Vision and Mission of Julphar Pharmaceuticals - Essay Example

Julphar Pharmaceuticals of Julphar Pharmaceuticals Julphar Profile Vision: vision of the company is to add values to communities through uncompromising healthcare Mission: Striving to meet the healthcare needs of communities by producing highest quality medicines and ensuring their availability and accessibility Profile: Julphar is Middle East based pharmaceutical Company, which was established in 1980 by His Highness Sheikh Saqr bin Muhammad Al Qasmi. It manufactures and distributes the several brands of healthcare products. The company has its operations in Middle East and North Africa with a presence in over five continents. The company is a distributor of around 3537 medical products that are manufactured in the twelve ISO certified manufacturing facilities situated in UAE. Julphar has become the sole company to produce raw materials needed to make insulin. A separate division is maintained by the company, which is dedicated to diabetes. More than 800 products of the company are in the dosage forms, and few are yet to enter the market. The company employs more than 2800 employees around the world (Kapur, 2014). Turnover reported by the company at the end of 2013 was AED 1.36 Billion. The company reported various growth strategies in 2013. It performed a GCC wide review of its functions and operations. The new scientific office was launched across GCC under the new director. Additionally, the company launched its first manufacturing facility in Ethiopia at Addis Ababa (Julphar Extends its Global Footprint, 2015). This facility is a major part of the company’s international expansion objective and a milestone in its history (About Julphar, 2015). Analysis and Explanation of IAS 1 Presentation of Financial Statements The objective of IAS 1 is to provide the organizations with the basis for presentation of general-purpose financial statements. It is to ensure the comparability of the financial statements of the previous periods and the financial statements of the other entities. IAS 1 is applicable to general-purpose financial statements that are prepared in accordance with the international Financial Reporting Standards. General-purpose financial statements are prepared in order to provide information about the financial performance, financial position and cash flow of the entity that is useful to a wide range of users for the purpose of making economic decisions (IAS 1, 2015). To fulfil the objective, financial statements provide the information about an entity’s: • Assets • Liabilities • Income and expenses (which includes gains and losses) • Equity • Cash flows • Contribution by owners and distribution to owners. Components of Financial Statements 1. A statement of financial position 2. A statement for profit and loss and other comprehensive income 3. A statement of changes in equity for the period 4. A statement of cash flow for the period 5. Notes, consisting of summary of significant accounting policies and other explanatory notes 6. The comparative information prescribed by the standard. IAS 1 states that financial statements must present fairly the financial position, financial performance and cash position of the entity. This means that the entity should faithfully represent the effects of the transactions, events and condition in accordance with the criteria of assets, liabilities, income and expenses as mentioned in the framework. An entity shall make explicit and unreserved statements of compliance in the notes. Going Concern: the conceptual framework requires the financial statements to be prepared on assumption that entity is a going concern and will continue to operate for the foreseeable future. Entity management must make an assessment of the entity’s ability to continue as a going concern. Julphar has disclosed that it manages it capital in a way that enables it to continue as a going concern. Accrual Basis: entities are required by the IAS 1 to prepare its financial statements using the accrual basis of accounting. Julphar has followed accrual concept throughout its financial statements. Financial statements should be retained from one period to the next unless a change is justified. Materiality: material classes of similar items must be presented separately in financial statements. Comparative information: IAS 1 requires the comparative information to be disclosed for the previous period. Julphar has disclosed the comparative financial statements of 2012 on the face of the financial statements. In the financial statements of 2013, the company has presented the two years financial information in the statement of financial position, statement of profit and loss, statement of cash flows and in the statement of comprehensive income. There was no retrospective treatment for any accounting policy or reclassified items, so the company has not presented the third statement. Financial Statements Presentation IAS 1 requires the entity to identify clearly the financial statements, distinguished from others. Julphar has maintained each statement under a separate heading that clearly identifies the name of the entity, the name of the financial statement and the year to which the statement relates. The amounts are rounded to the nearest thousands in the UED, which is displayed on top of every financial statement. All the line items, as stated by the IAS 1, are presented accordingly in the statement of financial position of the Julphar. Subtotals are presented in understandable and clear manner and are consistent for both the periods 2012 