Accounting Standards in Woolworths Australia

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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