Reason of Liquidation of the ABC Learning | Report

Financial accounting
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Table of Contents
Introduction.................................................................................................................... 3
ABC learning.................................................................................................................. 4
HIH insurance................................................................................................................. 6
One.Tel Phone Company................................................................................................... 8
Conclusion..................................................................................................................... 9
Recommendation........................................................................................................... 10
References................................................................................................................... 11
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Introduction
The liquidation is the situation in which the company stops its existing operation and in the
recent year, many of the Australian company has gone into liquidation because they were unable
to meet out there liability. The present report discusses the reason of liquidation of the ABC
learning, HIH insurance and One.Tel phone company which was liquidated due to the company
financial stress. The report will help in identifying the possible reason which leads to liquidation
of these companies. The liquidation is the process through which life of the company is brought
to end due to certain reason. The company can either have voluntary liquidation or compulsory
liquidation. Compulsory liquidation is when the company closed down by the order of the court
and the voluntary liquidation is when the director, member, shareholder and other employee
dissolve the company due to incapability to perform the basic function. Among the three above
cases the reason behind the liquidation of the ABC learning was due to inability of the company
due to huge expenditure incurred by the company. On the other hand the HIH insurance and
One.Tel were compulsory liquidated as the company has ignored the corporate governance at the
time of conducting its operation.
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ABC learning
The ABC learning was once one of the largest service providers of early childhood training
program in Australia which went into liquidation due to fallout from the supreme mortgage
crises. The reason behind the failure of the company was thehigh cost of the care as the company
was operating with the cost of 80 to 90 percent of the operating revenue (Pretorius and Le Roux,
2011).The company was barely able to generate the surplus but was able to generate the
operating profit of 30 to 40 percent. The vision of the company corporatize of the cottage
childhood industry was sound and was supported by thegood demographic trend. Also, the
company strategy of attaining economy of scale by bringinga large number of childhood care
was also well executed. The company has only focusedon buying as many centers possible as the
company center from the year 2001 to 2005 has gone up from 43 to 697 and was not
concentrating over the growing cost of the center. The biggest acquisition of the company was
made in 2004 of rival company peppercorn childcare and grabbed the 450 center of the company
at a cost of $340 million. The company expansion plan at any cost leads to increase in liability
which was akey reason behind the liquidation of the company.
The grove during the year 2005 started the global push by acquisition in the United States and
later in the Britain. As stated by Ross, et. al. (2012), company concentrated over growing global
and took the eye of the company Australian childcare operation which wasthe main profit
generating asource of the company. The staffing cost of the company was increased particularly
staffing cost which leads to decline in the profitability of the company. The company was not
focusing on its core activity as around 200 centers of the company were unprofitable.
Also, the accounts of the company were acomplete mess as the company share remains
suspended pending due to therelease of the company accounts which was to be released at the
end of the August. The auditor of the company Ernst and young made huge effort to unravel the
way company accounted for its revenue and the way compensation payment was treated as
revenue. Also, the company corporate governance was poor as the company has never cared
about the same and has entered into many related party transaction. The company during the year
2006 for the purpose of renovation and maintenance work has paid $74 million to Queensland
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