Corporate Accounting Analysis: Wesfarmers Annual Report 2018 Report

This report provides a comprehensive analysis of Wesfarmers' corporate accounting practices based on its 2018 annual report. The analysis includes an examination of the number and qualifications of independent directors, the gender ratio on the board, and the company's subsidiaries. It delves into the application of AASB 101/IAS 1, comparing the nature and function of expense classifications. The report assesses Wesfarmers' financial performance, highlighting profitability and stability, as well as the company's strategic investments and social responsibility initiatives, including community contributions and sponsorships. Furthermore, it defines social contracts and organizational legitimacy within the context of Wesfarmers' operations, providing a holistic view of the company's financial and social landscape.

Corporate accounting

Contents
Corporate accounting......................................................................................................................1
Introduction......................................................................................................................................3
Section 1..........................................................................................................................................4
Part A...........................................................................................................................................4
Part B...........................................................................................................................................6
Section 2..........................................................................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Introduction
Corporate accounting is considered as the branch of accounting which helps in dealing with
accounting for the companies. In the corporate accounting cash flows are formed and the
analysis of the cash flow is done so as to achieve the objective of describing the accuracy for the
financial information. This is also done so as to interpret the company's financial results and
accounting for the special event of the company through which the amalgamation and absorption
of the company are done (Ahmad, 2019). This is seen that every company must perform some of
the accounting so that they are able to identify the financial state of the company. Here the
company Wesfarmers has been identified to analyse various factor of corporate accounting for
the company. While various analysis has been done so as to identify the requirement of the
Australian accounting standard board. Also, the other part of the report includes the definition of
social contracts and the definition of organisational legitimacy.

Section 1
Part A
1. How many independent directors are there?
The term independent director is considered as the director of the board who does not have a
material or any pecuniary relationship between the company and the person. This is considered
as the director which plays an active role in various committees so as to ensure good governance
in the company (Bayne, Purchase and Tarca, 2019). There are various independent directors in
the company. The board consist in the year 2018 contains all the eight non-executive directors as
independent directors. These directors are expected to bring different views and judgment to the
board which helps in the deliberating the independence of management and are considered to be
free from any business or the other relationship or circumstances that could materially interfere
with the objective of the company.
2. What is the number of director of each gender in the company?
There is a total of 10 directors in the company of which three directors are female that is
mandatory by the company to have and seven are male directors. This is seen that the gender
ratio in the company is of 3:7.
3. Do select three directors provide their qualification and experience?
There are various directors in the company of which three are chosen to bifurcate these include
Michael Chaney AO who is of 68 years and is having BSc, MBA, Hon. LLD W. Aust, FTSE. He
has a great experience in petroleum and geology and corporate finance. He joined the company
in the year 1984 where he became the company secretary and the administrative manager of the
company (Campbell, 2017). Then he became finance director in the year 1984 after which he
was appointed as managing director in 1992. His other experience includes Chairman of
Woodside Petroleum Limited, Chancellor of the University of Western Australia, Member of the
Commonwealth Science resourcing board, Chairman of National Australian Bank Limited.
Jennifer Westacott AO is on the position of Director of the company and she is of 58 years. She
has done a BA (Honours), FAICD, FIPAA. She is chief executive of business council Australia.
She also worked as the board of director and a lead partner at the famous firm KPMG. Also has

extensive experience in a critical leadership position in the South Walesa and Victorian
Government (Cranston, 2018). She has the experience as a member in the prime minister's expert
advisory panel on the reform of federation. She is also a board member of the Cybersecurity
research centre.
Bill English KNZM has been given an honour of The Right Honourable and is 56 years old. He
has done BA (Hons) (Wellington) and B.Com (Otago). He was deputy prime minister and the
ministry of the finance of New Zealand. He was the prime minister of the country until the year
2017.
4. A number of subsidiaries and associate and the foreign subsidiaries and associates of the
company?
The company is having a various investment in the subsidiaries and the foreign subsidiaries and
associates of the company. The main subsidiary of Wesfarmers includes Bunning warehouse,
Officeworks, Officeworks business direct, Kmart, Target, Bengalla mining company, Koukia,
Blackwood's, Wesfarmers industrial, Australian gold reagents, Wespine industries etc. The total
of main industries that are owned makes a total of 33 subsidiaries (Ferreira and et. al., 2018).

