ACCT20074: Evaluating JB Hi-Fi's Financial Decisions with Theories

This assignment analyzes JB Hi-Fi's financial reporting decisions through the lens of Classical Political Economy Theory, Institutional Theory, and the Managerial branch of Stakeholder Theory. It examines JB Hi-Fi's decision to release a profit downgrade, considering the impact of market conditions and the company's commitment to ethical governance. The analysis further explores how JB Hi-Fi's reporting decisions align with stakeholder interests, particularly in managing shareholder expectations and maintaining resource interdependence. Finally, the assignment investigates the relationship between current share prices and future earnings announcements, using the JB Hi-Fi case study to illustrate how market expectations and information dissemination influence stock valuation. The student solution references academic literature to support its claims and provides a detailed explanation of the theoretical frameworks applied to the case.

ACCT20074 Final Assignment
Term 1, 2018
Student ID:………………………………. Student name……………………………………………………..
Marker’s overall comments: The markers may include any
final comments here.
Overall Mark (Total) out of 50:
0

Question 1: Use Classical Political Economy Theory to explain JB Hi-Fi’sdecision to release its profit downgrade
in the way it did. Make sure you explain what Institutional Theory is, and support your observations with evidence
from the case study.
Answer: As per the classical thinkers, the determinants of financial development are labour specialization, human expertise,
profitability changes, exchange and the market expansion. It was expected more markets = more exchange = more development =
rising tide lifts all boats. Regardless of whether this is valid or not will be not affirmed. The Classical political economy theory was first
coined by Karl Marx in the main version of Das Kapital, for depicting the British and Scottish financial analysts that tried to clarify the
'internal structure' of the "bourgeoise generation mode". The challenging conditions in the home appliance market are expected to
impact performance in the short term of the company, therefore the shares if the company dealing with retail has dropped $2.29
that is 9%( Mosco, 2014).The Institutional theory stresses on the deeper and more resilient aspects of social structure and considers
the processes by which structures, including schemes, rules, norms, and routines, become established as authoritative guidelines for
social behaviour. In the given case study the company in order to adapt with the social authoritative norms has taken the decisions.
The chief executive of the JB hifi along with the board is committed to conduct ethically according to the high standards of the
governance principle has considered the institutional theory and has taken the decision of downgrading the profits for the year(Cohn,
2016).
The traditional political economy hypothesis helps in the analysis of the generation, conveyance, and trade of items in advertise
market societies. Anyway on account of JB hifi the CEO has foreseen a fall in the profit for the year by 2.9%.With the assistance of the
classical economy political Theory one might say that the primary purpose behind the anticipation of downfall if the profit is rivalry
that has been occurring in the home apparatus industry in Australia (Gilpin, 2016). Moreover as per the institutional Theory that
Provides a clarification regarding why tend to take on similar characteristics and form that might be adopted in order to bring
legitimacy to the organisation –‘Organisations conform because they are rewarded for doing so through increased legitimacy,
resources and survival capabilities’. The company of JB hifi who had expected the profit to be $235 million and $240 million in
2017/18 has reduced the same to $230 million (Healey, 2017).
References:
Cohn, T. H. (2016). Global political economy: Theory and practice. Routledge.

Gilpin, R. (2016). The political economy of international relations. Princeton University Press.
Healey, P. (2017). Political Economy, Diversity and Pragmatism: Critical Essays in Planning Theory (Vol. 2). Routledge.
Mosco, V. (2014). Political Economy. In The Routledge Companion to Global Popular Culture (pp. 35-44). Routledge.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many
spellingmistakes. Little or no
evidence of proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 2: Use the Managerial branch of Stakeholder Theory to explain JB Hi-Fi’s reporting decisions. Make sure
you support your observations with evidence from the case study.
Answer: The Managerial branch of Stakeholder Theory represents the extent up to which the organisation believes to maintain and
manage the relationship in interests of the organisation. The theory can be tested with empirical observation unlike normative
ethical branch, it specifically considers the different stakeholder groups within the society and provides knowledge on how they
should managed in the most effective way, and it does not consider the society as a whole like Legitimacy Theory. The company of Jb
hifi considers the Managerial branch of Stakeholder Theory in this decision making process as the concentration is more on the
stakeholders of the company that includes the outsiders and the investors(Beaudoin, Cianci & Tsakumis, 2015). The share price of the
company for the accounting period fell down drastically by 9% due to this, as the various share holders were willing to sell off their
JB hifi shares anticipating a loss. The company with this decision making process warned the shareholders before hand in order to
avoid the loss. The managerial branch of stakeholder theory is based on the principle that an organization and its stakeholders are
interdependent upon one another for resources and managers are responsible for maintaining this exchange relationship for the
organization's survival (Robert Knechel, Vanstraelen, & Zerni, 2015). Jb hihi, therefore declared the loss anticipation for their
stakeholder’s survival. Here the Expectations of stakeholders considered to impact on operating and disclosure policies. In the given
case it is clear that the giant company of JB hifi has adapted the managerial branch of Stakeholder Theory in their decision making

