Accounting Policy Report 2022

Running head: ACCOUNTING POLICY AND EARNINGS QUALITY
Accounting Policy
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1ACCOUNTING POLICY AND EARNINGS QUALITY
Table of Contents
Part A...............................................................................................................................................2
Part B...............................................................................................................................................3
Part C...............................................................................................................................................4
Part D...............................................................................................................................................6
References........................................................................................................................................8

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Part A
a) The accounting policy that has been used by the Myer Holding has been done in
accordance with the AASB 118 where relevant accounting standards and classification
were made by the company for the purpose of recognizing the revenue of the company
for the stated time period. The classification of the revenue on a group basis whereby the
company has made critical accounting estimates in the case of loyalty program where
customers accumulate award points for the purpose of purchases made that would be
entitling them to discounts for the future purchases that would be made. The recognition
of the award points are done separately by the company as an individual component of
the initial sales transaction thereby allocating the fair value of the considerations that
would be received between the award points that are ultimately recognised at the fair
value. After the redemption of the award points the company recognizes the associated
revenue for the group revenue that are done (Dunbar & Laing, 2017).
b) There were relevant disclosures and that were made by the company in relation with the
accounting policy of the company and the same were well done by the company to reflect
economic reality in the same correspondence. The accounting choices that were made by
the Myer Holdings Ltd were well in line or consistent with the Australian Accounting
Standard Board with the help of which the accounting policy of the company were made.
The accounting policy of the company should be such that it would be helping the overall
business statement and policy preparation of the company (Komninos & Cameron, 2017).
The strategies undertaken by the group company is taken in such a way that the operated
expected earnings and retail market conditions are well taken into account for the purpose

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of analysis along with the prevailing economic conditions. The company views the
material benefits and well into account various benefits and associated judgements that
would be essential for the company for the purpose of correctly classifying and analysing
it in the balance sheet of the company. Myers analyses and well monitors the various
economic and other benefits that would be flowing to the company. There are various
financial disclosures for which accounting choices have been well made by the company
after assessing the nature and characteristics of the expenses and the relevant accounting
choices that would be appropriate for the company given the nature of expenses.
Part B
a) The Board of Directors of Myers Industries Inc has appointed the Audit Committee (AC)
that comprises of minimum of three members. Each of the Committee member would
serve till the earliest of their removal by the Board or his or her successor having been
appointed duly (Cohen & Simnett, 2014). Each of the committee member is independent
based on the legislative provision of Section 303A-02 of the ASX Listed Company
Manual. The Audit Committee meets the criteria for the independence that is set forth in
the Rule 10A-3 under the Corporation Act Act of 2001, subject to the exemptions
explained under the Rule 10A-3(c) of the Exchange Act. The audit member of the Audit
Committee holds expertise in the finance.
The Independent Auditors report states that the financial reports of the Myer
Holdings Ltd are in accordance with the Corporation Act 2001 (Knechel & Salterio,
2016). On the page number 87 of the annual report the company states that its Audit
Committee is an independent in agreement with the independence requirement auditor in

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respect of the Corporation Act 2001 and ethical requirements of the Accounting
professionals (Cooper & Owen, 2014). The Audit Committee of the company also
adheres with the APES 110 code of ethics for the professional accountants which is
relevant to its audit of the financial report in Australia.
b) The audit process is usually designed to safeguard the investors and with the hope that
the shareholders would have trust in the financial report which is released by the
company. The characteristics of audit committee is beneficial because it helps in assuring
that the audit committee members are independent, shareholders can gain the assurance
which the company is using its best effort in preventing the employees from manipulating
the work of the committee and external auditors (Laing & Hoy, 2018). The audit
committee can be anticipated to review the significant accounting and reporting issues
and current professional as well regulatory pronouncement to understand the probable
effect on the financial statements.
The audit committee also conducts a review on the results of the audit with the
management and external auditors together with the matters that are needed to be
communicated to the committee under the generally accepted auditing standards.
Controls over the financial reporting, information technology security and operational
matters falls under the purview of the committee. The audit committee is important for
the shareholders because it provides independence in communication and oversight
associated to the audit procedure that is helpful in assuring accurate financial reporting.

