Analysis of Financial Statements of Harvey Norman

Running head: ACCOUNTING THEORY & CONTEMPORARY ISSUES
Accounting Theory & Contemporary Issues
University Name
Student Name
Authors’ Note

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ACCOUNTING THEORY & CONTEMPORARY ISSUES
Executive Summary
The study critically analyses the financial statements using key financial ratio, uses of
accounting standards and conceptual framework with special orientation to the firm Harvey
Norman. Also, this study focuses on the market in which the firm operates and presents a
review of the same. Additionally, this study also elucidates in detail about the competitive
forces and competitive position of the firm. The findings of financial analysis suggests about
a favourable profitability condition of the firm as it has maintained positive trends in profit
margin. However, issues can be detected in the liquidity position that can be addressed by
means of the suggested measures discussed in the study.

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ACCOUNTING THEORY & CONTEMPORARY ISSUES
Table of Contents
Introduction................................................................................................................................4
Body...........................................................................................................................................4
-Current Market Analysis of the company.............................................................................4
-Accounting Standards used by the company........................................................................4
-Contingent liability of the company.....................................................................................6
-Conceptual Framework.........................................................................................................6
-Competitor Analysis of the company...................................................................................7
-Ratio Analysis of the company.............................................................................................8
Recommendations................................................................................................................13
Conclusion............................................................................................................................14
References................................................................................................................................15
Appendix..............................................................................................................................17
INCOME STATEMENT.....................................................................................................17
BALANCE SHEET.............................................................................................................18
Ratio Analysis......................................................................................................................20

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ACCOUNTING THEORY & CONTEMPORARY ISSUES
Introduction
The study at hand concentrates on delivering an insight regarding analysis of financial
statement using key ratio, review of accounting standards used and conceptual framework
with special reference to the company Harvey Norman. Harvey Norman, a publicly listed
firm on the Australian Stock Exchange is selected for undertaking the research on the
financial statements. Moving further, the company also presents a critical analysis of the
market in which the firm operates and further reviews the competitive forces that affect the
operations of the firm.
Body
-Current Market Analysis of the company
The company Harvey Norman Holdings Limited is primarily engaged in retailing business of
products such as furniture, electrical products, communications, bedding as well as computers
2001 (Harveynormanholdings.com.au, 2018). The business enterprise undertakes overseas
business activities that are outside Australia all the way through franchising model. In itself,
this firm gets lease payments from different franchise stores based on percentage of sales.
Currently, they own around 260 retail stores across the nation as well as franchise stores all
around the world. This publicly traded (ASX) listed company is supposed operates different
labelled department stores in different locations namely Australia, Malaysia, New Zealand
and Ireland among many others (Harvey Norman Australia, 2018). Also, this company is
regarded as largest retailer of computer hardware as well as software products in the world.
-Accounting Standards used by the company
The financial statement of the Harvey Norman Holdings Limited is a general-purpose
financial report prepared as per the regulations stipulated under the Australian Accounting

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ACCOUNTING THEORY & CONTEMPORARY ISSUES
Standards Board-AASB as well as International Financial Reporting Standards-IFRS.
Simultaneously, the yearly declaration has also observed the regulations of the Corporation
Act 2001 (Harveynormanholdings.com.au, 2018).
Figure 1: Extracts taken from annual report of Harvey Norman
(Source: Harveynormanholdings.com.au, 2018)
Based on the above mentioned extracts taken from yearly report of Harvey Norman Holdings
Limited, it can be hereby observed that the corporation has followed the AASB standards.
Harvey Norman has also arranged the consolidated yearly declaration. In essence, the extracts
derived from yearly pronouncements are also divulging the fact that the pronouncements are
prepared by means of the method of historical cost (Harveynormanholdings.com.au, 2018).
Nevertheless, valuation of land as well as buildings, various listed shares of the company,
derivative financial instruments has been reflected based on fair value system.
Thus, the yearly report of the firm Harvey Norman Holdings Limited is signifying that the
firm has not correctly followed all the guiding principles mentioned in the AASB,

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ACCOUNTING THEORY & CONTEMPORARY ISSUES
particularly for enumerations of different financial values barring certain assets. Again, in
case of the yearly statement of the firm it has been stated that corporate governance of the
company is essentially good, although nothing has been stated to uphold that the corporate
governance status is at a satisfactory level. Basically, the report presented by the director of
the Harvey Norman declared that the firm has pursued diverse principles and doctrines of
good corporate governance but the principles that the firm has followed has not been stated in
the declaration (Harveynormanholdings.com.au, 2018).
-Contingent liability of the company
According to AASB 137, a business entity is supposed to reveal contingent liabilities in case
if it regards itself to be liable towards the community. Nevertheless, analysis of the yearly
declaration of the firm Harvey Norman Holdings Limited reveals that the company has
divulged about the contingent liabilities clearly in the report (Harveynormanholdings.com.au,
2018). As per report for the period of June 30, 2017, this consolidated business entity does
not necessarily have contingent liabilities at all. According to reports, the contingent liability
registered as on June 30 of the year 2016 was $10.30 million associated to “guarantee” for
presentation of joint venture unit that had entered into a specific loan facility together with
many other parties (Harveynormanholdings.com.au, 2018).
-Conceptual Framework
Harvey Norman intends to commit towards attainment of sustainability in the upcoming
period. This necessarily gives an explanation for socio-economic, environmental influence of
diverse operations carried out for the purpose of analysis of future period. This necessarily
concentrates on presenting best outcomes that can reap benefits for the society and carry
positive business necessarily in an effectual manner. Fundamentally, this makes sure
developing on reputation and helps in placing as first-rate corporate citizen in the future
period. So far as the notion of conceptual framework is concerned, this necessarily takes into