Accounting Concepts and Practices Assignment

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 1
Application of Accounting Concepts and Practices to Wesfarmers
Your Name
Institutional Affiliation

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 2
Application of Accounting Concepts and Practices to Wesfarmers
Wesfarmers is a retail company that operates in Australia and New Zealand. The company deals
with products such as agrochemicals,coal, fertilizers, industrial and other mining and safety
products. With its headquarters in Perth- West of Australia, Wesfarmers has its origins in 1914.
Wesfarmers has four retail business units namely Coles, Home Improvements, Department
Stores and Office Works. This paper seeks to review the Westfarmers Annual Report to identify
the financial performance of each of the retail sections and give a report of performance for the
company in 2016 and 2017. Sustainability reporting for each of the retail sections for
Wesfarmers is also reviewed and rated.
Coles
The Coles retail section has its origin in 1914 when the first store was opened in
Collingwood - Melbourne. Since its introduction, the Cole section has grown to be an iconic
retailer in the Australian market. The section operates the Coles supermarkets, Liquorland, First
Choice Liquor, Coles Online, Spirit Hotels, Vintage Cellars, Coles Financials Services and Coles
Express. In terms of financial performance, the Coles sections have been improving year in year
out.
In 2017, the retail section posted a revenue of $39,217 million. Comparing the sales
revenue for 2017 to 2016, the revenue was not a big deviation from the previous years. Earnings
Before interest and tax for Wesfarmers in 2017 was $1,609 million a decline of 13.5 from 2016.
Narrowing down to the individual retail sections, the Food and Liquor section brought a sales
growth of 2% from 2016's figure ("Annual reports", 2018). The slight increase in sales growth
for the subsection is attributed to the continued investment in the quality of service and value of

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 3
products for the company. Huge transaction volumes were realized as a result of a basket size
improvement due to continued focus on the customer offers.
Coles Retail Section Milestones in 2017
Despite operating in a very competitive and slowly growing market, the Coles retail section was
able to remain committed to its customer-led strategies of increasing sales. This was done
through a whole year accelerated investment plan that was aimed at enhancing customers offers
(Group, 2018). The proactive investment was able to bring about a lower level of products prices
a situation which was attained through a dedicated plan to absorb the inflationary costs factors
associated with the production of products such as fresh products and meat. The end result for
the investment plan was an increased food quality and improved customer services quality.
Another great milestone for Coles retail section is the successful investment plan for new
channels and plans which continued throughout the year. The Coles online trading initiative was
able to register a double-digit sales growth from 2016 to 2017 ("Coles Supermarkets", 2018).
The Coles Financial services subsection was able to grow with the General Insurance policies
being able to successfully complete a 10-year credit card distribution Contract with Citi. The
Flybuys was also able to register a lot of growth in the number of its active members. Through
the 2017 Annual report, the Managing Director for Coles retail subsection, John Durkan reported
that Coles eyes continuing to extend the new channels and services further by increasing the
offers advanced to customers in the Financial Services, Coles online and the loyalty program
(Flybuys) initiatives in 2018.
Home Improvement Retail Business

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The home Improvement retail section is a customer focused business for Wesfarmers
found in Australia and New Zealand whose main strategy is underpinned on continued
improvement of performance for better gains. During the year ended 30th June 2017, Home
Improvements registered a lot of improvements in terms of operation and financial performance
("Home Improvement", 2018). This was achieved through a number of progress made in
building strong foundations for customers through transformational retail business and
development of the Bunnings product brand.
Financial Performance for Home Improvements Retail Business
The revenue for Home Improvement retail division of Wesfarmers in 2017 increased by a
whopping 17.4 % to $ 13,356 million from the previous years $8,646 million. The improvement
in the divisions revenue for the year ended 2017, was highly contributed by the Bunnings
product launched in the United Kingdom and Ireland in February 2016 and the growth of
Bunnings brand product in New Zealand and Australia ("Bunnings, Kmart and Officeworks were
the winners, while Target and Coles struggled.", 2018). The net earnings for the retail section
amounted to $ 1,245 million, a 2.6% increase from the previous year’s earnings of $275 million.
The operating revenue for Bunnings New Zealand and Australia also increased to $11,514
million a percentage increase of 8.9% from 2016 (Group, 2018). The overall sales growth for the
Home Improvements retail store also increased by 8.9% a level which was arrived at by an
increase of 7.3% in store-on-store sales. Bunnings for Australia and New Zealand also registered
an EBIT of $ 1,334 million which is an increase of about 10% from 2016’s EBIT of $ 133.4
Million (Group, 2018).
Department Stores Retail Division