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Part C
a) Evidences gained from the Myer Holdings Ltd financial report states that the financial
results of the company were disappointing. When the board understood that the execution
of the strategy was not successful in delivering the shareholder value, the board decided
to make the decisive changes in the leadership (Kanapathippillai et al., 2016). The board
most importantly and deliberately sought to re-base the fixed remuneration with the
present KMP that is paid no more and typically less than their predecessors. This implies
that the company has reduced the average remunerations of its key management
personnel along with the application of reduction in the non-executive director’s fees.
In spite of introducing the new remuneration structure majority of the shareholders casted
their votes in favour of adopting the 2017 remuneration report which alone accounted
70.59% of the voters. While only 29.41% of the total votes casted their vote against the
remuneration report which amounted to fair strike under the Corporation Act 2001. The
company however after the AGM made certain immediate changes in its remuneration
structure which also included decrease fees of chairman and non-executive director (Appiah
& Chizema, 2015). The company introduced the scheme of target to purchase the minimum
shareholding for the non-executive directors.
Recommendations can be made to avoid in future of not returning to the 2018 position,
these are as follows;
 To form an alignment of interest among the Executive Management and the
shareholders of the company Myer Holdings should consider both short-term and

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long-term targets by setting up the incentive plans for the members of its
executive management.
 Non-share based instruments can be entered into by the board of directors with
the executive management regarding the cash bonus plans.
Part D
a) The Altman Z-Score is the output of a credit-strength tests that tells about the likelihood
of bankruptcy for a public manufactured company by using the various aspects of
financial factors including the profitability, leverage, liquidity, solvency and activity for
predicting whether the ability of the company in being insolvent. A Z-Score greater than
2.99 means that it is very unlikely that the bank may go bankruptcy. In the case of Myer’s
Holding the company is having a score of 0.709 which states that the operations and the
financing activities that are done by the company may not be sufficient enough for he
purpose of sustainable operations and activities of the company (Altman Z-Score
Definition & Example | InvestingAnswers, 2019).
Financial ratio’s that were well calculated for the purpose of financial analysis
would be debt to equity ratio for the company that was around 0.26 times. On the other
hand, the return on assets for the company was around -35.92% for the company which
has been consistently poor for the company due to high operational and direct costs that
were associated with the company. The current ratio for the company was around 1.06
times for the company which well states that the company is not having adequate

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liquidity or financial coverage for meeting the current liabilities of the company. The
adequate current ratio that the company should have is around 2 times (Vaidya, 2018).
Altman Z-Score
Working Capital 24341
Total Assets
135299
8
Retained Earnings -160282
Earnings before Interest and Tax -485763
Equity Market Value 583989
Total Sales
240998
8
Altman Z-Score 0.709
Current Assets 466314
Current Liabilities 441973
Current Ratio 1.06
Net Profit -486002
Total Assets
135299
8
Return on Assets -35.92%
Long-Term Borrowings 149165
Total Equity 583989
Debt to Equity Ratio 0.26
b) The results derived from the Altman Z-Score clearly states that the company is not
having adequate financial position in terms of its operations and financial capability
where the company has not performed well. The financial positions of the company in
terms of profitability, EBITA Margins and retained earnings which are in negative
numbers well states that the company may not be creating wealth for the shareholders of
the company, The company should undertake various actions and strategies for the

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purpose of reducing the overall costs associated along with increase in the revenue base
of the company so that it can ultimately improve the financial position of the company.

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References
Altman Z-Score Definition & Example | InvestingAnswers. (2019). Investinganswers.com.
Retrieved 22 August 2019, from https://investinganswers.com/dictionary/a/altman-z-
score
Appiah, K. O., & Chizema, A. (2015). Remuneration committee and corporate
failure. Corporate Governance, 15(5), 623-640.
Cohen, J. R., & Simnett, R. (2014). CSR and assurance services: A research agenda. Auditing: A
Journal of Practice & Theory, 34(1), 59-74.
Cooper, S., & Owen, D. (2014). Independent assurance of sustainability reports.
In Sustainability accounting and accountability (pp. 90-103). Routledge.
Dunbar, K., & Laing, G. K. (2017). Deconstructing the Accounting Standard AASB 13 Fair
Value: Exit vs Entry Price for Assets. Journal of New Business Ideas & Trends, 15(2).
Kanapathippillai, S., Johl, S. K., & Wines, G. (2016). Remuneration committee effectiveness and
narrative remuneration disclosure. Pacific-Basin finance journal, 40, 384-402.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.
Komninos, J., & Cameron, R. B. (2017). IMPACTS OF REVENUE RECOGNITION
CHANGES IN THE CONSTRUCTION INDUSTRY.
Laing, G. K., & Hoy, S. (2018). A Retrospective of Professional Liability of Auditors in
Australia. Journal of New Business Ideas & Trends, 16(1).

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Vaidya, D. (2018). Altman Z Score (Meaning, Formula) | Score to Predict Bankruptcy
Risk. Wallstreetmojo.com. Retrieved 22 August 2019, from
https://www.wallstreetmojo.com/altman-z-score/