Corporate and Financial Accounting: Importance of Corporate Regulation and Analysis of Owners Equity and Debt-Equity Position of Four Australian Companies

This report emphasizes on the importance and role of corporate regulation in the disclosure of the financial information in comparison of the disclosure of the financial accounting information in a voluntary method by a manager. It also focuses on the analysis of the items of equity present in the balance sheet of the four companies of Australia that are listed in ASX related to same industry and find out the reasons for the occurrence of the change. It also entails the information related to the comparative analysis of the debt and equity position of these four firms.

Corporate and Financial Accounting 1
Corporate and Financial Accounting

Corporate and Financial Accounting 2
Executive Summary
It is found out that the companies should disclose the financial information by the compliance of
the corporate regulations in place of carrying out disclosure in a voluntary manner as the
regulated disclosure of the financial information takes into consideration the changes taking
place in the external business environment and is cost effective and saves time of the company. It
is also found out that AASB has taken active participation in standard setting process of IFRS
and it is not a compulsion for the member countries to follow IFRS. The four companies of
Australia has been selected listed on ASX namely Accent Group Ltd, Beacon Lighting Group
Ltd, Baby Bunting Group Ltd and Bapcor Ltd from the retail industry to analyze the changes
occurred in different components of owners equity for past four years along with the changes in
the debt-equity levels.

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Table of Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Corporate Regulation...................................................................................................................................4
Accounting Standard Setting.......................................................................................................................5
Owners Equity.............................................................................................................................................5
Comparative Analysis of debt and equity position................................................................................10
Conclusion.................................................................................................................................................10
References.................................................................................................................................................12

Corporate and Financial Accounting 4
Introduction
This report emphasizes on the importance and role of corporate regulation in the disclosure of
the financial information in comparison of the disclosure of the financial accounting information
in a voluntary method by a manager. Besides this, it also emphasizes on the role and
participation of the Australian Accounting Standards Board in the global accounting standard
setting process and the reason behind the non compulsion of the members countries of IASB to
follow IFRS. Along with this, it also focuses on the analysis of the items of equity present in the
balance sheet of the four companies of Australia that are listed in ASX related to same industry
and find out the reasons for the occurrence of the change. It also entails the information related to
the comparative analysis of the debt and equity position of these four firms.
Corporate Regulation
It is identified that the regulation of public reporting for firms should be mandated by
government regulations and not be disclosed by the firms in the way of usage of their goodwill,
private lawsuits, gatekeepers and market discipline to access the public securities market despite
of gaining adequate incentives for disclosing the information in a voluntary manner at social
optimal levels. The main reason behind the reporting of the financial information should be
regulated is the existence of the market failure (Leuz and Wysocki, 2016).
The regulation of the disclosure of the financial information through government regulation
facilitates in the reduction in the enforcement costs, opportunistic behavior, redundancies in
information production, mitigation of the risks related to externalities in case of the absence of
the internalize of the consequences of their disclosure decision. Apart from this, there is an
existence of the difference between countries in different aspects such as corruption, culture,
institutional development and political and legal regimes. This is the reason that there is an

Corporate and Financial Accounting 5
existence of the variations in security regulations, properties of reported accounting numbers and
structure of financial regulatory regimes. There is a requirement of regulating of the accounting
standard setting which is considered as central element of regulation of financial disclosure. This
can be done by promotion of the efficient allocation of capital as the absence of harmonization of
the accounting standards results in an increase in the competition among the firms (Guay,
Samuels and Taylor, 2016).
Accounting Standard Setting
AASB took active part in the global accounting standard setting process by making
modifications in IFRS in a way that removal of some options and adoption of some disclosures
in the year 2007 in order to create identical requirements of the AASB. AASB has also released a
new differential reporting regime released by AASB in the year 2010 named Reduced Disclosure
Requirements which allows entities to follow the measurement requirements of Australian
Accounting Standards (Christensen, et.al, 2015). Apart from this, there is no compulsion for the
member countries of IASB to follow IFRS as the countries can make modifications in the
accounting standards established by the authority as per the IFRS in order to bring uniformity
with the internationally accepted standards in an effective manner.
Owners Equity
The four companies selected for evaluation of the changes in the items of equity and debt and
equity position for the past four years include Accent Group Ltd, Beacon Lighting Group Ltd,
Baby Bunting Group Ltd and Bapcor Ltd.
Company Overview
Accent Group Ltd has established in the year 1981and formerly known as RCG Corporation
Limited which is a regional leader in the retailing and distribution of lifestyle and performance

