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For current assignment, we have selected ‘Ramsay Health care Limited’. The organization is in healthcare industry and is in business from past 50 years. We will look into the core business activity of the company along with industry analysis. We will also look the sources of funds in the business.

Detailed analysis will be made for the subsequent event and change in accounting policy:

  • Ramsay Health care limited (RHCL) is in healthcare industry. The company is operating in 11 countries with their headquarters in Australia. The company is specialized in acute healthcare. However, currently providing both the acute and primary healthcare in all 11 countries which make them one of most largest and diversified private sector healthcare organization. Main business segment moves as Primary Healthcare, Acute healthcare including surgeries, mental care and rehabilitation. In FY 2018, both company revenue and EBIT have increased. An increase of 5.4% and 6.8% can be seen in both these factors.
  • The company operates in the Health care Industry. The Industry is growing at higher pace than any other industry and is largest employer in Australia. (Britannica World Data ) Growing old age population in Australia and availability of private healthcare covers will further increase the demand in this industry. This industry is projected to grow at rate of 16.1% over the next 5 years. (Department of Jobs and Small Business ‘Australian Jobs 2018’ report). The main competitors are Healthscope, Quest Diagnosis and St John of God. All these organizations are providing tough competition to Ramsay. Like the Ramsay, healthscope also specialized in doing the surgeries and have strong presence in Australia with 43 hospitals. Global business is in Australia and New Zealand. Prime focus of Healthcope in Australia can give challenge to Ramsay. St John of God is non profitable organization and is in operation in Australia with 3400 hospital beds. Low treatment cost on account of being non profitable gives strong competition to Ramsay.
  • The company is adopting a mix of Equity and debts, short term and long term for the funds. Internal funds are in form of Equity, reserves and retained earnings. At end of FY 2018, company has total equity of $2356960 mainly comprising of share capital of $713523, Equity securities of $252165 and retained earnings of $1484285.

Outside funds are in form of Bank loans under current and noncurrent liabilities of $31961 and $3622268. Trade payable and sundry creditors can also be considered as part of external funding in form of trade finance. Total of $1109224.  Looking at above figures, it is evident that there is more involvement of external funds in business than the internal funds. This will bring pressure on company profits in the future as fixed repayment or obligations have to be served by the company. Also, the portion of unsecured loans is higher in the company. These loans are available at the higher coupon rate as these are with extra risk for the lender.

  • Financial performance of an entity can be judged by looking into the five major components which are:

Revenue: Revenue is the total receipts generated by the business. For Ramsay, the revenue has remained positive and revenue has reached at $9.2 billion which is 5.4% higher than of year 2017. Company has recorded revenue of $8.7 billion in FY 2017.

Profits: Profit generating is one of the final objectives of running the business. Despite of increased revenue, company PAT has been declined in the year. The reason for same is the higher increase in related expenses than the revenue. Major increase is in the medical consumables and the occupancy cost. The PAT has been decreased from $550996 to $411214.

Operating Performance: The operating performance can be judged by looking the efficiency of management to generate profit in form of the EBITDA margin the organization. EBITDA is used for measuring the management efficiency as this reflects the profits out of business operations only eliminating the effect of Taxation, Interest, depreciation and amortization. The margins in FY 18 have been declined to 12.15% from 14.44% in year 2017 which shows poor management of resources by the company management.

Capital Efficiency: Capital efficiency is the effective use of capital employed in the business. For Ramsay, this ratio has also not remained positive, return on assets and return on equity has been declined to 4.26% and 16.23%. These were 5.82% and 22.46% in the previous year.

Solvency: Solvency is ability to repay the company obligation and to run the business smoothly. In 2018, the financial leverage has increased to 3.95 times in comparison to 3.66 times in the year 2017. This shows that use of external funds have increased in business. However, the leverage of 3.66 times can be said to be satisfactory. However, business shall look into to reduce the liabilities. Funds may be further obtained from the equity. This will help business to reduce the interest and other obligation cost.

  • Subsequent events are the events after the balance sheet date but before the date of release of financial statements. These events can be divided into recognized and not recognized expenses. It is the duty of auditor to highlight any changes which are though after the close of financial year which is audited but is material and can affect the operations of business or its state of affair. For Ramsay, there are no subsequent event reported which will affect the Groups operations or group’s state of affair (Pg No 127)
  • Financial statements requires the disclosure of all accounting standards followed to understand the financials of entity. Accounting standard requires to disclose all accounting standard followed at one place for easy understanding and recognition. Same way, any change in accounting standard followed in the previous year shall also be disclosed. Any change in accounting standard can affect the amount of profit and asset/;liability in business. Smount by which any financial item is effected by such change also needs to be disclosed. For Ramsay, no change in accounting standards are in the Annual report of company for 2018.

In this task, we have looked for the annual report of Ramsay Healthcare Limited. What are its core business and the activities it performed. We have understood the Healthcare industry and growth in the industry. The company dependency on external debt can be seen and it is advised to decrease the same. We have looked that company have performed well on the revenue but other factors such as return on equity and capital have decreased in the year 2018. There are no subsequent event and no change in accounting policy.