and 2013. IAS 1 requires the entities to present sub-classification of line items in the notes. Julphar has presented the classes of property, disaggregation of receivables, disaggregation of inventories and classes of equity in the notes forming the part of the financial statements thereto. Statement of Comprehensive Income IAS 1 provides the choice of presenting either the single statement of profit or loss and other comprehensive income or two separate statements. Julphar has adopted the policy of preparing two separate statements, which are in compliance with the standard. The statements clearly present, in accordance with the standard, the profit or loss, total comprehensive income for the period and an allocation of the income between controlling and non-controlling interests (Epstein & Jermakowicz, 2008). The company fulfils the minimum line item criteria mentioned by the standard by presenting separately the revenue, gains and losses, finance cost, gains or loss from financial assets, tax expense and a total of discontinues items. The disclosure is provided in the notes by the company for expenses that are analysed by functions of depreciation, amortization and employee benefits expenses. The company in the following sections classifies other comprehensive incomes: • Change in the fair value of available for sale investments • Adjustment for disposal of available for sale investment • Exchange differences on translations of subsidiaries financial statements • Board of director’s remuneration. These presentations are classified by their nature and are reclassified separately between items that will or will not be reclassified to profit and loss in future periods. Statement of Cash Flows IAS 1 does not provide separate requirements for a statement of cash flows but rather refer to the IAS 7. Julphar’s Statement of cash flows is presented in accordance with the IAS 7 and complies with all the requirements mentioned thereto. Statement of changes in equity Statement of changes in equity of Julphar clearly shows the total comprehensive income for 2013 and the amount attributable to equity holders of the company and non-controlling interest. Additionally, amounts of dividends and bonus recognized for distribution is also presented separately in the statement of changes in equity. Notes to the Financial Statements IAS 1 requires the notes to present information about the basis of preparation of financial statements and the specific accounting policies used, and to disclose any information that is not available elsewhere in the financial statements. The company presents all the notes related to the financial statements of Julphar in systematic manner. Statement of compliance, a summary of significant accounting policies and supporting information with the other disclosures are all presented in the manner prescribed by the IAS 1. However, these notes are not cross-referenced to the face of the financial statements as required by the standard. It is the non-compliance with the IAS 1. Judgments and Key Assumptions Judgments and key assumptions are disclosed by the company under the heading of “Critical accounting judgments and key sources of estimation uncertainty”. All the judgments applied to revenue recognition, allowance for doubtful debts, allowance for slow moving inventories, and classification of properties and control of the Julphar over Gulf Inject LLC, are disclosed separately in the notes thereto. Dividends Other than disclosure of dividends, disclosures are made in notes about the amounts of dividends proposed and declared and the amount of cumulative preference dividends. Analysis and Explanation of IFRS 9 Financial Asset Initial and Subsequent Measurement All financial instruments should be measured at fair value plus or minus transaction cost. When the assets are measured at fair value, standard require the gains or losses to be recognized either in profit or loss or statement of other comprehensive income (IFRS 9, 2015). Financial instruments should be classified when they are initially recognized. It means when the entity enters the contractual obligation. Fair Value Option Financial liabilities could be measured at FVTPL if: • By doing so, recognition inconsistency is eliminated or reduced • It is part of financial liability or assets and if the information about the group is provided internally The group has classified its financial assets under the categories of bank balances and cash, financial assets at fair value through profit or loss, available for sale financial assets and loans and receivables. • Cash and cash equivalents: they are comprised of cash on hand and demand deposits and short-term liquid investments. • Financial Assets at FVTPL: the company classifies these assets when the assets are held for trading, or they are designated as FVTPL. Held for trading if: 1. They are acquired for the purpose of resell in the short term 2. On initial recognition, they were the part of a portfolio of instruments that had a recent pattern of short-term profit taking. 3. It is derivative, which is not designated as a hedging instrument. Designated as FVTPL if: 1. The designation eliminates completely or reduces a measurement inconsistency that could rose otherwise. 