This report provides an analysis of Nine Entertainment Co Holdings Ltd, including its board of directors, investment decisions, corporate governance, auditors, business ethics, investors, and financial statements.
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Running head: ACCOUNTING Accounting Name of the Student Name of the University Authors Note Course ID
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1ACCOUNTING Table of Contents Introduction:...............................................................................................................................2 Brief Company Overview:.........................................................................................................2 Board of Directors:.....................................................................................................................3 Investment Decision:..................................................................................................................7 Corporate Governance:..............................................................................................................8 Auditors:...................................................................................................................................10 Business Ethics and Ethical Judgements:................................................................................11 Investors and Significant Ownership of Stakes:......................................................................11 Analysis of Financial Statement:.............................................................................................12 Liquidity:..................................................................................................................................12 Asset Management Efficiency:................................................................................................12 Capital Structure:.....................................................................................................................13 Profitability Ratios:..................................................................................................................13 Market Value Ratios:...............................................................................................................13 Cash Management Ratio:.........................................................................................................14 Conclusion:..............................................................................................................................14 References:...............................................................................................................................15
2ACCOUNTING Introduction: The current report is based on analysing and discussing operational functions of Nine Entertainment Co Holdings. The report would outline the industry in which the company operates, its primary activities and current performance. A detail outline of board of directors including the name, age, educations, career history and other relevant details would be provided. An evaluation of the composition of the board and board expertise of Nine Entertainment Co Holdings would be provided. Emphasis would be paid on the investment and financial decision made by the NEC Ltd throughout the year. Furthermore, the report would cover the corporate governance of Nine Entertainment Col Ltd and recommendations would be provided concerning the ASX Corporate Governance Council. The study would cover the external audit functions of Nine Entertainment Co Holdings with key measures taken by the company in making sure that the business operations are carried on with ethical means. An identification of the top five investors for NEC would be identified and comment on the ownership stake in the company would be presented. The analysis of financial statement through relevant ratios would be covered in the study as well. Brief Company Overview: Nine Entertainment Co Holdings Ltd is regarded as the publicly listed Australian media organization. Initially the company is the 50/50 joint venture with the consolidated media holdings (Nineentertainmentco.com.au 2018). The strategy of the company is to establish a great content, to distribute it widely and indulge in audience or advertisers. Since Australia is the home of the most trusted and loved brands ranging from news, lifestyle, sports and entertainment. The company takes pride in creating the finest content that is
3ACCOUNTING accessed by the consumers when and how they want, while celebrating its ability to provide the shared experiences among the audience. The business functions of the company are engaged in the operations of four divisions, free to air television, digital publishing, on demand video and production of content. The company has the long standing strategic relations with the Microsoft, for selling their suite of advertisement products while leveraging their world-leading technology data insight, innovations together with the data relations with some Australia’s leading technology providers such as Red Planet and Data Republics (Nineentertainmentco.com.au 2018). The wide investment includes 50% interest in Stan and interest in Rate City with ASX-Listed financial service company in Yellow Brick Road. Board of Directors: NameAgeGenderEducationCareer HistoryRemuneration forFY2015 ($): Peter Costello 58MaleBachelor of Arts and BachelorofLLB Hons and Doctorate of Laws LLB (Hons) MrCostellowas the member of the AuditandRisk management committee.Mr Costello served as the member of the Houseof Representative. Beforeentering into the parliament $850,000
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4ACCOUNTING MrCostellowas the barrister Hugh Marks 55MaleBachelorof Commerceand Bachelor of Laws. Mr Marks has the 20years’ experiencein content productionsand broadcastingand PayTV.Priorto joiningtheboard Mr Marks was the authoritymember ofAustralian Communications andMedia Authority for more than two years. $1,400,000 David Gyngell 52MaleBachelorsin Marketingand Communications MrGyngellwas the chief executive officerforthe companyand earlierservedas theCEOofthe ninenetwork.Mr Gyngellwasalso $869,307