process. The Managerial branch of Stakeholder Theory is a theory that attempts to explain when corporate management will be likely
be able to meet the expectations of particular stakeholders especially who are powerful (Armstrong, Guay, Mehran & Weber, 2015).
It concentrates more on the organisation and its identified stakeholders. The company has downgraded their profit. JB hifi who had
expected the profit to be $235 million and $240 million in 2017/18 has reduced the same to $230 million. The challenging conditions
in the home appliance market are expected to impact performance in the short term of the company; therefore the shares dropped
$2.29 that is 9% (Commerford Hatfield, & Houston, 2018).
References:
Armstrong, C., Guay, W. R., Mehran, H., & Weber, J. (2015). The role of information and financial reporting in corporate governance:
A review of the evidence and the implications for banking firms and the financial services industry.
Beaudoin, C. A., Cianci, A. M., & Tsakumis, G. T. (2015). The impact of CFOs’ incentives and earnings management ethics on their
financial reporting decisions: The mediating role of moral disengagement. Journal of business ethics, 128(3), 505-518.
Commerford, B. P., Hatfield, R. C., & Houston, R. W. (2018). The Effect of Real Earnings Management on Auditor Scrutiny of
Management's Other Financial Reporting Decisions. The Accounting Review.
Robert Knechel, W., Vanstraelen, A., & Zerni, M. (2015). Does the identity of engagement partners matter? An analysis of audit
partner reporting decisions. Contemporary Accounting Research, 32(4), 1443-1478.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 3: To what extent do current share prices anticipate future earnings announcements? Use the case
study to support your answer.
The earnings announcement normally occurs on a specific date during earnings season and is preceded by earnings estimates that
equity analysts issue. If a company has been profitable leading up to the announcement, its share price will usually increase up to and
slightly after the information is released. The earnings announcement refers to the official public statement that represents the
profitability of company in the present case of retail business of jb hifi, for a specific time period which is generally a quarter or a
year(Chung, K., Kim, Lim, & Yang, 2016)..The public listed companies like Jb hifi has the duty to communicate to the shareholders on
the financial performance of the firm which is usually done through earnings announcement. Managers strive to maximize
shareholders wealth by making rational financial decisions. The Rationality theory argues that all investors are rational thus when
new information is released to the market they adjust their estimates of stock prices in a rational manner. The declaration would
provide the market glimpse on how stocks will likely be valued in the future. If the Stock prices tend to rise when earnings results
exceed market expectations while disappointing earnings results tend to lower share prices. In the present case of Jb hifi when they
anticipated a market is weak and the stock prices may react so fast that no investor can earn an above normal risk adjusted return.
The information that they declared efficient, stock prices should reflect all information released making it impossible to earn above
normal return by acting on publicly available information(Li, Sougiannis & Wang, 2017). However this may include such issues like
changes in management, introduction of new accounting techniques.
Stock prices move based on market expectations. Therefore the chief executive of Jb hifi declared the profit downgrade beforehand.
Earnings announcements are important since it determines the firm’s financial performance in terms of profits and wealth.
The 9% percent decrease in earnings may cause a stock to go up if the expectation is a much larger decline. In absence of market
expectations, there is little correlation between stock prices and earnings growth results. Therefore it can be said that the share
prices respond to earnings announcements in the month of earnings announcement. Shares in JB Hi-Fi sank 10 per cent after the
consumer electronics giant company cut its profit forecast for financial year 2018 at the conference, marking the stock’s biggest
single-day fall since 2011 (Savor & Wilson, 2016).
References:
Chung, K., Kim, O., Lim, S., & Yang, S. (2016). Strategic informed trading and the market reaction to earnings announcements.