This task is related to PPE, intangible assets and the impairment on these assets along with the accounting policy followed for them:

  • Property, Plant and equipments: Term used to classify the company’s fixed assets. The useful life of these assets is more than 1 year. Under the IFRS framework these assets are to be carried in books of accounts after giving the affect of impairment. Any excess value over the realizable value shall be impaired and value of asset to be decreased accordingly. (Dyckman, 2012)For Ramsay,

below are carrying amount of different assets in the PPE:

  • Land and Building-  $2866735
  • Plant & Equipment- $887111
  • Assets under Construction-  $359316

Total carrying amount of PPE on reporting date of $4113162.

  • Accounting policies for PPE: PPE in books are reflected at cost less depreciation and after giving affects of impairment in these assets. Company is capitalizing cost of replacement which is capital in nature.

Depreciation is charged on straight line method by the company.

Company is considering below useful life for following assets:

  • Building and its integral Part-Useful life of 40-60 years.
  • Leasehold improvement- Useful life is over the lease term.
  • Plant & Equipment- Maximum useful life of 10 years subject to

nature of asset.

Above estimated useful life of asset is based on the historic experience of company. Company is assessing and analyzing the useful life on yearly basis and necessary adjustments are made accordingly. Similarly, the carrying value of PPE is reviewed yearly for the impairment purpose based on internal and external events indicating any change in the value in use or recoverable value of asset. Company is discounting the future cash flows to decide about the value in use of assets. Same way, these are reviewed for any reversal of impairment loss booked if realizable value of these assets increase and indication exist for same.( BDO International 2013)

Company is derecognizing the assets in booked either on the sale or when the asset has no economic benefits. The difference of carrying amount and net disposed off amount is booked in Income statement as profit or loss as per the circumstances.

  • Intangible Assets: Intangible assets are the assets which will provide economic benefit in future but does not have any substance. Company has total intangible assets of $2264500 on the end of 2018 divided into Goodwill of $2154072, Service concession assets of $61567 and Development cost of $48861.

Goodwill is generated upon purchase of existing business. Goodwill is the market name and reputation which helps to get higher and larger revenues and gives an edge over the competitor. (Hamilton 2011) Especially in healthcare segment, where the customer are willing to pay the price of good services; goodwill plays an important role in higher revenue generation. Service concession assets are the group’s right to operate hospital under the arrangement. These agreements provide an unconditional right to group to receive cash or other financial assets thereby increasing the resources available. Development cost is the cost of internally generated software. These specialized and customized software helps in providing better customer experience and better analysis to management also.

  • Accounting policies for Intangibles: Goodwill is recognized at cost less any accumulated impairment loss. These are considered to have an indefinite life. These are reviewed for impairment during each reporting period or even at shorter period based on the indication available. Other intangible assets are recognized at cost, if self generated or at fair value on date of acquisition. These are recognized based on the cost as reduced by the amortization and any impairment losses. Service concession assets are being amortized over the period of lease and Development cost are amortized over the period of expected future benefits. The method of amortization is Straight line method. Both service concession and development cost are reviewed for impairment at year end, if any indication exists.
  • Ramsay has booked total impairment loss of $27304 divided into Plant and Equipment- $7457, Land and Building- $18073 and Intangible assets of $1774.

Under the intangible assets, only goodwill has been impaired. Goodwill is need to be reviewed in each reporting period for any impairment. The requirement to review goodwill is irrespective of any indicator. Impairment is recognized when the recoverable value of a Cash generating unit is less than the recoverable value of assets under the CGU. There is no reversal allowed for impairment booked on goodwill

Other impairment of $18073 is on the Land and buildings. Company is charging the impairment expense each year from the profit and loss account and reducing the value of assets accordingly. Hence, there is no accumulated impairment in the company.

The assignment looks in depth for the Property, plant and Equipment for the company. We have seen the carrying amount of this group and the accounting policies for this group. Same is done for the intangible assets for their value and the accounting policies. In last point, we have highlighted the impairment loss booked for the year, same is booked for land & building, goodwill and intangibles by the company. The Impairment loss is debited in income statement and asset value is decreased accordingly.


  • Britannica World Data, Australia". 2009 Book of the Year. Encyclopædia Britannica, Inc. 2018.
  • Ramsay lines up against Healthscope". Sidney Morning Herald. 14 January 2014. Retrieved 2 February 2014.
  • Medicare Levy Surcharge. Private Health Insurance Ombudsmen. Retrieved on 10 July 2012.
  • Dyckman, Intermediate Accounting, Revised Ed. (Homewood IL: Irwin, Inc. 2012),195.
  • Hamilton, Kallie; Hyland, Brett; Dodd, James L. (2011). "Impairment: IASB-FASB Comparison" . 1 (1): 55–6
  • "IFRS in practice: IAS 36 Impairment of assets"BDO International. December 2013.
  • Department of Jobs and Small Business ‘Australian Jobs 2018’ report

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