5ACCOUNTING the director of the International Management Group. Janette Kendall 45FemaleBachelor of Business and Marketing MsKendallwas appointedasthe Non-Executive Directorofthe Board and was the Memberofthe Peopleand Remuneration Committee.Ms Kendall worked in widerangeof industriessuchas marketingand technologies, advertisementand arts. $730,000 Samantha Lewis 38FemaleBachelorofArts (Hons) MsLewishas more than 20 years ofexperiencein ToucheTehmatsu including 14 years $425,000
6ACCOUNTING as the partner. She also worked as the auditorinseveral numberoflisted companiesin Australia.Ms Lewisworkedin Deloitteand provided accountingadvice aswellasdue Diligence. Catherine West 35FemaleBachelorsofLaws (Hons) and Bachelor of Economics. Ms West has more than20yearsof experienceasthe business and legal affairs in the media industrybothin theAustraliaand UK. $434,654 During the year nine reviewed and amended the charter of board and the charter relating to the People and Remuneration Committee as this would enable the board to be responsibleforconsideringthenominationsofthenewdirectors.Thechangein responsibilities is reflected into the corporate governance of the nine entertainment (Arjoon
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7ACCOUNTING 2017). The corporate governance statement of the Nine Entertainment Ltd reflects the degree to which the company has adhered with the ASX Corporate Governance principles and the corporate governance best practices. The board of directors of Nine Entertainment Ltd plays an important part in discharge of their responsibilities. For instance, committees such as audit, risks management, obedience, nominations, peoplepolicyandsustainabilitycommittees.Eachandeverycommitteeischaired independentlytocarry-outthefunctionsofattainingtheoverallorganizationalgoals (Nineentertainmentco.com.au 2018). The board members represent the organizations by acting as the ambassadors since the charter of the company demands the members to be loyal and remain committed to the organizational functions (Aguileraet al.2015). These board of directorsare required to report directlyto the shareholdersand held accountablefor organization’s growth and development. Investment Decision: Over the period of last twelve months Nine Digital has strengthened its position in the certain number of targeted customer facing verticals with investment in Nine now, Honey and Car Advice. The current restructuring of the sales team has also commenced to render the positive restructuring of the sales momentum and would continue to remain focussed in the year ahead (Soltani and Maupetit 2015). The financial report of Nine Entertainment has been prepared in accordance with the historical cost except on the circumstances of the derivative financial instruments and investments in the listed equity firms that are measured based on the fair value. The makes investments in the associates that are accounted based on the method of equity. Investment in the listed securities are based on the non-derivative financial assets, principallyintheequitysharesthatmeetstheconceptofequityinstrument
8ACCOUNTING (Nineentertainmentco.com.au2018).Thecompanydeterminesthefairvalueofthe investment that are traded actively in the organized financial markets that are determined by referring to the quoted market prices upon the closure of the business on the reporting date (Crane and Matten 2016). The company has made investment in the associates and joint ventures and are accounted in terms of the equity method of accounting in the consolidated financial statements. Corporate Governance: S.NOPrincipleRecommendations 1Layingdownthesolid foundations for management and oversight Listed entities must establish and disclosing the roles and responsibilitiesofthe management and how their performanceassessmentis made (ArAs 2016). 2Structuring the board to add value Toefficientlydischarge theirresponsibilities,the boardofdirectorsofthe companiesmust be of the appropriate size and skills.
9ACCOUNTING 3Actingresponsiblyand ethically Companies listed under the ASXarerequiredto dischargetheirduties ethically and responsibilities (GarcĂa-Sánchezetal. 2015). 4Safeguarding the integrity of corporate reporting The listed companies must havetheformalandthe rigorousprocedurethat independentlyprotectsthe integrityofcorporate reporting. 5Making disclosure in timely manner Thecompaniesthatare listed in the ASX are under obligations of making timely disclosure of all the matters relatingtothepriceof securities and shares (Davies 2016). 6Respecting the rights of the shareholders Companies listed under the ASX are required to be the security holders by offering themwiththecorrect information’sandenabling the shareholders to exercise
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10ACCOUNTING their rights. 7Identifyingandmanaging risks Companieslistedunder ASX should create a strong risk management framework andreviewingperiodically theeffectivenessofthe framework. 8Remuneratingfairlyand responsibly Companiesthatarelisted under the ASX are required topaythedirectors remuneration fairly in order to maintainthemotivation ofthehigherquality management. Auditors: Earnest and Young was the independent auditor for the Nine Entertainment Ltd for the financial year ended 2017. The Earnest and Young have conducted audit for the company and its subsidiaries that consist of the consolidated statement of financial position. The auditor statement stated that the financial report of the company and its group is in adherence with the“Corporation Act 2001”(Abbottet al.2016). The financial report of Nine entertainmentCoLtdprovidedthetrueandfairviewoftheconsolidatedfinancial performance during the year ended. Furthermore, the company complies with the Australian Accounting Standard and the“Corporations Regulations Act 2001”.
