Accounting for Managers: Financial Reporting of JB-Hi-Fi Analysis

This report provides a comprehensive analysis of accounting principles, corporate governance, and financial reporting, using JB-Hi-Fi as a case study. It begins by examining the importance of corporate governance and its evolution over the last decade, followed by an investigation of JB-Hi-Fi's compliance with financial reporting integrity. The report then delves into the concept of goodwill, outlining ASX reporting requirements and analyzing JB-Hi-Fi's goodwill recognition and impairment. Furthermore, it explores independent auditors' reports, comparing JB-Hi-Fi's audit reports from 2016 and 2017. The analysis covers key financial aspects, including the allocation of goodwill to cash-generating units and the impact of goodwill impairment on the company's financial statements. The report concludes with a summary of findings, highlighting the significance of corporate governance and its impact on financial reporting practices.

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction:...............................................................................................................................2
Part A:........................................................................................................................................2
Corporate governance:...............................................................................................................2
Importance of corporate governance in last decade:..................................................................2
Investigation of JB-Hi-Fi compliance with integrity of financial reporting:.............................3
Part B:.........................................................................................................................................4
Concept of Goodwill and ASX current reporting requirements:...............................................4
Investigation of JB-Hi-Fi financial report to support and illustrate the analysis:......................5
Part C:.........................................................................................................................................6
Concept of Independent auditors Reports:.................................................................................6
Objective of Independent Auditors Report:...............................................................................7
Comparative analysis of JB-Hi-Fi audit report for the accounting year of 2016 and 2017:......7
Conclusion:................................................................................................................................8
Reference List:...........................................................................................................................9

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Introduction:
The current study is engaged in the understanding of corporate governance and
studying the rising importance in the last decade. A detailed understanding of principles of
corporate governance for JB-Hi-Fi is examined to report on the matters of integrity in
financial reporting. The report will be providing the definition of goodwill by reflecting the
current requirements of reporting for firms that listed in ASX. The analysis of the JB-Hi-Fi
goodwill recognized and unrecognized is performed together with the description of goodwill
impairment. Additionally, the study of Intendent Auditors Report and relative analysis of
audited financial statement of JB-Hi-Fi will be reflected by stating the necessary changes
made by the company.
Part A:
Corporate governance:
Corporate governance is the study of rules, regulations, process and system that act as
the tool for applying authority and regulating the internal control of an organization
(Panditharathna 2016). The corporate governance structure principally recognizes the
distribution rights and accountabilities amid different participations in the company.
Corporate governance acts as the mechanism of procedure through which the relations of the
company are controlled and directed.
Importance of corporate governance in last decade:
During the last decade, corporate governance has become a vital aspect. The tool of
corporate governance assist in understanding the rights of the shareholders and assisting them
in exerting the rights. Modern conversation of corporate governance tends to refer the general
principles that surrounds the business that anticipated operating is to assure appropriate
governance (Lins et al. 2017). They help the shareholders in exercising the rights by

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efficiently communicating the information and promoting the participation of shareholders in
the meetings. According to Domadenik et al. (2016) corporate governance is an important
tool of directing the companies towards self-governing state, establishing own rules and
enforcing laws among workers from superior to subordinate level.
As put forward by McCahery et al. (2016) over the last decade there is a growing
importance of corporate governance since the tool help in making corporations more
responsible and avoiding the instances of adversity. An argument led by Tricker et al. (2015)
states that failing companies with insolvent stakeholders are primary reason for increasing
importance of strong corporate governance principles. A well-designed principles of
corporate governance is equivalent to law enforcement agency of internal affairs unit that
help in reducing the problems under extreme predisposition. A corporation can conduct
meetings with the shareholders and debtors and external members such as suppliers,
customers and community leaders to meet the requirements of effected parties.
Corporate governance is of paramount vitality for corporation and it is regarded as an
important part of business plan. The framework of corporate governance is important because
it helps an organization in avoiding scandals of fraud and criminal offences. The growing
importance of corporate governance is directed towards enhancing the organizations
reputation among public as the self-governing firm that responsible and exemplary towards
shareholder’s capital. McCahery et al. (2016) stated that the growing importance of corporate
governance is due to its principles of shared values, organizational cultural practices and its
employees. An organization lacking the principles of corporate governance is regarded as
firm without ethics. Decisively, corporate governance assists an organization in remaining
honest and trouble-free.

