Case Coca Cola Amatil Ltd
Case 12 Coca-Cola Amatil Ltd Both customary practice and statutory reporting requirements require the classification of assets and liabilities to reflect the time required to convert assets into cash and the order of payment of liabilities in the ordinary course of business. This case demonstrates that the basis of this classification is not as simple as it might appear at first glance. • Balance sheet classification
• Current liabilities
• Deferred liabilities The 1993 Annual Report of Coca-Cola Amatil Ltd (CCA) described the company as an ‘international beverage company and the most geographically diverse bottler of Coca-Cola trademarked products in the world’. Included in the total of non-current liabilities in the consolidated balance sheet as at 31 December 1993 were ‘unsecured notes - commercial paper’ of $325 million. Note 21 to the accounts described the treatment of these notes as follows: The unsecured notes are short-term by their nature, however they are matched by a long-term standby loan facility of $325 million which was established to support the notes (refer financing facilities Note 36). Accordingly, the Directors believe the notes are most appropriately classified as non-current. Note: 36 stated: the long-term standby facility which expires in 1995 was established to support the unsecured notes included in Note 21’. The unsecured notes of $325 million were issued during the year ended 31 December 1993. Based on consolidated figures, the current ratio for 1992 and 1993 were determined as follows: 1992 1993 $000 $000 Current assets 710 090 1184 712 Current liabilities 1 068 321 869 193 Current ratio 0.67 1.37 The Audit Report for the year ended 31 December 1993 contained an unqualified audit opinion. Required: Prepare a structured case study advising as to the appropriateness of this accounting treatment
• Current liabilities
• Deferred liabilities The 1993 Annual Report of Coca-Cola Amatil Ltd (CCA) described the company as an ‘international beverage company and the most geographically diverse bottler of Coca-Cola trademarked products in the world’. Included in the total of non-current liabilities in the consolidated balance sheet as at 31 December 1993 were ‘unsecured notes - commercial paper’ of $325 million. Note 21 to the accounts described the treatment of these notes as follows: The unsecured notes are short-term by their nature, however they are matched by a long-term standby loan facility of $325 million which was established to support the notes (refer financing facilities Note 36). Accordingly, the Directors believe the notes are most appropriately classified as non-current. Note: 36 stated: the long-term standby facility which expires in 1995 was established to support the unsecured notes included in Note 21’. The unsecured notes of $325 million were issued during the year ended 31 December 1993. Based on consolidated figures, the current ratio for 1992 and 1993 were determined as follows: 1992 1993 $000 $000 Current assets 710 090 1184 712 Current liabilities 1 068 321 869 193 Current ratio 0.67 1.37 The Audit Report for the year ended 31 December 1993 contained an unqualified audit opinion. Required: Prepare a structured case study advising as to the appropriateness of this accounting treatment