HI5020 Corporate Accounting: Sources of Funds and Liabilities

This report provides a comprehensive analysis of corporate accounting practices, specifically focusing on the funding strategies, liabilities, and asset management of two selected companies, Wesfarmers Group and Woolworths Group. The report identifies and examines the various sources of funds employed by these companies, including shareholder funds, retained earnings, global bonds, and bank loans, and evaluates the evolution of these funding sources over a three-year period. It also delves into the percentage of internal and external funding used by each company, highlighting the relative merits and shortcomings of different funding options. Furthermore, the report critically examines the types of liabilities presented in the balance sheets, distinguishing between interest-bearing and non-interest-bearing liabilities. A significant portion of the report is dedicated to the analysis of AASB 137, its provisions, and how the selected companies reference this standard in their annual reports. The report concludes with an identification of different asset categories and an examination of the measurement bases used for each asset class, providing a detailed overview of the companies' financial reporting practices.

Running head: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING
Name of the Student
Name of the University
Author Note

1CORPORATE ACCOUNTING
Table of Contents
Introduction........................................................................................................................2
Identify the different sources of fund that have been used by your selected companies. 2
Examine the evolution of the sources of fund used by the company over the last three
financial years with specific focus on the changes of different sources of funds..............2
Identify the percentage of the fund that is internally generated and the percentage of the
fund that is externally generated for each selected company...........................................3
Explain the relative merits and shortcomings of the different sources of fund used by
your selected companies...................................................................................................4
Critically examine different types of liabilities shown in the balance sheet of your
selected companies? Identify which ones of the liabilities are interest bearing and
which ones are not interest is bearing............................................................................5
Critically examine the key provisions under the AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets.......................................................................................6
Identify if your selected companies have made any reference to this particular standard
(AASB 137) in their annual reports....................................................................................7
Identify all different categories of assets recorded by the selected companies................7
Critically examine the measurement basis used by the company for each class of
assets recoded by the selected companies......................................................................8
Conclusion.........................................................................................................................8
References.........................................................................................................................9

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Introduction
Funding can be essentially identified as the various ways in which an enterprise
gathers liquid cash for its overall operations. The funding in an enterprise needs to be
carried out in a manner such that, it does not pose to be a burden on the enterprise.
The AASB 137 as a standard has laid down certain regulations related to the Liabilities
and Assets which caters to the fact that the companies need to apply an appropriate
recognition criteria and measurement bases which are applied to the Provisions, the
contingent Liability and the Contingent Assets in order to disclose information to the
users in a timely manner (Aasb.gov.au 2020). The two companies which have been
chosen for the analysis can be stated to be Wesfarmers Group and the Woolworths
Group. All companies are required to have an adequate source of funding options
which need to be developed by the different enterprises. In line with this, the primary
aim of the given study is to develop a clear understanding of the various sources of fund
which are used by the companies and understanding how their choice of funds have
been evolving over the past three years (Wesfarmers.com.au 2020). In addition to this,
the report will also utilize the annual reports to determine the manner in which the
different companies have been making use of different sources of funding and the
percentage of funds raised internally and externally. As the study is essentially focused
on understanding the concepts relating to the AASB 137, the study will conduct an
analysis of the same and aim to identify the `Provisions, Contingent Liabilities and the
Contingent Assets` which are essentially made use of by the different companies which
have been selected for this study. The category of assets which have been recorded
shall be identified and the measurement basis used for every asset class shall also be
assessed.
Identify the different sources of fund that have been used by your selected
companies
After the analysis of the different financial statements of the two companies, it
was essentially identified that, the Woolworths and the Wesfarmers group make use of
various sources of funding in order to attain the cost of capital advantage and to
maintain the balance sheet strength as well as the flexibility so that the firm will be able
to meet expenses and identify them in an appropriate manner (Appelbaum et al. 2017).
The diverse sources of funds which are essentially, identified by the firm can be
mentioned to be the bank facilities, global bond markets along with optimizing funding
costs. The two groups also tend to ensure that they maintain strong credit metrics and
invest in lines with good credit ratings so as to be able to be supported by the cash flow
generation and disciplined management of capital.
Examine the evolution of the sources of fund used by the company over the last
three financial years with specific focus on the changes of different sources of
funds
Woolworths Group

