HA2032 Corporate and Financial Accounting Report Analysis

This report, prepared for the HA2032 Corporate and Financial Accounting course, analyzes various aspects of corporate accounting. It begins with an executive summary and table of contents, followed by an introduction to the core concepts. The report addresses the regulation of financial accounting and reporting, exploring the debate between mandatory regulation and voluntary disclosure. It then delves into accounting standard setting, examining the roles of the AASB and IASB, and their impact on Australian businesses. The report also investigates owners' equity, analyzing the equity positions of CBA, Westpac, Australia and New Zealand Bank, and NAB over a four-year period, including share capital, reserves, and retained earnings. The conclusion summarizes the key findings, and a bibliography provides a list of references. The report aims to provide a comprehensive understanding of corporate accounting principles and practices.

Running Head: CORPORATE ACCOUNTING 1
Corporate Accounting

Running Head: CORPORATE ACCOUNTING 1
Executive summary
This is a corporate accenting report which has been prepared to identify the role of
accounting standards in an organization along with the IASB and IFRS rules. The disclosure
in the annual report, manager’s performance in resenting the financial information, owner’s
equity, Debt and equity position etc has been studied in the report to improve the
understanding about the corporate accounting.

Running Head: CORPORATE ACCOUNTING 2
Table of Contents
Introduction 3
Answer to question no-1 3
Answer to question no-2 5
Owners’ Equity 7
Debt and Equity position 10
Conclusion: 12
Bibliography 13

Running Head: CORPORATE ACCOUNTING 3
Introduction:
The recording and keeping the financial transaction and the information about the
financial position is quite crucial for the businesses because of the globalization and the huge
competition in the market. The report focuses on the various rules, frameworks, information
related to the financial and non financial position, corporate governance, corporate
regulations, accounting standards, recording system etc of the business1.
Answer to question no-1
Annual reports are prepared and maintained by the companies in order to keep the
record of all the important aspects of the business and communicate the performance and
position with the stakeholders of the business. The financial performance and the activities
influence the decision of the shareholders about the company and their investment in the
company.
The annual report and all the financial information contained in the annual report of
the company helps to stakeholders such as shareholders, investors, financial institution,
suppliers and other stakeholders of the business to make a decision. The internal and external
stakeholders of the business evaluates the accounting information and the annual report of the
business in order t maintain the future strategies of the business and forecast the financial
position of the business to make better decision2. The annual report does not only contain the
financial statement of the business but it also offers about the operation, activities, new
1 David J. Cooper, and Sherer Michael J. "The value of corporate accounting reports:
arguments for a political economy of accounting." Accounting, Organizations and
Society 9.3-4 (2014): 207-232.
2 Madan Lal Bhasin. "Corporate accounting fraud: A case study of Satyam Computers
Limited." (2015).

Running Head: CORPORATE ACCOUNTING 4
projects etc of the business in order to make it easier for all the stakeholders of the business to
identify the position and make better decision.
The information about the financial position and performance could be obtained by
the financial manager and the external stakeholders of the business through identifying the
profitability, solvency, liquidity etc position of the company. On the other hand, the non
financial performance of the business could be evaluated on the basis of the corporate
governance, sustainability report, and corporate social responsibility etc headings of the
annual report of the company3.
Because of the improved area and focus on the financial information of a business, it
is important for the managers to regulate it at grand level and must disclose all the related
information about the company in the annual report to improve the transparency level and the
faith of the stakeholders in the company. In case the managers get permission to disclose the
financial information and position on the basis of their thought then it does not offer the
desired information to the shareholders of the business and only that information would be
disclosed in the annual report of the business which is in the favour of the company4. The
reports would be manipulated in such a way that the investors got attracted towards the
company even though the company is suffering through huge losses.
3 Joseph PH Fan, Gillan Stuart L., and Yu Xin. "Property rights, R&D spillovers, and
corporate accounting transparency in China." Emerging Markets Review 15 (2013): 34-56.
4 Robert M. Bowen, Rajgopal Shivaram, and Venkatachalam Mohan. "Accounting discretion,
corporate governance, and firm performance." Contemporary accounting research 25.2
(2008): 351-405.