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 5
The department stores retail section for Wesfarmers was established in February 2016. The
departmental store consists of K-mart and Target. The establishment of these stores was aimed at
creating, sharing and maximizing opportunities presented by the iconic brands of the company's
products in the Australian market.
Kmart
Kmart is one of the largest retail departmental stores in Australia with more than 200 stores
throughout Australia. Kmart offers a diverse array of products ranging from general
merchandise, home brand products to apparel products selling at low prices but providing an
exceptional value to customers. Kmart also employs close to 30 000 people in Australia and New
Zealand.
Target
Target is also another departmental store under Wesfarmers that has a regional network
of close to 300 stores in Australia. The retail unit deals with the sale of a wide range of products
including homewares, general merchandise and contemporary products for the family such as
apparel. Targets have employed up to 16 000 employees by 2017 across its stores in Australia,
New Zealand and also in the support offices in Asia, China and Hong Kong.
Financial Analysis for Departmental Stores Retail Division
In terms of financial performance, the revenue for the department stores was $ 8,528 in
2017 which was a decrease of 1.4% from 2016. The decrease in the revenue is attributed to a
lower revenue in Target so that the revenue raised by Kmart was used to partially offset the costs
used to grow Target (Group, 2018). According to targets to the Chief Executive officer for the
Departmental stores Guy Russo, the sales for Target retail division were driven by the rest of the

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 6
business and transition to the normal low prices. This situation saw the reduction in the
profitability of the overall earnings capacity of the division. It is worth noting that Target had
reduced some of its unprofitable events and exited from the loss-making categories a situation
which saw the reduction in the overall revenue for the division.
When it comes to Kmart, the unit was able to register higher growth in sales level
because of the increased customer transactions in the section. The increase in transactions saw
the increase in the number of units per customer. It is therefore evident from the earnings that
Kmart did well in 2017 than 2016. The earnings for Kmart in 2017 was $ 543 million a 97.5%
increase when compared with the earnings of the unit in 2016 (Group, 2018). For Target, the
2017 earnings reflected a 32.4% increase from $3,456 million in 2016 to $5,578 million in 2017
before removing the restructuring costs that were incurred in 2016 and 2017.
Office Works
Office works are one of the first retail stores for Wesfarmers to be opened which became
operational in 1994. Since its opening, Office Works has grown to be one of the leading supplier
retailers in Australia providing office products and other office solutions. The retail section has a
wide network coverage with its stores and business channels offering customers with an
opportunity to purchase in-store, online or using a phone call ("Office Supplies, Office Furniture,
Stationery, Ink & Toner at low prices | Officeworks", 2018). The retail division seeks to expand
and provide a broader range of products for business, students, teachers and other educational
institutions.
Financial Analysis of Office Works Retail Division

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Looking at the 2017 results for the Office Works retail division for Wesfarmers, it is
evident that the section has grown over the period of one year. The revenue for Office works in
2017 was $1,964 an increase of 6.1% from the previous year earnings of $1,851million. The
earnings before interest and tax for the section increased to $144 million from 134 million in
2016 indicating a 7.5% positive change ("2017 Annual Report", 2018). Office Works managing
Director Mark Ward reassures the readers that the retail divisions ‘‘every channel'' strategy is to
continue to resonate with all the customers so that the sales can grow across all its stores and also
online. This is the strategy that saw the growth in sales and earnings levels in the store by more
than 6%. The sales growth is also alleged to have been driven by store design and layout changes
and ongoing enhancements in the online offer coupled with new and expanded products ranges.
The relentless focus and effort of the company on providing a greater customer service both in
the stores and online is expected to strengthen the position and value of the Office Works retail
section.
Wesfarmers 2017 Sustainability Report
Sustainability reporting is becoming is a very important part of the business and financial
reporting today. In Australia, corporations are required by a number of standards such as AASB,
IAS and government regulations to include a sustainability report in its annual reports. Because
of its importance in business and financial disclosure, sustainability reporting is gaining
widespread acceptance and a number of big corporations are providing yearly sustainability
reports. Wesfarmers has not been left behind in this. Wesfarmers has taken Sustainability
reporting as a way of showing openness, mutual concern for the community and diversity
relationship with the environment, the community and to the government (Ahern, 2016)