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 2017: The organization has undertaken the funding opportunity with the help of
which they can maintain their overall credit rating. In addition to this, it is integral
to understand that, the firm has made use of various funding techniques such as
the borrowings, shareholder funds, bank loans and other related sources of
funding’s.
 2018: The shareholder investments form one of the largest sources of funding for
the enterprise (Atanasov and Black 2016). It enables the firm to perform well and
attain its different objectives. In line with this, it is integral to understand that, if a
firm needs to gather funds, it keeps in mind the capital rating and availability in
consideration to the same (Woolworthsgroup.com.au 2020).
 2019: The firm has made use of a variety of funding sources such as the short
term market loans, the banking loans and related securities. In association with
this, other non-current sources of borrowings comprise of the methods of Bank
loans, securities, unamortized borrowing costs and the different financial leases.
The shareholder investments also form a greater source of funding for
Woolworths Group.
Wesfarmers Group
 2017: In the year 2017, the Wesfarmers as an enterprise has been able to
source funds from a variety of sources such as the Lenders who can be
understood to be the different borrowers who are interested in investing money
into the funds operations. Additionally, other sources of funds comprise of the
bank loans, bank accepted bills, commercial papers, corporate bonds and other
cash facilities. Shareholders’ investment forms a large source of funding for the
firm.
 2018: In the year 2018, the sources of funds which were used by the Wesfarmers
groups remained the same whereby, the fund made use of the resources such as
loans from private and public institutions, bills and bonds. Shareholders’
investment forms a large source of funding for the firm (Wesfarmers.com.au
2020).
 2019: In 2019, the firm maintained its daily regulations and gets its funding
opportunity from different resources such as the bank facilities and capital bond
markets. Shareholders’ investment forms a large source of funding for the firm.
Hence, form this analysis it can be mentioned that, the firm has not been able to
evolve its funding sources and they can be stated to be very limited and consistent.
Identify the percentage of the fund that is internally generated and the percentage
of the fund that is externally generated for each selected company
Woolworths Group:
Presently, the enterprise has made use of both the Internal as well as the
external sources of funding’s to carry out the different operations successfully. The
Woolworths as an experience gains 70% of its funds internally through shareholder
offerings, the revenues, the retained earnings and others. In line with this, it is critical to

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understand that the rest 30% of the offerings of the firm are made from sources like
External debts and Global Bond market (Woolworthsgroup.com.au 2020).
Wesfarmers Group:
The enterprise utilizes both the internal as well as the external means of
funding’s. In consideration with this, it becomes effective to consider that, the right kind
of balance and capital management is maintained so as to ensure that the firm is being
able to successfully attain all its objectives. In association with this 75% of the funds of
the firm are raised internally through revenues, shareholder funds and other similar
sources. On the other hand, the sources of external funds are the borrowings and the
global bonds and other liabilities.
Explain the relative merits and shortcomings of the different sources of fund
used by your selected companies
Shareholder funds
Advantages
 Long source of capital: The shareholders’ funds can be essentially described as
a long source of capital which are essentially long term in nature and need not be
paid back to the different shareholders quickly. In consideration with this, it
becomes effective to ensure that the firm is being able to utilize these funds in
the right manner (Balashova et al. 2016).
 Limited control: The different shareholders generally tend to have limited control
over the overall manner in which the firm generally tends to perform. In
consideration of this, it becomes effective for the organization to ensure that it is
being able to ensure that, the long term source is being preferred by the
enterprise for the particular aspect.
 Low risk: The risk involved in the shareholders’ funds and in association with this,
it becomes effective to understand that, the firm should opt this source of funding
in an effective manner (Brinca et al. 2016).
Disadvantages
 Increased management involvement: The disadvantages of using this method of
funding involve engaging the shareholders in the overall control of the firm. This
means that, the different members of the shareholder group often participate in
the decision making of the enterprise which makes the working increasingly
difficult (Hoyle, Schaefer and Doupnik 2015).
 Dividends: The shareholders have to be paid a fixed amount of dividends which
thereby makes the funding an expensive one.
Retained earnings
The retained earnings source of funding refers to the previous savings of the
enterprise and the ways in which the firm would be essentially required to use their own
savings to fund the different operations which they necessarily engage in. In line with

