Corporate Accounting - Woolworths Group and the National Australia Bank

Running Head: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING
Name of the student
Name of the University
Author’s Note

1CORPORATE ACCOUNTING
Executive Summary
Finance is the significant factor for any kind of business entities. An organisation raises funds
through many sources. The paper focuses on the different types of sources used by the
Woolworths Group and the National Australia Bank. The paper examines the percentage of
internally and externally generated funds in these companies over the last three financial
years. It then discusses about the key provisions in the AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets.’ It identifies the different type liabilities disclosed in both
the companies followed by a critical examination of measurement methods such as historical
methods and fair value basis for different categories of assets.

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Table of Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................5
Companies selected................................................................................................................5
Answer to question (i) & (ii)..................................................................................................5
Answer to question (iii)..........................................................................................................6
Woolworths Group:............................................................................................................7
National Australia Bank (NAB).........................................................................................9
Answer to question (iv)........................................................................................................12
Advantages-......................................................................................................................12
Disadvantages-.................................................................................................................12
Answer to question (v).........................................................................................................13
Answer to question (vi)........................................................................................................13
Answer to question (vii).......................................................................................................14
Answer to question (viii) & (ix)...........................................................................................14
Conclusion................................................................................................................................16
References................................................................................................................................17

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Introduction
Finance is the significant factor for any kind of business organisation. An organisation
raises funds through many sources. Three most important sources for any organisation are its
revenue from the daily operations of the organisation, loans from any financial institution or
any independent body and the capital invested by the owners of the firm. Funds are needed
for carrying on daily operations and long- term investments of the entity. “Funding is the fuel
that powers a business.” Hence, identifying these sources and maximising the funds
generated is the most essential part for smooth working and expansion of the organisation
(Bhattacharya and Londhe 2014). These sources of funds helps in meeting the daily goals of
an organisation, to carry on short- term and long-term operations in the organisation from
time to time and to achieve the ultimate financial goal that is highly manipulated by these
managing these sources.
This paper aims at identifying the different sources that have been used by the
Woolworths Group and National Australia Bank (NAB), followed by a detailed examination
of different sources of funds that these companies have used over a period of three years and
identifying the major change in these sources, if any. The assignment then aims at classifying
the percentage of fund that is generated internally and externally by both the selected
companies with a detailed explanation of the advantages and shortcomings these sources
bring with it. It also highlights the key provisions under the AASB 137, which talks about the
provisions of contingent assets and contingent liabilities and identifying if Woolworths
Group and Nation Australian Bank have referred to this standard in their annual report. It
identifies the different kinds of assets recorded by both the companies in the recent years and
examines the basis of measurement methods used by the Woolworths Group and National
Australia Bank for the recorded assets.

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Discussion
Companies selected
Woolworths Group (Financial Years- 2017, 2018, 2019)
National Australia Bank (Financial Years- 2017, 2018, 2019)
Answer to question (i) & (ii)
Sources of funds used by The Woolworths Group are as follows:
1. Issue of Equity Share Capital- It is the most common source of funding for any
organisation. The group’s equity has increased from $9876 million in the year 2017 to
$10669 million in the year 2019. Increase in the value of share capital signifies that
the group has increased its funds from issuing more equity shares to the public.
2. Loans from Financial Institutions- The group raises its long term fund through bank
loans. Bank loans in the consolidated financial statement of the group increases to
$678 million in the year 2019 from $529 million in 2017. This increase implies that
there was a requirement of long-term fund, which the company decides to increase
through bank loans. It also takes short-term money market loans and bank loans for
short-term funding.
3. Finance Leases- Finance lease is a method of financing assets in which the ownership
rights is not shifted to the operator of the asset. Woolworths uses this source to fund a
little portion of its entire finances. The company simultaneously pays back a part of
the total amount or total amount financial lease on daily basis. Opening balance under
financial lease in the year 2017 was $3 million of which the company repays $1
million. The group paid back the entire amount under finance leases by paying back
the remaining outstanding amount $2 million. Currently, the group holds $3 million
balance under financial lease for the year 2019.

