Contemporary Accounting Theory and JB Hi-Fi's Downgraded Profit Information Disclosure

This article discusses the failure of JB Hi-Fi in following social norms and institutional theory in disclosing the downgraded profit information in the market. It also explores the impact of the decision on stakeholders and the stock market. The article uses the Brunswick Lens model to explain how investors perceive the environment through imperfect cues and make decisions accordingly.

Contemporary Accounting Theory

Contents
Answer 1..........................................................................................................................................3
References........................................................................................................................................4
Answer 2..........................................................................................................................................5
References........................................................................................................................................6
Answer 3..........................................................................................................................................8
References........................................................................................................................................9
Answer 4........................................................................................................................................11
References......................................................................................................................................12
Answer 5........................................................................................................................................13
References......................................................................................................................................15

Answer 1
Classical political economy tends to perceive the accounting reports and the disclosures being
made by the company as a means of maintaining the position of the ones which controls the
scarce resources and as mean for the purpose of undermining the position of those which or
without the scarce capital (Kurz & Gehrke, 2012). The theory focuses on the structural conflict
within the society. The theory explains that the JB Hi-Fi opted a wrong way of disclosing the
downgrade profit information in the market. The failed in following social norms and their
intention is being challenged by the Australian Stock Exchange (Foye, 2018; Markets and
Money, 2018; AFR, 2018).
The company filed in following the concept of institutional theory in their conference (AFR,
2018). The company did not follow the deeper and resilient aspect of the social structure. The
meeting held for disclosing the downgrade profit did not consider the structure schemes, rules,
norms and routines that have been established by the authoritative guidelines for the social
behavior. JB Hi-Fi operates under the guidance of Australian Stock Exchange where a variety of
norms suggest how the company should disclose the information so that the company becomes
an institutional organization. The Australian Stock Exchange attempts to manage the activities of
companies (AFR, 2018; Higheredprofessor, 2017). As the JB Hi-Fi did not make any stand-alone
statement to the stock exchange of Australia instead they stuck by reasoning for realizing a profit
downgrade buried deep within the presentation to the analyst, external constituents are no more
viewing the company in the corporate field as the legitimate actor (Higheredprofessor, 2017).
The corporate environment is no more willing to reward the company as the legitimate
organization in respect of the funding, quality factors and much more (Higheredprofessor,
2017).. Richard Murray could have effectively emphasized the values by sharing the story about

the company in the right kind of manner to the stakeholders of the company, but they basically
failed completely in doing so in effective manner (Higheredprofessor, 2017).
The Australian Stock Exchange has questioned the company how they decided to inform the
stakeholder that it had downgraded the profit forecast (Higheredprofessor, 2017). This was done
because eth ASX being their regulatory body was not staid foes with ted decision. The stock
exchange revealed that it had difficulty with the company as they published in the market the
news which was having market-sensitive material and that also in fairly innocuous title instead of
justifying the dedicated trading update. This was not acceptable by the stakeholders of the
company as it was against the legitimacy theory (Higheredprofessor, 2017).
References
AFR. (2018). JB Hi-Fi rapped by ASX for burying earnings downgrade in Macquarie
presentation. Retrieved May 29, 2018, from The Australian Financial Review:
http://www.afr.com/business/retail/jb-hifi-rapped-by-asx-for-burying-earnings-
downgrade-in-macquarie-presentation-20180507-h0zq08
Foye, B. (2018). JB Hi-Fi grilled by ASX over profit downgrade. Retrieved May 29, 2018, from
https://www.crn.com.au/news/jb-hi-fi-grilled-by-asx-over-profit-downgrade-490446
Higheredprofessor. (2017). What is institutional theory? Retrieved from
http://higheredprofessor.com/2017/02/20/what-is-institutional-theory/
Kurz, H., & Gehrke, C. (2012). Classical political economy and modern theory. LIB.
Markets and Money. (2018). Why has JB Hi-Fi’s share price fallen? Retrieved May 29, 2018,
from https://www.marketsandmoney.com.au/jb-hi-fi-share-price-suffers-following-asx-
query-asxu/2018/05/08/

