Financial Analysis of ABC Learning's Collapse: Causes and Impact

This report provides a detailed analysis of the collapse of ABC Learning, a prominent childcare service provider. It begins with an overview of the company's background, including its founding, growth, and eventual listing on the ASX. The report then delves into the factors contributing to the company's downfall, such as manipulated financial statements, lack of transparency, inappropriate accounting practices, poor corporate governance, and inadequate expansion strategies. The role of stakeholders, including governmental bodies, financial institutions, and employees, is also discussed. Furthermore, the report examines the unethical conduct of the company, the misrepresentation of financial information, and the impact of these issues on the company's stakeholders. The report concludes by highlighting the key lessons learned from this case study, emphasizing the importance of sound financial practices, transparent reporting, and effective corporate governance.

ABC LEARNING’S
COLLAPSE

ABC Learning’s
Background
 It was founded in 1988 by Eddy Groves.
 It was the largest child day care service
provider of Australia listed on ASX
 It operated its business internationally
through countries like UK, US and New
Zealand
 It owned total 2238 learning centres
before it collapse.

ABC’s Collapse
 In 2007, it encountered sudden decline in
its profits.
 It became difficult for ABC Learning to
repay its huge debts.
 To seek finance for debt repayment ABC
had to sell its UK and US subsidiaries.
 There was a significant decline in its
market worth and hence it got delisted
from ASX.

Factors contributed to ABC’s
Collapse
 Manipulated financial statements
 Lack of transparency in financial
reporting
 Inappropriate accounting treatments of
Related party transaction (ABC News.
2012).
 Poor Corporate Governance Structure
 Inadequate expansion strategies.
 Auditor’s incorrect audit opinion (Teen,
2012)

Stakeholders of ABC Learning
 Governmental bodies that offered license
to ABC
 Providers of finance: Shareholders and
Investors, Banks and other financial
institutions.
 Employees

ABC’s Corporate
Governance
 The board of the company was not
adequately constituted as it contain the
majority of members who were not
holding relevant knowledge and expertise
in day-care industry (Walsh, L. 2015).
 It was unethical conduct on part of
company to mislead its stakeholders
through provision of falsified financial
information.

References
 ABC News. 2012. Auditor suspended over ABC
Learning report. Available at:
http://www.abc.net.au/news/2012-08-08/auditor
-suspended-over-abc-learning-report/4185408
Accessed on: 05.10.2018
 Walsh, L. 2015. Key corporate governance
systems 'missing' from ABC. Available at:
https://www.couriermail.com.au/news/key-corpo
rate-governance-systems-missing-from-abc/ne
ws-story/f601d3e4242f16efbc70610f9707de05?
sv=96f188f44e8845619b7d48fa7cf73f91
Accessed on: 05.10.2018
 Teen, M.K. 2012. The ABC of a corporate
collapse. Available at: