Account Financial Analysis Report

Running head: ACCOUNTING FINANCIAL ANALYSIS REPORT
Accounting Financial Analysis Report
Name of the Student:
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ACCOUNTING FINANCIAL ANALYSIS REPORT
Executive Summary
The key objective of this report has been to undertake an assessment on the key factors that are
behind the failure of the three renowned Australian organizations namely ABC Learning, HIH
Insurance and One Tel Phone. An introduction on the three organizations has been provided in
the initial section of the report and thereafter objective of the report which has been to address
the key events, which led to the downfall of the concerned companies. Thereafter the report has
looked to address the ethical point of view with respect to which the downfall of the companies
has taken place. At the end of the report, the function that is related to the liabilities that led to
the downfall of the organizations has been explained.

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ACCOUNTING FINANCIAL ANALYSIS REPORT
Table of Contents
Introduction......................................................................................................................................3
Introduction of the Companies........................................................................................................3
Liquidation Reasons........................................................................................................................3
Corporate Governance and Ethics...................................................................................................5
Role of Liabilities............................................................................................................................6
Conclusion.......................................................................................................................................6
Reference List..................................................................................................................................7

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ACCOUNTING FINANCIAL ANALYSIS REPORT
Introduction
McAlister and Ferrell (2016) addressed that liquidation refers to the method of winding
up of the business activities of an organization and this takes place when the management of the
company undertake the steps to close the activities of the business permanently. The liquidation
process initiates when all the liabilities and the rights related to the company has been realised
and thereafter the liquidator pays off all the due claims of the creditors. It is observed that there
are certain issues that lead to the liquidation of the business operations of a company and some
instances have been the incorporation of the extensive policies of accounting, issues and
mistakes that are within the corporate governance, taking up of unethical factors etc. The actual
goal of the report therefore has been to evaluate the various factors that have lead to the
liquidation of the renowned Australian companies namely One Tel Phone, ABC Learning and
HIH Insurance.
Introduction of the Companies
One Tel Phone: Soltani and Maupetit (2015) explained that One Tel Phone has been one of the
renowned companies that has been a telecommunication organization established in Australia.
The organization was established in the year 1995 and the key business strategy has been to
concentrate on the demands and desires of the consumers in order to manufacture much better
and effective services and products. The company at a certain point of time was in the fourth
position within the Australian telecommunication industry before they liquidated. The goal of the
organization was to create an image that would be young and innovative by offering their one net
services and mobile phones to the consumers in Australia.
ABC Learning: ABC Learning has been known to be one of the pillars in the educational sector
in Australia. The company had a market capitalization of around of “AUD $2.5 billion” and the
company has been listed in the Australian Stock Exchange. The company however, faced a
downfall because of the mortgage issues that took place due to extensive amount of debt and
managerial issues (Filatotchev and Stahl 2015). The company was founded in the year 1988 and
the company had more than 800 centres all over the country. The company had their
headquarters in Queensland and thereafter in the year 2006, the company spread their wings and
established their business even in United Kingdom and United States of America.
HIH Insurance: This Company has been one of the largest and the most extensive insurance
organization in Australia. The company underwent extensive level of acquisitions in the year
1997 and 1998 in Australia and all over the globe. In 1995, the firm sold out their shares to an
organization from Switzerland and thereafter changed their name. During the liquidation time of
the company, over loss of the company has been $5.3 billion. It is due to this factor several
members of the organization were accused and thereafter were imprisoned (Mason and Simmons
2014). For this factor the downfall of HIH Insurance is regarded as a huge downfall in Australia.
Liquidation Reasons
The distinct reasons and the factors that have led to the downfall of the concerned
organizations have been explained as follows:

