JB Hi-Fi Financial Report: Analysis of Accounting Standards & Ratios

This report provides a financial analysis of JB Hi-Fi, an Australian consumer goods company, focusing on its financial performance and application of accounting standards. It includes an overview of the consumer electronics industry in Australia, followed by a detailed ratio analysis covering current ratio, debt ratio, and interest earned ratio from 2014 to 2018. The analysis assesses JB Hi-Fi's liquidity, debt management, and ability to cover interest expenses. Furthermore, the report discusses the valuation of non-current assets, emphasizing the application of AASB-136 (impairment of assets) and AASB-13 (fair value measurement). The analysis concludes that JB Hi-Fi operates effectively, maintains a strong liquidity position, and appropriately implements accounting standards in its financial reporting. Desklib offers a wide range of similar reports and study tools for students.

ACCOUNTING

ACCOUNTING 1
Overview of the organization
JB Hi-Fi is Company of Australia that delivers the consumers goods. The company
operates the business in New Zealand and Australia. It is growing with the continuous rate due to
which it earned $4 billion in revenue and $221 million in operating incomes in the year 2016.
The company especially offers the network services to consumers. In the year 2018, it was
ranked as the 7th largest company in the consumer electronic and home appliance retailer in the
world. After achieving the success at the initial years, the company also bought 70% of the
Clive Anthonys chain in Queensland (JB HI-FI, 2018).
Overview of the industry
Consumer electronic and home appliances industry delivers the equipment’s related to
home and the others. Consumer electronic devices are used by the company for entertainment
and home activities. This industry becomes an essential part in the consumers daily life routine
as they are useful in the daily life such as laptops, digital cameras, DVDs, tablets, printer,
internet and the others (Euromonitor, 2018). It has been seen that the company operates the
business in consumer electronic industry in Australia. The consumer electronic industry of
Australia gets the experienced of another year of growth in both the terms volume and value
terms. It has been seen that the manufacturers continued to place the greater efforts into
penetrating television in Australia. The Consumer electronics industry earned the revenue $2759
m in the year 2019 and it is also expected that the annual growth rate of industry is increases
with the percentage of 1.8% . The market volume of the industry is $2968m in the coming year
2023. According to evaluation, it has been found that the average revenue per user is up to
$356.23 that describes an ideal amount for the users in order to contribute in the economy.

ACCOUNTING 2
(Source: Statista, 2017).
Financial Analysis
of JB Hi-Fi
Ratios Analysis 2018 2017
201
6
201
5 2014
Current Ratio
Current
assets 1211 1171 703 617 578
Current
liabilities 917 1.32 886
1.3
2 447
1.5
7 380 1.62 352 1.64
Debt Ratio
Total
liabilities 1,544 1599 588 552 565
Total Asset 2492 0.62 2452
0.6
5 992
0.5
9 895 0.62 860 0.66

ACCOUNTING 3
Interest earned ratio
Income
Before
Interest and
tax 350 290 221 201 191
Interest
Expenses 17
20.5
9 11
26.
36 4
55.
25 6 33.5 9
21.2
2
Financial Analysis
As per the above evaluation, it has been seen that the current ratio of JB HI-FI is
decreasing with the continuous rate. Current ration defines the ability of the organization to pay
its short term obligations that can pay within a year. It also helps the investors to evaluate the
company ability to satisfy the current debt and the other payable. The decreasing current ratio
states that the corporation ability or efficiency to pay its current liabilities is reduces. In the year
2018, it has been evaluated that the current ratio of the firm is 1.32 which is decreasing with the
ratio 1.62 from the year 2015 (JB HI-FI, 2015). It has been seen that the amount of current assets
is increasing with the increasing current liability which reflects the negative amount due to which
it will face the challenges in coming future due to financial crises. It also states that the company
liquidity ratio is effective (Williams, & Dobelman, 2017).
Debt Ratio refers the debt amount that is taken by the firm in exchange of purchasing
asset. Debt Ratio also evaluates the ability of the business to purchase the asset on loan or the
ability to pay its obligation. It has been seen that the debt ratio of the company is reduces or
somewhat same (Robinson, Henry, Pirie, & Broihahn, 2015). It states that the company has the

ACCOUNTING 4
ability to pay its all debts that is why; it is suggesting it has to maintain their liability amount or
does not take any loan in the coming future for long time survival. The amount of total asset is
increasing faster as compare to the amount of total liability which reflects that the company has
the ability to pay its all long term or short term debts (Zainudin, & Hashim, 2016).
Interest Earned Ratio evaluates the equivalent amount of income that is used to cover the
interest expenses in the near future (Peavler, 2018). The amount of net income is increasing from
the previous year’s such as 191 to 350 from 2014 to 2018 (JB HI-FI, 2018). But it has been
found that interest expenses is reduces which reflects that the net incomes is increases. Net
income of the company is reduces from the previous year’s such as 1599 to 15444 in the year
2018 and 2017 respectively. The increasing income and reducing expenses reflects that the
company high income to recover all the expenses. The capability of covering interest expenses is
high which is good for the company to survive for long time in the market (JB HI-FI, 2017).
As per the above evaluation, it has been observed that the company operates the business
in an effective manner. The liquidity situation of the company is effective as the current asset is
more as compare to current liabilities. The corporation has the capability to pay the short terms
obligations as it current asset is increases as compare to current liability. The debt ratio reflects
that the company has the ability to pay all long term or short term obligations with the total
assets. JB HI-FI has high amount of total asset as compare to total liability due to which the
capability of paying all debts. As per the above analysis, it has been evaluated that the company
has high income due to which it has the capacity to covers it interest amount. It has been found
that the corporation is able to cover its interest expenses which state the company has the
opportunity to borrow loan. It can be said the company can survive for long time in the market.