Answer 2
The Stakeholder theory looks at the relationships in between the company and others in the
internal and external environments. It also looks at how such connections influence the business
activities. Thinking of Australian Stock Exchange as one of the stakeholders of JB Hi-Fi
company it can be said that the Austrian Stock Exchange go affected by the by the decision of
the company for sharing its information regarding the downgraded profit in the conference. The
company has no followed the stakeholder approach in sharing the information regarding the
profits. The company failed in managing the stakeholder relations effectively and that is why
Australian Stock Exchange bombarded questions related to their queries on disclosure of
information. The Australian Stock Exchange has questioned the company about how they
decided to inform the stakeholders of the company regarding the information associated with the
downgrade of the profits of the company by 5 million dollars during the investor presentation.
because of this information company destroyed the commitment level of shareholder interest and
not only this they failed in dividing and categorizing the interest into manageable segments. The
decoration by the company did not follow morals and values in managing the company. JB Hi-Fi
is known consumer electronics giant who instead of making a stand-alone statement, stuck to its
reasoning for releasing profit downgrade buried deep in the presentation to the analyst. This
decision of the company called for please explain notice by the Australian stock exchange for not
releasing the news in the perfect legitimate manner and hiding the truth from the company
(Akinyi & Melissa, 2017; Syed & Bajwa, 2017). Company like JB Hi- Fi is associated with the
production of the consumer products considers the safety feature as the mian issue. When the
downgrade revenue issue was first identified by the company, they did not made much effort in
dealing with the issue. The process should have included the Australian stock exchange as the

stakeholder because the stakeholders are equally responsible for the safety of the products and
the profits of the company and for this purpose the company is always required to up to date the
varied concerns (Harrison & Wicks, 2013; Fontaine, Haarman, & Schmid, 2006). While
considering the information sharing in the conference, Job Hi- Fi's managers failed in
determining the fundamentals of the information and how the information could affect the level
of integrity of the reaccepts because of the lack of stakeholder involvement in the conference
organized by the company (Akinyi & Melissa, 2017; Syed & Bajwa, 2017). Mangers of the
company failed in determining that the Australian Stock exchange is a stakeholder of the
company and that it should be aware that no matter what level does it offer, but an element to the
news sharing should have bene shared and the stakeholder must be aware of what the others are
contributing (Scheid, 2011). As per the stakeholder theory, the purpose of JB Hi-Fi company
should have been to develop as much value as possible for the stakeholders for succeeding and
being sustainable over the time (Scott, 2018). The managers should have kept the interest of
customers, suppliers, communities, and shareholders aligned and going in the similar direction.
Instead of following the tsarists of stakeholder theory JB Hi-Fi preferred the easy safety of
trading off the interest of shareholders against one another (FT, 2018).
References
Akinyi, O. M., & Melissa, A. G. (2017). Effect of Earnings Announcement on Share Prices of
Companies Listed at the Nairobi Securities Exchange. European Business &
Management, 3(2), 29-36.
Fontaine, C., Haarman, A., & Schmid, S. (2006). The Stakeholder Theory. Retrieved from
Semantic Scholar:
https://pdfs.semanticscholar.org/606a/828294dafd62aeda92a77bd7e5d0a39af56f.pdf
FT. (2018). Definition of stakeholder theory. Retrieved from Lexicon.ft.com:
http://lexicon.ft.com/Term?term=stakeholder-theory

Harrison, J. S., & Wicks, A. C. (2013). Stakeholder Theory, Value, and Firm Performance.
Business Ethics Quarterly, 23(1), 97-124.
Scheid, J. (2011). The Fundamentals of Stakeholder Theory. Retrieved from Brighthubpm.com:
https://www.brighthubpm.com/project-planning/96385-the-fundamentals-of-stakeholder-
theory/
Scott, G. (2018). The Concepts, Evidence & Implications of the Stakeholder Theory of a
Corporation. Retrieved from Smallbusiness.chron.com:
http://smallbusiness.chron.com/concepts-evidence-implications-stakeholder-theory-
corporation-33236.html
Smith, D., & Jacobs, K. (2011). “Breaking up the sky”: The characterisation of accounting and
accountants in popular music. Accounting, Auditing & Accountability Journal, 24(7),
904-931.
Syed, A. M., & Bajwa, I. A. (2017). Earnings announcements, stock price reaction and market
efficiency – the case of Saudi Arabia. International Journal of Islamic and Middle
Eastern Finance and Management. Retrieved from https://doi.org/10.1108/IMEFM-02-
2017-0044