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ACCOUNTING FINANCIAL ANALYSIS REPORT
HIH Insurance: The main factors are:
 The acquisition of FAI Insurance was not effective decision by HIH Insurance as the
move comprised of a huge amount of investment, which became deadly for the insurance
company. The firm had to go through extensive level of damages because of this move
(Martin et al. 2016).
 The other decision that was not appropriate from the point of view of the company had
been the company entering in the sector of business financing and therefore made
investments in various films that led to a loss of millions of dollars for the organization.
 The unprecedented and the sudden alteration in the accounting policy with regards to the
compensation payment for the Californian employees was discovered to be one of the
essential factors that led to the huge loss for the company and thereby leading to
liquidation (Crowther and Aras 2016).
 The natural disaster that took place in Florida was another factor that led to the extensive
loss for the company as huge amount of debt was created over the company and this
amount of debt created a loss for the firm. This has been one of the essential reasons for
the liquidation of the company.
 It is seen that around “$800 million” within a time frame of six months because of faster
rate of expansion and development and the complicated structure of the reinsurance and
the unmonitored distribution of authorities.
One Tel Phone: The factors have been explained as follows:
 The plan and the policy of the business were to make themselves look superior by
making extensive amount of profits and postpone the key costs related to the business for
more than three years. This kind of accounting policy taken by One Tel was not legal and
this was against the accounting policies and standards.
 A report that there had been a loss of $291 million for One Tel was disclosed in the year
2000 and the loss took place because of the incorporation of the accounting policies that
were not legal and it had an impact on the share price of the firm and therefore there was
a fall in the share price to lower than $1 (Néron 2016).
 In the next year, the firm even had a fund shortage in order to operate their business and
Rodney Alder the director of One Tel decided to sell off 5 million of their shares for $2.5
million. According to the report of the management, One Tel became bankrupt and
thereby laid off around 1400 employees.
 It is due to the process of liquidation that One Tel was accountable for the compensation
of the $92 million as the firm did not undertake their authority of diligence and care
(Aguilera et al. 2015).
ABC Learning: The key factors related to this business have been explained as follows:
 In the year 2007, ABC Learning went through a fall of about 42% in the profit that is
around $37.1 million. Simultaneously, the company went through a debt of $1.8 billion.
This has been the essential factors that went through the downfall for the company
(Soltani 2014).
 ABC Learning share price had a fall by 43% and value came to $2.15 due to the low
trading of $1.15. During the end of the accounting year, the management of ABC
Learning was compelled to sell of the stakes of $20million and $6million at a lower cost

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ACCOUNTING FINANCIAL ANALYSIS REPORT
of $2.7 million. Because of this factor, the firm went through suspension of trade as the
organization was incompetent to release their income for the year 2007 and 2008.
 In 2008, ABC Learning underwent receivership because of a rise in debt and the
incompetency of the auditors in order to close the accounts (Heracleous. and Werres
2016).
 ABC Learning incorporated ineffective process of the intangible assets of accounting.
According to the company, $2.4 million and $8.4 million was the value of goodwill
licence and intangible assets this was the amount levied for impairment. This element led
to the ineffective valuation of the future cash flow and the organization had a loss of 42%
out of their profit (Filatotchev and Nakajima 2014). It is regarded as the essential reason
for the downfall for ABC Learning.
Corporate Governance and Ethics
The business companies consider ethics to be one of the issues of the judgment of the
business about the factors that are correct and one that is wrong. The decisions that are
undertaken by the management are in accordance to the business culture. The decisions that are
taken by the firms needs to be ethical and thereby the firms can undertake the precise action
course. Short term profits can be hampered if ethics are maintained but development long term
profits can be attained (Too and Weaver 2014). The incorporation of corporate governance
creates directed and managed actions of ethics in the business. The business organizations with
the help of the ethical concerns and the efficient corporate governance can lead to benefits of the
business. The businesses are able to attract more and more customers for their services and
products that may raise the profitability and sales and at the same time rise in the level of
goodwill assists in attracting more and more employees.
The explanations that are made in accordance to the failure ethics and corporate
governance have been explained in order to understand the downfall of the concerned
organizations.
HIH Insurance: The acquisition of FAI Insurance by HIH Insurance was undertaken without
gaining the permission from the Directors of the Board. Simultaneously, the director resigned
without notice after the share disposal. This entire situation explains the ineffective corporate
governance of the organization. HIH even made an ineffective decision by coming in the
business of film that was way too risky (Salami, Johl and Ibrahim 2014). It even addresses the
ineffective decision making and ineffective corporate governance for HIH Insurance. HIH
business was associated with unethical practices of the business by paying no attention to the
sustainable work with respective diligence and this explains the insufficient ethics in the
activities of HIH Insurance. Ineffective activities of the management can be observed from Mr.
Williams who published the brochure of the exclusion of the material and thereby over explain
the profit that was made in the year 1998-1999.
One Tel: The firm did not comply with the codes of ethics with the violation of the standards and
policies of accounting. The other failure has been the management team being unable to monitor
the financial performance and thereby explains the lack of corporate governance of the firm
(Young and Thyil 2014). The company was even unsuccessful in implementing the strategy of
pricing that led to the company liquidation as there was a loss of the company and this has been
the availability of insufficient ethics within the company.