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this, it becomes effective to understand that, the enterprise would be required to ensure
that the main advantages of using this as a medium can be stated to be the fact that the
company would not be required to pay any other means of interests or repayment
aspects to the different lenders (Khan, Serafeim and Yoon 2016). In addition to this, the
sources of funds do not require any management involvement or related aspects.
Global bonds
The global bond funds can be referred to as the mutual funds which focus on a
wide range of fixed incomes and securities around the globe. In line with this, it
becomes effective to ensure that, Funds are generally sovereign or corporate bonds.
The main advantage of this source of funding is that, it is easily available and the brand
name of the enterprise acts as a greater source of funding opportunity (Maas,
Schaltegger and Crutzen 2016). However, the only disadvantage facing this can be
mentioned to be the fact that the risk for investors is low which means, the bonds are
easily en-cashable and hence, the enterprise cannot retain the borrowings for long time
periods.
Bank Loans
The Bank Loans can be effectively mentioned to be the loans and borrowings
which are effectively taken from the various Banking and related Financial institutions.
In consideration of this, it becomes effective to understand that, the Banking Loans act
as a reliable source of funds whereby the firm would be essentially required to see to it
that, the firm gains a considerable amount of revenue and it can take a long term loan
which will be helpful for the company (Schaltegger and Burritt 2017). However, one of
the greatest disadvantages of the business loans can be mentioned to be the fact that
the firm would be required to pay interests to the different banks from whereby the loan
is essentially collected.
Critically examine different types of liabilities shown in the balance sheet
of your selected companies? Identify which ones of the liabilities are
interest bearing and which ones are not interest is bearing
Woolworths Group
Liabilities
The liabilities can be essentially defined as the company`s legal financial debts
and obligations which generally tend to arise during the course of business operations.
In consideration of this, the liability can be either limited in nature or unlimited. They are
settled over a course of time, through the transfer of the economic benefits which
generally tend to comprise of goods, services and money (Schaltegger, Burritt and
Petersen 2017).
Current Liabilities
The current liabilities can be defined as the liabilities which have to be paid within
a short span of time. These liabilities comprise of various liabilities and debts like the

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Tax payable during the current year, the financial liabilities which have to be made, the
provisions which are required to be made, the Trade and related payables, the
Borrowings and other such short term creditors.
Noncurrent Liabilities
The non-current liabilities can be mentioned to be the liabilities which are long
term in nature and do not have to necessarily be paid within a span of one year. In
consideration of this, it becomes integral to ensure that, the aspects under the non-
financial liabilities comprise of Long term borrowings, the provisions made for debts,
other categories of non-current liabilities and financial liabilities to be made
(Schaltegger, Etxeberria and Ortas 2017).
Out of these two given Liability types present and its variants, the liabilities which
are interest bearing can be essentially mentioned to be the Trade payables and the
Short term and Long term borrowings and loans which are taken. In consideration with
this, it is effective to mention that the company would be required to ensure that it is
being able to make timely payments in this regard to avoid any added expenses in
consideration to the firm.
Wesfarmers Group
Similar to the Woolworths Group, the Wesfarmers also has the Current and
Noncurrent liabilities under its umbrella. In consideration with the Current liabilities, the
firm has aspects like the Trade and other payables, Interest bearing loans as well as
borrowings, the provisions, derivate as well as the Income tax payable. The non-current
liabilities comprise of aspects like the Derivate, long term loans and other financial
bearings (Watson 2015).
Hence, in consideration of this, it becomes effectively essential to understand
that out of the given set of liabilities which are present with the enterprise, the Interest
bearing loans are the only liabilities which are interest bearing ones. The rest of the
liabilities which are present are not interest bearing liabilities. Therefore, Wesfarmers
would be required to see to it that, it is being able to pay back these loans which have
been accumulated on time.
Critically examine the key provisions under the AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets
The AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets` have
been essentially designed to ensure that the measurement basis to the provisions, the
contingent liabilities and assets which are made can be assessed adequately. In
consideration of this, it becomes effective to understand that, the accountant or the
company would be essentially required to see to it that, proper recognition criteria and
measurement basis can be made effectively (Wesfarmers.com.au 2020). In
consideration of this, it is essential to ensure that this particular act is applicable to all

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companies who are reporting entities and their financial statements are required to be
prepared in regard to the structure.
The scope of the particular research can be understood to be based on
accounting for provisions and all companies except the ones with a contract or the ones
who are covered by other Standards. The different measurements which are
recommended by the acts and provisions for the measurement of such provisions,
assets and the liabilities can be understood as the Best estimate measure, Present
value and related calculations, Risks and Uncertainties and future value methods.
The measurement acts as assistance for the different enterprises and helps them
to identify the manner of treatment which is required to be given to the different assets
as well as the various liabilities which are present with the enterprise
(Woolworthsgroup.com.au 2020).
Identify if your selected companies have made any reference to this particular
standard (AASB 137) in their annual reports
The Woolworths Group
The Woolworths Group as an entity does not make use of any reference or
relevance to the AASB 137 as a standard or a measure of recognition. In consideration
to this, it becomes effective to ensure that, the firm must be making use of another
recognition and measurement policies to engage in effective operations.
The Wesfarmers Group
As per the annual reports of the Wesfarmers group, the enterprise has not made
use of any such relevant references to the AASB 137. In line with this, it can be
considered effective for the organization to ensure that, it is using another set of means
to recognize and measure the contingent provisions, liabilities and assets
(Wesfarmers.com.au 2020).
Identify all different categories of assets recorded by the selected companies
Assets are generally classified into Current and Noncurrent assets. Under the
category of the current assets, the assets which are existent can be mentioned to be the
cash and cash equivalents, marketable securities, the prepaid expenses, accounts
receivable and the inventory. In consideration of this, it becomes effective to ensure
that the Non-current assets which are present are the fixed assets and the Goodwill.
The classification of assets is generally undertaken by the enterprise from the
perspective of the investments which are made. The classification applied can be stated
to be the growth assets and the defensive assets (Wesfarmers.com.au 2020). The
growth assets generally generate income for the firm whereby the defensive assets
generate income through interests. The equity securities, the rental property and other
such exquisite properties generally come under the category of the growth assets. On
the other hand, the defensive assets are the Debt securities, the savings accounts and
other such savings are categorized under the Defensive assets.