11ACCOUNTING Key audit matters of the company refers to the professional judgement that were most significant in its audit of the financial report in the present year. The auditor of the Nine Entertainment Co Ltd was independent and in accordance with the auditor requirement set down under the“Corporation Act 2001”(Lenz and Hahn 2015). The total amount of the auditor’s remuneration paid to the auditors stands $1,355,031 (Nineentertainmentco.com.au 2018). The audit functions carried out by the Earnest and Young includes the performance process that is designed to respond to its assessment of risks of materials misstatement stated in the financial report. Business Ethics and Ethical Judgements: Being the holder of the commercial television licence Nine is bounded by the Commercial Television Code of Practice that prohibits certain forms of programs and advertisements. This requires classifying the program and broadcasting appropriate slots of time by putting limits on the extent of advertisement and other non-programming materials that can be broadcasted (Pizzini, Lin and Ziegenfuss 2014). The company has created certain number policies that supports reward and governance along with the code of conduct. The company has implemented the policies to promote the ethical behaviour and responsible decision making. The company adheres with the ethical requirement of the Accounting ProfessionandEthicalStandardsofAPES110codeofethicsfortheProfessional Accountants (Mat Zain, Zaman and Mohamed 2015). The code of ethics of the company is relevant to its financial report and fulfils other ethical responsibilities in compliance with the code. Investors and Significant Ownership of Stakes: The list of top five investors for the Nine Entertainment Ltd are stated below; Names of ShareholdersTotal UnitsPercentage of Total Shares
12ACCOUNTING HSBCCustodyNominees (Australia) Ltd 285,508,98432.79% JPMorganNominees Australia Ltd 125,942,53114.46% Citicorp Nominees Pty Ltd122,943,85114.12% Birketu Pty Ltd99,677,71811.45% National Nominees Ltd57,743,4856.63% As evident from the above stated tabular representation it can be stated that HSBC Custody Nominees Australia Ltd holds significant amount of shares. The total share holdings for HSBC Custody Nominees Australia Ltd stands 32.79%. While JP Morgan Nominees Australia Ltd total shareholding stands 125,942,531 with total percentage of shareholdings stands 14.46% (Nineentertainmentco.com.au 2018). Citicorp Morgan Nominees Australia Ltd stands 122,943,851 units and total percentage of shareholdings stands at 14.12%. Birketu Pty Ltd stands fourth in the line of the major shareholdings as the total shareholdings stands 99,677,718 with total proportion of shareholdings stands 11.45%. Finally, the National Nominees Limited stands fifth in the line total shareholder as it holds 57,743,485 of the total shareholdings with 6.63% of the Nine Entertainment total shareholdings. Analysis of Financial Statement: Liquidity: Under the liquidity ratio current ratio is computed for Nine Entertainment Ltd. During the year ended 2016 and 2017 the current ratio for Nine Entertainment Ltd stands 1.36 and 1.90 respectively. While the quick ratio for the company during the year 2016 stood 0.81 which subsequently increased to 1.03. The primary reason for increase in liquidity ratio for
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13ACCOUNTING 2017 is because NEC reported an increase in free cash flow with cash and cash equivalent increased to $66,700. Asset Management Efficiency: The asset management ratio makes an attempt to assess the success of the firm in administering its assets to derive sales. For NEC the asset management ratio for 2016 stands 0.55 while in 2017 it increased to 0.61. The rise in ratio signifies that the NEC has improved the efficiency of its small business in managing its assets to generate its sales. Additionally, the total asset turnover ratio stands 0.60 for 2016 while in 2017 stands 0.65. The total asset turnover ratio has improved in the subsequent year primarily because of the increase in the total assets. Capital Structure: The capital structure ratio refers to the mixture of the organizations long standing debt as well as the short term debt, common equity and preferred equity. As evident the debt ratio for NEC is computed to measure the extent of company’s liquidity. The debt ratio for the company during 2016 stood 0.43 while in the subsequent year of 2017 the debt ratio for the firm increased to 0.49. The rise in debt ratio is primary because of rise in debt to 224.5 million as while in 2016 it stood 177.6 million. The debt equity ratio on the other hand is computed for NEC to measure the proportion of debt it uses to finance its assets comparative to the sum of shareholder’s equity. The debt to equity ratio for NEC during the year 2016 stands0.74whilein2017itstands0.95.Thissignifiesthatalargerproportionof shareholder’s fund is used to finance the assets of NEC. Profitability Ratios: Profitability ratios represents the class of financial metrics that is used to determine the business ability of generating earnings in comparison to its expenditure. The net profit
14ACCOUNTING ratio for 2016 stands 0.25 while in 2017 the ratio stands negatively at -0.16. The primary reasonfordeclineinnetprofitratioisbecauseoffallinsalesrevenueby4%. Simultaneously, the return on assets for NEC stands 0.14 in 2016 while in 2017 the return on assets for the company stands negatively at -0.10. The lower return on assets is due to the decline in the profit margin as well as the fall in the average total assets. Market Value Ratios: The price earnings ratios are employed to assess the present share price of publicly- held organizations stock. The price earnings share of NEC stands 0.08 in 2016 while in 2017 it stands 0.10. The increase in price earnings ratio is primarily because rise in the earnings per share by 4%. Similarly, the dividend pay-out ratio for NEC during 2016 stood 0.88 while in the subsequent year it declined to 0.67 primarily because of 20.8% variance in NPAT. Cash Management Ratio: The cash management ratio during the year ended 2016 stood 283.10 while in the subsequent year of 2017 it stood -18.65 similarly operating cash flow ratio computed stood 0.012 for 2016 while in 2017 it stood 0.009. This represents that operating cash flow is sufficient for NEC to pay-off its current debts. Conclusion: On a conclusive note it can be stated that the NEC in accordance with the ASX code ofprincipleshasadheredwiththeprinciples.Additionally,thereportprovidesthat management and operations of NEC creates a direct influence on the composition of major shareholders. Furthermore, the audit functions are attained through the independent auditors in order to evaluate and express the opinions of the fair presentation of the financial report.
