Critical Analysis of Material Capitals in JB Hi-Fi's Reporting

This essay provides an analysis of JB Hi-Fi's integrated reporting practices, focusing on identifying the most material capitals as defined by the International Integrated Reporting Framework (IIRF). It examines the company's business model in relation to the six capitals: financial, manufactured, intellectual, human, social and relational, and natural capital. The analysis utilizes data primarily from JB Hi-Fi's Operating and Financial Review and Corporate Governance Statement in the annual reports for the past three years. The essay identifies key measures for each capital, considering both inputs and outputs of JB Hi-Fi's business model. It further discusses measures implemented by the company to ensure the effective utilization of these core capitals to foster growth and sustainability, with a focus on financial, human, and social and relational capital as the most material for JB Hi-Fi's business model. The essay also touches upon risk management and governance practices within the company.

ADVANCE FINANCIAL REPORTING
Advance financial reporting
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WC: 2560

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Organizational Overview
JB Hi-Fi is a company based in Australia that specializes in consumer goods that
range of telecommunication, audio-visual and electronics such as the mobile phones,
electrical home appliances, electronic hardware, CDs, DVDs Blu-rays Ultra Blu-rays and
video games as well as a number of Telstra services. Moreover, the company offers
professional services to wholesale markets, government and corporate including education
and hospital sectori.
JB Hi-Fi is a listed company on the ASX with its head offices at the Chad stone
Shopping Centre in Melbourne. The company generated a total of $ 6,855,400,000 in sales
and other revenues in the year 2018 and is ranked at position 53 out of the 2000 listed
companies. The company has managed to employ well over 12200 employees who are also
employed under the company subsidiaries.
The chief executive officer Mr. Richard Muray and the non-executive chairperson Mr.
Gregory Richards head the company. The company has over 180 outlets across Australia and
New Zeeland
The company operates in a highly competitive market both from existing and new
entrants. Such competition may lead to decreased profits and therefore the company plans to
strategize on competitive advantage to maintain its market position. Moreover, the company
hopes to give customers quality online offers that are available in the general stores to ensure
that they get ahead of their competitors.
On the other hand, the company hopes to focus on compliance of the management
team in an effort to mitigate risk through adequate staff training. This will ensure that
litigation and breach of regulatory requirements are avoided. Reach of legal requirements
might have detrimental effects such as adverse monetary penalties as well as high legal

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cost.The company is also exposed to economic sustainability risk that has prompted the
preservation of the shareholders’ value. In addition, the company aims to consider its
operations and its impact on the environmentii.
Governance
The JB HiFi directors and management are committed to ensuring that ethics is
observed during the normal operations of the business and in accordance with the corporate
governance, standards. The company has put in place a board that continually reviews and
keeps track of development in corporate governance.
The board is tasked with the responsibility of ensuring that company policies are in
line with the 3rd edition of ASX Corporate Governance Council Principles and
Recommendations. The organization has provided a law that directs the board to undertake
relevant checks before appointing a director or presenting a candidate to the shareholdersiii.
Opportunities and risks
The company’s opportunities have been increased greatly as a result of acquiring the
Good Guys. With the Good Guys on board, there has been an increase of 35.5% profit, which
is expected to rise in the coming years. Moreover, a double-digit growth is expected soon as
the company has booked a full year sale from the Good Guys thereby reducing cost and
saving to $ 15 million thereby offering better buying terms and increasing the profits.
On the other hand, the company might fail to realize the expected growth in the
future. This might be brought about due to plans by Amazon in expanding to Australia or the
plans y Best Buy to set up a shop in Australia. Moreover, as the profits sore higher there is a
possibility that the company might require incremental capital.

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The company faces a number of risks factors ranging from natural to those specific to
the organization. Such risks are a threat to the company’s financial performance as well as the
future operations. Financial performance will vary depending on various economic conditions
such as economic and business conditions, interest exchange, inflation, government
regulations as well as access to debt and capital markets.
Other risks include competition, in that the market in which the company is operating
on remains highly competitive in which may lead to decreased profits and sales in case
another competitor enters the marketiv.
Reputation is another risk that the company is likely to suffer, as the acquiring of the
Good Guys has elevated the loyalty and trust of the customers. According to the corporate
reputation index, JBHi-Fi ranked third which puts the company in a position where in case
something of bad popularity is tied to the company the reputation will spiral down. However,
the company has laid down measures in dealing with most of the risks.
The company seeks to ensure that its reputation stays intact by carefully monitoring
the prices set by their competitors, market share data, customer engagement analytics,
customer compliance as well as the latest innovations. Another risk that might lead to poor
reputation is the security breach of the IT systems; this risk is to be handled through investing
in IT security measures.
The risk related to health and safety incidents will be mitigated by having the
necessary work health and safety procedures in position for all sites. Moreover, a breach of
the regulatory requirements will be handled through staff training.
The six-core capitals include natural capital, social and relational capital, human
capital, intellectual, manufactured and financialv.
Financial capital

