Decision Usefulness of Accounting Information: CIMB and Maxis

This report examines the decision usefulness of accounting information presented in the financial reports of CIMB Group Holdings Berhad and Maxis Berhad. It explores how various stakeholders, including shareholders, managers, and government entities, utilize this information to make informed decisions. The analysis covers the stakeholders' interests, the metrics they employ to evaluate financial performance, and the strategic insights derived from the annual reports. For shareholders, the report highlights the importance of assessing risk, return on investment, and company vision. Managers leverage financial statements for performance comparisons, valuation, and creditworthiness assessments. The government uses the information to ensure regulatory compliance and understand the economic contribution of the companies. The report references specific financial data from the 2018 annual reports of both companies, illustrating how accounting information supports stakeholder decision-making processes.

DECISION USEFULNESS OF ACCOUNTING INFORMATION
CIMB Group Holdings Berhad
Maxis Berhad Group of Companies

Executive Summary
Financial reports of the company are considered to show a primary window of the financial
performance and financial position of a company to the stakeholders. The stakeholders of the
company include shareholders, investors, government, management, financial institutions,
etc. Also, the presentable financial reports of a company help to maintain a healthy position
in the capital markets and attract investments from around the world. To attain a link with the
stakeholders, it is imperative that the company must have a strong level of disclosure. It helps
in creating a balanced link with the stakeholders and even help them in assessing the
companies.
The discussion will be done on the usefulness of the accounting information contained in the
financial reports of the following companies:
CIMB Group Holdings Berhad
Maxis Berhad Group of Companies
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Contents
Introduction...........................................................................................................................................3
 Different stakeholders have different interest in the workings of the company:..........................3
 Shareholders..................................................................................................................................4
 Managers.......................................................................................................................................4
 Government..................................................................................................................................5
CIMB Group Holdings Berhad................................................................................................................6
 Shareholders..................................................................................................................................6
 Managers.......................................................................................................................................7
 Government..................................................................................................................................7
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10
Introduction
 Maxis Berhad Group of Companies
Maxis Berhad is a communication service provider company which has its headquarter based
in Kuala Lumpur. Maxis Berhad Group is a holding company which operates Maxis
Company under it. It provides varied services such as communication products, various
applications, value-added products for consumers including small, medium and large scale
enterprises.
 Different stakeholders have different interest in the workings of
the company:
 Shareholders
Usefulness of accounting information- Shareholders need financial reports of a company to
make subtle and informed decisions about the continuance of their investments in the
company. It is vital to report every relevant matter in the report so as to address the related
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parties. This is done by the shareholders by assessing the risk and return on their funds
invested in the company. Shareholders use various measurement tools to assess their money
value invested in the company which includes a comparison of dividends, earnings, etc from
previous years and comparison of various ratios like profitability ratios, liquidity ratios, debt
ratios with previous years (CIMB, 2012). The shareholders are mostly concerned with the
business performance, dividend payouts and company’s strategies and vision (Davies &,
Crawford 2012).
Prior to the year 2018, the group services were limited to the fixed broadband market. The
year 2018 was a turning point for Maxis as it started offering more accessible and affordable
fiber broadband service in more businesses and households. From the Financial Statements
presented in the Annual report, we can see that although the revenues are substantial enough
to meet out the expenses and reap profits for the year ended 2018 if we compare these
revenues and net profits with the previous year, it shows a downfall. For example, other
measurement tools EBITDA Margin percentage was 45.7% in 2017 which has reduced to
41.3% in 2018.PBT and PAT have also declined from 30.5% & 23.1% in year 2017 to 25.8%
& 19.4% in 2018 respectively. Moreover, Earnings per Share have also decreased in
comparison to the previous year. This can concern the shareholders regarding their further
investments if the company does not give justifications for the decline. The positive point for
shareholders is that despite the downfall in profit factor also, the company has provided for
the same dividend as was provided in the previous year (CIMB, 2012). But overall the return
on investments has reduced from previous years as can be seen from the below snapshot from
the Annual Report:
The shareholders are also concerned with the vision and strategies of the company. This has
also been taken care by the company by presenting their visions and strategies in its Annual
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Report. The presence of vision and mission provides a general understanding that the
business wants to disclose the goals with the stakeholders (McGrath & Whitty, 2017).