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Sources of funds by the National Australia Bank (Capital.nab.com.au, 2020):
1. Issue of Equity Share Capital- The group has increased its funding through issue of
equity shares up to $55604 million in the year 2019 from $51317 in the year 2017.
This is the most important source of funding for the group as a large portion of
finances are funded through this.
2. Debt instruments- These instruments are the tool used by the organisations in order to
raise funds. Debt instruments are the documented obligation, which offers capital or
fund to an organisation, with a contract that the company would repay the amount.
National Australia Bank uses different debt instruments such as government bonds,
notes and securities; semi-government bonds, notes and securities; financial
institution bonds and other bonds. The group’s Debt instruments balance was $42131
million in the year 2017, the company continued to raise the fund through this source
but simultaneously pays back to reduce the liabilities. The closing balance in the year
2018 reduced to $42056 million and raised in the upcoming year amounting to
$40205.
3. Loans from Banks and other financial institutions- In 2017 bank loans amounted to
$36683 million to $38912 million in the upcoming year. However, in the year 2019
the closing balance reduced $34723 million, implying that the group is simultaneously
paying off the banks.
Answer to question (iii)
Sources of funds can be categorised under various heads, on the basis of time, on the
basis of control and ownership and on the basis of source of generation. On the basis of
generation, the sources can be categorised under two major heads namely, internal sources
and external sources. Internal sources are those in which the funds are generated within the
organisation. These are same as owned capital. Retained Earnings, Reduction in Working

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Capital of the firm and Sales of assets are some major sources of internally generated funds.
All the other sources except the prior mentioned ones are external source (Cummings and
Wright 2016). These can be Equities or debt from banks.
Woolworths Group:
(In $, million)
Internally generated funds in the year 2019:
Total internally generated funds = Reserves + Retained Earnings
= 490 + 3,968
= 4458
Total Capital Employed = 10,669
Percentage of the internally generated fund
= (Total internally generated funds /Total Capital Employed) * 100
= (4458/ 10,669)* 100
= 41.78%
Internally generated funds in the year 2018:
Total internally generated funds = Reserves + Retained Earnings
= 353+ 4,073
= 4,426
Total Capital Employed= 10,849
Percentage of the internally generated fund
= (Total internally generated funds /Total Capital Employed) * 100
= (4,426/10,849)* 100
= 40.80%

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Internally generated funds in the year 2017:
Total internally generated funds = Reserves + Retained Earnings
= 357 + 3,554
= 3911
Total Capital Employed = 9,876
Percentage of the internally generated fund
=(Total internally generated funds /Total Capital Employed) * 100
= (3911/ 9,876)* 100
= 39.60%
Externally generated funds in the year 2019:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 2,855 + 5,828
= 8,683
Total Capital Employed = 10,669
Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (8683/10669)* 100
= 81.39%
Externally generated funds in the year 2018:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 2,199 + 6,055
= 8,683
Total Capital Employed = 10,849

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Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (8683/10849)* 100
= 80.03%
Externally generated funds in the year 2017:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 2,777 + 5,615
= 8,392
Total Capital Employed = 9,876
Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (8,392 /9,876)* 100
= 84.97%
National Australia Bank (NAB)
(In $, million)
Internally generated funds in the year 2019:
Total internally generated funds = Reserves + Retained Earnings
= 306 + 16,583
= 16889
Total Capital Employed = 55,604
Percentage of the internally generated fund
= (Total internally generated funds /Total Capital Employed) * 100
= (16889/ 55604)* 100
= 30.37%

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Internally generated funds in the year 2018:
Total internally generated funds = Reserves + Retained Earnings
= $ 46 + $ 16,673
= $ 16,719
Total Capital Employed= $ 52,712
Percentage of the internally generated fund
= (Total internally generated funds /Total Capital Employed) * 100
= (16719/52712)* 100
= 31.72 %
Internally generated funds in the year 2017:
Total internally generated funds = Reserves + Retained Earnings
= 237 + 16,442
= 16,679
Total Capital Employed = 51,317
Percentage of the internally generated fund
=(Total internally generated funds /Total Capital Employed) * 100
= (16679/51317)* 100
= 32.50 %
Externally generated funds in the year 2019:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 34,273 + 38,707
= 72,980
Total Capital Employed = 55,604

