Analysis of Regional Express Holding

Question: Discuss about the Annual Report Analysis of Regional expressHolding Limited Answer: Introduction: Regional express Holding limited is the largest independent regional airline of Australia. Organization enjoys monopoly power which places it in the position that is favorable due to positive shift in the number of passengers. The main focus of the Group is on the small regional routes in SA, NSW, QLD, Victoria and the monopoly power is enjoyed in more than 70% of the route (Rex.com.au 2017). Rex is in a very strong capital position and it has a bulk of the value of the assets in cash. Several costs are incurred by the airline. The key factor for the success of the organization is that it focuses on the regional routes and it does not operate on the trunk routes. Group operated with little or no competition. Discussion: Conceptual framework: Organization has the conceptual framework for different aspects and it is prepared according with the Australian Accounting standard. The reporting of the statements of financials is made according to the standards. Framework of the Group is based on three factors that include maintaining the optimal capital structure and the development of the contributed capital. Optimal capital structure: The Group is able to manage the capital to ensure that the entities would be able to continue as the going concern and at the same time maximizing the profits for the shareholders. Since the year 2014, the overall strategy of the group concerning the capital structure remained unchanged. As disclosed in note 12 of the report, debt is also included in the capital structure. Equity holders of the parents are attributable to the reserves, issued capital and retained earnings. Overall capital structure of the Group is balanced through the dividend by back, share issue and dividend payments (Rex.com.au 2017). Improving return on invested capital: Rex has experienced an increase return on the invested capital. Rex has strong business model and attractive long term prospects. Capital allocation: Airlines such as Regional Express are capital expensive and the investors are offered with the poor return. The dividend payout ratio is planned at 30%-40%. Price of share is not expected to reach at the intrinsic value at this pace. Turnover generated is illiquid and to small for the institutional investors. Return of shareholders: Rex believes that the interest of shareholders are best served by pursing the sustainable growth of the earnings. Maximizing the return of the shareholders in the long term is not compatible with the responsibilities and duties with the other stakeholders. Critical accounting Judgments: Directors are required to make estimates, assumptions and judgment about the carrying amount of the liabilities and assets that are not readable apparent from the other sources. This is in regard to the application of the accounting policy of the Group and is described in Note 30. Revision to the accounting estimates are recognized in which the estimates are realized. Judgment of management is applied in determining the key assumptions about the future on cost rate, future increase in salaries sand wages and period of service and experience of employee departure. Dividends: For the financial year ending 30th June 2015, the deferral of the decision to pay dividends in November is recommended by the Board. The final dividend per share given to the shareholders is fully franked and after corporate tax rate of 30%. Dividend is reflected in the financial statements and is declared after the balanced date (Rex.com.au 2017). Directors report: The report presented by the director set out the remuneration of the executives. The deed of cross guarantee, the wholly owned entity has been relieved from the requirement of preparing the directors report Notes to Financial statements: Regional express is listed on the Australian stock exchange and at and the interpretation and standards are listed below at the date when the financial statements are authorized: Risk management: The economic risk and management of the business is an integral part of the operations and the process of risks managements has been integrated into the operations. The risk management committee ensures that the programme concerning risk management are in place to protect the value of the shareholders and the assets of the Group. Risk framework of the Group is approved and monitored and this also include the internal control system. Cash and cash equivalent: Cash comprise of demand deposits and cash on hand. On the other hand, the cash equivalent comprise of highly liquid investment that can be readily converted into known amount of cash and the short term assets. These are subject to risks of changes in value that are insignificant. In the consolidated balance sheet statement, bank drafts are shown within the borrowings of the current liabilities. Independent auditors report: The audit of the organization is conducted in accordance with the Corporation Act 2001 and Australian accounting standard. Internal control of the Regional express and conducting the audit enables financial report presentation that is free from the material misstatements and gives the true and fair view (Rex.com.au 2017). The independence declarations is given to the directors of the Regional Express Holding Limited and the opinion are as follows: The financial report is prepared in accordance with the corporation Act, 2001 and it includes that it gives the fair and true view consolidated financial position of the entity and performance for the year ended. It also complying with the regulations and with the Australian accounting standard. Consolidated financial statements also prepared and are in compliance with the International financial Reporting standards. The disclosure is made in Note 30 of the financial statemement. Intangible assets: Intangible assets are tested for the impairment annually and the assets are impaired according to the indication. These assets are recorded at the cost which is less of impairment loss and accumulated amortization. Capital management: One of the strategic and the financial goal of the company is managing the capital. Capital structure of the Group is reviewed on an annual basis and in regard to this, the cost of capital of the risk associated with it is reviewed by the Board. It intends to maintain the optimal capital structure. Directors declaration: Conclusion: From the above analysis of the annual report of Regional express Holding Limited, it can be concluded that the Group enjoys the strong monopoly power in the regions of Australia. Airline industry in Australia is highly regulated and are subjected to legislative provisions. Therefore, the airline is highly regulated. Reference and Bibliography: Ahmed, A.S., Neel, M. and Wang, D., 2013. Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence.Contemporary Accounting Research,30(4), pp.1344-1372. Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration.Accounting, Organizations and Society,39(6), pp.395-413. Boone, L.E. and Kurtz, D.L., 2013.Contemporary marketing. 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