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The company has brought forward various measures to ensure that the core capitals
are well utilized to foster growth in the company.
Measures that have been put in place to ensure financial capital is well utilised,
involves remunerating group executives on the basis of performance by linking long and
short-term incentives to associated financial measure such as achieving the STIs performance
conditions
Manufactured capital
Among the six core, capital, JB HiFi does not deal with manufacturing of products
since it is a retail business selling manufactured and created content. Due to this reason, there
are no measures laid down to handle such capital.
However, the company owns some assets that facilitate the business, which will be
classified under manufactured capital. Such assets include buildings and tools that help make
operations easier. The buildings are located in an environmentally friendly location within
customers reach and convenience.
Human capital
The company has employed more than 1800 employees who work at various outlets
across Australia and New eland. As a result, the company has put down measures that ensure
that this type of capital is taken care of.
Such measures include employee benefits, which are measured at the end of the
period and involve both monetary and non-monetary benefits. The expected amounts are paid
once the liabilities are settled. Another measure is that equity-settled share based payment is
paid at fair value of equity investment at grant date.

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The company has also put in place a measure that requires the employee to observe
the code of conduct as well as the ethical standards of corporate behaviour. This type of
capital is expected to bring in more revenue as the company enforces its code of conduct to
the Good Guys Company that did not have.
Mover when it comes to leadership, the company has strived to ensure that the
number of female employees are well represented by ensuring that they participate is equal at
that level of the organization. Finally, key employee retention has been looked after as the
board has set competitive remuneration packagesvi.
Social and relational capital
The company board has continuously monitored and reviewed matters of social
relations with the clients, employees, suppliers as well as the shareholders. This has helped to
conduct business in an ethical manner and in line with the standards of corporate governance.
Moreover the board has enhanced strong ties with the management in order to encourage
innovation and diversification with the new products.
This also brings out a constructive engagement. Moreover, the board has ensured
equity participation in management through group-employee option plan, which works to
maintain strong ties with the shareholders as well as attract and retain management through
performance rewardingvii.
The company has gone a step further to improve its relationship through the
establishment of "Helping Hands" a program that enables employees, directors, and
management to donate to registered charitable organizations. This fosters the relations with
the client as well as those of the surrounding community and prospective clients.
On the other hand, accompany acquired by JB Hi-Fi, Good Guys have their own
charitable program whereby they match a dollar for a dollar for every contribution made by

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the team members. The company founds its operations on the belief that it has to conduct its
business in a socially responsible way as well as give back to the community.
Natural capital
The natural capital, in which JB Hi-Fi operates in, varies from outlet to another.
However, the company has put measures that ensure that such capital is taken care of to
ensure business sustainability. Natural capital consists of air, soil, geological position, water,
among others.
The company refrains from any activities that pollute the environment. Moreover,
apart from business sustainability, the business ensures that it observes all the environmental
regulations as wet out in the law.
Intellectual capital
JB Hi-Fi has a total net worth of $ 22.4 million and $ 15.8 million in intellectual
property. The company has stipulated that the intellectual property be represented as an
excess of the cost of acquiring above the fair value of the Company’s share of the net
recognized assets acquired during the date of acquisition.
Rights to profit share, location premiums and brand names are considered having an
indefinite useful life. However, each period of the useful life of the asset is reviewed to
determine whether the expected circumstances support the indefinite useful life.
The intellectual capital is allocated to each of the group cash generating units
expected to benefit from the synergies of the business operations.
Intellectual property arising from the company’s acquisition activities in the foreign country
is treated as assets and liabilities of the operation and translated at the closing date.

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The core material capital for JB Hi-Fi business model includes social and relational
capital, financial capital and human capital.
Given the business model used by the company, there is a greater need of considering the
material capital highlighted above.
Financial capital tops the list of the three most material capitals, as the aim of every
business is to make a profit. Financial capital works as a lubricant in the business operations
as it helps the business stay afloat. Financial capital ensures that current assets are supplied,
employees are remunerated and obligations are serviced.
Moreover, financial capital is the main element that investors focus on when making
decisions on investing. Hence, good financial performance will see more investors joining
hence increase in the share price, which is beneficial for business. On the other hand, poor
financial performance leads to lack of the capacity to service obligation, which is bad for
investmentviii
The second most material capital is the human capital. Human capital entails the
stakeholders who enable the company to run its day-to-day operations. This includes the
employees, management board members as well as other stakeholders. The company ensures
that it supports its employees in terms of delivering quality services to the customer through
training and proper remuneration.
Moreover, there are programs that take care of the benefits that are entitled to the
company’s staff. Taking care of the human capital ensures that the staff is motivated hence,
acting in the interest of the business.
Last though not the least is the social and relation capital. This type of capital covers a
wide range of issues and is the main determinant of whether the business will be embraced by
the clients. The social and relation capital helps to build business connections as well as