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Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (72980/55604)* 100
= 131.24 %
Externally generated funds in the year 2018:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 38,192 + 52,712
= 90,904
Total Capital Employed = 52,712
Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (90904/52712)* 100
= 172.45%
Externally generated funds in the year 2017:
Total Externally generated funds= Total Borrowings + Equity Share Capital
= 36,683+ 34,627
= 71,310
Total Capital Employed = 51,317
Percentage of the internally generated fund
=(Total externally generated funds/Total Capital Employed) * 100
= (71310/51317)* 100
= 138.96%

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Answer to question (iv)
Advantages-
1. Issue of Equity Share Capital: This is the most common source of finance used by
many organisations. Woolworths Group and National Australia Bank use this source
of financing to raise long-term funds, which is then used in investing in other assets.
These investments help the group to expand and grow the business (Qian and Yeung
2015).
2. The group does not have to repay these amounts to the shareholders instead; they
have to allocate the gains earned among them.
3. Bank Loans: Loans from banks do not give the banks ownership position in the
organisation. There is an option of flexible or fixed rate interest loan at the time of
taking loan. Once the loan has been paid, the company has no obligation on the banks.
4. Leasing: leasing helps in reducing the total expenses of the company. Lease amount is
much lesser than the actual buying cost of a land or premise. Relocating the lease
property is easier and much more profitable than selling the owned property.
5. Debt instruments: Using debt instruments such as issuing of bonds, borrowing money
from financial institution and many more is an efficient technique of raising fund. The
company can issue bonds and raise funds without the intervention of the bank or other
financial institution. The company does not have to share the ownership position with
the bondholders of the company.
Disadvantages-
1. Issue of Equity Share Capital: The organisation lose full control over the company as
the stockholder share the ownership position. Owners of the company are accountable
for any decision they take to the stakeholders. The stakeholders can restrict or raise
clarification if they feel the company is investing in some riskier projects.

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2. Bank Loans: Bank loans are acquired only if the company has a good credit score or a
good past records. The companies might face some issues in getting the entire fund
through bank loans, as there are certain limit up to which the loan can be issued.
3. Leasing: the company is dependent on the owner of the premise for maintenances or
any other renovation. The rent paid by the company is not actually contributing to the
company’s assets or capital growth of the company.
4. Debt instruments: It comes with a high cost and with greater risks. Investors might not
invest in the company if the interest rate is not higher. The investors would always
look at the company’s past record and its credit score. This might not be beneficial for
a company that has a poor credit score.
Answer to question (v)
Woolworths Group:
The group categorises total liability into current and non-current liabilities. Current liabilities
consist of trade payables, borrowings, current tax payable, of which borrowings are interest
bearing and in others interest is not bearing. In the non-current liabilities, the group includes
long-term borrowings, provisions and other non-current liabilities. Here, provisions and other
non-current liabilities are non-interest bearing. Total current liabilities of the group amounts
to $8952 million in the year 2017 with a little increase in the year 2018
(Woolworthsgroup.com.au, 2020). However, by the year 2019 the group pays back a part of
its liabilities bringing the amount down to $8620 million.
National Australia Bank:
The group does not classify its total liabilities as current or non-current liabilities. The
group identifies all the long term and short-term liabilities under the head liabilities. It
consists of due to other banks, Trading instruments, Hedging derivatives, Deposits and other

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borrowings, Due to controlled entities, Bonds, notes and debts issues (Cohen and Scatigna
2016). All these are interest-bearing liabilities. The group also discloses some non-interest
bearing liabilities such as Provisions, Tax Liabilities and other current liabilities.
Answer to question (vi)
AASB 137, is the standard that deals with recognition of uncertain and unrecognised
activities, categorically it can be provisions related to some expected losses, Contingent
Assets or Contingent Liabilities. The standard states “a contract in which the unavoidable
costs of meeting the obligations under the contract exceed the economic benefits expected to
be received under it.” It ensures that there is a proper disclosure of any kind of future
operating loss, any present obligations, if there is any deferred liability or any contract
(Manuela and Neonila 2015).
Contingent liabilities are those liabilities that are expected to arise in the near future
due to the result of some uncertain events that has have happened or is expected to occur. If a
company discovers any such liability, it should disclose them in the footnotes or key notes
that are stated in the end of the financial statements.
Contingent Assets are some probable gains that an organisation expects to have in
some near future. These gains are uncertain for the company and hence the disclosure cannot
be done in the balance sheet. However, AASB 137 ensures that if there is any recognition of
such gains it should be disclosed in the notes at the end of the financial statements.
Answer to question (vii)
There is no disclosure of contingent asset or liability under ‘The Australian
Accounting Standards Board 137’ in the annual reports of both, the Woolworths Group and
the National Australia Bank. However, Woolworths Group discloses Employees Benefits,
Self-insured Risks, Restructuring and other costs under provisions in the balance sheet of the

