ACCT20074 Case Study: JB Hi-Fi's Reporting & Political Economy

This case study delves into JB Hi-Fi's financial reporting decisions, applying classical political economy theory, institutional theory, and managerial stakeholder theory. It examines the company's decision to release a profit downgrade, relating it to market conditions, tax avoidance strategies, and the influence of powerful stakeholders. The analysis also considers how current share prices anticipate future earnings announcements, using concepts like dividend yield and earnings per share. The study references ASX guidelines and academic literature to support its conclusions about JB Hi-Fi's strategic financial management.

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’s decision 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.
Institutional Theory is related to the social structure of the society and gas various aspects of the social structure.
The theory relates with the various polices, norms, routines, rules are established by an authority in order to
establish such as authoritative guidelines for social behaviours. Institutional theory is also related to various
components which are diffused, created and adopted over time. Many of the philosophers are also of the view
that the institutional theory throws light on the concepts of rational myths, Legitimacy and isomorphism. The
trends which are associated with such a theory are institutionalism and new institutionalism. New Institutionalism
is concerned with the development of the theory of sociological view of the institutions. This theory is also known
as neo-institutionalism which is concerned with how the institutions interact and how the activities of such
institutions affect the society. Some of the ideologies which are present in the new institutionalism and the roles
of different organisation following such a theory is seen to reject the rationale characteristics of models which is
included in the classical economies (Mosco 2014).
As per the new institutionalism theory, organisations must follow the predominant belief system and rules in a
particular business environment and also the rules which are applicable on the same. Instances can be provided of
multinational companies facing immense pressures which generally relates to domestic pressure and in some case
international pressure as well (Greenwood et al 2017). The decision which was taken by the management of JB hi-fi
can be related to the classical political economic theory which is focused on the resources-based view and
considers that the main motto of the company behind any strategies should be based on profits. The resources of
the business comprise of intangibles, property, capital and know how. The company acted as per the current
market condition of the business and therefore the company was unapologetic.
The analysis of the management decisions to lower the profits of the business can be traced to the good guys

driving shares down by 10% since late November. The range of the electronic retailer which was earlier between $
235 to $ 240 dropped its profit to $ 230. According to the institutional theory, in several instances business
corporations tackle the decreasing earnings by avoiding additional payment of tax. Many businesses following the
institutional theory follow such an approach. In the case of JB hi-fi, the company has shown more amount of profit
after tax, however the same is shown to be written down by 5 to 10 million in the consolidated statement so that
the business can pay lesser amount of taxes to the authorities. Therefore, it is easier for JB hi-fi company to so
that the company does not have to pay additional taxes which will help the business to be competitive in an
intense market (Senge 2013). Therefore, the reason for the drop of sales is clear from the above discussions as the
company wants to stay competitive in the market and at the same time generate more revenues for the business.
Thus, the business has rightly downgraded its profits by lowering the sales of the business.
Mosco, V., 2014. Political Economy. In The Routledge Companion to Global Popular Culture (pp. 35-44). Routledge.
Greenwood, R., Oliver, C., Lawrence, T.B. and Meyer, R.E. eds., 2017. The Sage handbook of organizational
institutionalism. Sage.
Senge, K., 2013. The ‘new institutionalism’in organization theory: Bringing society and culture back in. The American
Sociologist, 44(1), pp.76-95.
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
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,

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%
high level of analysis. Utilises
current, appropriate and credible
sources.
of analysis. Utilises mostly current,
appropriate and credible sources.
of analysis. Utilises some current,
appropriate and credible sources.
few current, appropriate and
credible sources.
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 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.
Managerial Branch of stakeholder theory focuses on the identification of the stakeholders of the business.
Stakeholders are individuals who have interest in the activities of the company and who are affected by the
activities of the company such as investors, lenders, banks and society at large (Ali and Rizwan 2013). The theory
requires the management of the company to meet the needs of particular stakeholders of the business. The
theory also emphasizes that the management of the company should look after the needs of the stakeholders for
the best interest of the company itself. There are various theories which can be tested for the purpose of this
theory. It considers those shareholders who can best manage the self-independency rather than as a society in
case of legitimacy theory. The expectations and needs of the shareholders are taken into expectation before
polices and disclosure practices are formulated. The managerial branch theory also specifies that the
management of the organization should not consider the needs of each stakeholders and respond equally but can
respond differently to powerful stakeholders. The power of the stakeholders is determined by the ability of the
stakeholders to influence the stakeholder has over the resources of the business. The resources which can be
influenced by the stakeholders are finance capital funds, labour supply and similar other resources.
As per the case study which is provided on JB hi-fi, the company has followed managerial branch of stakeholder
theory for the purpose of revising the net profit after tax of the business. As per section 7.3 of the guidance note 8
published by the ASX, a company is expected to treat its variation in earnings as per the guidance equal to 5% less
than being material and presume the guidance therefore does not need updating. However, JB hi-fi overlooked
such a consideration (Strand and Freeman 2015). Therefore, it can be said that the company follows the consideration
of managerial branch of stakeholder theory that makes it clear that the management does not need to respond in
an equal manner to the needs of every stakeholders and the management can respond to the needs of the
powerful stakeholders of the business. The business of JB hi fi in this case follows the materiality guidelines which