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Investigation of JB-Hi-Fi compliance with integrity of financial reporting:
The corporate governance fourth principles deals with safeguarding the integrity of
corporate reporting. The principles necessitate a firm to apply formal and arduous process of
independently validating and safeguarding the integrity of financial reporting (Tricker et al.
2015). Upon investigating the financial statements of JB-Hi-Fi it is found that the
management and executives of JB-Hi-Fi have remain dedicated at the highest standard in
making sure that the business is carried functions are conducted in an ethical manner by
complying with the greater standards of corporate governance. In accordance with the 3rd
edition of ASX corporate governance principles and recommendations the business practices
and policies of JB-Hi-Fi comply with the materiality aspects.
The company has placed controls, which is designed to assure that the financial
reporting integrity complies with the regulatory requirements of reporting. Evidences
obtained from the financial statement of JB-Hi-Fi provides that the company during the
accounting period have appropriately complied with “section 286 of the Corporations Act
2001”. JB-Hi-Fi financial report provides the company has maintained right interpretation of
books of accounts and along with the financial position (Jbhifi.Com.Au 2018). The
independent professional auditors audit the financial reports of JB-Hi-Fi on annual basis.
Part B:
Concept of Goodwill and ASX current reporting requirements:
Goodwill is regarded as the intangible asset that arises when the purchaser acquires an
existent business. Goodwill is an asset that indicates the upcoming financial benefits arises
from other assets that is acquired by a company when gaining control of business that is not
separately recognized. According to corporation Act 2001, there are statutory requirements
for financial reporting (Chen et al. 2017). Companies conducting business in Australia are

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required to prepare and lodge with ASIC the financial statements at the end of the accounting
year. The annual financial statements should be audited and under specific state of affairs, the
corporations are exempted from financial reporting. Companies listed in the ASX are
bounded by continuous disclosure requirements. Firms listed under ASX are required to
report under present Australian accounting standard;
a. To prepare the financial statement in compliance under section 286 of the Corporation
Act 2001.
b. Section 320 of the Corporation Act 2001 provides a statutory reporting requirements
for organizations listed under ASX to lodge a half-yearly reports and auditors reports
with the ASX as and when required (Glaum et al. 2018).
c. Section 302 of the Corporation Act 2001 provides that a company is required to
prepare the half-yearly reports.
d. In compliance to section 292 of the corporation act 2001 a company is required to
prepare the financial statement and directors report
e. As stated under section 301 of the Corporation Act 2001, a company is required to
have its financial reported audited by the financial auditor.
f. In compliance to Section 317 of the Corporation Act 2001 provides that a company
listed under ASX is required to lay down the financial document in the annual general
meeting (Sherrill 2016).
Investigation of JB-Hi-Fi financial report to support and illustrate the analysis:
Evidences obtained from the financial statements of JB-Hi-Fi the goodwill
impairment stood AUD 15.8 that was identified by the company in the statutory financial
statement of 2017. During the financial year of 2017, the impaired goodwill amounting to
$14.7 million and PPE stood $1 million, which was attributed to the JB-Hi-Fi cash-generating
unit.

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Goodwill impairment is referred as the charge on asset that is incorporated in the
books of accounts of the company when the value of goodwill on the financial statements
goes beyond the fair value (Darrough et al. 2014). Deferred tax assets and liabilities are not
identified by JB-Hi-Fi. If it is noticed that the provisional variances arises from the original
identification of assets and liabilities that is affecting neither the taxable income nor the
accounting profit relating to initial identification of goodwill. Goodwill of JB-Hi-Fi is
allocated to the cash-generating unit through impairment testing.
On finding that the recoverable amount of the cash-generating unit is below the
carrying amount of cash generating unit, the impaired amount of loss is allocated first to
reduce the carrying value of goods will allocated to cash generating unit. Additionally the
impairment loss related to goodwill is also identified in the profit and loss statement (Chen et
al. 2014). Upon the disposal of operations of goodwill in the cash generating unit, the
attributable amount of JB-Hi-Fi goodwill is included in the determination of proceeds or the
losses on the upon the disposal of the procedure.
The evidences obtained from the yearly financial report of JB-Hi-Fi provides that the
goodwill arising from the purchase of Good Guys amounting to $701.5 million is identified
and distributed to the JB-Hi-Fi Australian cash generating unit(Jbhifi.Com.Au 2018).
Goodwill associated with the JB-Hi-Fi New Zealand was impaired that carried the worth of
$14.7 million due to the poor performance in the financial year of 30 June 2017 into the cash
generating unit. The goodwill of JB-Hi-Fi has originated from the acquisition of Good Guys
continued to remain provisional during 2017 while the organization continued to finalize the
value of its assets and liabilities that is acquired.