Hence, the shareholders can make useful decisions as to their further investment in the
company by assessing the various above parameters in the accounting and financial
information given in the Annual Report. They may decide further whether to invest in the
company or not. (Davies &. Crawford, 2010)
 Managers
Managers study the financial statements of the company and create comparisons within the
company from last years to assess the performance of the company as well as with other
companies in the same industry to know the financial position of the company in the industry.
The performance can be easily compared with the previous year figures and the current
scenario of the company can be judged with ease and flexibility. How they measure- In the
Annual Report (Leo, 2011), the parameters to study are EBITDA (Deegan, 2011) Margin%,
PBT%, PAT%, Interest Coverage Ratio, etc. Which depict the financial performance of the
company in comparison to previous years.
Further, they also study the competitors’ financial statement and compare them with the
internal finances to assess their company’s weaknesses and areas of improvement. This helps
the management in finance, investment and operational decision making ((Merland &Urgega,
2013)..
The management uses financial information for calculating the valuation of the company.
There are various aspects that can be used to value the company. This is helpful to those
companies which are interested in mergers and acquisitions. The valuation can be done by
using various parameters in the financial reports such as historical cash flows and profits as
shown in the financial statements (Melville, 2013). Book value of the company assets can
also be calculated from the financial statements. This also makes the financial reports
presentable to the investors of the company (Christensen, 2015).
The banks and financial institutions perform due diligence to evaluate the creditworthiness of
the borrowers to approve loans. This is done by the review and evaluation of the financial
statements. Hence the managers study the financial reports so that they can assess the
creditworthiness of the company to present it to the financial institutions as well as the credit
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rating agencies. Here the important points for managers can be Net Assets which have shown
an increase from the previous year, increase in total equity from the previous year, etc as
shown in the Statement of Financial Position as at 31.12.2018
 Government
The financial statements of a company are important for all stakeholders including
government authorities. The main purpose of government in studying and assessing the
financial statement of various companies in different sectors is to check whether or not the
companies are abiding by the formulated laws and regulations of that country, whether or not
the company is paying the required amount of tax to the tax authorities, etc. Such studies also
let the government identify the economic contribution being done by the industry to the
economy of a particular country. From the Annual Report and other financials of the Maxis
Berhad Group of Companies, it can be seen that tax expenses have been provided in the
Statement of Profit or Loss and the provision of tax payable has also been provided in the
Statements of Financial Position for the year ended 31st December 2018. The company takes
care of the Government & the compliances of its laws and regulations which is mentioned in
the company reports.
CIMB Group Holdings Berhad
CIMB Group Holdings Berhad is an investment bank which has its headquarter based in
Kuala Lumpur and which operates in high growth economies in ASEAN. It has 1080
branches across the region. The activities of the group are Banking activities and deposits and
loan disbursements, corporate banking and treasury functions and underwriting functions.
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Different stakeholders have different interest in the workings of the company like:
 Shareholders
Shareholders use Financial Statements to assess the risk and return of their funds invested in
the company and take future investment decisions. The shareholders are mostly concerned
with the business performance, dividend payouts and company’s strategies and vision. It
needs to be noted that the shareholders are always attracted to the company that has a strong
motive of creating wealth and the figures are easily accessible on the annual report. The
investors keep an eye on the earning per share and dividends. There was a lot in for
Shareholders in CIMB Group 2018 annual report as their financial numbers were quite
positive despite global uncertainty. In the words of Group CEO, Tengku Dato Sri Zafrul
Tengku Abdul Aziz, CIMB recorded a PBT of RM 7.2 billion. Meanwhile, the return on
Equity came in at 11.4% up 180 bps from last year. The company Cost to Income ratio (CIR)
improved to 49.8%. This all could be achieved due to optimizing and streamlining assets. The
company was able to complete its targets collectively called T18. The company has seen
improvements in the areas like cost, capital, customer experience, footprint expansion,
culture and digital (Choi & Meek, 2011). The company is on the regular expansion of
business like opening up of digital retail banking in the Philippines and opening a branch in
Ho Chi Minh city. Also, the Earning per Share increased from the previous year from 49.63
RM’000 in 2017 to 59.67 RM’000 in 2018. But despite these positive aspects, if the whole
report is studied, it can be seen that the dividend payout ratio has decreased from 51% in
2017 to 42% in 2018. Also, the share prices have decreased from 6.54 RM’000 to 5.71
RM’000. All this helps the shareholders in decision making about their investments in the
company and whether or not to continue their investments. Apart from the financial figures,
there is more such information available to the shareholders of the company which will be
useful in decision making by the shareholders. In the Corporate Governance Report, the
shareholders have been imparted a good place for being provided with each and every
information relevant to them regarding their rights. All the relevant disclosures have been
made by the company in its Corporate Governance Report which shall affect the
shareholders. (Burns, 2014)
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 Managers
Managers of the company also require to study the financial and other reports of the company
so as to assess the financial position of the company as a whole, to assess the valuation of the
company, to assess the creditworthiness of the company in order to make the financial
statements presentable to the stakeholders of the company. The accounting information which
is helpful to the managers for serving the above-said purposes are- The managers were tagged
to saving of Cost and increased productivity programme called Project kaiju (Laux, 20114),
The collective results and accountability of all managers brought significant changes and the
company could save RM 2.1 Billion over the T18 period. The company also carries out the
succession plan and tries to build and develop both new and experienced employees together.
