ACC Case 11-5 Venus Cellular Limited

Case 11-5

Venus Cellular

Venus Cellular Limited (“Venus”) is the leading, worldwide provider of a wide variety of

telecommunications equipment and services. Its telecommunications equipment and

services enable its customers to send or receive virtually any type of voice or data

transmission. Its customers include fixed line and wireless telecommunication operators,

Internet service providers, governments, and businesses. Venus prepares its financial

statements in accordance with International Financial Reporting Standards (IFRSs).

Consolidated Statement of Comprehensive Income

20X1 20X0

(US$ millions except per share data)

Revenues 16,419 15,305

Cost of sales (10,629) (9,539)

Gross profit 5,790 5,766

Administrative and selling expenses (2,500) (2,430)

Research and development costs (1,804) (1,863)

Operating income — current 1,486 1,473

Share-based payments (stock option plans) (86) (75)

Restructuring costs (138) (405)

Impairment of capitalized development - (130)

Gain on one time contractual settlement 161 -

Operating income 1,423 863

Interest expense (273) (283)

Interest income 153 131

Finance costs (120) (152)

Income from sale of assets 1,858 244

Income before tax and associates 3,161 955

Income tax expense (114) (45)

Share in net income (losses) of associates (18) (76)

Profit or loss 3,029 834

Dividends (265) (247)

Retained profit or loss 2,764 587

Other comprehensive income:

Cash flow hedges 17 20

Available for sale financial assets (50) 25

Share of other comprehensive income of associates 13 5

Total comprehensive income for the year 2,744 637

Case 11-5c: Venus Cellular Page 2

Profit or loss for the year attributable to:

Owners of the parent 1,951 537

Noncontrolling interests 1,078 297

Basic earnings per share (in US$) 3.76 1.49

Diluted earnings per share (in US$) 3.76 1.49

Required:

• Question 1 — Identify whether the analysis of expenses in profit or loss is

presented by nature or function.

• Question 2 — Identify the alternative performance (operating) measures

presented in the statement of comprehensive income and document your

conclusions with regard to the appropriateness of the various performance

measures.

• Question 3 — Discuss any additional issues you have identified or other

observations.