Detailed Financial Report: JB Hi-Fi Limited Liabilities and Provisions

This report analyzes the liabilities of JB Hi-Fi Limited, differentiating between current and non-current liabilities. It examines the increase in current liabilities, detailing various components such as trade payables and borrowings. The report also explores provisions, distinguishing them from liabilities, and assessing their nature and classification within financial statements. It provides insights into interest-bearing loans, cash flow, and secured versus unsecured liabilities. Furthermore, the report includes a breakdown of non-current borrowings, including bank loans, and discusses the classification and nature of non-current provisions, such as employee benefits and lease provisions, as reflected in the company's financial statements. Overall, the report offers a comprehensive overview of JB Hi-Fi's financial position concerning its liabilities and provisions.

Ans-1
Liabilities of a company is the amount that the company owes to its stakeholders or any other outsider.
The liabilities of any company can be distributed in two types, one being the current liabilities and the
other one being the non-current liabilities.
As can be derived from the name itself current liabilities are the company's debts or any kind of
obligations that are short term in nature means which are due within a year and it also includes short-
term debt, accounts payable, accrued liabilities and other debts.
After going through the financial statements of the JB Hi-Fi Limited for the financial year 2015-2016
specifically the balance sheet, we can conclude that the current liabilities for the JB Hi-Fi limited has
increased in the financial year 2015-2016 as compared to the financial year 2014-2015.
The current liabilities for JB Hi-Fi Limited has increased by $66497000 (17.48 %) in the financial year
2015-2016.
There are various classes of liabilities which can be recorded under the head of current liabilities:
 Accounts Payable
 Interest Payable
 Accrued Expenses
 Tax liabilities
 Short-term Loans
 Dividends Declared
Ans-2
The Major liabilities for any company are the one which constitutes of some significant amount, which
after going through the annual report of JB Hi-Fi limited for the financial year 2015-2016 are
 Trade and other payables amounting to $384928000 out of which $302141000 is the amount for
Screenshot from JB Hi-Fi Limited Annual Report
Screenshot from JB Hi-Fi Limited Annual Report

trade payables only.
 Borrowings amounting to $109736000 which constitutes of the unsecured bank loan for the
same amount.
Ans-3
As the name suggests a provision is an amount which a company set aside from its profits to meet some
future liability or obligation as a result of some past event. As provision is a liability to the company, it
can be both current and non-current liability depending upon the purpose for which the provision has
been created.
There are various items which are included under the heading ‘Provisions’ in the ‘Current Liabilities’
section of the statement of financial position:
 Provision for bad and doubtful debts
 Provision for taxation
 Provision for discount to debtors
 Provision for repairs and renewals
 Provision for employee benefits
 Provision for loss in the value of stock
The nature of the above-shown items is that all of them are short term in nature, has a contingency
attached to them and will lead to an outflow of the resources.
The way in which a provision can be distinguished from a liability is due to the uncertainty regarding
the amount or timing of the future expenditure or some sort of settlement.
Yes, the items shown above satisfies the definition of provisions as contained in IAS 37/AASB 137
which is, a provision is a "liability of uncertain timing or amount", and requires that all the following
conditions be fulfilled before a provision can be recognized:
 Presently has a liability as a result of a past event;
 Outflow of resources is likely to happen to settle the liability
 The amount of the obligation can be estimated reliably.
As can be seen from the screenshot above it can be seen that the liabilities for employee benefits has
increased by $5288000 in the case of current provisions, whereas by $558000 in the case of Non-
current provisions.
Ans-4
Particulars Financial Year
2015-16($’000)
Financial Year
2014-15($’000)
Cash raised by interest bearing loans - -
Interest bearing loans repaid 30000 40113
It was found after going through the annual report for JB Hi-Fi Limited, that all of the unsecured
Screenshot from JB Hi-Fi Limited Annual Report

borrowings of the company are its interest bearing loans.
From the cash flow statement of the JB Hi-Fi Limited for the Financial Year 2015-2016, it can be seen
that company has not made any additional borrowings neither in the financial year 2015-2016 nor in
the financial year 2014-2015. It has just repaid the amount as shown in the table above, which shows
that the company is trying to be debt free, which is a good step to grow.
Ans-5
A secured liability is a liability on which the payment is guaranteed by an asset. It means that it has
something as collateral and if we won’t be able to pay our liability or debt then, our creditor has the
option to recover the amount through the proceeds from the sale of the collateral to satisfy the debt.
In the case of JB Hi-Fi Limited none of the non-current liabilities are secured, that is they had not
pledged any asset or lien against their non-current liabilities.
Ans-6
From the balance sheet of the JB Hi-Fi Limited for the financial year 2015-2016, it can be seen that out
of all the non-current liabilities it is just the bank loan which comes under the heading non-current
borrowings.
The actual amount in the balance sheet for bank loans is $109736000 but the total amount the company
will repay is higher, that is because of the presence of interest which the bank charges for lending the
loan to the company.
Particulars Amount ($’000)
Within two years 116,545
Between two and five years -
Beyond five years -
Here we are not including the lease amount as a non-current borrowings, as it is a non-current liability
but not borrowing. We considered only bank loans as the part of non-current borrowings.
Ans-7
As explained earlier also, a provision is the amount kept aside out of the company’s profits to a meet
present obligation either legal or constructive which occurred as a result of some past event, it is
uncertain that whether the company will settle the obligation and it is possible to make an appropriate
estimate regarding the amount of obligation.
Screenshot from JB Hi-Fi Limited Annual Report
Screenshot from JB Hi-Fi Limited Annual Report

As we saw earlier, the provisions can be both current and non-current depending upon the requirement.
After going through the annual report of JB Hi-Fi Limited Company we can say that:
Yes, in the case of JB Hi-Fi Limited Company there are two non-current provisions in the balance
sheet.
As the screenshot is showing that there are two Non-current provisions:
 Employee benefits, which in general includes liabilities for salaries and wages, non-monetary
benefits, liability for long service leave measured at the amounts expected to be paid when the
liabilities are settled.
 Lease provision, which in general shows the company’s estimate of the amount required by
them to return the leased property at its original like condition.
Screenshot from JB Hi-Fi Limited Annual Report