Structured Literature Review: Accounting Standards in Woolworths

This report presents a structured literature review of accounting standards in Woolworths, a major Australian retailer. It examines the company's adherence to Australian Accounting Standards (AASB), which aligns closely with International Financial Reporting Standards (IFRS). The review identifies common themes such as Woolworths' compliance with AASB and awareness of changes in accounting standards. It also explores differences in themes, particularly regarding the harmonization between AAS and IAS, and management's strategies for corporate reporting framework reform. The managerial implications discussed include the need for consolidated financial statements, adherence to AASB, IFRS, and Corporations Act 2001, and the importance of audit, risk management, and compliance committees. The report also highlights limitations of previous research and suggests areas for future research, such as the awareness of auditors regarding the current amendments within accounting standards and policies within Australia, and analyzing the role of compliance committee in reformation of corporate reporting structure of Woolworths.

Running head: ACCOUNTING STANDARDS IN WOOLWORTHS
Structured Literature Review on Accounting Standards in Woolworths
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Table of Contents
Brief Summary of the Theory..............................................................................................2
The Common Themes and Finding from the Articles.........................................................2
The Difference in Themes and Finding from the Articles...................................................4
Managerial Implications of Four Articles............................................................................6
Study Limitations and Future Research...............................................................................7
References............................................................................................................................8

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Brief Summary of the Theory
Woolworths Limited is considered amongst on the of the largest retailers in Australia and
New Zealand with various retail and wholesale stores in the aforementioned regions.
Woolworths Limited has several businesses which includes food, liquor and petrol retail outlets,
hotels as well as home improvement stores. It also deals in property dealings. Australian
Accounting Standards Board, (2016) elaborated that the organization, being an Australian firm,
follows Australian Accounting Standard. These standards are issued by Australian Accounting
Standard Board (AASB), an agency which is maintained and closely monitored by the Australian
government. the Australian Accounting Standard Board contributes significantly to the progress
of global financial reporting standards and enables the participation of the Australian community
in order to comply with the global accounting standards. Howieson (2017) stated that the
Australian government has adopted the International Financial Reporting Standards (IFRS) while
went on with some modifications which includes removal of a few options as well as addition of
some of the disclosures. The Australian Accounting Standards also follows the compliance so as
to comply with International Financial Reporting Standards (IFRS). The Australian Accounting
standard also provides an option to adopt the 'Reduced Disclosure Requirements' (RDR) with a
few exceptions.
The Common Themes and Finding from the Articles
The common themes and finding from the articles “An investigation into the roles,
characteristics, expectations and evaluation practices of audit committees” and “Harmonization
of international accounting standards: Is it possible?” are mentioned and justifies below:

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Theme 1: Woolworths Follows the Australian Accounting Standard
The article “Harmonization of international accounting standards: Is it possible?. Journal
of Accounting Education” indicated that Woolworths Limited, which is a domiciled in Australia
is considered under the category of ‘for-profit’ company. Hence, the figures present in the
consolidated financial report of the company is generally is Australian Dollar AUD and the
amount is being stated as per the law, in accordance with ASIC Corporations Legislative
Instrument 2016/191. Martinov-Bennie, Soh and Tweedie (2015) stated that the historical cost
basis is followed to prepare the Consolidated Financial Statement excluding the financial asset
which is ascertained through fair value method. Moreover, the fair value method is also followed
in calculating the income, derivatives as well as other financial liabilities as per the accounting
policies. Furthermore, the consolidated Financial Statement of the company also follows the
rules set by ‘Corporations Act 2001’ as well as Australian Accounting Standards and
Interpretations. As mentioned above, Sutton (2014) elaborated that the Australian Accounting
Standards maintains close parity with the International Financial Reporting Standards (IFRS) and
complying with AASB ensures the compliance with IFRS. Hence, the report which is prepared
by Woolworths Limited is according to IFRS.
The basis of consolidation is as per the standard set by the AASB, as the consolidated
Financial Statement includes all the subsidiaries on which the company has control and may
affect the same by accessing its powers but if its control ceases, then the particular subsidiary
will be deconsolidated. Moreover, the intra-group balances and transactions are eliminated from
any such consolidations. All the imperative component of the financial statement is in
accordance to the Australian Accounting Standard.