Corporate and Financial Accounting 6
footwear under 10 retail banners with 420 stores across New Zealand and Australia. The
different brands include Podium Sports, CAT, and Stance and so on (Accent Group Ltd, 2018).
Baby Bunting Group has established in the year 1979 in Melbourne and considered as a family
owned business and a largest nursery retailer and one stop baby shop. The company has
employed more than 700 employees across its 42 national superstores. The company targets
parents with children from newborn to three years offering 6000 lines of products such as car
seats, prams, safety, and baby wear and so on (Baby Bunting, 2018). Beacon Lighting Group Ltd
is a retailing company founded in the year 1967 in Australia dealing in selling and distribution of
lighting products in different countries like Germany, USA, New Zealand and Hong Kong. The
different products offered by the company include ceiling fans, floor lamps, exteriors,
chandeliers and so on. The company operates through 6 franchised stores, 5 commercial sales
office and 103 company stores (Beacon Lighting, 2018). Bapcor Ltd has founded in the year
1971 and considered as a leading provider of automotive aftermarket accessories, equipment and
services in Australia. The core business segment of the company includes trade, specialist
wholesale and retail and services businesses. The company employs 3800 team members across
800 locations at a global level (Bapcor, 2018).
Changes in the items of equity
Baby Bunting Group
Changes in items of Equity
Particulars 2015($000)
2016
($000)
2017
($000)
2018
($000)
Issued Capital 55070 84420 84816 85292
Share based payments reserve 989 132 451 912
Retained Earnings 15955 8172 8861 8613
Total Equity 72014 92724 94128 94817
(Source: Baby Bunting Ltd, 2018)

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Bapcor Ltd
Changes in items of Equity
Particulars 2015($000) 2016 ($000) 2017 ($000) 2018 ($000)
Issued Capital 337390 416427 600675 606456
Reserves 441 845 -202 -3645
Accumulated Losses -70906 -51052 -17067 37138
non controlling interests 6561 2397
Total Equity 266925 366220 589967 642346
(Source: Bapcor, 2018)
Beacon Lighting Group
Changes in items of Equity
Particulars 2015($000) 2016 ($000) 2017 ($000) 2018 ($000)
Contributed Equity 62647 62735 62870 65690
Other Reserves -42847 -43105 -42965 -42587
Retained Earnings 29606 37793 44213 53226
Total Equity 49406 57423 64118 76329
(Source: Beacon Lighting Investor Website, 2018)
Accent Group Ltd
Changes in items of Equity
Particulars 2014($000) 2015 ($000) 2016 ($000) 2017 ($000)
Issued Capital 70860 257741 319319 385310
Reserves 2532 7780 1390 3208
Accumulated Losses -21053 -22693 -16282 -19603
non controlling interests 651 1547 1860 1737
Total Equity 52990 244375 306287 370652
(Source: Accent Group Ltd, 2018)
Issued Capital
Issued capital is the part of the authorized equity capital which has been issued to the
shareholders for the purpose of raising funds (Petty, et.al, 2015). It is identified that in case of
Baby Bunting Group, there is an existence of increasing trend of issued capital which states that
the company has issued capital in past four years for the purpose of expanding the business

Corporate and Financial Accounting 8
operations or meeting the working capital requirements. In a similar manner, in remaining three
companies i.e. Accent Group Ltd, Beacon Lighting Group and Bapcor Group Ltd, there is an
existence of similar increasing trend in the issued capital which reflects that for meeting out the
day to day requirements and expansion of the business to exploit available market opportunities,
the companies have issued the capital in last four years.
Share based payment reserve
Share based payment reserve is a transaction where the entity receives the goods and services in
consideration for equity instruments of the entity (Petty, et.al, 2015). In context of Baby Bunting
Group has issued equity shares in exchange of goods and services but it has declined over the
years from $989 in the year 2015 to $132 in the year 2016 and then increased to $912 in the tear
2018.
Retained Earnings
Retained earnings refers to the profit which is not being distributed to the shareholders as
dividends and has been retained by the company for the purpose of expanding the business
operations in other countries or diversifying the range of products being offered by the company
(Petty, et.al, 2015). Baby Bunting Group and Beacon Lighting Group has kept some profit aside
for the purpose of expanding the business operations in the form of retained earnings. It is found
out that there is a decrease in the amount of retained earnings in the year 2016 in a tremendous
manner which states that the company has made the investment to expand its business
operations. Along with this, there is an increase in the amount of retained earnings in next three
years which indicates that the company is planning to make investment in the business to avail
the available business opportunities in the market. In context of Beacon Lighting Group Ltd,
there is a presence of increasing trend in the amount of retained earnings held by the company