Part B
1. As per the AASB 101/IAS 1 to present analysis of the expense using a classification
which is based on either their nature or their function includes that entities have the
option to recognise expense in the profit and loss which may be based on either of nature
or the function of the entity whichever provides the best information about the expense
(Fund, 2017). This is stated that the companies which are presenting the information may
present them in the profit and loss statement and also in the comprehensive income
statement of the entity.
It is seen that expenses are subclassified into two segments so that they are able to
highlight the component of the financial performance of the company. This may differ
from the frequency, the potential for gain and or loss and predictability of the company.
Hence for making analysis two forms are determined which includes the "nature of the
expense method" and the other includes the "function of expense method". The former
method is considered as the method where the company aggregate the expense in the
profit and loss statement according to the nature of expense which means that nature of
expense is considered to be one of the methods to identify the expense that has to be
recorded in the books. This method is considered as one of the easiest methods that are
simple to apply because no allocation of expense to the functional classification is
required by the company. Some of the examples of an expense that are recognised in this
method include Depreciation, Raw material purchased, advertisement and marketing
expense, employees remuneration etc.
While the second method that is based on the "Function of expense" helps in classifying
the expense on the basis of the function or the cost that is included in making the sale for
the company. Under this method, it is seen that entities disclose the cost of sales
separately from the expense that is recognised by the company. This method helps in
providing more relevant information regarding the classification of the expense that is
done by the user of the report (Gerard and Johnston, 2019). While this is to be considered
that any entity which is providing a classification of expense on the basis of the function
of expense has to showcase additional information about the nature of the expense which
includes the depreciation and the amortisation expense.

Wesfarmers utilises the method that is specified in the AASB 101/IAS 1 to allocate the
expense that is based on two different methods. The company uses the Nature of expense
method to determine the expense for the disclosure in the financial statement of the
company. As in the consolidated accounts of the company it is seen that there is the use
of the classification of expense on the basis of nature hence this can be said that company
is using nature of the expense method to determine the expense in the financial statement.
As this is seen that the company using the nature of expense method to determine the
expense. This can be recommended to the company that they can use the function of
expense method to classify the expense (Haq, Avkiran and Tarazi, 2019). This method is
considered as a more reliable method and helps in disclosing the information more
accurately. This allocates the cost to the functions and is considered to be a method that
helps in giving the judgement for the arbitrary allocation and involves considerable
judgment for the same.
2. The company is having a good profitability status for the current period from the
operations of the continuing business of the company. But the company is not able to
maintain financial stability and growth in the profitability of the company as this is seen
that the company is having huge losses through the business that has been discontinued
by the company. For the current period, the company is having a profit of $2604Mn.
Which is considered as less from the previous year of the company that was $2760Mn?
While in the current year the company has also loss due to which the stability of profit of
the company is impacted.
3. The company is currently working in many divisions and has a various alternative that
are available to the company. This is seen that company is having an ongoing investment
in store division of the company and they are also investing in the online support for the
future sales of the company. The company is focusing on the one stop shop for its core
customers so that they are able to fulfil their needs and wants. The company is focusing
on the industrial divisions where they are considering to find new opportunities to
increase the production of the company (Lim and et. al., 2016). The company is also
focusing on the opportunities which include the investment in the local community where
they operate their functions.

4. Wesfarmers produces various social responsibility that they have towards the society as
they are taking from the society hence they have found different ways to pay it back to
the society so that they are able to fulfil the corporate social responsibility of the
company. The company contributed to the $86.6Mn inn the direct funding to the
community organisation. The company also invested millions of dollars in the
community program and also support the number of organisation in the country either the
organisations philanthropically. Company contribute around $9Mn to the partners and
also funded the Telethon Kids Institute with the increased funding of $1.5Mn every year.
Also, the Wesfarmers arts provided sponsorship support to the leading arts organisation
in the country with the amount of the $3.3Mn for this year.
5. The company while providing the information of the financial year and applying the
accounting policies made a various judgement and applied estimates for the future year
which includes that revenue is measured at the fair value consideration which is received
or is receivable by the company (Lim and et. al., 2017). Also, the future prospect of the
Loyalty program has been defined estimated for the purpose. The company also does not
recognise the unrecognised tax liability on the indefinite life intangibles for which the
carrying value has been assessed by the company. Company has also seen that net
realisable value would be considered to be the cost that is used for bringing the inventory
to the location and to the condition of sale.

