ASS#2 - Step 7-9 - The Final Accountingdown

Almost at the end of it all (thankfully) so here are my Steps 7-9. I'll be looking to start a discussion and provide feedback for other students, so if you do read this and provide me some feedback, let me know and I will try to return the favour!

I'm not 100% sure I've got everything right on my ratios but that's because it didn't give me nearly as much grief as restating the financial statements. I'm really interested to hear other's opinions on my observations of Experian's ratios.


ASS#2 - Steps 7 - 9 Draft:
https://docs.google.com/document/d/1UU0BrY5krM4GlIimyMd70KUxVoeHw8QF1Q8ifKvnhbg/edit?usp=sharing

Spreadsheet with ratios:
https://docs.google.com/spreadsheets/d/1Wk7If9gN-OHSfXtuD5wfua-Be86JyiDLnLO9eVxClJM/edit?usp=sharing

ASS#1 - Everything Draft

Hi everyone,


I've finished my draft. I'm posting it here as a link to Gooogle Docs and would love some feedback before I tie this off.


Regards,


Zac.


ASS#1

ASS#1 Step 5 - Chapter 3 Review - Blind date

So I got invited to a party. It goes for 13 weeks. The party is exclusively for accounting students and companies that, for the most part, we’ve never heard of or met before. The idea is that we get awkwardly introduced, ask dumb questions, profound questions, make rubbish observations and maybe, just maybe, we start to understand them on a deeper level. Let’s set the scene: I’m suddenly 18 and awkward, kind of standing near the wall but not leaning on it and Martin comes over, grabs me by the shoulder; whisking me away from the relative safety of my wallflower position. “I have someone I’d like you to meet.” he says, as he shuffles me across the room past other students fumbling through conversations about cash flow statements. All of a sudden we come to a halt and I’m standing in front of my company. Martin shoves a 188 page financial statement in my hand, smiles and says “Zac, meet Experian plc. Experian plc, this is Zac. Have fun!” He immediately walks off and I hear him shouting “Elizabeth! I have someone I’d like you to meet.” as he briskly slips through the crowd.

All of a sudden he’s gone and I’m alone. Well, not alone. Experian plc looks at me expectantly and I stand there frozen, dumbly holding the thick wad of corporate spin, jargon and accounting wizardry. We stare at each other for a moment as I struggle to think of something to say. Experian sighs and its’ eyes glance down at the Financial Statement I have in my left hand. “Oh. Right” I say, “Um… let me see. You, uh. Hmm.” I desperately try to flick through the pages but I’m also holding my drink in my right hand so I almost drop everything and end up spilling some of the contents of my red solo cup on Experian’s shoes. To stall (and change the subject from ruining shoes), I ask what Experian does.

“We’re an IT company. At a high level, we provide products for online security for credit information, personal details, marketing products and data analysis.” It replies.

“Wow, great” I say, trying to find that damn Statement of Changes in Equity. I ask how old Experian is as I take a big swig of my drink.

“214” it replies and I spurt that mouthful of drink I’d attempted to sip.

“You’re what?” I ask incredulously, “But there were no computers back then.”

“It’s complicated.”

And that’s how we met. So the story above may be a little silly but those feelings of awkwardness, confusion and surprise were all felt by real Zac when he first looked at his company. That feeling of trying to juggle flipping through something and multi-tasking a conversation is exactly the sort of cumbersome incoordination that I experienced reading the financial statement and attempting to fill out my company’s spread sheet. It’s so much information, and the scale is overwhelming, spanning numerous countries, business segments and hundreds of millions of dollars. As above, I tried to just stick to the basics. I got to know the company at a high level and stuck to the information required for the spread sheet. It helped to get a base level understanding of what is important in the firm.

Initially, I had read the week 3 study guide prior to transcribing the details of my firm’s financial statements to the spread sheet. I thought that this made sense and felt buoyed as I jumped into the statement and to my dismay, immediately drowned. There was just so much information and so many references to the sections I was looking for and it wasn’t like there were neon signs saying ‘this stuff her is important!’ So I took a deep breath and used my search function.  I found an example that another student[i] had already completed and started looking for the similar line items to confirm that I was looking at the right thing and all of a sudden it started to make sense. It was interesting to note that Experian’s total equity had been declining over the last four years. This last financial year, they have purchased and cancelled $190m of their own shares. I wasn’t sure why they might do this but I did some research on Investopedia and there could be a number of reasons: buying outstanding shares can pay off investors and reduce the overall cost of capital or; stocks are undervalued and the company buys back some of those stocks to reissue when it regains its’ popularity. So the question is: why did Experian plc do it?

