Financial Reporting of JB Hi-Fi: Examining the Six Capitals

This paper examines the financial reporting of JB Hi-Fi and focuses on the six capitals of the organization. It identifies the problem of material capitals and determines relevant information. The paper lists options, assesses and makes preliminary decisions, and self-corrects.

Advanced Financial Reporting

Table of Contents
Introduction...........................................................................................................................................2
Main Context.........................................................................................................................................2
Identifying the problem.....................................................................................................................2
Determining relevant information......................................................................................................3
Enumerating options..........................................................................................................................4
Assessing and making preliminary decisions.....................................................................................4
Listing reasons explicitly...................................................................................................................6
Self-correcting...................................................................................................................................7
Conclusion.............................................................................................................................................7
References.............................................................................................................................................8
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Introduction
JB Hi-Fi was founded in the year 1974 which offers leading brands consisting of Television,
Tablets, Computers, Car Sound, Speakers, Hi-Fi, Cameras, Home Theatre and Portable
Audio. The company also offers a wide range of games, Blu-Ray and DVD music, recorded
music, television shows and DVD movies. The company has managed to establish its brand
in the market by offering its products at the cheapest prices to the customers (JB Hi-Fi, 2018).
The financial report is being prepared by the organization for providing important
information to the stakeholders. The true and fair value depiction of the financial items is
considered to be crucial for any organization. The main focus of the paper is to determine and
examine the financial reporting of JB Hi-Fi. The business model has been developed and
adopted by keeping in mind the operational activities of the organization.
Main Context
Identifying the problem
The most “material” capitals are to be determined included in the Integrated Report for JB
Hi-Fi. It is being argued that financial reporting does not disclose all the information needed
by investors and other stakeholders. The financial information is to be recognized in the
operating and financial review and comply with the ASX corporate governance
recommendations and principles (Bontis, Bart & Wakefield, 2007). However, there is
additional reporting which is based on the International Integrated Reporting Framework
(IIRF). The business model as per IIRF is based on six capitals that are manufactured,
financials, the human, the intellectual, natural, social and relational capital.
Materiality is referred to providing incorrect or missing information in the financial
statements which are considered to be imposing a significant impact on the decision-making
process of the users. A business model is referred to the framework of a company which
assists in generating sales revenues and profits. It provides direction to the organization of
what products or services are to be manufactured and how to be supplied in the market. The
integrated reporting was introduced for improving the usefulness of corporate reporting. The
main aim of integrated reporting is to provide a holistic form and appropriate corporate
reporting (Britton & Waterston, 2013).
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Determining relevant information
The business model of an organization consists of six capitals as per the integrated reporting
framework that is intellectual, financial, human (people), social and relationship (partners)
and natural. JB Hi-Fi has depicted to be limiting the impact on the natural capital. Thus, the
natural capital is considered to be the material to the stakeholders. In the business model of
JB Hi-Fi, the natural capital is not being taken into account (Annual Report, 2018).
The capital of JB Hi-Fi consists of intellectual, people, partners, financial and infrastructure.
The six capitals of the organizations are considered to be inputs and outputs that assist in
creating value during a period of time. The inputs are made along with the value-added
activities in order to obtain the appropriate result and value for the organization.
Inputs Outputs
Intellectual
 Knowledge and expertise
 Brand
 High-quality products
 Strong service culture
 High skilled employees
 Influence and thought
leadership
 Recognition and brand
value
 Passionate and capable
workforce
 Robust financial
management
 Increase in the sales
revenues and
profitability
People
 Employees
 Managers
 Directors
Partners
 Community
 Charity organizations
 Suppliers
Financial
 Sales revenues from the
selling of products and
services
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Infrastructure
 Digital and IT
infrastructure
 Offices and buildings
Enumerating options
The intellectual of JB Hi-Fi consists of the brand, high-quality products and Knowledge and
expertise. The management of JB Hi-Fi has been able to provide high-quality products and
enhanced the capabilities of the employees. The employees have enhanced their skills in
order to carry out their activities in an appropriate manner. It assisted the organization in
having skilled professionals with a strong culture of service. The interest of the public has
been protected which lead to the creation of public trust and confidence. The true and fair
view of the information is significant for making better business decisions (Hill, 2014).
