal objectives. These business and personal objectives are consistent with those used in the performance reviews for the Managing Director and Finance Director.

 

AASB Standards

 

• The Directors of Sonic Healthcare Limited present the Remuneration Report for the year ended 30 June 2011 in accordance with section 300A of the Corporations Act 2001.
• The Concise Financial Report does not contain all the disclosures required by the Australian Accounting Standards.
• The Directors are responsible for the preparation and presentation of the Concise Financial Report in accordance with Accounting Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001.
• Auditor’s responsibility

Their responsibility is to express an opinion on the Concise Financial Report based on the     audit procedures. They have conducted an independent audit, in accordance with Australian Auditing Standards, of the Financial Report of the Company for the year ended 30 June 2011. The audit report on the Financial Report for the year was signed on 29 September 2011 and was not subject to any modification. The Australian Auditing Standards require that they comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the Financial Report is free from material misstatement. The procedures in respect of the Concise Financial Report included testing that the information in the Concise Financial Report is derived from, and is consistent with, the Financial Report for the year, and examination on a test basis, of evidence supporting the amounts and other disclosures which were not directly derived from the Financial Report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the Concise Financial Report complies with Accounting Standard AASB 1039 Concise Financial Reports.

 

 

Valuation Ratio

Two Valuation Methods

Net asset value method

Sonic Health Care can use the third-most common method of estimating the value of a company looks to the assets and liabilities of the business. At a minimum, a solvent company could shut down operations, sell off the assets, and pay the creditors. Any cash that would remain establishes a floor value for the company. This method is known as the net asset value or cost method.

Guideline companies method

This method determines the value of a firm by observing the prices of similar companies (called “guideline companies”) that sold in the market. Those sales could be shares of stock or sales of entire firms. The observed prices serve as valuation benchmarks. From the prices, one calculates price multiples such as the price-to-earnings or price-to-book ratios—one or more of which used to value the firm.