Section 2
a. The term social contracts mean the relationship between society and the banking institute.
This is seen that it is considered as the agreement between the people of the country and
the banking institutions through which the people of the country agree to follow certain
rules and regulations that are formed by the bank of the country. It is the duty of the bank
to protect the money that is deposited with them and the does not use them in any of the
illegal activity which may cause the bank to breach the social contract that they have. It is
the duty of the bank to be reasonable and to fulfil the social contracts that they have for
the company (Moradi-Motlagh and Babacan, 2015). there are various implicit and the
explicit conditions which are related to the bank's social contracts these include the
implicit term that social contract is considered as the idea of each party which is a bank
and the people of the country that they both must give up something in exchange for the
business. While there are some of the implied conditions that are related to the social
contracts that are related to the bank which includes that, as the bank receives the rate
cuts that must be passed to the customer directly on time so that they are benefited from
the rate cuts to the greater extent. Also, the banks are expected to charge from the
customer in a realistic manner and should not penalise the customers unduly for the
services.
b. The charge that was levied on the company for the fee for no service told explicitly that
the company was charging a fee from the customer and this was seen that they were not
giving any service to them. The various stakeholders for this involve the NULIS and the
MLC nominees. The Andrew Hagger executive of NAB has disrespected the role of
regulator and disregard the gravity of events in the question. Also, ASIC founded that the
NAB current and the former super trustee are also liable for the same.
c. Organisational legitimacy means a congruency which an organisation seeks to establish
so that the social values which are associated with the company (Sullivan and Gouldson,
2017). These are inferred by the activities that they do and the norms which may be
considered to be acceptable by a large social system which they are part of. The
companies legitimacy has been negatively impacted in this case as the company was not
able to perform its obligation and also have used the negative way to perform the social
contract that is built between the bank and the customer of the bank. They have charged

their customer for no service that they have provided and hence are lost their
organisational legitimacy in front of customers. The belief if the customer is lost due to
the unethical behaviour that the company has decided to perform. While this is seen that
to regain the market and the trust of the customer on the products that they offer they
have promised and have created a policy that aims to the customer first approach. The
company has promised to take care of the internal auditing events that take place and has
organised a platform that helps in addressing the functions which provide the customer
first approach for completing the task (Wong, 2017). The company has also promised to
make the organisational as well as the management change from inside to outside. While
before this the company was focusing on the approach of more give less take which
helped them a lot. The company was only focusing on generating revenue for the
customers before and now they have shifted it to the theme of customer desires and
wants.
d. The organisational legitimacy can be improved in various ways if the strategies for this
are used in the best and proper manner by the company. The company can use the image
repair discourse as a strategy to improve the image of the brand that they have lost in
recent years. They can also improve this through the process of Benoit's theory of Image
of repair discourse (Zentes, Morschett and Schramm-Klein, 2017). Also, the strategy to
the scrutinise the media is one good method to improve the organisational legitimacy by
the company as they should check what are the areas which are taken by media and that
should be corrected by them. The behaviour of the organisation should be properly
executed and should be projected in a manner that helps in increasing the motivation of
the employees of the company.

Conclusion
From the above report, this is considered that Wesfarmers is considered to be having one of the
best managing staff. The company is working and conducting its operation in the best manner so
as to achieve the objective of maximising the goal of the company. It is seen that the profits of
the company are not stable and are volatile. While the company follows the method of nature of
expense in recording the expense in the company. It is also seen that organisational legitimacy is
important for the company to achieve the objective of maximising the objective of the company.
The company has the objective of following the social contract that they have with the people of
the country.

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