Accounting Theory and Contemporary Issues Report: Dick Smith Holdings

This report provides a comprehensive accounting analysis of the Dick Smith Holdings collapse. It begins with an introduction to the research topic, background of the company, and a detailed account of the strategic errors that led to the company's downfall, including market changes, high costs, and poor financial decisions. The report further examines the accounting practices that contributed to the collapse, governmental issues, and conflicts of interest. It also highlights key lessons to be learned from the case and concludes with a summary of the findings. The report includes an executive summary, table of contents, and references, providing a structured and insightful review of the events surrounding Dick Smith Holdings.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting theory and contemporary issues
Name of the student
Name of the university
Authors note

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
ABC Consulting Firm
Mr Karman T,
Deputy Manager,
Dick Smith Holdings Limited
Melbourne, Australia
21.05.2019
Dear Karman T,
(Accounting & Contemporary Issues)
I am very pleased to inform you that I am submitting my report on the as per your request on
the topic of accounting theory and contemporary issues as on May 12, 2019 which is related
to the Dick Smith Holdings Limited. The details of this report includes the background of the
company, the governmental measures related to the collapse of this company, other major
areas which have been responsible for this collapse and the governmental measures prevent
this from occurring second time.
In the preparation of this report all the requirements and rules have been strictly followed and
it has highlighted the marking skill of this company.
Finally I would like to thank for giving me the opportunity to express my view on this report
and familiarizing myself with the company details.
Yours sincerely,
Adam Smith
Accountant and Financial Consultant

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Part 2: Final Business Report
“Report on Accounting Theory and Contemporary Issues
And its impact on Dick Smith Holdings Limited
THURSDAY MAY 15, 2019
COMPANY: DICK SMITH HOLDINGS LIMITED

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Executive Summary...................................................................................................................4
1.0 Introduction:.....................................................................................................................5
1.1 Research topic..................................................................................................................5
1.2 Background of Report:.....................................................................................................5
1.3 Strategic Errors:...............................................................................................................7
Market Change...................................................................................................................7
High Cost Social Network.................................................................................................7
Downward Market Share & Sales Falling.........................................................................8
Too Fast..............................................................................................................................8
Too Much on Shelves.........................................................................................................8
Low Sales...........................................................................................................................8
High Cost of Finance.........................................................................................................9
2.0 Accounting practices to the collapse of Dick Smith........................................................9
3.0 Governmental issues for collapse of dick smith:...........................................................11
4.0 Conflicts of interest and soft landings for directors of failed companies......................11
5.0 Key lessons to learn:......................................................................................................13
6.0 Conclusion......................................................................................................................14
References:...............................................................................................................................15
Appendices:..............................................................................................................................18

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Executive Summary
The report mainly focuses to conduct an accounting analysis of the Dick and Smith Holding
Company. The above case study deals with then background of the Dick Smith holdings
limited and the governmental issues related to the collapse of the company. The study also
depicts the possible measures which are be taken care of by the governments regarding the
case ad further ensuring that no such case do repeat in the future.

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1.0 Introduction:
1.1 Research topic
The study deals with the background of the Dick Smith Holdings Limited which is an
electronics company and deals with the electronics merchandise and the accounting errors
which have been associated by the company management and further the reason behind such
destruction of the company. Apart from this the study also describes the accounting practises
about the collapse of the company and the governmental issues relating to changes and the
collapse of the company. Lastly, the main lessons which can be learned by the other
companies in order to ensure that no such second scandal occurs by the other companies
(Dick Smith Holdings Ltd - AnnualReports.com. 2019).
1.2 Background of Report:
Dick smith holdings limited was an Australian company of Australian chain of retail
resources, which have been sold in the retail stores that sold the consumer electronics goods,
hobbyist and electronic components and electronic projects kits. New Zealand is the country
where the chain expanded and in the other areas the chain remained unsuccessful. The
business have been originated into Sydney in the year 1968 by dick smith, which have been
owned by his family till they sold 605 of the company to Woolworth limited in the years
1980 and remaining of the works 40% in the two years later (Schaltegger and Burritt 2017).
Hence the company closed the business in the year 2016 within most of the years of
attainment by the waterfront capital limited partners. In the year 1968, the incorporation of
the business of $15 as rent per week premises and in case of the natural bay it is the Sydney
suburb. However the entire electronics business has been remoulded by the government
across the board by the company 255 of the tariff have been cut by the company for a loss of
138000 manufacturing jobs. Smith have been moved in the market competition with a re
emphasis of the imported electronics related goods. Together with the car radio business has

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also been implemented by the company, which have catered by the company into the
electronic hobbyists and the founder had meet the needs of the business. However in this case
the company had dealt with the commercial customers. However after touring outsides places
the company had let to store the modern engineering machineries and tools. However the
company management had been introducing some new counter sales set up and increased the
sales volume at the time and produced the annual mail order catalogue with a substantial data
section. However the company had promoted themselves in a good style and made their own
publicity stunts. The company had profiled from the CB radio boom in the year 1970 and by
the end of the decade they had closed all the stores. However many CB stores were closed
due to coming of internet facility and in the late 70’s the company thrived on exploding the
PC sales and electronic components and kit lines. Hence, in order to ensure almost every
enthusiast in the electronic departments if Australia the catalogue includes the essential
involvement of the professional references of the hobbies (Ji 2017). Apart from this the
company had also introduced private branding on a large set of products and many DSE
based brands were re branded versions of the same or similar products which were
manufactured by the company. Dick Smith Company also had their own branded computer
which had been very successful at that period of time. Apart from this the company had also
some sub branded computers models which were also very popular in the market at that
period of time. However the company and also expanded he products range especially in the
year 1970 and 1980 (Zhang, Ullrich. and van Dick 2015). And the stock items like heath kit
electronic kits, TV receiving stations, beeple pager and the dick smith computer games.
Hence the company was an earlier seller of telephone equipment including the answering
machines, cordless and novelty phone. However the company started losing their market and
lastly sold 60% of their shares to wools worth company and the transfer pricing to the
company was costed at $125 million. The company continued to add the small main street