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group. The group defines provisions as those liabilities where the time of occurrence and the
amount to be occurred is uncertain. The group has increased its provisions to $1528 million
in the year 2019 from $1470 million in the year 2017, suggesting that the future losses are
expected to increase. National Australia Bank (NAB) creates and discloses provisions for
Employee Entitlements, Operational Risks, Customer-related remediation and Restructuring
provisions. NAB’s total provisions increases to $ 3507 million in the year 2019 from $1961
million in the year 2017, implying the group’s uncertain losses are expected to increase.
Answer to question (viii) & (ix)
The Framework of International Accounting Standards Board (IASB) states that
measurement basis is the method of recording the assets and liabilities is to be recognised by
the organisation as the principle method, which is to be followed throughout the course
unless there is any change declared by the directors (Enahoro and Jayeoba 2013).
Measurement methods are classified into four broad categories, namely, Historical Cost,
Current Cost, Realizable Cost and Present Value also known as fair value.
COMPANY NAME CATAGORIES ASSETS MEASUREMENT
BASIS
Woolworths Group Current Assets
Non-current Assets
-Cash and Cash
Equivalents
-Receivables
- Inventories
-Other financial
statements
-Plant, Property and
Equity
Historical cost basis
Historical cost basis
Historical cost basis
Fair value basis
Historical cost basis

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National Australia
Bank
Current Assets
Non-Current Assets
-Intangible Assets
-Other financial
assets
-cash and cash
Equivalents
-due from other
banks (Short-term)
-Trading instruments
-Debt instruments
-Due from
customers
-Other financial
assets
-Intangible
Assets(goodwill)
-Plant Property
equipment
-Investments
-Due from
controlled activities
-Other Assets
Historical cost basis
Fair value basis
Fair Value Basis
Fair value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Fair Value Basis
Conclusion
From the above study, it can be concluded that there are different sources of fund an
organisation can used to raise finance for its daily operations or for long-term investments.

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Some very common sources of funds through which every organisation raises finances are
from issue of equity share, where the shareholders enjoy some voting rights. The other, loans
from financial institutions these includes loans from banks loans from other private
institutions, these are to be repaid by the organisation either in the same financial year or in
the upcoming financial years. Selected companies in this study are the Woolworths Group
and the National Australia Bank.
Woolworth Group a retail company raises funds mainly from issue of equity share
capital, financial leasing and loans from banks. The group increases its percentage of
externally generated funds from 80.03% to 81.39% in the year 2019. Percentage of internally
generated funds also see a rise from 39.60% in the year 2017 to 41.78% in the financial year
2019. This implies that the company is increasing its external source of financing as this
would help in speeding up the growth and acquire new equipment instead of depleting the
savings and reserves of the company. Increasing the internally generated financing would
help the group to maintain its reserves balances as these could be used at the time of financial
crisis.
National Australia Bank (NAB), a financial institution, raises its funds mainly from
the issue of equity share capital, Loans from other banks and from Debt instruments such as
bonds. As it is a financial institution, its main objective is to raise more funds from external
sources and then lend to other organisations and individuals. The group observes a fall in the
percentage of internally generated funds from 31.72% in the year 2018 to 30.37% in the year
2019. However, the company comprehends a huge increase in the percentage of externally
generated finance in the year 2018 as compared to the previous year. Although, it manages to
reduce the externally generated finance in the year 2019, bringing down the percentage to
131.24% in 2019 from 172.45% in 2018. It is important that the group maintain the
percentage of externally generated finance as a lot of it would increase the liability for the

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group. Externally generated goodwill includes interests, more of which might become a
concern for the group.
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