Answer 3
Future earning announcements are important financial updates that offers market glimpse on the
how the stocks will likely be values in the coming time. Stock prices end to rising when earning
results exceeds the expectations of the market while disappointing earnings results tend to lower
the prices of shares. The future anticipated earning forecast of ob Hi-Fi shows downfall in profit
earning because of which the current share prices trolled down 10 percent making the Australian
stock’s biggest daily fall since the year 2011. Earning announcements information plays an
important role in the functioning of the stock market are both individual and institutional investor
level. the stock market reaction towards earning announcements has received significant
importance in finance and Accounting Literature. When JB Hi-Fi released their earnings,
analysts might have compared them with the predetermined estimates for the financial year
concerned. he estimates might have been based on the company's past performance, recent good
or bad news and any outside effect, which affects the firm's performance. In case of Job Hi-Fi the
surprise earning announcement of downgrade profit earning affected the stock prices
significantly. Being negative earning surprise announcement, the news exerted a downward
procedure on the stock price as investors perceived negative signal regarding the future often
company. For around 40 years from now, researchers have consistently dominated the
phenomena in the stock market wherein the stock prices tends to drift in the directions of the
earning surprises following the earning announcements. The phenomena is considered as Post
earning Announcement Drift. There has been much research that has documented the tendency
of stock price show continuous drift after the release of he earning announcements. The business
earning of JB Hi-Fi is the main element of the price of the shares, because of the fact that the

earning of the company and the circumstances associated with them can show whether the
organization will be profitable and successful in the future (Akinyi & Melissa, 2017; Syed &
Bajwa, 2017). The information shared by the members of the company shows that company will
not be earning good profits in incoming time and that is why the investors of the company
decides not to further invest in the company so as to mitigate the risk. The relationship in
between the earning per share and the returns are also positive (Ong, 2017). The stock brokers,
investors normally utilizes the consensus of earnings estimates made by the analysts in the
market, wherein the median estimate becomes the base for comparison. Market reactions to
earning report are stronger at JB Hi-Fi as it has bog capitalization market because institutional
investor when they create to surprise, can dictate the short-term impacts of the JB Hi-Fi company
which happened because the small size of the investments (Akinyi & Melissa, 2017; Syed &
Bajwa, 2017). The stakeholders of JB Hi-Fi company strictly kept the eye on the margining
announcements of the company and the movement of the share prices around the announcement
date and they soon realized that the Australian Stock Exchange has gone down to its lowest ever
since 2011 because of the information of low of profit earnings in coming time. The information
was used by the investors are the yardstick for assessing the profitability and financial strength of
the company.
References
Akinyi, O. M., & Melissa, A. G. (2017). Effect of Earnings Announcement on Share Prices of
Companies Listed at the Nairobi Securities Exchange. European Business &
Management, 3(2), 29-36.
Ong, H. (2017). How do quarterly earnings reports affect stock prices? Retrieved from
Business.inquirer.net: http://business.inquirer.net/229677/quarterly-earnings-reports-
affect-stock-prices

Syed, A. M., & Bajwa, I. A. (2017). Earnings announcements, stock price reaction and market
efficiency – the case of Saudi Arabia. International Journal of Islamic and Middle
Eastern Finance and Management. Retrieved from https://doi.org/10.1108/IMEFM-02-
2017-0044

Answer 4
The Brunswick Lens model comes from the family of Theoretical models which are popularly
known as lens model. The Brunswick Les model shows that a person perceives the environment
trough set o imperfect cues and acts after that accordingly.ss to be composed of three main
elements:
Basic information in decision making: anytime the investors of JB Hi- F company will make a
decision of purchasing or selling the shares, they will have at their disposal a number of cues or
indicators that they may or may not use an aid in the process. For instance, considering the
investors of JB Hi-Fi company, the investors have to decide whether hey should invest in the
company or they should sell the shares. There are mainly a wide variety of decision variables
which they could utilize to help them make this decision, like the profit, current position of the
company in the market and general market indicator.
 Observed Decision: It is necessary that the decision making must end in the responses,
even if the responses are simply the decisions which are not meant for making responses.
It probably says that the responses of such sort has been made. The decision making
process is quite indistinguishable concept (Miyamoto, 2017).
 Correct Decision: Just the way there are observed actions of the art associated with the
decision maker, the same way there are optimal responses which are associated with the
decision making. This particular optimal decision making reveals that the best possible
alternative of the actions that could have bene selected by the investors in many situations
(Miyamoto, 2017).
One cue which investor probably might be using is the profit announcement news. This
announcement reveals that if correlation in between using and selling and profit announcements

news will be taken out then the correlation will be negative (J-dm, 2014). This means profits are
highly but negatively correlated with coming years as per the earning announcements. The
research-based lens Model shows that the investors will prefer selling their share in the
anticipation of earning more losses in coming time (Nitisha, 2018; Miyamoto, 2017).
References
J-dm. (2014). What has Brunswik’s Lens Model Taught? Retrieved from J-dm.org/archives:
http://j-dm.org/archives/1560
Miyamoto, J. (2017). The Lens Model and Linear Models of Judgment. Retrieved from
Faculty.washington.edu: https://faculty.washington.edu/jmiyamot/p466/hnd02-
1.p466.a17.pdf
Nitisha. (2018). Decision Making Models: Brunswik Lens and Bayes Model. Retrieved from
Yourarticlelibrary.com: http://www.yourarticlelibrary.com/decision-making/decision-
making-models-brunswik-lens-and-bayes-model/46470