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ACCOUNTING FINANCIAL ANALYSIS REPORT
ABC Learning: The Company has not been able to incorporate the accounting policies that are
regarded to be the actual factor for the liquidation of the firm and thereby led to the operations
that were fraudulent in nature with respect to the accounting practices of the firm (Voegtlin and
Pless 2014). The company was even unable to provide effective services to the government and
the customers and this can be looked upon as an unethical factor that led to the downfall for the
company.
Role of Liabilities
The role of the liabilities has been the major concern that led to the downfall for the three
companies because of the fact that all the companies that have been taken into consideration had
huge amount of debts. The ineffective nature of the refinancing activities has led to the breach of
the debt covenant. The management of the companies have even been accountable for the rise in
the level of liabilities (Schneider and Scherer 2015). Therefore, it can be said that liabilities has
been one of the essential factors that has led to the downfall for the companies.
Conclusion
The explanations that have been made earlier has indicated the fact that there have been
several factors that have led to the downfall for HIH Insurance, ABC Learning and One Tel. The
ineffective decision making from the management and wrong use of the accounting policies have
led to the manipulation of the financial accounts. The ineffective corporate governance and
ethical issues have been essential factors that have led to the liquidation of the three companies
and therefore the other companies need to undertake steps and actions with the help of which
such issues does not arise in the future.

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ACCOUNTING FINANCIAL ANALYSIS REPORT
Reference List
Aguilera, R.V., Desender, K., Bednar, M.K. and Lee, J.H., 2015. Connecting the dots: Bringing
external corporate governance into the corporate governance puzzle. The Academy of
Management Annals, 9(1), pp.483-573.
Crowther, D. and Aras, G., 2016. Corporate governance and corporate social responsibility in
context. In Global perspectives on corporate governance and CSR (pp. 23-64). Routledge.
Filatotchev, I. and Nakajima, C., 2014. Corporate governance, responsible managerial behavior,
and corporate social responsibility: Organizational efficiency versus organizational
legitimacy?. The Academy of Management Perspectives, 28(3), pp.289-306.
Filatotchev, I. and Stahl, G.K., 2015. Towards transnational CSR. Corporate social responsibility
approaches and governance solutions for multinational corporations. Organizational
Dynamics, 44(2), pp.121-129.
Heracleous, L. and Werres, K., 2016. On the road to disaster: Strategic misalignments and
corporate failure. Long Range Planning, 49(4), pp.491-506.
Martin, G., Farndale, E., Paauwe, J. and Stiles, P.G., 2016. Corporate governance and strategic
human resource management: Four archetypes and proposals for a new approach to corporate
sustainability. European Management Journal, 34(1), pp.22-35.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-86.
McAlister, D.T. and Ferrell, O.C., 2016. Corporate governance and ethical leadership.
In Business ethics: New challenges for business schools and corporate leaders (pp. 68-93).
Routledge.
Néron, P.Y., 2016. Rethinking the ethics of corporate political activities in a post-citizens united
era: Political equality, corporate citizenship, and market failures. Journal of business
ethics, 136(4), pp.715-728.
Salami, O.L., Johl, S.K. and Ibrahim, M.Y., 2014. Holistic approach to corporate governance: A
conceptual framework. Global Business and Management Research, 6(3), p.251.
Schneider, A. and Scherer, A.G., 2015. Corporate governance in a risk society. Journal of
Business Ethics, 126(2), pp.309-323.
Soltani, B. and Maupetit, C., 2015. Importance of core values of ethics, integrity and
accountability in the European corporate governance codes. Journal of Management &
Governance, 19(2), pp.259-284.
Soltani, B., 2014. The anatomy of corporate fraud: A comparative analysis of high profile
American and European corporate scandals. Journal of business ethics, 120(2), pp.251-274.
Too, E.G. and Weaver, P., 2014. The management of project management: A conceptual
framework for project governance. International Journal of Project Management, 32(8),
pp.1382-1394.

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Voegtlin, C. and Pless, N.M., 2014. Global governance: CSR and the role of the UN Global
Compact. Journal of Business Ethics, 122(2), pp.179-191.
Young, S. and Thyil, V., 2014. Corporate social responsibility and corporate governance: Role of
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