Analysis of JB Hi-Fi Consolidation for Company Accounting Module

This memorandum analyzes the consolidation aspects of JB Hi-Fi, a listed Australian retailer specializing in consumer goods. It examines JB Hi-Fi's consolidated financial statements, which incorporate the assets, liabilities, and results of its subsidiaries. The report details the company's accounting policies, including consolidation principles, treatment of non-controlling interests, and goodwill. It also explores the company's commitment to corporate governance, sustainability, and risk management, including economic, environmental, and social risks. The analysis covers the company's financial position, including current assets, current liabilities, and current ratio. It discusses goodwill, impairment losses, and financial risks such as market and credit risks. The report includes references to relevant sources and provides a comprehensive overview of JB Hi-Fi's financial performance and management practices.

Running Head: COMPANY ACCOUNTING
Memorandum
To: Board of Directors
From:
CC:
Date: August 23, 2019
Subject: Introduction of JB Hi-Fi and Analysis of Consolidation
This memorandum is prepared with the aim to do the analysis of the consolidation aspects of
JB Hi-Fi, which would be helpful for assisting the directors as well as stakeholders for
understanding the performance, business, composition as well as the management of the
business in the better way. The JB Hi-Fi company is the retailer of Australia, having listed,
which sells as well as specializes in the consumer goods. The company is headquartered in
Australia and has their locations in the New Zealand and Australia. JB Hi-Fi prepares the
consolidated financial reports for providing the financial statements that are relevant as well
as comparable (Investors.jbhifi.com.au. 2019).
The consolidated financial statements of JB Hi-Fi are based on financial statements of parent
company as well as their controlled entities. These consolidated financial statements helps in
incorporating the liabilities, assets as well as the results of principal subsidiaries according to
the policy of accounting. The principle of the company for the consolidation includes the
principal for subsidiaries and for the changes in the interests of the ownership. The company
controls its subsidiaries. The subsidiaries are consolidated in full from the date at which the
control has been transferred to the Group. In the consolidated financial statements, the non-
controlling interests in outcomes as well as subsidiaries equity are separately shown. The
investments in the subsidiaries are being accounted for at the cost less impairments, if any in

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JB Hi-Fi separate financial statements. Moreover, JB Hi-Fi treats the transactions with the
non-controlling interest, which does not results in the loss of the control as the transactions
with company’s owners of equity. The changes of ownership interests’ results into the
adjustments between the amounts of carrying of their controlling interest and non-controlling
interest for reflecting their interest that is relative in the subsidiary. There is recognition in the
separate reserve within the equity that is attributable to JB Hi-Fi Ltd., in case if there is any
difference between adjustments amounts to the non-controlling interests as well as any
received or paid recognition (Investors.jbhifi.com.au. 2019).
JB Hi-Fi Ltd. helps in recognizing the importance of social, environmental as well as matters
of governance to the customers, shareholders as well as customers. There is continuous
monitoring as well as reviewing of the developments in the corporate governance that are
relevant for Group. The management and the directors of group are committed for ensuring
that the business of the Group is ethically conducted and is according to the highest standards
of the corporate governance. The policy as well as practices of the Group complies in all the
materials with the 3rd edition of ASX corporate governance council principles as well as
recommendations. It has also complaint with principals’ spirit contained in ASX
recommendations (Investors.jbhifi.com.au. 2019).
The company is exposed with the risks of economic sustainability risks, environment
sustainability risks as well as social sustainability risks. They makes every attempts for
minimizing the risks by creating or preserving the value for their shareholders over short-
term, long-term and medium-term. JB Hi-Fi is committed towards participating in the
sustainability program of Victoria TAKE 2 that is the collective program of the climate
change, which supports the business, individuals, government as well as other organizations
for helping Victoria for achieving the emissions to net zero by the end of 2050 (Berger, P.G.,
Minnis and Sutherland 2017).

