Corporate Governance Failures and Analysis of ABC Learning

This report analyzes the corporate governance practices of ABC Learning, a company that faced significant financial challenges and ultimately collapsed. It examines the company's compliance with legal and accounting standards, focusing on the Corporations Act 2001 and relevant accounting standards. The report assesses audit reports, methodologies, and recommendations, highlighting concerns arising from the company's rapid expansion and subsequent financial difficulties. It reviews internal organizational practices, corporate governance obligations, and the role of regulatory authorities. The report also examines the content of internal financial reports, statutory returns, and processes, revealing substantial financial losses and impairment charges. Performance indicators are analyzed to assess compliance with corporate governance requirements, including strategy formulation, compliance control, and delegation of authority. The report further details key result areas, including the company's expansion, acquisitions, and eventual liquidation. Information technology indicators are evaluated, and report plans for ensuring compliance are discussed. Finally, the report identifies and discusses the main failures in compliance that occurred and suggests potential remedies, emphasizing the importance of financial stability and effective risk management.

Running head: MONITOR CORPORATE GOVERNANCE ACTIVITIES
Monitor Corporate Governance Activities
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Introduction................................................................................................................................2
Determination of whether organisation complied with the existing legal and accounting
standards.....................................................................................................................................2
Accessing of the audit reports, the methodologies applied and the recommendations..............2
Review of internal organisational practices along with corporate governance obligations.......3
Identification of appropriate regulatory authority......................................................................3
Reviewing the content of internal financial reports, statutory returns and processes................3
Performance indicator signifying compliance with corporate governance requirements..........4
Revealing made in performance indicator of the company with regard to key result areas......4
Evaluating information technology indicators along with key result areas...............................5
Report plans needed to ensure compliance requirements are met within the deadline..............5
Description of main failures in compliance which have occurred and remedy for the same....5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

2MONITOR CORPORATE GOVERNANCE ACTIVITIES
Introduction
ABC learning was recognised was recognised for its excellence in providing early
childhood educational services. The listing of this company was seen in Australian securities
exchange with total market capitalisation of AUD $2.5 billion as on March 2006. The
company faced sub-prime mortgage crisis due to debt repayments and signing off on the
financial reports citing which needed to be casted as per previous years of the profits
(McGrathNicol, 2017).
Determination of whether organisation complied with the existing legal and accounting
standards
It has been discerned that the main accounting standards complied by ABC learning
during the period of 2007-2008 was as per Corporations Act 2001. It has been further
determined that the remuneration report was prepared as per section 300A. The presentation
of the financial statements where done as per accounting standards AASB 101 (Asic.gov.au,
2017).
Accessing of the audit reports, the methodologies applied and the recommendations
The conduction of the audit has complied with the independence requirement of
Corporations Act 2001. The financial report of A.B.C learning has been conducive in
presenting a true and fair value of group’s financial position as on 30th June 2007. However
the main concern was arise due to the dramatic expansion which ultimately led to company
being defunct. In addition to this, the company was pleaded guilty for failure to enclose and
was fined with an amount of $ 1300. The consolidation of the financial report is also seen to
comply with international financial reporting standards as per the disclosures made in Note 1.
As per the recommendations made by the auditors on AASB 124 the remuneration disclosure

3MONITOR CORPORATE GOVERNANCE ACTIVITIES
has been contained in the director’s report. As per the opinion of the auditors it has been
discerned that the company is subject to audit and complied with the aforementioned
accounting standards (Ferrierhodgson.com, 2017).
Review of internal organisational practices along with corporate governance obligations
The review of the internal organisational practices has been identified with the
corporate governance statement. Some of the main obligations of corporate governance have
been discerned with commitment for spending sufficient time in carrying out the necessary
duties as a director, maintaining confidentiality with the legal requirements and ethical
standards and continuous disclosure of coordinating with the ASX rules of the company.
Some of the other form of internal organisational practices has been discerned in form of
giving independent professional advice and regular performance review and evaluation.
Identification of appropriate regulatory authority
Some of the main forms of the regulatory body of the company have been identified
with “Regulation Impact Statement (RIS)”, which is responsible for providing financial
information to assess and monitor the financial viability on a regular basis. This is also
responsible for creating new aesthetic power for enabling independent audit of childcare
provider and associating the concerns about financial viability. And the regulatory authority
has been discerned with new National Quality Framework (NQF) for the purpose of early
child care and education. This has been identified with a total funding of $ 1.9 million to help
achieve the ongoing stability in childcare facilities. The various types of internal role have
been assessed with external management consultants and the audit committee.