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Hence, when the financial statements of both the enterprises, the Woolworths
Group and the Wesfarmers Group were assessed, it was identified that, both the
companies have both kinds of assets which can be categorized as the growth and the
defensive assets. In regards to this, the companies have assets which help in its growth
such as the fixed assets and other equipment’s along with defensive assets like
Investments and Debt opportunities.
Woolworths
Figure 1: The Asset categories
(Source: Woolworthsgroup.com.au 2020)
Critically examine the measurement basis used by the company for each class of
assets recoded by the selected companies
The company generally tends to apply a certain kind of a measurement basis to
ensure that it is being able to recognize and measure the different classes of assets
which are present in the financial statements of the enterprise. As per the annual report
of both the enterprises, the AASB 9 is a new standard which has essentially replaced
the previous standard, the AASB 139 financial instruments Measurements and
Recognition. In line with this, it is essential to ensure that, the firm follows this new
standard to experiment with new models. Both the firms, Woolworths and the
Wesfarmers have essentially made use of the AASB 9 versions and introduced a credit
loss impairment model for the financial assets and utilized the new classification and
measurement category which is the `fair value through comprehensive income` for the
class which pertains to the debt and related equity instruments. In consideration with
this, it is effective to mention that, when an assessment was undertaken by the
enterprises to measure the influence of the expected credit loss impairment model and
the classification and measurement category, it was found that, the influence of the
transition which was undertaken to arrive at the AASB 9 was not concerned with
material and hence, no comparative amounts have been taken and adjusted
accordingly.
Conclusion
Therefore, from the given analysis, it can be essentially mentioned that, the two
enterprises which have been made use of are the Woolworths and the Wesfarmers
Group. The report followed a structured format whereby the different categories of
assets and liabilities as identified by the organization were identified. This was then

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followed by the analysis of the funds utilized by the company, the different sources of
funds and in addition to this, the Measurement and recognition standards were also
identified accordingly. Hence, it was learnt that both the companies were not applying
the AASB 137 but were following another standard to measure the same. The
organizations have used a structured capital management plan which has essentially
assisted them in undertaking the right decisions in the right manner.

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References
Aasb.gov.au 2020. AASB 139 [online]. Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-
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analytics and enterprise systems on managerial accounting. International Journal of
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finance and accounting research. Critical Finance Review, 5, pp.207-304.
Balashova, N.N., Melikhov, V.A., Ovchinnikov, M.A., Egorova, E.M. and Tokareva,
E.V., 2016. Organizational and methodological approaches to development of
accounting policy for formation of integrated accounting of interrelated agricultural
companies.
Brinca, P., Chari, V.V., Kehoe, P.J. and McGrattan, E., 2016. Accounting for business
cycles. In Handbook of Macroeconomics (Vol. 2, pp. 1013-1063). Elsevier.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Khan, M., Serafeim, G. and Yoon, A., 2016. Corporate sustainability: First evidence on
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Schaltegger, S., Burritt, R. and Petersen, H., 2017. An introduction to corporate
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https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-
annual-report.pdf?sfvrsn=0 (Retrieved on: 23 Jan. 2020).

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Wesfarmers.com.au 2020. Annual report [online]. Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0 (Retrieved on: 23 Jan. 2020).
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https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2019-annual-
report.pdf?sfvrsn=0 (Retrieved on: 23 Jan. 2020).
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https://www.woolworthsgroup.com.au/icms_docs/195582_annual-report-
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(Retrieved on: 23 Jan. 2020).
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https://wow2017ar.qreports.com.au/xresources/pdf/wow17ar-full.pdf(Retrieved on: 23
Jan. 2020).