15ACCOUNTING References: Abbott, L.J., Daugherty, B., Parker, S. and Peters, G.F., 2016. Internal audit quality and financial reporting quality: The joint importance of independence and competence.Journal of Accounting Research,54(1), pp.3-40. Agrawal, A. and Cooper, T., 2017. Corporate governance consequences of accounting scandals: Evidence from top management, CFO and auditor turnover.Quarterly Journal of Finance,7(01), p.1650014. Aguilera, R.V., Desender, K., Bednar, M.K. and Lee, J.H., 2015. Connecting the dots: Bringing external corporate governance into the corporate governance puzzle.The Academy of Management Annals,9(1), pp.483-573. ArAs, G., 2016.A handbook of corporate governance and social responsibility. CRC Press. Arjoon, S., 2017. Virtues, Compliance, and Integrity: A Corporate Governance Perspective. InHandbookofVirtueEthicsinBusinessandManagement(pp.995-1002).Springer Netherlands. Armstrong,C.S.,Blouin,J.L.,Jagolinzer,A.D.andLarcker,D.F.,2015.Corporate governance, incentives, and tax avoidance.Journal of Accounting and Economics,60(1), pp.1-17. Cañibano, L., 2017. Accounting and intangibles. Crane, A. and Matten, D., 2016.Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press. Davies, A., 2016.The globalisation of corporate governance: The challenge of clashing cultures. Routledge.
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16ACCOUNTING Dimopoulos,T.andWagner,H.F.,2016.CorporateGovernanceandCEOTurnover Decisions. Du Plessis, J.J., Hargovan, A. and Harris, J., 2018.Principles of contemporary corporate governance. Cambridge University Press. GarcĂa-Sánchez, I.M., RodrĂguez-DomĂnguez, L. and FrĂas-Aceituno, J.V., 2015. Board of directors and ethics codes in different corporate governance systems.Journal of business ethics,131(3), pp.681-698. Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015.Issues in financial accounting. Pearson Higher Education AU. Lenz, R. and Hahn, U., 2015. A synthesis of empirical internal audit effectiveness literature pointing to new research opportunities.Managerial Auditing Journal,30(1), pp.5-33. Macve, R., 2015.A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge. Mat Zain, M., Zaman, M. and Mohamed, Z., 2015. The effect of internal audit function quality and internal audit contribution to external audit on audit fees.International Journal of Auditing,19(3), pp.134-147. McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional investors.The Journal of Finance,71(6), pp.2905- 2932. Nineentertainmentco.com.au.(2018).FinancialResults-Nine.[online]Availableat: https://www.nineentertainmentco.com.au/investor-centre/results [Accessed 29 Jun. 2018]. Nineentertainmentco.com.au. (2018).Nine - Where Australia Connects. [online] Available at: https://www.nineentertainmentco.com.au/ [Accessed 29 Jun. 2018].
17ACCOUNTING Pizzini, M., Lin, S. and Ziegenfuss, D.E., 2014. The impact of internal audit function quality and contribution on audit delay.Auditing: A Journal of Practice & Theory,34(1), pp.25-58. Soltani, B. and Maupetit, C., 2015. Importance of core values of ethics, integrity and accountability in the European corporate governance codes.Journal of Management & Governance,19(2), pp.259-284. Stout, L.A. and Blair, M.M., 2017. A team production theory of corporate law. InCorporate Governance(pp. 169-250). Gower. Tricker, R.B. and Tricker, R.I., 2015.Corporate governance: Principles, policies, and practices. Oxford University Press, USA. Warren, C.S. and Jones, J., 2018.Corporate financial accounting. Cengage Learning.