I looked into why Experian plc might have done this and found that there was a significant downturn in share price in November 2016. I remembered seeing an article regarding privacy breaches when I originally started researching the company so I searched for news for Experian in October 2016. I found an article from the Huffington Post regarding hackers breaching a server that withheld the private information of T-Mobile customers. The article was written on the 6^th October 2016 and claims the privacy breach occurred in September 2016 and September 2013. It could be safe to assume that the fallout from this hacking incident affected share pricing as it dropped significantly (about $200 per share) from October to a low at 11^th November 2016. Since that point Experian’s share price has risen steadily to an all-time high in March 2017. It was great to use this information from the study guide practically on my own company and it really illustrates (ironically) the trust relationship in business. I found this exercise really exciting because I feel like I finally connected with the firm’s business realities.

---

[i] I’ve lost the student’s name but it was whom ever had Objective Corporation as their company. I couldn’t seem to reference them on the Find Your Company spreadsheet.

ASS#1 Step 4 - This took longer than expected...

I'll be honest here, this was a little harder than I originally thought it would be. 'Input some data they said'. 'It'll only take me a minute' I thought. Yeah... it took me a lot longer than that.


I learned a lot about what numbers are important though while I was sifting through everything. It's amazing to think about the sheer scale of money involved in my company's reports. I've had a look at a few other student's companies but wow... hundreds of millions of dollars-plus.


Anyway, feel free to have a look and let me know what you think of Experian plc in number form:


https://drive.google.com/file/d/0B_MaWdlV24sYUV8xUkhzU0hXRXc/view?usp=sharing

ASS#1 Step 5 - Chapter 2 Review - It’s all about the ‘Game’

“You have to understand the rules of the game. And then you have to play better than anyone else.” – Albert Einstein

This quote really speaks to me. I love games. Always have. All sorts of games. Heck, I’ve played tabletop strategy wargames[i] (sometimes on-and-off) from the age of five. Tabletop wargames, if you have never heard of them before, are like chess played on three dimensional battlefields using miniature models and terrain (most include a chance mechanic like dice or cards to help resolve actions). I find I’m most successful when I treat things like a game. I engage more in games, I take feedback and learn better when I’m trying to get better at a game. I treat work like a game. I try to be the best at what I do, I try to maximise my performance but ultimately I try to have fun and that I think is the critical point. I engage more when I’m enjoying something; when something is fun. I think sometimes I lose sight of the ‘fun factor’ in things or I forget to enjoy something (or more importantly, make it enjoyable). I haven’t got far through Chapter 2 and I’ve already written a heap about two sentences but I’ve spent a lot of time on this quote because it’s important. I couldn’t tell you how many tabletop games I’ve played and they all have varying themes, backgrounds, scales and feel. One thing is consistent though: they all have rules. And first, and most important, thing is first: you need to know them.

Rules are designed to level a playing field. In my experience with games, the best ones are the ones that are balanced with rules that make sense and have clear intentions. The rules allow you to have fun. Too many rules make a game too prescriptive and limits your ability to form your own strategies and approaches. Too few rules or poorly written rules can be confusing and leave the game open to manipulation through interpretation. The best games have just enough rules to set clear boundaries leaving you some room to approach things in different ways. The point I want to make is this: the rules that are created for games define the reality of the game and that reality allows you to immerse yourself. This same point applies to financial accounting. The rules are the same for everyone, they are designed to create a level playing field so everyone can immerse themselves in the game. The hard part is being better than everyone else.

One of the most important things I’ve learnt about rules, especially when it comes to interpreting and disputing them, is that there two ways to consider them: rules as written and rules as intended. It’s important to consider the duality of rules in that sense, as what the rule intends to achieve might be different from the reality of the way the rule is written. If you consider this in relation to legislation, if a rule is written as open to interpretation, a loophole may result for someone to exploit and create unfair advantage, which is why it’s important that those writing the rule (as written), write them very well. I’ve experienced an argument like this in numerous games and it never creates a good experience for the people who end up exploited. As a result, it’s reassuring to see that there are so many standards set by the variety of bodies mentioned in this text. The concept of ‘rules as intended’ is important for a different reason.

