Accounting Standards in Woolworths Australia

This research study evaluates the impact of the AASB 16 accounting standard on the financial reporting and business performance of Woolworths Group in Australia. It aims to explore the set of rules defined by AASB 16, investigate the impact on financial reporting, and find ways to address the challenges faced by Woolworths.

Name : ________________________________________________
Student ID : ____________________________________________
Proposed Research Title:
_Accounting standards in Woolworths Australia
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Client Organisation (if applicable)
Woolworths Group, Australia is the client organization for the research study on the overview
and quality of accounting standards. Woolworths Group is one of the largest Australian
companies that have extensive level of retail investment in Australia and New Zealand. It is the
second biggest company in Australia in terms of revenue (Humayun, 2016). In 2017, the
revenue of the group was around A$55.669 billion (Woolworthsgroup.com.au, 2018) and it
provides employment to almost more than 2 million people across the country in its various
business divisions, namely, supermarkets, petrol, liquor, hotels, general merchandise and
finance. Thus, this organization has a strong accounting structure that covers all the divisions of
business.
Research Background
Accounting standard refers to the common set of rules or principals, procedures and standards,
which are adopted by the companies for designing their financial acocunting policies and
practices (Albu, Albu and Alexander, 2014). Accunting standards are meant to enhance the
transparency of finaicial reporting. In Australia, the Australian Accounting Standards Board
(AASB) defines the policies for accounting standards. Companies are now adopting the AASB
16 for a proper evaluation and reporting of their assets and liabilities by lease assessment.
However, as highlighted by Niskanen (2010), the accounting standards are some general set of
rules and policies, which all might not be beneficial for all types of companies belonging to
different industries. As reported by Mitchell (2017), the liabilities of Woolworths were to be
doubled after the change in lease accounting as per the AASB 16. The new rules force the
companies to bring their operating leases in the balance sheets for the first time since January
2019 to increase the transparency in the estimation of lease liabilities.
Research Problem / Research Question
The research problem is that after the implementation of AASB 16, Woolworths faced
challenges in terms of doubling of lease amount, increasing financial ratios and return on the
invested capital as the company needs to preent the value of the leases as assets and liabilities
in the balance sheet. Thus, it is a problem for the companies like Woolworths as in the financial
statements, EBITDA and EBIT will rise but the net profits will fall. Thus, this research study will
evaluate the impact of the new accounting standard on the Woolworths Group performance and
financial reporting in a more extensive manner.
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Primary research question:
What is the impact of new set of accounting standards, that is, AASB16, on the financial
reporting and business performance of Woolworths Group, Australia?
Research Aim and Objectives
The aim of the research study is to explore and evaluate the impact of the AASB 16 on the
business performance, assets and liabilities of Woolworths Group and to investigate tofind oout
ways to address the challeges.
The research objectives are:
 To explore the set of rules or accounting standards defined by AASB 16
 To investigate the impact of AASB 16 on the financial reporting of Woolworths Group
 To find out the ways to address the challenges faced by Woolworths due to the new
accounting standards
Keywords for Literature Review
Accounting standards, AASB 16, financial reporting, balance sheet, assets and liabilities
Publication details of relevant articles for literature review
Some of the relevant articles to be used for literature review are listed below.
 Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
 Aasb.gov.au, 2016. Accounting Standard AASB 16 Leases. [online] Aasb.gov.au.
Available at: <https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf>
[Accessed 6 April 2019].
 Brown, P., Preiato, J. and Tarca, A., 2014. Measuring country differences in
enforcement of accounting standards: An audit and enforcement proxy. Journal of
Business Finance & Accounting, 41(1-2), pp.1-52.
 Cornaggia, K.J., Franzen, L.A. and Simin, T.T., 2013. Bringing leased assets onto the
balance sheet. Journal of Corporate Finance, 22, pp.345-360.
 Rule, G., 2015. Understanding the central bank balance sheet. Handbooks.
 Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting
Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the
Balance Sheet. The Journal of New Business Ideas & Trends, 15(2), pp.1-11.
 Xu, W., Davidson, R.A. and Cheong, C.S., 2017. Converting financial statements:
operating to capitalised leases. Pacific accounting review, 29(1), pp.34-54.
 Dakis, G.S., 2016. Upcoming changes to contributions and leasing
standards. Governance Directions, 68(2), p.99.
 Chen, C.J., Ding, Y. and Xu, B., 2014. Convergence of accounting standards and
foreign direct investment. The International Journal of Accounting, 49(1), pp.53-86.
 Peytcheva, M., Wright, A.M. and Majoor, B., 2014. The impact of principles-based
versus rules-based accounting standards on auditors' motivations and evidence
demands. Behavioral Research in Accounting, 26(2), pp.51-72.
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Data Collection Plan
To conduct the research study on the accounting standards of Woolworths Group, Australia,
secondary data will be used. Secondary data are those that are collected from secondary
sources, that is, peer reviewed journals, books, government reports and publications, industry
reports, annual reports of companies from official websites etc. (Clark, 2013). In this study, the
acocunting standards will be explored from the AASB publications, and the annual reports of
Woolworths will be reviewed to get information on their financial reports. The impact of
accounting standards on the financial reports of the companies and their business performance
will be reviewd from various journal articles sourced from university library, public library, and
online databases. Several newpaper articles will also be explored to get information on the
impact of AASB 16 on the balance sheet, that is, assets and liabilities of Woolworths Group.
Ethical Consideration
To conduct the research in an ethical manner, the orginality of the paper must be maintained. In
order to do that, all the information, facts and figures must be correctly cited. The references for
the information must be authentic and that should be genuinely mentioned. Moreover, as per the
Data Protection Act (1998), the data collected for the study should be protected and kept
confidential in the university database and those data should be used only for academic
purpose. Furthermore, informed consent must be taken from the Woolworths Group before
using their data on financial report for the research study.
References
Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the local
context—Insights from an emerging economy. Critical Perspectives on Accounting, 25(6), pp.489-
510.
Clark, G., 2013. 5 Secondary data. Methods in Human Geography, p.57.
Humayun, S.H., 2016. Merchandising operation of Woolworths Global Sourcing.
Mitchell, S., 2017. Wesfarmers, Woolworths Liabilities To Double Under Lease Accounting Change.
[online] Australian Financial Review. Available at: <https://www.afr.com/business/retail/wesfarmers-
woolworths-among-retailers-bracing-for-new-lease-accounting-rules-20170706-gx69ij> [Accessed 6
April 2019].
Niskanen, W., 2010. Problems With Accounting Standards. [online] Cato Institute. Available at:
<https://www.cato.org/publications/commentary/problems-accounting-standards> [Accessed 6 April
2019].
Woolworthsgroup.com.au, 2018. Together: 2018 Annual Report. [online] Woolworthsgroup.com.au.
Available at: <https://www.woolworthsgroup.com.au/content/Document/Woolworths%20Group
%202018%20Annual%20Report.pdf> [Accessed 6 April 2019].
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