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Theme 2: Awareness of Change in Accounting Standards
The accountants and auditors of the Group are found to be well aware of the new and
amended Accounting Standards and Interpretations that has been issue by the Australian
Accounting Standards Board (AASB). Sutton (2014) elaborated that the amendments which has
been recently included into the accounting standards are “Recognition of Deferred Tax Assets
for Unrealized Losses, Disclosure Initiative, Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture, Revenue from Contracts with Customers and the relevant
amending standards, Financial Instruments and the relevant amending standards, and
Classification and Measurement of Share-based Payment Transactions.” Moreover, leasing as
referred to AASB 16 and Insurance contract (AASB 17) are yet to be implemented.
Martinov-Bennie, Soh and Tweedie (2015) revealed that revenue from Contracts with
Customers (AASB 15) refers to the recognition of revenue after the obligation is satisfied.
Similarly, as per AASB 15, the company introduces new impairment method for assets and fair
value method for debt instrument. The AASB 16, leases replaced that AASB 117 leases, where
the leases are classified on their particular natures and treated accordingly.
The Difference in Themes and Finding from the Articles
The different themes and finding from the four articles are mentioned and justifies below:
Theme 3: Harmonization between the AAS (Australian Accounting Standards) and the IAS
(International Accounting Standards).
The article “Stakeholders’ interest in sustainability assurance process: An examination of
assurance statements reported by Australian companies” focused on considering that there lie

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various differences among the two accounting standards but Australian Accounting Standards
incorporated certain features through amendments in order to harmonize with International
Accounting Standard. Bepari and Mollik (2016) stated that the concept of business combination
finds its difference in AASB and IAS, but the Australian board has amended its rules as per the
accounting standard AASB 3. A similar treatment is given to the format of cash flow statement
wherein Australian board prefers direct method but in IAS, both direct and Indirect methods are
permitted. However, the same does not impact the figures significantly and is accepted widely.
Nevertheless, the real difference lies in preparation of consolidated financial statements wherein
Australian entity requires to provide detailed reporting as the parent group is required to prepare
consolidated statement. In IAS, the holding group is may not prepare consolidated statement.
Bepari and Mollik (2016) stated that the same goes with reporting date wherein the parent
company and subsidiary has to maintain same reporting date as per Australian Standard Board
whereas it is not necessary for International Accounting Standards.
Theme 4: Management Step for the Reformation of the Corporate Reporting Framework.
The article “An investigation into the roles, characteristics, expectations and evaluation
practices of audit committees” signified that Woolworths Limited follows an approach to
improve the shareholder’s value and protect their funds. The board of directors are the governing
body of the company who work for the value-creation for shareholders. Loyeung, Matolcsy,
Weber and Wells (2016) revealed that the senior management of the organization develop as
well as implement the strategies which they seem fit for the corporation. The risk is efficiently
managed by them while remaining intact to their ethics and following compliance. Moreover, the
board has created audit, risk management and compliance committee (ARMCC), which assists
the management in maintaining framework of the company which includes the risk management

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as well as internal audit. Loyeung, Matolcsy, Weber and Wells (2016) added that the internal
audit team is closely monitored by the board which performs its process while complying to the
standards.
Managerial Implications of Four Articles
Analyzing the four articles indicated several managerial implications regarding the
accounting standards use in Woolworths Company It has been gathered from evaluating the
article “The cost of implementing new accounting standards: The case of IFRS adoption in
Australia” that the company must focus on developing consolidated profit and loss along with
income statements as per AASB 10. Australian Accounting Standards Board, (2016) elaborated
further that this the balances along with transactions associated with the inter group along with
unrealized profits and losses are avoided at the time of developing financial statements. The
article “Harmonization of international accounting standards: Is it possible?” also indicated that
Woolworths consolidated financial statements must be prepared based on the standards related
with AASB, IFRS and Corporations Act 2001.
Brennan and Kirwan (2015) evidenced that the cash flows of the company must be
prepared within financial statements through following AASB 16 along with the operating lease
commitments that has been affirmed. These must include certain vita lease contracts that are
legally binding and are present for a subsequent period. Hines, Masli, Mauldin and Peters (2015)
indicated in the article that the audit, risk management along with compliance committee must be
formulated in order to supervise the implementation of certain accounting principles in
developing financial statements. The researchers in these articles also focused on explaining
important managerial implications regarding harmonization of the accounting standards.