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increase client base, which leads to increased profits. Such a capital also ensures that the
shareholders are well taken care of as well as the suppliers and the creditors. Moreover, the
company has established a helping hand program that enables the management and the
employees to give back to the community. This helps to win more clients and participate in
social activitiesix.
Conclusion
An integrated report is very crucial in highlighting various underlying issues that
affect businesses. However, most companies do not provide such a report. According to the
integrated report on this paper, the JB Hi-Fi Company has proved to have adequate measures
on all of the six material capital. Such measures ensure that the company is able to keep track
of its progress and determine areas that need improvements.
Out of the six, the company has three of them, which are most crucial in its business
operation. These are financial, social and relation capital and human capital. These three
capitals have the main potential in realizing the best growth in a business.
Reflection
Integrated reporting is good for the financial users as it provides a summarized report
of a given number of years. However, the report is still not the best as the integrated
information is derived from the same financial reports presented to the shareholder. There is
no new information, and a dedicated investor would easily integrate the information from the
financial reports.

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Endnote

iMitchel, S. (2018). JB Hi-Fi's not-so-secret weapon against Amazon. Retrieved from
https://www.afr.com/business/retail/jb-hifis-notsosecret-weapon-against-amazon-20170216-guf4cn
iiMitchel, S. (2018). JB Hi-Fi's not-so-secret weapon against Amazon. Retrieved from
https://www.afr.com/business/retail/jb-hifis-notsosecret-weapon-against-amazon-20170216-guf4cn
iiiClark, E., Stuyck, J., & Terryn, E. (2014). The commercial and economic law in Australia (p. 405). London: University
Press.
ivMeucci, A. (2012). A Fully Integrated Liquidity and Market Risk Model. Financial Analysts Journal, 68(6), 94-105. doi:
10.2469/faj.v68.n6.6
vMorris, R. (2015). Book review: Jane Gleeson-White, Six Capitals: The Revolution Capitalism Has to Have – or Can
Accountants Save the Planet?Gleeson-WhiteJane, Six Capitals: The Revolution Capitalism Has to Have – or Can
Accountants Save the Planet?Allen & Unwin: Sydney, 2014; xxv + 340 pp.: 9781743319161, RRP AUD32.99. The
Economic And Labour Relations Review, 26(4), 689-693. doi: 10.1177/1035304615613036
viPiotrowska, K. (2018). Falsification Of Non-Financial Information In The Integrated Report. Prace Naukowe
Uniwersytetu Ekonomicznego We Wrocławiu, 3(503), 376-386. doi: 10.15611/pn.2018.503.33
viiMorris, R. (2015). Book review: Jane Gleeson-White, Six Capitals: The Revolution Capitalism Has to Have – or Can
Accountants Save the Planet?Gleeson-WhiteJane, Six Capitals: The Revolution Capitalism Has to Have – or Can
Accountants Save the Planet?Allen & Unwin: Sydney, 2014; xxv + 340 pp.: 9781743319161, RRP AUD32.99. The
Economic And Labour Relations Review, 26(4), 689-693. doi: 10.1177/1035304615613036
viiiBucaro, A., Jackson, K., & Lill, J. (2017). The Influence of CSR Measures on Investors' Judgments When Integrated into
a Financial Report Versus Presented in a Separate Report. SSRN Electronic Journal, 2(1), 432-546. doi:
10.2139/ssrn.2930360
ix
References
Bucaro, A., Jackson, K., & Lill, J. (2017). The Influence of CSR Measures on Investorss Judgments
When Integrated in a Financial Report Versus Presented in a Separate Report. SSRN
Electronic Journal, 2(1), 432-546. doi: 10.2139/ssrn.2930360
Clark, E., Stuyck, J., & Terryn, E. (2014). Commercial and economic law in Australia (p. 405).
London: University press.
Kelvin, H. (2016). The effectiveness of the integrated financial management system in
Australia (3rd ed., pp. 341-403). Melbourne: University press.
Meucci, A. (2012). A Fully Integrated Liquidity and Market Risk Model. Financial Analysts
Journal, 68(6), 94-105. doi: 10.2469/faj.v68.n6.6
Mitchel, S. (2018). JB Hi-Fi's not-so-secret weapon against Amazon. Retrieved from
https://www.afr.com/business/retail/jb-hifis-notsosecret-weapon-against-amazon-20170216-
guf4cn
Morris, R. (2015). Book review: Jane Gleeson-White, Six Capitals: The Revolution Capitalism Has
to Have – or Can Accountants Save the Planet?Gleeson-WhiteJane, Six Capitals: The
Revolution Capitalism Has to Have – or Can Accountants Save the Planet?Allen & Unwin:
Sydney, 2014; xxv + 340 pp.: 9781743319161, RRP AUD32.99. The Economic And Labour
Relations Review, 26(4), 689-693. doi: 10.1177/1035304615613036

Piotrowska, K. (2018). Falsification Of Non-Financial Information In The Integrated Report. Prace
Naukowe Uniwersytetu Ekonomicznego We Wrocławiu, 3(503), 376-386. doi:
10.15611/pn.2018.503.33