ACC303 Company Accounting: Memo to Board of Directors - Analysis

This assignment is a memo to the Board of Directors analyzing the 2019 Annual Report of Commonwealth Bank. It covers key aspects of the financial statements, including the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, and statement of cash flows. The memo highlights the bank's corporate governance structure, including the role of the audit committee, its approach to sustainability, and its handling of acquisitions like Aussie Home Loans. It also examines goodwill impairment, consolidation assumptions, and the judgments made regarding control, voting rights, and the determination of agent or principal. The analysis offers a comprehensive overview of the bank's financial performance and reporting practices, focusing on the technical and writing skills required for effective communication to a board with varying levels of accounting knowledge.

 These financial statements include income statement, statement of comprehensive
income, balance sheet, statement of change in equity and statement of cash flows
 According to the 2019 Annual Report of Commonwealth Bank, it has disclosed the
information related to corporate governance, audit committee, sustainability and
solvency in separate parts in the annual report
 There is a separate section in the 2019 Annual Report of Commonwealth Bank named
“Corporate Governance” and the bank has included all the information related to
corporate governance in that section (commbank.com.au 2019). The major parts
under this section are the bank’s commitment towards corporate governance, details
on board of directors and executive leadership team, commitment towards corporate
governance, the adopted corporate governance framework, stakeholder engagement
and others
 Commonwealth Bank has mentioned about the audit committee under the corporate
governance framework and this framework takes into consideration the review of
independent assurance and services including internal audit, external audit and other
ad-hoc independent assurance and advice
 As per the Audit Committee Chairman, the audit committee is responsible for the
external reporting of financial information, the internal control framework and
environment, the internal auditors and internal audit functions, external auditors and
the conjunction of the bank’s risk management framework with the Audit Committee
 The bank has reported its undertaken approaches to address the issue of climate
change under the section of Risk Management
 Commonwealth Bank has adopted the sustainability frameworks like The United
Nations Sustainable Development Goals, United Nations Global Compact and Global
Reporting Initiatives (GRI)
 The 2019 Annual report of Commonwealth Bank states that the bank has acquired
two companies in the year of 2018; they are Aussie Home Loans and eChoice
 However, the acquisition of Aussie Home Loans led to the generation of additional
goodwill of $446 million
 In order to assess the impairment of goodwill and other assets with indefinite useful
lives, the carrying amounts of the cash-generating units are compared to the
recoverable amounts.
 The recoverable amount is determined based on fair value less cost to sell through the
use of an earnings multiple applicable to this type of business. It can be seen from the

2019 Annual Report of Commonwealth Bank that no goodwill is impaired in the
financial year of 2019
 As per the 2019 Annual Report of Commonwealth Bank, the banks has used certain
assumptions and judgments regarding different aspects of consolidation which are
control and voting rights and agent or principal
 As per the accounting judgement and assumptions used for determination of control
and voting rights, holding more than 50% of an entity’s rights implies that the Group
has total control over the entity. There is an involvement of significant judgments
where the Group either holds more than 50% of the voting rights but does not have
control over the entity, or where the Group is deemed to have control on an entity in
spite of holding less than 50% of the voting rights. In case of the determination of
agent or principal, the Group is considered to have power over an investment fund
when it holds either the responsible entity and/or the fund’s manager function. The
management of Commonwealth Bank has determined that the Group acts as a
principal and have control over a fund when it is not possible to easily remove it as a
manager by the investors.