Answer 5
It has been observed in many studies that the accounting profession has been criticized in varied
and numerous unrelenting ways. Accounting profession is being criticized for being the tool and
technology of the capitalist hegemony and being the mean for the dissemination of the principles
of capitalism. The Accounting practices are considered to be symbolic and hegemonic force in
respect of the struggles which covers over the distribution of the income of social platform. It is
therefore, being considered to be becoming increasingly learn that the capital of the business is
the dominant force and it is also offering far from negligent support by the profession of
accounting in the dominance. It is quite apparent considering the light of criticism that the
adoption of the regulation of the global accounting has impart lubricated and legitimized
movements to the liberals and the financial funding of the economy
The current crisis of the JB Hi- fi company shows that accounting has faced both the pressure
towards change and the approach for being co- responsible for the emergence of the issues, has
offered us the opportunity of reflecting towards the varied possibilities of the understanding of
the role being played by the accounting profession in the society as well a the foundation of
politics and economics.
The mainstream accounting respond towards the pressure and the varied challenges induced by
the crisis from the traditional view on the role of accounting in the society. This shows persisting
on the existence of the truthful representation of the varied objectives of the economic reality,
considering the accounts as the innocent messenger of the not so good news and the accounting
merely as the socially technical solution for the issues in technology. The main broad view of the
accounting being a social practice comes from the fundamental ideas that there is actually not
much things which can be consider as inept and unbiased accounting (Smith & Jacobs, 2011).

The background of the accounting practices of the JB Hi-Fi company seems to be ideological
and the practices of the accounting reveals prevailing social economical relationships and the
changes which occurs along their side (Horvat & Korošec, 2015; Zhang, 2010; Yagoubi, 2014);
(Zhang, 2010).
This particular view, shows not just sees the current stream of accounting as the main tool of
accounting but it also considers it as the technology of capitalist hegemony and as the mean for
the dissemination of the principles associated with the capitalism. It also critically draws some
sort of attention towards the entrapment of the accounting which s institutional and the
profession of the accountancy in the principles (Horvat & Korošec, 2015; Zhang, 2010; Yagoubi,
2014).
The recent issue in the JB Hi- Fi company which is associated with the downturn parts does not
shows a major shock for the accounting practices (Horvat & Korošec, 2015; Zhang, 2010;
Yagoubi, 2014).
The issues have not affected the accounting much as merely just receiving minor touch up in the
form of strengthening of the auditing, the perfection of the rules associated with the fair value
measurement and strengthnizing the ideology of the transparency of the reporting associated with
the enhanced harmonized standards of the accounting profession. It was basically another form
of the agreement in between the capital structure and the accounting practices. Moreover the
interconnectedness of the accounting practices and the capital or he integration of the standards
of accounting and the business model which is based on capitalism is basically one of the reason
current issue in the company is not considered as the major circle of accounting as the crisis of
accounting (Horvat & Korošec, 2015; Zhang, 2010; Yagoubi, 2014).

References
Horvat, R., & Korošec, B. (2015). The Role of Accounting in a Society: Only a techn(olog)ical
solution for the problem of economic measurement or also a tool of social ideology?
Naše gospodarstvo/Our economy, 61(4), 32-40.
Smith, D., & Jacobs, K. (2011). “Breaking up the sky”: The characterisation of accounting and
accountants in popular music. Accounting, Auditing & Accountability Journal, 24(7),
904-931.
Yagoubi, S. (2014). Accounting Theories, Financialization Process and Neoliberalism. Journal
of Global Economics, 2(2).
Zhang, Y. (2010). Accounting and Neoliberalism: A critical reading ofIASB/FASB’s Conceptual
Framework for Financial Reporting 2010. Retrieved from Elsevier.conference-
services.net:
https://elsevier.conference-services.net/resources/247/2182/pdf/CPAC2011_0037_comm
ents.pdf