Omantel - Annual Report Cases

The TMA Questions Financial Reporting on the Internet (Case study: Omantel)

Table of Contents Question No. 1...........................................................................................................................3 Question No. 2...........................................................................................................................3 Question No. 3...........................................................................................................................3 Question No. 4...........................................................................................................................3 Question No. 5...........................................................................................................................3 Question No. 6...........................................................................................................................3 Question No. 7...........................................................................................................................3 Question No. 8...........................................................................................................................3 Question No. 9...........................................................................................................................3 Question No. 10.........................................................................................................................3

Question No. 1 A stakeholder is an individual who is legally engaged in project or company and is equally valuated in success or failure of the project. It is important for a project to involve a suitable individual as a stakeholder and start a healthy business relationship. As they follow up all the issues from the start of the project, which includes planning and execution of the project. To ensure a better scope and effective goals of the project stakeholders should be acknowledge about the performance of the project, Omantel has the numerous stakeholders in every field of work area, enabling enthusiastic behavior regarding their performance in the project. There is a classification between stakeholders which are probably internal and external as they both are responsible for the success and failure of the project. Internal stakeholders are the individual which are incorporated in project and are directly affected by the project such as employee, whereas external stakeholders are not subjected as a part of company as they play their role in terms of vendor and supplier but have a keen interest in outcome of the company. Omantel realizes the importance of the stakeholder as an essential part of building and developing the business criteria in the society, as the result corporate social responsibility (CSR) aim strategically to improvise Omantel’s role and its contribution towards it important customers and society, it gathers and join hands with relevant stakeholder in order to achieve the objective and ambition of the company. Primary Stakeholders which are directly associated with the project are eager and have a major interest in the success of the company, as they are directly affected by the outcome of the project, whereas secondary stakeholders assist with administration, financial and legal formalities of the company in order to minimize their objective issues which company faces.

Question No. 2 The PEST analysis was formed including the (Political, Economic, Socio-Cultural, Technological) as this analysis shows framework of the macro-environmental aspects of the Omantel, for the development of the business it is most essential for the managers to identify the macroeconomic variables (opportunities vs. potential risks) this consideration remains relatively uncertain. In order to make right decisions today for enhancing the interest of the future, the model conceptualize the scenarios which are based on the uncertain variable of macro-environmental sector of Omantel. For the survival of the company it is important to ensure or predict the certain event which can slowdown the success of the Omantel, the change in moderation can eventually effect in some people’s way of direction towards word, this indicates to avoid such circumstances which can stop the development process of the company as these indicators aren’t that easy to visualize therefore PEST analysis take place in these circumstances in order to identify the and analyze the macro-environmental relevant to company. PEST includes examination the factor which are being impact in order to regain their business prospective and in sustainable position. For planning and preparing a business strategy PEST analysis helps as an advantage in order to prevent unforeseen threat plan, whereas PEST is also being utilize for the effectiveness of the strategic and business planning, product and business development, marketing planning and research reports. It also shows and make certain of the company’s positivity as performing in alignment with a suitable changes that can affect in business environment. Omantel is being well prepared in order to offer unrivaled quality and capacity for the growing service which is being adapt by

economically by the sultanate of Oman and neighboring countries in order to create a positive environmental business. Question No. 3 The accounting for the property, plant, and equipment is being recognized by the IAS 16 method, The recognition of the assets are the main issues of business, the determination of their carrying amounts, and the depreciation charges legalized by standards and impairment losses are also recognized eventually as relation to IAS standards. IAS 16 allows two model for accounting: Cost model: This methods is prepared by the assets which is carried at cost less accumulated depreciation and impairment. Revaluation model: This method is prepared by carry the assets at a revalued amount, being its fair value at the date of revaluation less accumulated depreciation and impairment, this method evaluates the fair value reliably. Whereas Omantel Company occupies the unit of production depreciation method, which depreciates assets based on the total number of hour a company utilize or the total number of unit produced within its functional life. Question No. 4 The fundamental regulatory changes which should take place in 2018 will have considerable huge impact on the Omani telecom market, firstly in order to organize advanced and new access & interconnection regulation in the present period, will certainly lead the overall market in a tremendous pressure for the value and profitability, secondly the 3 rd mobile license award, at this stage where the circumstances of the condition and timeline are inadequate, although will shift competitive forces in the market for the Omantel Company, on a positive note the financial statement shows the current stabilization of the Omantel company is much efficient towards the economic environement, showing a positive growth in telecommunication market.

Question No. 5 Capital are expenditure consider to be variable assets, which are probable to be productive assets which is being utilize for a long period of time, Revenue expenditures are the cost that are entitled to specific revenue transactions or operating period, which are usually the cost of goods sold or maintenance or repairing expense, Capital expenditure are mostly charge annually through depreciation over a long period of time, revenue expenditure are charged in the current period, whereas the a capital expenditure are charged over the useful life of the fixed assets, a revenue expenditure is consumed within a short period of time, According to Omantel annual report shows the capital expenditure are very suitable against the revenue expenditure. Question No. 6 In order to gain stability with a company is important to obtain going concern concept in accounting principles. As this assumption helps a companies to stable the prepay or accrue expenses, the companies carry’s the prepay expense in order to realize or having freedom on future expense, as if companies doesn’t assume such concept, the company will keep operating without knowing the possibilities to having a suitable payable ledger, this may affect the company’s longitivity in market. As for the Omantel Company, the Strategy “3.0” remains as the essential tool to defend the position in the market and to deal efficiently with the changing market dynamics. Question No. 7 The IAS 2 Inventories includes the necessities on how to account for most type of inventory, the evaluation of the inventories are standard requirement at the lower cost and net realizable

value (NRV) and outlining the method of determining cost , that includes some identification ; first in first which is also called FIFO method, and weighted average cost. As the accounting treatment of inventories are the main objective of IAS 2, it allows to determine the cost of inventories and for recognizing an expense, including any bad debt to net realizable value, the cost formula are also justified by the IAS 2 standard for the Omantel Company. Question No. 8 If a company requires its sale on for only cash basis therefore sale is made immediately, as if the sale is on credit term the customer will have the goods without paying the amount of sale at that time, though it will charges as an account receivable as the customer will pay after a suitable period which a company has decided as the company will send the customer an invoice with written details of payment and procedure and period of credit terms as the Omantel company their receivable plays an important task for the growth of the company by having a strong recovery on account receivable. Question No. 9 With regards to the GAAP, the firms need to be approved themselves from the international accounting practices. Companies must account for their sales in particular way. For reliability, when a company utilize the recognized method of GAAP, they must continue utilizing the same format. There are multiples ways of recognizing revenue technique. Which are also practiced by the Omantel. These methods includes. •

Sales Basis Method

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Percentage of Completion Method

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Completed Contract Method

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Cost Recoverability Method

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Installment Method

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Updated Revenue Recognition Method

Question No. 10 The financial condition of the Omantel shows that the company is going on downward track since last year. The company’s net revenue has decreased from past years yet the cost of the sales remained on their position. On the other hand if we take a look on the balance sheet of the company, it shows that the company has decreased in their cash in hand and at bank, moreover the company also faced a downfall in the other asset of the firm which reduced to 94,000 only from last year’s 9,411,000. The company also witnesses a decline in their goodwill and intangible assets which marked a question on their performance. The total liabilities and equity section shows that the equity of the company in comparison to the liabilities is decreasing phase, yet it provides estimation that the company is more focused on debt financing. The overall financial position of the company shows a decline phase, that is needed to be address for the growth of the company.