The people of JB Hi-Fi consist of managers, employees and directors. The organization has
been managing the human resources in an appropriate manner that led to an increase in
productivity. The employees are being managed in an appropriate manner with the assistance
of appropriate leadership skills and styles. The workforce should be encouraged to achieve
the goals that lead to enhancement of brand value. The members of the organization give
their efforts for improving the products and services in order to maintain the customer’s
needs. The growth of JB Hi-Fi depends on the efforts and skills of the workforce (Annual
Report, 2018).
The partners of JB Hi-Fi consist of community, charity organizations and suppliers. The
organization has appropriately maintained a relationship with the partners. The partners are
considered to be a significant aspect of the corporation because they are associated with the
business operations. The community people purchase the products offered by the
organization. The suppliers provide raw materials and high education sectors provide skilled
employees. The organization donates funds to the charity organization for the development of
the society.
Assessing and making preliminary decisions
The intellectual capital of JB Hi-Fi assists in improving the brand value. It encourages the
employees of the organization to focus on improving their knowledge and expertise. It
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motivates to implement and monitor the work procedures and policies. The stakeholders
should be provided with accurate information in order to assist them in their decision-making
process. The organization has implemented strategies in order to increase the quality of the
products and services as per the needs of the customers. The brand value of the firm has
increased which can be determined from the increase in the sales revenues and profitability.
The sales revenue has increased from $5.63b in 2017 to 6.84b in 2018 and net profit after tax
from $152.2m in 2017 to $233.m in 2018 (Annual Report, 2018).
The intellectual capital can become a huge issue for the organization if it is not managed
appropriately. The lack of knowledge and skills can lead to low productivity. The material
misstatement can also occur that can lead to the inappropriate representation of the financial
statements. The stakeholders can be misguided which is considered to be illegal and also
affects the business operations of the organization. JB Hi-Fi has been able to manage the
intellectual capital in an appropriate manner. The detailed information also needs to be
provided in the annual report (Holton, 2012).
Harvey Norman has been managing its intellectual capital with the focus of improving the
brand value. The organization has also provided quality products and services to its
customers. The company provides training for enhancing skills and knowledge as per the
organizational goals and objectives. The shareholders and other stakeholders are assisted
properly while making a decision with respect to the organization. However, the intellectual
capital if not maintained then the brand value of Harvey Norman can decrease adversely
(Mercer & Harms, 2008).
The members of JB Hi-Fi are considered to be a valuable resource because they are
responsible to execute the business functions. The board of members creates plans and
objectives on the basis of the suggestions provided by the advisers. The employees use their
skills and knowledge for carrying out the operations. JB Hi-Fi has also been able to expand
its business operations with the effective use and assistance from human resources. Thus, the
human resource management plays a significant role in recruiting and managing the human
resources. The workforce has assisted in increasing the sales revenue from $5.63b in 2017 to
6.84b in 2018 and net profit after tax from $152.2m in 2017 to $233.m in 2018 (Needles &
Powers, 2012).
The lack of adequate skills and knowledge among the employees can lead to low productivity
of the organizations. JB-Fi has focused on enhancing the efficiency of the employees that will
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lead to improvement of brand value. JB Hi-Fi needs to provide an ethical framework within
the employees can be directed. The lack of adequate leadership can also affect the processes
and employees of the organization. The leaders and managers have to enhance their
capabilities in order to motivate the employees in an efficient manner (Ross, Westerfield &
Jaffe, 2010).
Harvey Norman has maintained an engaged, committed and well-trained employee which is
considered to be the key priority of the management. The training strategies have assisted to
enhance the skills and knowledge of the employees. However, the organization is still facing
some difficulties in increasing the productivity.