ACCOUNTING 5
Non-current Assets
Non-current Assets are the long-term investment of the company for which the full value will not
be realized within the accounting year. It is an asset which is not expected to turn into cash
within a year. It is reported in the balance sheet of the business under the headings of Assets
(Accounting Tools, 2019).
Application of Accounting Standards for the valuation of non-current assets
Non-current assets include land and building, plant and equipment, tools, and the other
motor vehicles. It is usually esteemed by subtracting the accumulated depreciation from the
original cost of purchase. As per the accounting standards, these are reported on the basis of two
methods such as historical cost and fair value. According to the accounting standards, the
companies can value the non-current asset in an appropriate manner.
ASSB-136
ASSB-136 states the accounting standard of impairment of assets. This accounting
standard defines the processes that an entity applies to confirm that its assets are carried not more
than its recoverable amount. By analyzing the annual report, it is observed that the impairment
loss is recognized for the total amount by which the exceed amount of carrying asset is
recoverable amount. It has been evaluated that the company implement the accounting standards
while valuating the non-current assets. The recoverable amount of asset is high than an asset’s
fair value. The company evaluate the recoverable amount is the higher than the fair value less
costs to sell and value in use. Plant and equipment and leasehold improvements are tested for
impairments by the JB HI-FI while the changes in conditions that reflect the carrying amount
that may not be recoverable. It states that the company implements the accounting standard in an

ACCOUNTING 6
appropriate manner to evaluate the value of assets (CFI, 2018). The impairment charges of JB
HI-FI business are $15.8 million in which the charge of plant and equipment is 0.7, leasehold is
0.4.
ASSB-13
Accounting Standard 13 (ASSB-13) is fair value measurement which states that the
company evaluates the asset at the fair value to evaluate the asset in the accurate amount (AASB
Standard, 2018). According to this standard, plant and equipment’s, financial assets and
liabilities are evaluated at the fair value. In the annual report of 2018 of JB HI-FI, it has been
seen that the corporation prepared the financial statement under the historical cost. But some of
the financial assets and liability are determined at the fair value to evaluate the current amount of
asset. It is observed that the company reports the financial assets, plant and equipment’s, and
liabilities including derivative instruments at the fair value. Measuring the asset at the fair value
helps the organization to evaluate the amount of asset at the current value (JB HI-FI, 2018). As
per the analysis, it has been seen that the company implement the accounting standards to
evaluate the value of non-current asset in an ethical manner.

ACCOUNTING 7
References
AASB Standard. (2018). Fair Value Measurement. Retrieved From:
https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf
Accounting Tools. (2019). Noncurrent asset. Retrieved From:
https://www.accountingtools.com/articles/2017/5/12/noncurrent-asset
CFI. (2018). What is Asset Valuation?. Retrieved From:
https://corporatefinanceinstitute.com/resources/knowledge/finance/asset-valuation/
Euromonitor. (2018) Consumer Electronics in Australia. Retrieved From:
https://www.euromonitor.com/consumer-electronics-in-australia/report
JB HI-FI. (2018). About Us. Retrieved From:
https://www.jbhifi.com.au/General/Corporate/Consumer-Matters/About-Us/
JB HI-FI. (2015). Annual Report 2015. Retrieved From:
https://www.jbhifi.com.au/Documents/Annual%20Report%20-%202015.pdf
JB HI-FI. (2017). Annual Report 2017. Retrieved From: https://investors.jbhifi.com.au/wp-
content/uploads/2018/08/Annual-Report-2017.pdf
JB HI-FI. (2018). Annual Report 2018. Retrieved From: https://investors.jbhifi.com.au/wp-
content/uploads/2018/10/Annual-Report-2018-with-Chairmans-CEOs-Report.pdf
Peavler, R. (2018). The Times Interest Earned Ratio and What It Measures. Retrieved From:
https://www.thebalancesmb.com/the-times-interest-earned-ratio-and-what-it-measures-
393208

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Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Statista. (2017). Consumer Electronics. Retrieved From:
https://www.statista.com/outlook/251/107/consumer-electronics/australia#market-
revenue
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific Book
Chapters, 109-169.
Zainudin, E. F., & Hashim, H. A. (2016). Detecting fraudulent financial reporting using financial
ratio. Journal of Financial Reporting and Accounting, 14(2), 266-278.