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The Audit and the committee of risk management are committed towards assisting the Board
in the oversight of integrity as well as reliability of the financial disclosures and reporting,
financial management as well as related disclosures practices and non-financial reporting of
the Group. This committee also assists the oversights of external auditor’s independence,
appointments, removal as well as performances. Moreover, they reviews on the policies of
the Group on the risk management and insights as well as discharging of their responsibility
for satisfying themselves that sound and adequate system of internal control as well as risk
management are being implemented for managing material risks, which affects the business
of the Group including the compliance to all the laws applicable. The audit as well as
committee of risk management is comprised of four non-executive directors who is Beth
Laughton, Wai Tang, Stephen Goddard and Mark Powell, all of them are independent with
the experience of relevant commercial, financial and risk management that include an
independent chair, who are not chair of board (Cîrstea 2014).
As per the company’s consolidated balance sheet for the year 2018, $1,210.5 was the current
asset and $917.2 was the current liabilities, which means 1.32 was the current ratio for year
2018. JB Hi-Fi is having more current assets as compare to the current liabilities, which
means the company is in the good position of solvency (Sedki, Smith and Strickland 2014).
Goodwill of the company is represented by the excess of acquisition cost over the fair value
of the shares of company of acquired net identifiable assets at acquisition date. If the cost is
less than the identifiable net assets of the fair value then there is occurrence of gain on
bargain purchase. Goodwill is found in the section of non-current assets on the consolidated
balance sheet and the notes. The opening net book amount of goodwill was $49.5m after that
$712.2m was added because of the business combination and the impairment charges of
$14.7 has been deducted. Hence, $747 was the net book amount of goodwill at the year-end

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June 30, 2017 and this particular amount was the opening balance of June 30, 2018.
Therefore, there was no any addition of goodwill in year 2018 (Robinson et al. 2015).
The recognition of the loss of impairment is done for amount at which carrying amount of the
assets is in excess than their amount of recoverable. The amount of recoverable is higher
when the fair value of assets less costs to the sell as well as the value in use. In order to assess
the impairments, the grouping of the assets are at lowest levels for which the identifiable cash
inflows are separate and are independent largely of cash inflows from the other assets or the
groups of assets (Seay 2014). The impairment loss is then recognized for the goodwill
immediately in the account of profit and loss. Further, there were no impairments for the year
2018. However, with The Good guys acquisition in the month and year of November 2018,
the charges of goodwill and fixed assets relating to the JB Hi-Fi business of New Zealand
totaling to $15.8million (Vernimmen et al. 2014).
The activities of the Group are exposed to the different financial risks that include market
risks as well as credit risks. The group is exposed in some of the foreign currency risks such
as The Good Guys has purchased some of the private label product, which is denominated in
the foreign currencies. For minimizing the risks, the forward foreign exchange contracts are
hold by the Group. Moreover, the Group is not having the exposures of significant credit risk
for any of the single counterparty or any of the group of the counterparty that have same
characteristics. The financial assets carrying amount are recorded in the financial statements
that is net of any of the impairments allowance helps in representing the maximum credit
risks exposure (Ito et al. 2016).
The documentations are done by the Group at inception of transactions of hedging is of the
relationship the exist in between the instruments of hedging and the items of hedge and its

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objectives and strategy of risk management as well as the strategy to undertake the different
transactions of risk (Adeusi et al. 2014).

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Reference
Adeusi, S.O., Akeke, N.I., Adebisi, O.S. and Oladunjoye, O., 2014. Risk management and
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Economics, 64(2-3), pp.253-277..
Cîrstea, A., 2014. The need for public sector consolidated financial statements. Procedia
Economics and Finance, 15, pp.1289-1296.
Investors.jbhifi.com.au., 2019. [online] Available at: https://investors.jbhifi.com.au/wp-
content/uploads/2018/10/Annual-Report-2018-with-Chairmans-CEOs-Report.pdf [Accessed
23 Aug. 2019].
Ito, T., Koibuchi, S., Sato, K. and Shimizu, J., 2016. Exchange rate exposure and risk
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International Economies, 41, pp.17-29.
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.
Seay, S.S., 2014. The economic impact of IFRS-a financial analysis perspective. Academy of
Accounting and Financial Studies Journal, 18(2), p.119.
Sedki, S.S., Smith, A. and Strickland, A., 2014. Differences and similarities between IFRS
and GAAP on inventory, revenue recognition and consolidated financial statements. Journal
of Accounting and Finance, 14(2), p.120.
Vernimmen, P., Quiry, P., Dallocchio, M., Le Fur, Y. and Salvi, A., 2014. Corporate finance:
theory and practice. John Wiley & Sons.

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Appendix

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