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products into the markets of Australia. The company had witnessed some major changes in
the business of power plant projects which had been branded under the name of dick smith.
The products were replaced by a large amount of windows computer, mackintosh computers
which had been basically taken into account of the power house stores. Hence, the company
had decided to push forward and reworked on the old concept to form a new one (Ya’acob
2016).
1.3 Strategic Errors:
Following the announcement that the operations of the electronic retailer dick smith to
lose down their operations and over 360 stores on the world are going to be closed many
were left wondering what had happened. However the news became reality when the
company wrapped up their business and it was announced that the company had went to
liquidation and the administrators who were appointed to serve had been forced to resign
from their post while the conditions in the real estate sectors were in a bad stake. Hence it
was assumed that the poor decision making and wrong strategy implementation had been
caused as a main factor behind the stopping of the business. However the collapses are likely
to mean the shortfall of the creditors to more than $260 million. The banks will get the money
back and there is no prospect of the unsecured creditors. Therefore, the reports said that there
are below factors, which have cost the collapses in the dick smith company (Englund and
Gerdin 2014).
Market Change
The consumer market is highly competitive in nature with the rapid changes in the
business as well as in the consumer demand patterns.

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High Cost Social Network
The company had a store network which was large than the competitors as well as
comes up with a higher cost base. Thus the considerable exposure to reliance to and reliance
on the fast moving office and the consumer market had played a major role in the breakdown
of the company.
Downward Market Share & Sales Falling
Since most of the company revenue is based on the company business perspectives,
hence the company profitability had been fully dependent on the company valuation. Thus in
case of dick smith company the loss generated by the business in the financial years had cost
them to lose the company market share and similarly the loss in sales had affected the
revenue generation largely (Parker and Northcott 2016).
Too Fast
The company had made severe expansion plan of the business without knowing the
consequences of the business. However too much investment in the business had caused
many business issues to the company, which was another factor or logic behind the closure of
the business.
Too Much on Shelves
The investment decisions which had been made by the company was regarded as a
weak decision since these were not made as per the customer demand. Apart from that
company had not been able to provide a good amount of dividend to the shareholders owing
to the loss of the business. Hence, it was another reason on why the company had to close
down the business forever (Ailon 2015).

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Low Sales
Dick smith was a successful brand in the manufacturing and selling of electronic
products and services. However, over the years due to the changes in the business decisions
and the involvement of the competitors’ brands, the sale of the products of this company had
been decreased over the years and the company did not properly meet up the customer
requirements, which had cost the company to stop the business. Therefore, fewer sales in the
business bought less profit to the company (Clemente and Gabbioneta 2017).
High Cost of Finance
The company finances are the most import6ant part of the business. However the
company looks a heavy amount of loan from the bank in order to meet up the business
requirements, business expansion and other cases. However, the Company did not made good
amount of profit in the financial year. Therefore, it did not let them to pay off the debts to the
banks, which had forced them to liquidate the business (Yu, Zhang and Zheng 2015).
2.0 Accounting practices to the collapse of Dick Smith
It is significant to understand the failure of the company for classifying hr life
business cycle implement plan and in the place which can recover the commercial. In the way
to understand the reasons as to why companies fail as others succeed, examination of the
business performance is important. It is considered as one of the iconic electronic retailer as
Dick Smith is a renowned retailer in Australia. Due to the impact of the external and internal
factors the business of the company failed. The main reason behind the failure of this
company had been held responsible were management motivation and the accounting issues,
which had led to the collapse of the company (Soltani 2014). In the finanacial yaer 2013, it is
identified that successful listing of the stock market has further enjoyed the rapid
improvement in the sales in the case of the new lines of business along with the development
plans associated with it. In case of the difficult situation, the management of the organization

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ACCOUNTING THEORY AND CONTEMPORARY ISSUES
tries to enhance the revenues of the company. The main aim of the company is further related
to the business growth where the organization is struggling to keep their performance
(Salvioni, Astori and Cassano 2015).
The expansion strategy of the firm is costly and further the management of the
company dealt with the failures of the inventory purchasing. Such kind of earnings of the
employees forced the business to get the significant deals according to the extension plan of
the company. However suck kind of the expansions plan are not checked by the retailers
where there are too much stocks which were overvalued (Soltani 2014).
The retailers could have accomplished the effective margin and further the clearance
regarding the sales which was significant. The recipients of the cash in that case were not
enough to meet the commitment of the business. Further the poor sales and the lease
provision of the margin, the impairment of the inventory is implemented in the same (Jory et
al. 2015).
The growth which raised from the revenue growth which depends on the sales from
commercial and growth store which is comparatively at a very diminishing margin. From the
above point the repercussion it is observed that the comparable sales degraded. The plan
which is related with the financial condition of the company required commitment from the
supplier and also the bank borrowing. It is observed that Dick Smith has a big store network
than the competitors in the market. In respect to obtain the electronic credit terms has a great
impact on the product mix, presentation of the store and also the stock levels which is related
with the business. It is seen that the management was not able to take any considerable
decision regarding the inventory decision within the competitive environment. The company
was left with the stock which is not required and it also required immediate write-down.
(Crête 2016).