Li, S., Sougiannis, T., & Wang, I. (2017). Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future
Earnings and Cash Flows.
Savor, P., & Wilson, M. (2016). Earnings announcements and systematic risk. The Journal of Finance, 71(1), 83-138.
Shevlin, T., & Thornock, J. (2015). Market (in) attention and the strategic scheduling and timing of earnings announcements. Journal
of Accounting and Economics, 60(1), 36-55.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 4: Show how the Brunswik Lens Model might be used to explain an investor's decision about whether
to buy or sell shares in JB Hi-Fi following their downgrade“announcement”.
The Lens Model is a process of thinking the gives an elaborate description of the relations between the environment and the
behaviour of organisms in the environment. The process of viewing the decisions that the people make and how they go about
making them is through the Lens Model of Brunswik has been discussed in the context of the investor’s decision in the company of Jb
hifi (Brigham, Ehrhardt, Nason, & Gessaroli, 2016). According to the model, there are the decision process to be composed of three
essential elements, the elements includes the basic information that has been transferred for the situation of decision, then comes
the actual decision that is taken by the investor and then the last step includes the correct decision that should have been
taken(Nofsinger, 2016). The fundamentals were developed by Egon Brunswik and popularized by Kenneth Hammond through
research on social judgments. According to the Brunswik Lens Model the decision of the investors depends on the factors based on
the current situation (Gitman, Juchau & Flanagan, 2015). Keeping them in mind the management of the Jb hifi made the
announcement beforehand regarding the downfall if the company profit. This would enable the potential investors to take the
decisions accordingly. The anticipated loss would make the shareholders take the decision of selling their shares to avoid further loss.
As a result the price of the Shares in JB Hi-Fi sank 10 per cent after the giant company of consumer electronics cut its profit forecast
for financial year 2018 at the conference, marking the stock’s biggest single-day fall since 2011 (McCahery, Sautner & Starks, 2016).
It can be concluded that as per the Lens Model of Brunswik the investors took their decisions after announcement after analyzing the
consequences of the share value due to the profit downgrade anticipation of the company.
References:
Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Managment: Theory And Practice, Canadian Edition.
Nelson Education.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate governance preferences of institutional
investors. The Journal of Finance, 71(6), 2905-2932.

Nofsinger, J. R. (2016). The psychology of investing. Routledge.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 5: Some academics have criticised the accounting profession for acting to legitimise the capitalist
system (supposedly by supporting the “haves” against the “have nots”. Indicate whether the case study
supports the critical view of accounting, or whether it doesn’t. Use the case study to support your answer.
In a capitalistic economy, the means of production are owned by private individuals or organizations and they are free to make use of
them in any manner with a view to making profit. The Capitalism stands for an economic order in which the instruments of
production (Land, Labour, Capital and Organization) are owned and controlled privately and production takes place for profit(Brown,
Dillard & Hopper, 2015).
A capitalist economy or capitalist system is one of the main parts of whose productive resources are engaged in capitalist industries
in which the material instruments of production are owned or hired by private persons and are operated at their orders with a view
to selling at a profit the goods or services that they help to produce (Lee & Cassell, 2017). In a capitalistic society, the production and
pricing of goods and services are determined by the free market, or supply and demand, however some government regulation may
occur(Hopper, Ashraf, Uddin & Wickramasinghe, 2015). On the other hand, a private owner in a capitalist system can have
a monopoly on the market and prevent free competition. In the present situation the company of jb hifi supports the capitalist
system.
References:
Brown, J., Dillard, J., & Hopper, T. (2015). Accounting, accountants and accountability regimes in pluralistic societies: taking multiple perspectives
seriously. Accounting, Auditing & Accountability Journal, 28(5), 626-650.
Hopper, T., Ashraf, J., Uddin, S., & Wickramasinghe, D. (2015). Social theorisation of accounting. The Routledge Companion to
Financial Accounting Theory, London: Routledge, 452-471.
Horvat, R., & Korošec, B. (2015). The Role of Accounting in a Society: Only a techn (olog) ical solution for the problem of economic measurement
or also a tool of social ideology?. Naše gospodarstvo/Our economy, 61(4), 32-40.
Lee, B., & Cassell, C. (2017). Facilitative reforms, democratic accountability, social accounting and learning representative initiatives. Critical
Perspectives on Accounting, 46, 24-37.
Mark (10):

Marker’s Comments: The marker will provide feedback here. 0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.