Running Head: CORPORATE ACCOUNTING 5
The financial reports of the company are prepared because of various reasons such as
in order to enable the stakeholders of the company to understand the actual financial position
of the business, to make it easier for the internal and external stakeholders of the business to
make better decision, to allow the potential investors to make decision about the investment
into the company etc. if the proper information is not offered in the annual report of the
business than it could affect the business at huge level5.
Thus, it is necessary for the managers and the business to follow the financial
regulatory in order to prepare and present the annual report of the business. The frameworks
and the accounting regulatory make it easier for the business to set the uniformity in the
annual report and offer all the relevant information about the company in the annual reports.
Further, these frameworks and rules also stop the managers to offers the manipulative
information in the annual report to affect the decisions of the stakeholders of the company.
Answer to question no-2
Accounting standards are prepared by the accounting bodies and followed by the
companies in order to offer the guidance and uniformity in the annual report of the business.
These standards make it sure that all the relevant information and the details are provided in
the annual report of the business and the recording of all the financial figures are done in a
proper way. AASB makes and amends the accounting standards in the Australian market6. It
5 Juan Manuel Lara, García, García Beatriz, and Penalva Fernando. "Accounting conservatism
and corporate governance." Review of accounting studies 14.1 (2009): 161-201.
6 Dori Danko, et al. "Corporate social responsibility: The united states vs. Europe." Journal of
Corporate Accounting & Finance 19.6 (2008): 41-47.

Running Head: CORPORATE ACCOUNTING 6
is a government body which evaluates the market, international regulatory etc in order to
make the better accounting standards for the Australian businesses. The AASB is responsible
for the changes, development, maintenance etc of the accounting standards.
Australian Accounting standards board (AASB) and the policies, rules and regulations
of AASB are important for the business. The AASB takes the concern on various factors to
develop and make the changes in the already existing accounting standards of the business.
The international accounting standard board (IASB) is the international body which regulates
the accounting standard. It is a private body which mainly commits the implementations and
development in the accounting standards to set a high quality across the international level for
the purpose of public interest7. The IASB framework cooperates with the different nations
accounting bodies to help them to maintain and set better accounting standards to offer
transparent information about the business to the stakeholders.
AASB has considered the framework of IASB. These steps have been taken by AASB
in order to maintain the policies in such a way that the adequate information is provided by
the annual report of the company to the stakeholders of the business. AASB assists the IASB
in order to find out the issues and the lose points of the accounting standards so that it could
be formulated soon.
Further, the AASB also asks for the individual entities in the Australian market to
identify the errors in the accounting standards. The AASB regulates its accounting standards
through the IASB standards in order to maintain the better framework and policies of the
7 Philip Brown, Beekes Wendy, and Verhoeven Peter. "Corporate governance, accounting and
finance: A review." Accounting & finance 51.1 (2011): 96-172.

Running Head: CORPORATE ACCOUNTING 7
business8. The main reasons behind not making it mandatory for few of the countries to
follow the IFRS rule is that the already set accounting standards of the country could not be
aligned with the new rules of the IFRS. If the country would force the entities of that country
to adopt the rules then it would affect negatively on the reporting standards of the country.
Owners’ Equity
Owner’s equity is the item related to the total funds which is maintained by the
businesses in order to invest in the long term project and the run the activities of the business
in better way. In the report, the owner’s equity of the CBA, Westpac, Australia and New
Zealand bank and NAB has been taken into the concern. The study has been performed on
the last 4 year’s equity position of both the companies. Below given table represent the last 4
years equity level of all the 4 companies of Australia:
(Common Wealth Australian
Bank) AUD in million
2014 2015 2015 2017
Share capital 24591 25742 2687 34971
Reserve 1564 1687 1789 1869
Retained earning 25252 2589 2610 26330
8 Janto Haman, Donald John, and Birt Jacqueline. "Expectations and perceptions of overseas
students in a post-graduate corporate accounting subject: A research note." Accounting
Education: an international journal 19.6 (2010): 619-631.

Running Head: CORPORATE ACCOUNTING 8
(National Australian Bank)
(Amount in Millions)
2014 2015 2015 2017
Share capital 48415 53096 58120 61288
Reserve 110 145 155 178
Accumulated earning 14255 15255 16454 17252
(Westpac) (Amount in Millions) 2014 2015 2015 2017
Share capital 29251 25254 30252 34627
Reserve 112 168 210 237
Retained earning 15442 15891 16422 16442