4MONITOR CORPORATE GOVERNANCE ACTIVITIES
Reviewing the content of internal financial reports, statutory returns and processes
As per the review of the internal financial reports and statutory return has stated on
the $ 1.78 billion loss in the financial year 2008, although the company was in the position of
insolvency in the mid 2007 itself. The final drafts for the FY June 30, 2008 has resulted in
total impairment charges of $1.168 billion, and a $364 million loss due to the disposal of the
majority stakes in the US business in ABC.
Performance indicator signifying compliance with corporate governance requirements
Based on the findings of the performance indicator it has been discerned that the
company is seen to comply with setting and formulation of appropriate strategy for the
operations. The company has been further identified to review the entire system as per the
compliance control and adherence with the accountability systems. It has been further
identified to be associated with appropriate measures related to delegation of authority. Some
of the other areas of the CG practices as per the performance report have been evident with
providing formal policies for the appointment of the directors and contribute to the
expectations.
Revealing made in performance indicator of the company with regard to key result
areas
On 12 December 2006 ABC learning centre was identified as the largest childcare
provider in US. In addition to this, with the acquisition made in U.K.’s Busy Bees Group,
Ltd, the company’s expansionary measures were seen to be aggressive in outsourcing of
childcare services and including employees from Australian Department of defence. On
March 2008, the company announced major sponsors as Adelaide 36ers an further sold their
60% of childcare business to Morgan Stanley. Built on the performance indicators, the
company voluntarily liquidated in the same year and was acquired by good start childcare in

5MONITOR CORPORATE GOVERNANCE ACTIVITIES
December 2009. It has been further seen that the company was rebranded as good start
"Goodstart Early Learning", and registered charity owned by Brotherhood of St Laurence,
Mission Australia, The Benevolent Society and Social Ventures Australia.
Evaluating information technology indicators along with key result areas
The key use of the information technology has been performed with distribution of
dividend as per date paid, dividend per share and total dividend. The company has been
further seen to protect the group’s financial asset and adverse market fluctuations by hiring of
a special personal for IT. The director’s performance has been further seen to be structured in
an orderly manner with the use of information technology. This is evident with including
elements of remuneration and adherence of the same as per non-executive directors, the
directors and Australia senior executives.
Report plans needed to ensure compliance requirements are met within the deadline
As per the compliance requirement, the company’s income statement and interest
expense has been classified in the balance sheet and the convertible preference shares were
converted to ordinary shares within the same time period. The developers of the business
took the initiative of purchasing Judas private limited with the diary getting worse pricing of
not less than $ 26.8 million. This has been seen to be adjusted as per five-year CPI (Rlf.com,
2017)
Description of main failures in compliance which have occurred and remedy for the
same
The company was identified as one of the largest publicly listed childcare service
provider with market capitalisation of more than $ 4.1 billion. However, there was an
unexpected drop of 42% profit in 2007 and inability to repay a debt amount of $ 1.8 billion

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which finally triggered the downfall of the company. The main remedy for this could have
been taken with a more stringent policy for estimating the date for a particular financial year
and improving the liquidity aspects such as keeping more current assets than current
liabilities (Mondaq.com, 2017).
Conclusion
The report has been able to establish the fact that although ABC learning centre and
adhered to the appropriate accounting standards and internal corporate governance structure,
there has been several controversies associated to increasing debt servicing obligations and
auditors failing to sign of its accounts. The main form of problem was seen with reliance on
external capital supported equity ended investors and further leading to liquidity crisis. The
CG practice of ABC learning centre has been further identified to review the entire system as
per the compliance control and adherence with the accountability systems.

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References
ABC Learning | ASIC - Australian Securities and Investments Commission.
(2017). Asic.gov.au. Retrieved 9 November 2017, from http://asic.gov.au/about-
asic/media-centre/key-matters/abc-learning/
ABC Learning Centres Limited - McGrathNicol. (2017). McGrathNicol. Retrieved 9
November 2017, from http://www.mcgrathnicol.com/case-studies/abc-learning-
centres-limited/
Asic.gov.au. (2017). ABC Learning | ASIC - Australian Securities and Investments
Commission . [online] Available at: http://asic.gov.au/about-asic/media-centre/key-
matters/abc-learning/ [Accessed 9 Nov. 2017].
Easy as ABC Insolvency and the Relation-Back Day - Insolvency/Bankruptcy - Australia.
(2017). Mondaq.com. Retrieved 9 November 2017, from
http://www.mondaq.com/australia/x/251926/Insolvency+Bankruptcy/Easy+as+ABC+
Insolvency+and+the+RelationBack+Day
Ferrier Hodgson - ABC Learning Centres Limited. (2017). Ferrierhodgson.com. Retrieved 9
November 2017, from https://www.ferrierhodgson.com/au/creditors/abc-learning-
centres-limited
Third Circuit Affirms Chapter 15 Recognition of Australian Liquidation Proceeding as
Foreign Main Proceeding - Richards, Layton & Finger - Delaware Law Firm .
(2017). Rlf.com. Retrieved 9 November 2017, from http://www.rlf.com/5402