are issued by the Australian Stock Exchange (ASX).
References:
Ali, W. and Rizwan, M., 2013. Factors influencing corporate social and environmental disclosure (CSED) practices in the developing
countries: An institutional theoretical perspective.International Journal of Asian Social Science, 3(3), pp.590-609.
Strand, R. and Freeman, R.E., 2015. Scandinavian cooperative advantage: The theory and practice of stakeholder engagement in
Scandinavia. Journal of business ethics, 127(1), pp.65-85.
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 future anticipated earnings of the business are important indicators of the business and effective forecasting
of the same is helpful in decision making process of the management. The management of the company is
anticipating of future earnings can be done with the current share prices of the business by considering the key
concepts which are plough back of profits, book value of shares, EPS of the business and dividend yield ratio. With
the help of the current dividend yield ratio and the earning per share of the business helps the investors to
determine the regular earnings which the investors can expect from the business and is the main consideration
which the investors consider before investing in a business (Al-Qenae and Wearing 2015). The dividend payout ratio
also helps the business to estimate the amount of revenue which can be generated by the business. The primary
consideration for the revenue generation is the dividend payout ratio of the business and the secondary
consideration is the capital appreciation which the business can achieve. Based on the anticipation of dividend
yield ratio companies with high dividend is not only have a poor growth record but often show for future growth.
On the contrary, high-growth companies generally have records of bleak dividend pay-out. Investors are
interested in the relationship of dividend during as per the market price of the company’s share rather than that
they are more interested in the relation of dividends which beer to the market’s price of company’s share.
Earning per share which can also determine the profits and future earnings which can be generated by the
business in future years. The estimate is calculated on the basis of the number of shares which are held by the
investors of the business (Cooper, Gulen and Rau 2016). The formula which is used for calculating the earning per
share of the business is by dividing the net profit which the business is able to generate after tax divided by the
number of shares which is issued by the business.
In the case of JB hi fi, the eps of the business is shown to have increased from 153.8 cents to $ 154.3 cents per
share which shows the improvement which is made by the business during the period. The growth rate which is

achieved by the business is about 22.4% which is quite significant. The net profit of the business has also
significantly increased during the year which is shown as $ 152.2 million in 2016 and the same increases to $ 172.4
million in 2017 as per the annual reports of the business. There is a growth of 36.5 % in net profit for tax. The
dividend payout ratio of the business also shows that the company is able to achieve 88.27% in 2016 which
increased to 101.4% in 2017 which shows the improvement in the business and the business efforts to meet the
expectations of the business effectively.
The above estimates are useful for the purpose of determining the future earnings which the business can
expected based on the current estimates which are mentioned above. However, certain indications about the
share price at the end of 2017 can predict certain aspects of the declining profit after tax. The share price of the
company at the end of 2015 was about $ 19.4 per share which has increased to $ 24.10 per share. The increase in
the shares can be measured by the increase in net profit after tax and the same can be related. However, the
share has fallen to $ 23.37 per share in 2017 which shows a decline in the share price of about 3% from previous
year. This decrease in the share prices of the company has further anticipated the rational for declining future
earnings (Demers and Vega 2014).
References:
Al-Qenae, R., Li, C.A. and Wearing, B., 2015. The information content of earnings on stock prices: The Kuwait Stock Exchange.
Cooper, M., Gulen, H. and Rau, P.R., 2016. Performance for pay? The relation between CEO incentive compensation and future stock price performance.
Demers, E. and Vega, C., 2014. Understanding the role of managerial optimism and uncertainty in the price formation process: evidence from the textual content of
earnings announcements.
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 identified as a way of thinking which is associated with the various relationships among the
environment and behaviour of companies in a particular environment (Orquin 2014). The fundamentals to this
theory was designed by Egon Brunswik and the concept was later on popularised by Kenneth Hammond by
including various components of social judgements. It is known as lens model because it looks like the framework
of this model is passing through a convex lens including the attributes of cues, judgement, achievement and
criterion (Hirschmüller et al. 2013). This model helps in clarifying the scope of items with a greater understanding. As
per the lens model which is based on the psychology of the investors and the behaviour decision theory which can
be related to the investors of the business (Nenycz‐Thiel and Romanik 2014).
The theory is related to the factors of the environment which can relate to dependent variable of the business.
The cues are identified as independent variable as per the lens model terminology. The main decision-making
criteria helps in determination of human decision process as an involvement of various mathematical indexes.
Majority of the research studies have applied this theory to indicate many realistic settings which relates to the
basic information of division situation, actual decision which is identified by the decision maker and in a particular
situation.
In the case of JB hi-fi, the theory can be effectively applied foe which the investors need to identify the investment
criteria of the business which are depended on three level which are input level, information processing level and
output decision level. The investor first need to consider the financial performance of JB hi-fi by the historical data
which is available for the business. The data can be accessed through the financial statements of the company for
the year 2015, 2016 and 2017. The investors can then compare the performance of the business from year to year
basis and judge the company’s performance in terms of revenue which the business is able to generate and also
based on the stock market performance.
The next step which the investor need to take for the purpose of making investment decisions which is based on