Running Head: CORPORATE ACCOUNTING 9
(Australian and New Zealand
Bank) (Amount in Millions)
2014 2015 2015 2017
Share capital 28254 27845 31252 33544
Reserve 114 188 210 225
Retained earning 13442 1441 1551 16642
On the basis of the above table, the main components of owner’s equity of the
company are share capital, reserves and the retained earnings. Share capital represents the
total funds which have been raised by the business through selling the equity and preference
shares in the market. Share capital position of CBA represent that the share position of the
company has been improved from $ 24591 to $ 34971 in the year of 2017. The share capital
shows an improvement of 42.21% in the total share capital of the business. The improvement
has been seen in the share capital of the business because of the better capital market position
and the issue of shares in the market. Further, on the basis of the NAB share capital position,
it has been found that the 26.59% increment has occurred into the share capital position of the
business9. The changes have taken place because of higher issuance of the shares in the
market. The owner’s equity level of Westpac bank and Australia and New Zealand bank also
explains about 18.38% and 18.72% increment in the share capital of the businesses. In case of
both the companies, increment has taken place because of better market position and stock
level.
9 Annual report, Westpac Bank (26th September, 2018) <https://www.google.co.in/search?
ei=LEyjW-3hBs-
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Running Head: CORPORATE ACCOUNTING 10
Further, reserves represent the total funds which have maintained by the business
from its operating profit in order to save the business from any sudden losses. Reserve
position of CBA represent that the reserve has been improved by 19.50% in 2017 from 2017.
The changes have occurred due to the demand of the economy and the international
operations of the company. Further, on the basis of the NAB share capital position, it has
been found that the 61.82% increment has occurred into the reserve position of the business.
The changes have taken place because of higher fluctuations in the debtor’s level etc. the
reserve level of Westpac bank and Australia and New Zealand bank also explains about
111.61% and 97.37% increment in the reserve of the businesses10. In case of both the
companies, increment has taken place because of demand of the business.
Lastly, retained earnings represent the total funds which are kept from the net profit in
order to manage the internal operations and the long term project of the business. Retained
earnings of CBA represent that the retained earnings has been improved by 4.27% in 2017
from 201411. The changes have occurred due to the better dividend payout ratio of the
business. Further, on the basis of the NAB retained earnings position, it has been found that
the 21.02% increment has occurred into the retained earnings position of the business. The
changes have taken place because of the funds demand in the business. The retained earnings
level of Westpac bank and Australia and New Zealand bank also explains about 6.48% and
23.81% increment in the retained earnings of the businesses. In case of both the companies,
the dividend payout ratios have been the main reasons behind increment in the retained
earnings.
10 Annual report, National Australia Bank (26th September, 2018)
<https://www.nab.com.au/about-us/shareholder-centre/financial-disclosuresandreporting/
annual-reports-and-presentations>
11 Annual report, Commonwealth bank of Australia (26th September, 2018)
<https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
annual-reports/annual_report_2017_14_aug_2017.pdf>

Running Head: CORPORATE ACCOUNTING 11
Debt and Equity position
The capital structure level of all the 4 companies has been studied further in order to
recognize the position of the financial gearing and cost of the business. The debt and equity
funds are the main source of funds of a business. On the basis of the debt and equity level of
the companies, it has been found that the different level is managed by the companies in
order to manage the financial risk and cost level. The tables below represent the debt and
equity level of all the companies.
NATIONAL AUSTRALIA BANK LTD (NAB)
Fiscal year ends in September.
AUD in millions except per
share data.
2014-09 2015-09 2016-
09
2017-09
Total stockholders' equity 47891 55494 51292 51306
Total liabilities 102793 110287 10377 10171
Debt / Equity 2.146 1.987 0.202 0.198
Common Wealth Bank
Fiscal year ends in September.
AUD in millions except per
share data.
2014-09 2015-09 2016-
09
2017-09
Total stockholders' equity 48811 52431 60206 63170
Total liabilities 24207 25291 27462 28449
Debt / Equity 0.496 0.482 0.456 0.450
Westpac Bank
Fiscal year ends in September.
AUD in millions except per
share data.
2014-09 2015-09 2016-
09
2017-09
Total stockholders' equity 48456 53098 58120 61288
Total liabilities 152251 184894 185707 186022
Debt / Equity 3.142 3.482 3.195 3.035
Australian and New Zealand Bank
Fiscal year ends in September.
AUD in millions except per
share data.
2014-09 2015-09 2016-
09
2017-09
Total stockholders' equity 49207 57247 57818 58959
12 Annual report, Australian and New Zealand bank (26th September, 2018)
<http://shareholder.anz.com/pages/annual-report-archive>