In section 2.2 you refer to the fact that there can’t be a rule for everything. When you’ve played a game for a while, you start understand the flavour and the bulk of rules define how most things interact through cause and effect and as a result you begin to understand the intentions of the game’s designer. In accounting, there can’t be a rule for everything and the message I get from this is you have to consider rules as intended and by extension, have an understanding of what is right and wrong. At the very least, forming your own principles of what is right or wrong. This concept is particularly relevant to relevance and faithful representation. The intention behind the relevant rules in this case are to allow people to make informed decisions with the appropriate level of disclosure.

In summary, I think the most important concept I take from all of this, is that regardless of whether you consider accounting a game or serious business, you have to understand the rules. Not understanding the rules purely as they are written, but understanding the concept of a rule and its intention to create personal, fundamental principles to play the game by. That is how you get good at a game.

---

[i] If you’re interested, this is the wargame I play the most: Infinity

ASS#1 Step 3 - Top of the pops (Top 3 Blogs as rated by me!)

Here are my top three blogs in no particular order:

Angela Engelbrecht’s – I chose Angela’s because it’s clear and simple in the best way possible. It has made me rethink my layout and I’ll be making changes as a result.

John Murray's – it just looks awesome, reads well and has a great theme. I may be a little partial to the new look Joker but that only adds to the experience for me. Very slick John!

Nicole Nelson's – I thought Nicole has done a great job with her theme, layout and I like the way she presents her opinions. It’s a very relatable blog and I look forward to reading more of her thoughts.

ASS#1 Step 3 - Experian is how old?!

Experian is an information technology company that is based in 37 countries around the world with approximately 17,000 employees. Their HQ is in Dublin. They primarily provide products that collect, analyse, interpret and store digital data. When you distil the message, it seems that Experian promise to provide value through clarity of information, the promise of direction and protection when you navigate the digital world, as a business or consumer. According to the spin, Experian is everywhere, kind of like your digital deity in the collection and use of financial information. For example: Experian promises to help a bank understand a consumer’s financial information to assess them for loans and on the flip side, will protect that consumer’s personal information as part of the process. Experian operate in four major segments which are: Credit Services, Decision Analytics, Marketing Services and Consumer Services.

When I read through the website, I found that there was a lot of corporate spin and ‘feel-good’ jargon. My initial impression was that the company is everywhere through the sheer need for information collection, analysis and protection that is required by businesses and consumers at all levels. They make it clear what segments they operate in on their website but they don’t make it particularly clear how they actually do it. My initial reaction to a company that has so many stock-footage-style videos and new-age promises of changing the world was not to trust them. Hopefully the irony of that isn’t lost on anyone. So I got a second opinion about what they do from Bloomberg. I found that Bloomberg’s description was far more helpful to me in understanding what it is that Experian actually does. I found out that in the Marketing Services segment there is a product that provides companies with a marketing platform, allowing clients to execute marketing campaigns through a variety of means with customers. Consumer Services provides online products that help consumers manage their finances, credit and protect themselves against identity theft and fraud. It serves customers in a wide variety of different industries including health, retail and government to name just a couple.

The most surprising thing to learn is that they were founded in 1803. I was astonished to find out how old Experian actually is and the first question that sprang to mind was: what the heck did an information technology do in 1803? I started envisioning a Delorian screeching to a halt with twin trails of fire behind it and the beginning of a potential time paradox but it turns out that, of course, they didn’t start out in IT as we know it now. From what I can glean on their website, London merchants started swapping information on customers who failed to settle their debts and this practice formed the cornerstone for Experian’s growth as a company. They evolved and diversified through many acquisitions but primarily focused on credit analysis which is still a huge component of the services they offer today. If you want to read more about their remarkable history, you can find it here.

So I sat down and thought: yeah I really need to have a read of the “about us” page of the website. Turns out there is a lot more to it than what one page can describe. I feel like the website is coated in a layer of airbrushed explanations, designed to nail a generic marketing brief and it was hard to get a sense of who they really are and what they actually do. When I dug into them a little more, they turned out to be a far more interesting story.


You can find their financial statements here:


2016
2015
2014