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 8
Looking at the sustainability report for Wesfarmers in 2017, it is evident that the company has
sought to disclose and report all the pertinent issues surrounding the social and environmental
aspects of the company. Having begun sustainability reporting in 1998, the sustainability
disclosure components for Wesfarmers has been revolving around matters Environment, Health
and Safety ("Wesfarmers Home", 2018). Over a period of 2 decades, Westfarmers 2017
sustainability report is being released together with the annual reports but as a separate
document. On a scale of 1-10, I can rate the sustainability reporting for Wesfarmers at 8.
The sustainability report for Wesfarmers shows the company's commitment to creating a long-
lasting value for its shareholders, employees, customers and the community by playing an active
positive role in the community that the company serves. The management of Westfarmers
believes that their sustainability is about understanding and managing the ways in which the
company impacts on the community, the environment and the customers to ensure that the
company will remain in a position of being able to provide the same value in future (Compact &
Energy, 2018).
From a number of research studies, sustainability reporting has been found to be a
reporting framework that fosters accountability in a company. The findings of such researchers
are also supported by the propositions of the legitimacy, stakeholders and the new institutional
theories ("Sustainability Reporting", 2018). Trough its sustainability report, Westfarmers shows
accountability to all the stakeholders of the organization including the customers and the
communities in which it operates.

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 9
Ways in which the Busines of Westfarmers Shows Sustainability
The sustainability report for Wesfarmers is guided by the materiality concept process of
the business. The materiality issues most significant for Wesfarmers are centred on the
environmental and social impacts created by the individual retail business divisions to the
decisions and assessment of the stakeholders ("Westfamers 2017 Sustainability Report", 2017).
Such material issues involve both internal and external stakeholders of the organization. They
include the people working at Wesfarmers at which the company has focused to maintain a
relentless effort of providing safe and conducive workplaces, suppliers at which the company has
committed itself at forming and maintaining strong relationships and the community at which
Wesfarmers always aims at providing a positive contribution to in the society's that it operates.

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 10
References
Ahern, D. (2016). Turning Up the Heat? EU Sustainability Goals and the Role of Reporting
under the Non-Financial Reporting Directive. European Company and Financial Law
Review, 13(4).
Annual reports. (2018). Retrieved from https://www.coles.com.au/about-coles/annual-reports
Bunnings, Kmart and Officeworks were the winners, while Target and Coles struggled. (2018).
Retrieved from http://www.news.com.au/finance/business/retail/wesfarmers-profits-up-
13-per-cent-to-16-billion-as-bunnings-kmart-and-officeworks-shine/news-story/
6cf0b1116a53f01b7d9e93b320f21586
Coles Supermarkets. (2018). Retrieved from https://www.coles.com.au/
Compact, U., & Energy, D. (2018). News & Views | Global Compact Network Australia.
Retrieved from http://www.unglobalcompact.org.au/gcna-news
Group, D. (2018). 2017 Full-year Results. Retrieved from
http://www.wesfarmers.com.au/util/news-media/article/2017/08/17/2017-full-year-results
Group, D. (2018). Home Improvement. Retrieved from http://www.wesfarmers.com.au/our-
businesses/home-improvement
Group, D. (2018). Department Stores. Retrieved from http://www.wesfarmers.com.au/our-
businesses/department-stores
Group, D. (2018). Reports. Retrieved from
http://www.wesfarmers.com.au/investor-centre/company-performance-news/reports
Home Improvement. (2018). Retrieved from https://sustainability.wesfarmers.com.au/

APPLICATION OF ACCOUNTING CONCEPTS AND PRACTICES WESFARMERS 11
Office Supplies, Office Furniture, Stationery, Ink & Toner at low prices | Officeworks. (2018).
Retrieved from https://www.officeworks.com.au/
WestfarmersHome. (2018). Retrieved from https://sustainability.wesfarmers.com.au/
Wesfarmers 2017 Sustainability Report. (2017). Retrieved from
http://www.wesfarmers.com.au/docs/default-source/asx-announcements/wesfarmers-
2017-sustainability-report-released.pdf
Sustainability Reporting. (2018). Retrieved from
https://www.globalreporting.org/information/sustainability-reporting/Pages/default.aspx
2017 Annual Report. (2018). Retrieved from https://www.wesfarmers.com.au/docs/default-
source/default-document-library/2017-annual-report.pdf?sfvrsn=0