The partners of JB Hi-Fi have helped in carrying all its business processes in an appropriate
manner. The establishment of relationships with the partners is important for improving the
brand value. The expansion of business of the organization is possible with the assistance of
the partners. The organization is able to prepare fair financial statements by following the
rules and regulations. The raw materials are used for the production of products and
government are also need to be maintained. The company is taking into account the needs of
the people of the community. It is also investing money for the welfare and development of
society (Pandey, 2015).
The lack of a healthy relationship with the partners can lead to a decrease in the brand
reputation of the organization. JB Hi-Fi has been able to maintain a healthy relationship with
the partners. Thus, the needs of the partners should also be taken into account by the
organizations.
Harvey Norman has established a relationship with the suppliers for obtaining the raw
materials. The accounting bodies have assisted in making the financial statements. The
government rules and regulations are being followed. However, the organization has been an
issue in increasing efficiency with the help of the partners (Sharma, 2010).
Listing reasons explicitly
The intellectual capital is important for JB Hi-Fi because it assists in enhancing the skills and
quality of the products and services. The enhancement of knowledge and skills are considered
to be important for increasing the quality and productivity of the products and services. The
human capital is important for JB Hi-Fi because, without them, the business functions cannot
be carried out (Annual Report, 2018). The firm can only be operated with the help of the
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workforce. Thus, an appropriate working culture should be maintained within the
organization. The partners are also considered to be important for JB Hi-Fi because they also
contribute to supporting the processes of the business. The organization has to maintain a
relationship with them in order to expand its business operations.
The three capitals are significant for JB Hi-Fi because CPA Australia has stated that the
organization is facing reputation issues which affected the overall value during the year. The
management has to focus on managing these capitals in order to increase its productivity. The
capitals would assist in increasing the sales revenues and profitability in an efficient manner
(Phylaktis, 2014).
Self-correcting
The lack of adequate information in the annual report of JB Hi-Fi is considered to be a major
limitation. The organization has not provided adequate information on the management and
values of the capitals. The decisions are made on the limited information provided in the
report of the organizations. The availability of financial data on the significant capitals would
have assisted in enhancing the quality of the research. However, the use of appropriate skills
and knowledge has assisted in overcoming the limitations (Wolf, 2010).
Conclusion
The capitals are considered to be very much important for the development of the
organization JB Hi-Fi. The business model has depicted the input and output of the capitals.
The three main capitals that are being depicted are intellectual, partners and human. The true
and fair representation of financial information is important for the company. The partner’s
needs should be managed in order to carry out the processes (Smart, 2008). The employees
are considered to be the heart of any organization. The company has been able to increase its
profitability but it is facing issues maintaining its brand reputation due to the lack in the
management of the capitals.
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References
Annual Report (2018). Annual Report. [online] Investors.jbhifi.com.au. Available at:
https://investors.jbhifi.com.au/wp-content/uploads/2018/10/Annual-Report-2018-with-
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England]: Emerald.
Britton, A. & Waterston, C. (2013). Financial accounting. Harlow: Financial Times Prentice
Hall.
Hill, J. (2014). The accounting. Place of publication not identified]: The Author.
Holton, R. (2012). Global finance. London: Routledge.
JB Hi-Fi (2018). JB Hi-Fi | JB Hi-Fi - Australia's Largest Home Entertainment Retailer.
[online] Jbhifi.com.au. Available at: https://www.jbhifi.com.au/ [Accessed 8 Nov. 2018].
Mercer, Z. & Harms, T. (2008). Business valuation. Hoboken, N.J.: John Wiley & Sons.
Needles, B. & Powers, M. (2012). Financial accounting. Mason, OH: South-Western
Cengage Learning.
Pandey, I. (2015). Financial management. New Delhi: Vikas Publishing House PVT LTD.
Phylaktis, K. (2014). Finance. Elsevier Science.
Ross, S., Westerfield, R. & Jaffe, J. (2010). Corporate finance. New York:
McGraw-Hill/Irwin.
Sharma, N. (2010). Business Finance. New Delhi: Global Media Publications.
Smart, S. (2008). Corporate finance. [Place of publication not identified]: Cengage Learning.
Wolf, M. (2010). Fixing global finance. Baltimore, Md.: Johns Hopkins University Press.
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