The company tries to develop its new talent in such a way that in case of a succession of a
senior and experienced staff, the new talent is given the responsibility. This gives the
employees and the new talent to carefully replace and assume greater responsibilities.
Regular meetings and seminars are being conducted for senior level managers. To ensure a
better understanding of future technologies and understanding of job roles, the company has
launched a 3D programme, Digital, Data & Disruption academy to take classes on Design
thinking, internet of things, etc. The employees are provided onsite training about their jobs
and new technology changes about the job, service or product (Lapsley, 2012).
 Government
The Government has mandated a 30% women presence in the company total workforce
keeping this in mind, the company in 2018 had a total of 56.4% out of the total workforce as
women. 44.1% of them were at key managerial post also. The company also gives it back to
society in the form of sustainable growth, higher exports, and the creation of jobs. The
company is bound by the Government rules and regulation which are applicable to them. The
Government requires taxes to perform its activities correctness of the financial statements
produced and declared by the company (Laux, 2014). The Malaysian Government has
launched a programme named INDUSTRY4WRD in order to promote Small and medium
enterprises. The Government of Indonesia has launched a new programme called Indonesia
4.0 to enhance the GDP of the country, boost jobs and expert and to create the country as
among biggest economies by 2030. The company helps the Government in achieving these
goals.
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Conclusion
The stakeholders of any company require the company growth and development; this
development may be a personal level or at the country level. Companies together in a country
take the country ahead and increase the reputation of the company globally. But despite profit
motive as the prime objective, the companies have corporate social responsibilities which we
have seen that the above-mentioned companies are following and have future visions aligned
to it as well. Hence, it is imperative for the company to undertake steps that will help in the
creation of wealth together with a strong emphasis on the society. Stakeholders are always
interested in the company that have an active participation in both and ignore the company
that dwells only on the profit motive.
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Choi, R.D. & Meek, G.K 2011, International accounting, Pearson .
Christensen, J. (2011) Good analytical research’, European Accounting Review, vol. 20, no.
1, pp. 41-51
https://www.researchgate.net/publication/227613941_Good_Analytical_Research [Accessed
11 May 2019]
CIMB. (2018) CIMB Annual report & accounts. Available from:
https://www.cimb.com/content/dam/cimbgroup/pdf-files/annual-reports/
CIMB2018_Annual_Report.pdf [Accessed 11 May 2019]
Davies, T. & Crawford, I. (2012) Financial accounting. Harlow, England: Pearson.
Deegan, C. M. (2011) In Financial accounting theory, North Ryde, N.S.W: McGraw-Hill.
Maxis. (2018) CIMB Annual report & accounts. Available from:
http://ir.chartnexus.com/klccp/doc/ar/ar2018.pdf [Accessed 12 May 2019]
McGrath, S & Whitty, J. (2017) Stakeholder defined. International Journal of Managing
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Merchant, K. A. (2012) Making Management Accounting Research More Useful’, Pacific
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Mersland, R. and Urgeghe. (2013) International Debt Financing and Performance of
Microfinance Institutions, Strategic change. 22, 17-19 Available from:
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Parmar, B.L., Freeman, R.R., Harrison, J.S., Wicks, A.C., Purnell, L and Colle, S.D. (2010)
Stakeholder Theory: The State of the Art. The Academy of Management Annals. 4(1).
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Available from: https://edisciplinas.usp.br/pluginfile.php/4127617/mod_resource/content/
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