Corporate and Financial Accounting 9
which shows that the company has plans to expand its business operations. Along with this, in a
case of Bapcor Ltd, there is an occurrence of the loss although it has declined over the years. In a
similar manner, in case of Accent Group Ltd, there is an occurrence of accumulated loss and has
declined over the years.
Reserves
Reserves are the money kept aside by the firms to meet out any contingency faced by the
company in future (Petty, et.al, 2015). Except Baby Bunting Group Ltd, all the other companies
have created reserves for meeting out the contingency situation faced in future by the company.
It is found out that Bapcor Ltd has a negative balance in the year 2017 and 2018 which reflects
that the company has used the reserve for overcoming the situation of contingency. In a similar
manner, Accent Group Ltd has used the reserve in the year 2016 as there is a tremendous decline
in the amount of reserve in the year 2016 in comparison to the year 2015. Apart from this,
Beacon Lighting Group has a negative balance in reserves which states that the company is
facing tremendous amount of risks and therefore required to make reserves to meet those
contingent situations.
Non-controlling Interests
Non-controlling interest is also known as minority interest which reflects the ownership position
of the shareholder that possesses less than 50% of the outstanding shares and has no control over
decisions. This means that such shareholders do not possess any voting rights (Petty, et.al, 2015).
It is found out that there is an increase in the minority interests of the shareholders over the years
in Accent Group Ltd. Besides this, there is a decline in minority interest in Bapcor Ltd in last two
years.
Comparative Analysis of debt and equity position
Particulars Baby Bunting Bapcor Beacon Lighting Accent

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Group
Total Equity 94128 589967 64118 370652
Total Debt 8114 463756 9321 125620
Debt to Equity 0.086201768 0.78607109 0.145372594 0.338916288
Debt refers to the amount of money borrowed from one party by the other party on which a
borrower has to pay interest. In context of financial accounting the debt is considered as long
term liabilities of the company which it owes to other party (Petty, et.al, 2015). It is found out
that Bapcor and Accent Group has a large amount of money that is considered as long term
liability. This shows that these companies are heavily dependent on debt along with equity. This
indicates that these companies have maintained an optimum balance between equity and debt
funding. Besides this, debt equity ratio depicts the proportion of equity and debt used to finance
the assets of the firm (Petty, et.al, 2015). It is found out that Baby Bunting has finance its assets
by the use of equity in large quantity in comparison to debt as the debt to equity ratio is 8.6%. In
a similar manner, Bapcor has financed 78% of its assets through debt as the debt equity ratio is
78%. Along with this, the debt equity ratio of Beacon Lighting is 14.5% and of Accent Group is
33.8%. Thus it can be indicated that Bapcor Ltd has strong financial position among the four
companies.
Conclusion
It can be concluded that it is suitable for the companies to regulate the financial accounting and
reporting by government regulations instead of allowing the manager to disclose the financial
information in a voluntary manner. This is because, the government regulation has helped in
aligning the changes occurred in the business environment in a effective manner. Apart from
this, the financial position of Bapcor Ltd is strong in terms of debt and equity position in
comparison to other three companies of retailing industry.

Corporate and Financial Accounting 11
References
Accent Group Ltd. (2018) About Us. [Online]. Available at: http://www.accentgr.com.au/about-
us/ [Accessed on: 21 September 2018].
Accent Group Ltd. (2018) Annual Reports. [Online]. Available at:
http://www.accentgr.com.au/for-investors/annual-reports/ [Accessed on: 22 September 2018].
Baby Bunting Ltd. (2018) Reports and Announcements. [Online]. Available at:
http://www.babybuntingcorporate.com.au/reports [Accessed on: 22 September 2018].
Baby Bunting. (2018) About Us. [Online]. Available at: https://www.babybunting.com.au/about-
us/ [Accessed on: 21 September 2018].
Bapcor. (2018) About Bapcor. [Online]. Available at: http://www.bapcor.com.au/bapcor-at-a-
glance [Accessed on: 21 September 2018].
Bapcor. (2018) Annual and Interim Reports. [Online]. Available at:
http://www.bapcor.com.au/annual-interim-reports [Accessed on: 22 September 2018].
Beacon Lighting Investor Website. (2018) ASX Announcements. [Online]. Available at:
http://www.beaconlightinggroup.com.au/asx-announcements [Accessed on: 22 September 2018].
Beacon Lighting. (2018) About Beacon Lighting. [Online]. Available at:
https://www.beaconlighting.com.au/about-beacon-lighting/about-us [Accessed on: 21 September
2018].
Christensen, H.B., Lee, E., Walker, M. and Zeng, C. (2015) Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.

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Guay, W., Samuels, D. and Taylor, D. (2016) Guiding through the fog: Financial statement
complexity and voluntary disclosure. Journal of Accounting and Economics, 62(2-3), pp.234-
269.
Leuz, C. and Wysocki, P.D. (2016) The economics of disclosure and financial reporting
regulation: Evidence and suggestions for future research. Journal of Accounting Research, 54(2),
pp.525-622.
Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M. (2015) Financial
management: Principles and applications. Australia: Pearson Higher Education.