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Howieson (2017) stated that accounting standards harmonization will facilitate the Australian
retail organizations such as Woolworths in attaining benefits of international transactions along
with decreasing exchange expenses through offering highly perfect information. The companies
can also focus on standardizing information to international economic policy makers, by
enhancing financial markets information and through enhancing government responsibility
(Ironkwe and Ordu 2015). Another implication provided is observed in case of free trade. In
such scenario, international accounting standards can facilitate in allowing nation’s tariffs and
restraint process to be highly accurate for companies like Woolworths that is involved in trade.
Investors and the managers of the Austrian retail company will be highly able to make all the
valuable decisions.
Study Limitations and Future Research
From analyzing the previous researches explained within the chosen four articles it has
been gathered that those researches have failed to elaborate that harmonization is a process for
increasing the similarity between accounting methods practiced within the domestic nation.
Considering the same, the future research will focus on evaluating the accounting method
practiced within the retail companies in Australia that are harmonized in those practiced globally
(Klettner, Clarke and Boersma 2014). Previous researches also have limitations in exploring
whether the auditors of Woolworths are aware of the current amendments within accounting
standards and policies within Australia. Addressing such gap, the future research will consider
addressing the same through analyzing whether the cash flows are presented within the financial
statements along with analyzing the role of compliance committee in reformation of corporate
reporting structure of Woolworths.

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References
Australian Accounting Standards Board, 2016. AASB 10 [online] Available from:
http://www.aasb.gov.au/admin/file/content105/c9/AASB10_07-15_COMPdec15_01-18.pdf
[Accessed 10th April 2018].
Australian Accounting Standards Board, 2016. Framework for the Preparation and Presentation
of Financial Statements [online] Available from:
http://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-14.pdf
[Accessed 10th April 2018].
Bepari, M.K. and Mollik, A.T., 2016. Stakeholders’ interest in sustainability assurance process:
An examination of assurance statements reported by Australian companies. Managerial Auditing
Journal, 31(6/7), pp.655-687.
Brennan, N.M. and Kirwan, C.F., 2015. Audit Committees: Practices, Practitioners and Praxis of
Governance. Accounting, Auditing and Accountability Journal. 28(4), pp. 466-493.
Hines, C.S., Masli, A., Mauldin, E.G. and Peters, G.F., 2015. Board risk committees and audit
pricing. Auditing: A Journal of Practice & Theory, 34(4), pp.59-84.
Howieson, B., 2017. The Phoenix Rises: The Australian Accounting Standards Board and IFRS
Adoption. Journal of International Accounting Research, 16(2), pp.127-154.
Ironkwe, U. and Ordu, P.A, 2015. The convergence of Accounting Standards to International
Financial Reporting Standards (IFRs): Issues and Prospects in Nigeria. International Journal of
Research in Business Studies and Management. 2(7), pp. 1-13.

10ACCOUNTING STANDARDS IN WOOLWORTHS
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible business
strategy. Journal of Business Ethics, 122(1), pp.145-165.
Loyeung, A., Matolcsy, Z., Weber, J. and Wells, P., 2016. The cost of implementing new
accounting standards: The case of IFRS adoption in Australia. Australian Journal of
Management, 41(4), pp.611-632.
Martinov-Bennie, N., Soh, D.S. and Tweedie, D., 2015. An investigation into the roles,
characteristics, expectations and evaluation practices of audit committees. Managerial Auditing
Journal, 30(8/9), pp.727-755.
Sutton, V., 2014. Harmonization of international accounting standards: Is it possible?. Journal of
Accounting Education, 11(1), pp.177-184.
Thijssens, T., Bollen, L. and Hassink, H., 2016. Managing sustainability reporting: many ways to
publish exemplary reports. Journal of cleaner production, 136, pp.86-101.