SHJ (ASX) Ann: FY18 Half Year Results Announcement Date

Originally posted by tim8wilson ↑

I think I need to get off my butt and read this thing properly

I have puzzled quite a bit over the material difference between expenses on income statement and cashflow. Trying to get to the bottom of this....

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7

1 Income Statement 2017 2016 2015 2014 2013 2012

2 Revenue 165 151.5 150.9 115.8 105.4 88.4

3 Employee Expense 82.1 77.3 68.9 52.9 49.9 38.2

4 Other Expense 48 48.3 37 28.3 27.1 23.3

5 Employee + Other 130.1 125.6 105.9 81.2 77 61.5

6 Cashflow Statement

7 Customer Receipts 162.2 152.9 134.6 101.7 92.9 59.3

8 Payments to suppliers and employees 142.9 134.1 121.6 91.1 84.2 50.4

9 Difference (income statement - Cashflow)

10 Money in 2.8 -1.4 16.3 14.1 12.5 29.1

11 Money out -12.8 -8.5 -15.7 -9.9 -7.2 11.1

12 Difference as % Income statement

13 Money in 2% -1% 11% 12% 12% 33%

14 Money out -10% -7% -15% -12% -9% 18%

Note that (unlike every other year) in 2012 expenses on the income statement were higher than on cashflow statement. This goes against what you are saying somewhat, though it's possible that a different accounting method was being used prior to the IPO in 2013.

Also note that the AASB15 rules don't apply to any of these figures as these rules have not been implemented yet.

There's also the fact that employee expenses are incurred unrelated to work directly billable to clients. What you're saying is that leads are some special case that drops off the income statement while other employee expenses remain. Not saying this is wrong but it is interesting. It would also need to account for a $13m difference (being costs spent on leads that have not become cases yet). If true this would make lead generation a very significant expense.

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Thanks for doing God's work Tim.

You're right, Shine hasn't been using AASB15. My point is more or less just to point out circumstances of work in which Shine will not bill Revenue, but it would probably be more helpful if I were to refer to the correct accounting standard. I think AASB15 creates a much clearer rules around WIP as Revenue. Please correct me if I'm wrong but it seems AASB118 is the standard they have been following on revenue recognition which in my own not-very-legal interpretation leaves interpretation of the standards subject to an accountant's opinion. Probably the reason they decided to roll out AASB15 in the first place.

http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPmay09_01-10.pdf

Page 14;

Rendering of Services 20
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
(a) the amount of revenue can be measured reliably;
(b) it is probable that the economic benefits associated with the transaction will flow to the entity;
(c) the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
(d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

21 The recognition of revenue by reference to the stage of completion of a transaction is often referred to as the percentage of completion method. Under this method, revenue is recognised in the reporting periods in which the services are rendered. The recognition of revenue on this basis provides useful information on the extent of service activity and performance during a period. AASB 111 also requires the recognition of revenue on this basis. The requirements of that Standard are generally applicable to the recognition of revenue and the associated expenses for a transaction involving the rendering of services.

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Page 15;

23 An entity is generally able to make reliable estimates after it has agreed to the following with the other parties to the transaction:
(a) each party’s enforceable rights regarding the service to be provided and received by the parties;
(b) the consideration to be exchanged; and
(c) the manner and terms of settlement. It is also usually necessary for the entity to have an effective internal financial budgeting and reporting system. The entity reviews and, when necessary, revises the estimates of revenue as the service is performed. The need for such revisions does not necessarily indicate that the outcome of the transaction cannot be estimated reliably.

24 The stage of completion of a transaction may be determined by a variety of methods. An entity uses the method that measures reliably the services performed. Depending on the nature of the transaction, the methods may include:
(a) surveys of work performed;
(b) services performed to date as a percentage of total services to be performed; or
(c) the proportion that costs incurred to date bear to the estimated total costs of the transaction. Only costs that reflect services performed to date are included in costs incurred to date. Only costs that reflect services performed or to be performed are included in the estimated total costs of the transaction.

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Page 22, - my opinion the 'best fitting' description of Shine's work would come under financial services, but I'm happy for someone else to counter with an alternative opinion;

14 Financial service fees
The recognition of revenue for financial service fees depends on the purposes for which the fees are assessed and the basis of accounting for any associated financial instrument. The description of fees for financial services may not be indicative of the nature and substance of the services provided. Therefore, it is necessary to distinguish between fees that are an integral part of the effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that are earned on the execution of a significant act.

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More on financial services on Pages 23 & 24.

As far as 2012 goes, you're right it is unusual. Although are AASB accounting methods applicable to private companies? If not this would support the different accounting method idea that you have. Or it could be some other cause. This comes from the AASB118 doc on Page 7 & 8:

Application
Aus1.1 This Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;
(b) general purpose financial statements of each other reporting entity; and
(c) financial statements that are, or are held out to be, general purpose financial statements.

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No.	Vol.	Price($)
1	7723	80.0¢

No.

Vol.

Price($)

7723

80.0¢

Price($)	Vol.	No.
83.5¢	999	1

Price($)

Vol.

No.

83.5¢

999

No.	Vol.	Price($)
1	7723	0.800
1	24997	0.790
1	33597	0.760
1	936	0.750
2	1688	0.730

No.

Vol.

Price($)

7723

0.800

24997

0.790

33597

0.760

936

0.750

1688

0.730

Price($)	Vol.	No.
0.835	999	1
0.840	10793	3
0.850	65684	8
0.865	1155	1
0.890	14633	1

Price($)

Vol.

No.

0.835

999

0.840

10793

0.850

65684

0.865

1155

0.890

14633

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Ann: FY18 Half Year Results Announcement Date, page-35

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	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
1	Income Statement	2017	2016	2015	2014	2013	2012
2	Revenue	165	151.5	150.9	115.8	105.4	88.4
3	Employee Expense	82.1	77.3	68.9	52.9	49.9	38.2
4	Other Expense	48	48.3	37	28.3	27.1	23.3
5	Employee + Other	130.1	125.6	105.9	81.2	77	61.5
6	Cashflow Statement
7	Customer Receipts	162.2	152.9	134.6	101.7	92.9	59.3
8	Payments to suppliers and employees	142.9	134.1	121.6	91.1	84.2	50.4
9	Difference (income statement - Cashflow)
10	Money in	2.8	-1.4	16.3	14.1	12.5	29.1
11	Money out	-12.8	-8.5	-15.7	-9.9	-7.2	11.1
12	Difference as % Income statement
13	Money in	2%	-1%	11%	12%	12%	33%
14	Money out	-10%	-7%	-15%	-12%	-9%	18%

Ann: FY18 Half Year Results Announcement Date, page-35

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