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Part C:
Concept of Independent auditors Reports:
An independent can be defined as the examination of financial accounts, commercial
transactions, accounting practices and internal control of the organization (Guénin et al.
2014). An auditor are viewed as the independent accountant that are appointed by the
shareholders to offer the independent view point of the financial statement and remuneration
report prepared by the directors.
Objective of Independent Auditors Report:
The purpose of audited financial report is provide the users with the noteworthy
assertion based on the information declared in the financial statement. The audit report is
designed to enable the auditor in assessing the materiality factors included in the report.
The objective of independent auditors report is to provide disclosure to the board of
directors and shareholders. According to Hariri et al. (2015) audit is not carried on for the
benefit of the firm or management but it is carried on for a person or group that are using the
financial statement with the objective of making decision. The independent auditors report
offers the investors and the management regarding the information relating to audit. The
independent audit report provides the clarification of the purpose of audit by denoting the
public corporation accounting oversight panel.
As cited by Boyle et al. (2015) the purpose of audit report is to enable the readers
with the sufficient amount of assurance regarding the independent viewpoint of the financial
information stated in the financial statement. The auditors provide altered viewpoint on those
situations where the financial statement does not provide the appropriate interpretation or
agreement with the accounting standards (Douglas et al. 2015). The objective of auditor’s

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report is emphasize on the section that are vital in determining the going concern aspects of a
firm.
Comparative analysis of JB-Hi-Fi audit report for the accounting year of 2016 and
2017:
On conducting a comparative study of JB-Hi-Fi, audit report for a financial year of
2016 and 2017 it was noticed that the audited reported consisted of balance sheet, profit and
loss statement, comprehensive income statement, statement of cash flow and statement of
changes in equity (Jbhifi.Com.Au 2018). Evidences obtained from the audit statement of JB-
Hi-Fi comprised of relevant accounting rules together with the description of materials and
units that are controlled by JB-Hi-Fi in accounting year 2016. Nevertheless, the audit report
of 2017 demonstrated a change from the audit reported published in 2016.
The audit report for 2016 did not contained key audit matters whereas in 2017 the
audit report contained key audit matters concerning the 100% acquisition of Good Guys for
cash considerations of $860 million. Further changes reflect that the accounting for the
acquisition transactions represents amounts that was attributable to certain assets and
liabilities that remained provisional during the year ended 30 June 2017 and was complex
that required management judgement (Jbhifi.Com.Au 2018). Judgements was required in
determining the fair value of acquired identifiable assets and liabilities together with the
purchase considerations to separately identifiable intangible assets.
The carrying value of New Zealand cash generating unit incorporates judgements
regarding the future growth rate of the business. The audit report reflects that the auditors
placed emphasis in the key audit matters because of the fall in financial performance of New
Zealand CGU and the judgement required forecasting of future cash flow and other vital
assumptions.

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The auditor’s report of 2016 reflect that there is no material misstatement whereas in
the year 2017 the auditors have stated their opinion in audit report that there is a material
misstatement and information presented in 2017 are materially inconsistent with the financial
report and appears to be materially misstated.
Conclusion:
Conclusively the directors and the management of JB-Hi-Fi has demonstrated highest
standard of commitment in assuring that the company has complied with the business
requirement ethically with the highest corporate governance standard. The report offers that
for impairment testing, goodwill is allocated to each cash-generating unit of JB-Hi-Fi.
Additionally, JB-Hi-Fi has identified the impairment loss associated to goodwill expressed in
either profit or loss. The comprehensive analysis of the audited financial statement of JB-Hi-
Fi provides an evidence that the company has complied with the guidelines of Corporation
Act 2001. As a general, JB-Hi-Fi has implemented the internal control practices that are
applicable to the organizations preparation of financial statement.

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Reference List:
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Review(2018).

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