2. Assets form part of the financial assets or financial liabilities, is managed on a fair value basis, are in accordance with the group’s documented risk management strategy, and information is provided by the entity internally. • Available for sale financial assets: it is the policy of the group to treat listed shares held by the group as being AFS. Those shares that are not listed but their fair value could be measured reliably are also treated as an available for sale financial assets. The company recognizes Dividends on AFS in profit and loss after the establishment of the company to receive the dividends. Furthermore, the fair values of monetary assets in AFS that are denominated in a foreign currency are determined in the same currency and are translated at the spot rate at the reporting date. • Loans and Receivables: company measures the loans and receivables at fair value plus transaction cost. These are then subsequently measured at amortized cost. The company recognizes interest income through applying the effective interest rate with the exception of short-term receivables. DE Recognition of Financial Assets DE recognition model presented by standard provides the premise for determining that whether the assets under consideration for derecognition are an asset in its entirety; a fully proportionate share of financial asset; a fully proportionate share of the cash flow from an asset, or specifically identified cash flow from an asset. Julphar derecognizes financial asset when the contractual right arising from the cash flows expires or all the risks and rewards are transferred to the other entity. Derecognition of Financial Liabilities A financial liability will only be derecognized if the obligation in the contract is discharged or cancelled or expired. Julphar complies with the principle of standard and derecognizes financial liability when the obligation is discharged or expired (Gupta, 2008). Reclassification Reclassification of financial asset is only allowed when the entity’s objective for its financial assets changes Impairment of Financial Assets Impairment model provided by the IFRS 9 applies on all of the following: • Financial assets measured at amortized cost • Financial assets measured at FVTOCI • Loan commitments, only when the obligation to extend credit, is present Julphar assesses its financial assets for impairment at the end of every reporting period. Those assets that are valued at amortized cost are impaired at the carrying amount less or add the present value of estimated future cash flows. Assets that are carried at cost are impaired at asset’s carrying amount plus or minus the present value of future estimated cash flows. Recommendation The analysis made above indicates that Julphar pharmaceuticals have complied with all the requirements of the International financial reporting standards that were evaluated in the report. However, the company has not cross-referenced the financial statements to the notes that form the part of the financial statements. The company should consider cross-referencing the amounts in the financial statements with the notes. This will make the analysis and evaluation of the financial statements easier for the users of the financial statements. Conclusion IAS 1 “Presentation and Disclosures in The Financial Statements” and IFRS 9 “Financial Assets” were selected for the compliance evaluation in this report. Julphar pharmaceuticals have complied with all the requirements of the IFRS that are analysed in the report above. The company has maintained a sound system of financial reporting and complies with all the regulatory requirements to which it is subject. References Annual Report: Julphar. (2013). Ras al Khaimah: Julphar. About Julphar. (2015). Retrieved April 30, 2015, from Julphar: http://www.julphar.net/about IAS 1. (2015). Retrieved from http://www.iasplus.com/en/standards/ias/ias1 IFRS 9. (2015). Retrieved from http://www.iasplus.com/en/standards/ifrs/ifrs9 Julphar Extends its Global Footprint. (2015). Retrieved from http://www.prnewswire.com/news-releases/julphar-extends-its-global-footprint-with-official-inauguration-of-julphar-ethiopia-manufacturing-facility-190010041.html Ahmed, D. S. (2015, March 10). Banking sector: Regulations, compliance and good governance. Retrieved from http://www.thedailystar.net/supplements/24th-anniversary-the-daily-star-part-1/banking-sector-regulations-compliance-and-good Bacha, A. (2015, January 02). Ethiopia: Julphar to Open Insulin Factory. Retrieved from http://www.2merkato.com/news/alerts/3494-ethiopia-julphar-to-open-insulin-factory Bellandi, F. (2012). The Handbook to IFRS Transition and to IFRS U.S. GAAP Dual Reporting. Hoboken: John Wiley & Sons. Epstein, B. J., & Jermakowicz, E. K. (2008). Wiley IFRS 2008: Interpretation and Application of International Accounting and Financial Reporting Standards 2008. Hoboken: John Wiley & Sons. Gupta. (2008). Financial Instruments Standards: A Guide on IAS 32, IAS 39 and IFRS 7. Delhi: Tata McGraw-Hill Education. Irvine, J. (2014, May 30). IASB and FASB converge on revenue recognition. Retrieved from http://economia.icaew.com/news/may-2014/iasb-and-fasb-converge-on-revenue-recognition JARA-PUYOD, M. (2015, April 28). Drugs, medicines in the form of biosimilars are the future: Experts. Retrieved from http://gulftoday.ae/portal/62565d64-717c-47c8-a856-5cd3f8a084ee.aspx Kapur, S. (2014, September 18). Julphar looks to hire 300 staff in UAE. Retrieved April 30, 2015, from emirates247: http://www.emirates247.com/news/emirates/julphar-looks-to-hire-300-staff-in-uae-2014-09-18-1.563357 Sahoo, S. (2015, February 10). Julphar acquires Bangladeshi drugs maker. Retrieved from http://www.thenational.ae/business/economy/julphar-acquires-bangladeshi-drugs-maker United Nations Publications. (2007). International Accounting and Reporting Issues: 2006 Review. New York: United Nations Publications. Read More