the lens model. Firstly, the investors need to make the decisions as per the cues used in the model and then
compare the same with the actual outcomes (Bristow, Mowen and Krieger 2015). Based on the significant level of
comparison of statistic modelling provided in the lens model it will be ideal for the shareholders to hold the shares
of JB hi-fi and wait for future market indications to take the final decision of buying or selling of shares. The
decision which is to be taken about the investment decision of the business should be based on the further
indications which are provide in future by significant financial indicators of the business. The present decision of
the business should be based on the competitiveness and volatility of the market.
References:
Orquin, J.L., 2014. A Brunswik lens model of consumer health judgments of packaged foods. Journal of Consumer Behaviour, 13(4), pp.270-281.
Hirschmüller, S., Egloff, B., Nestler, S. and Back, M.D., 2013. The dual lens model: A comprehensive framework for understanding self–other agreement of
personality judgments at zero acquaintance. Journal of Personality and Social Psychology, 104(2), p.335.
Nenycz‐Thiel, M. and Romaniuk, J., 2014. The real difference between consumers' perceptions of private labels and national brands. Journal of Consumer
Behaviour, 13(4), pp.262-269.
Bristow, D.N., Mowen, J.C. and Krieger, R.H., 2015. The quality lens model: A marketing tool for improving channel relationships. In Proceedings of the 1994
Academy of Marketing Science (AMS) Annual Conference (pp. 397-401). Springer, Cham.
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.

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%
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.
As per the question the role of accounting process is to be considered whether the same is in the interest of the
public and shareholders of the business. As per the modern situation of the business market, due to market
changes, the role of accounting is very important and it is expected that the business needs to act in the best
interest of the shareholders and the general public (Foss, Lyngsie and Zahra 2013). In Australia, accounting plays a vital
role in both private and public sector and the professionals act in the best interest of the public following the
accounting standards which are issued by the accounting regulatory authority. Many of the critics are of the view
that the accounting process and the standards which are set by the businesses are used for the purpose of capital
interest and not for the interest of the general public.
The knowledge and the professional ethics which are necessary to be developed by accounting professionals for
effective protection and serving of the interest of the general public. Over the past 50 years the importance of
systematic knowledge has been considered to remain axiomatic for defining various constraints of accounting
profession. In addition to this, based on various events it can be argued that state has accommodated
multinational corporate interests instead of public interest as per the section of CLERP Act 1999 and ASIC Act
2001.
The case study cannot be regarded to support the critical view of this notion as that based on the guidance in the
section 7.3 of the guidance note 8 published by the ASX, a company is expected to treat its variation in earnings as
per the guidance equal to 5% less than being material and presume the guidance therefore does not need
updating. The case study which is provided does not suggest in any way that the company JB hi-fi is any way
opposed to the general interest of the public.
References:

Foss, N.J., Lyngsie, J. and Zahra, S.A., 2013. The role of external knowledge sources and organizational design in the process of opportunity
exploitation. Strategic Management Journal, 34(12), pp.1453-1471.
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.