ACCT20074 Final Assignment: Analyzing JB Hi-Fi's Reporting (2018)

This report examines JB Hi-Fi's reporting decisions, specifically focusing on their profit downgrade announcement, through the lenses of classical political economy theory and stakeholder theory. The analysis utilizes institutional theory to explain the company's decision-making process, particularly their response to the ASX's concerns. The report also applies the managerial branch of stakeholder theory to understand JB Hi-Fi's prioritization of stakeholders, suggesting a preference for retailers over the ASX. The analysis highlights the company's strategic choices in managing external pressures and stakeholder expectations, emphasizing the importance of company interests in their reporting strategies. This document is intended to provide insights into the theoretical underpinnings of corporate reporting decisions and stakeholder management.

ACCT20074 Final Assignment
Term 1, 2018
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Question 1: Use Classical Political Economy Theory to explain JB Hi-Fi’s decision to release its profit downgrade
in the way it did. Make sure you explain what Institutional Theory is, and support your observations with evidence
from the case study.
Classical economic political was developed by Adam Smith who is considered one of the fathers of economics. He is known for
advocating for a non-capitalist society for institutions. He envisaged a situation where the government and another stakeholder only
operated as night watchmen for the organization. For him, organizations were supposed to run professionally without influence from
external actors. The external factors that his theory referred to were any influences that weren’t organizationally based. The external
factors include; individual states, market influences and stock factors (Joseph 2014).
From his reasoning there developed further reasoning’s that were in agreement and others in disagreement. The second line policies
that deconstructed his theory reasoned that organizations could not stand on their own. That for the organizations to develop other
external factors had to influence their operation. This line of thought was importantly promoted by Richard Vice who was also a
philosopher. In the JB hi-fi company, there are external factors that influence their operations. This is preferably a contextualized line
of thought (Knights and Willock 2016). The concern from ASX who demand an apology for profit downgrade. This, therefore, proves
the economic-political view of Richard Vice, that the tendencies and operations of an institution are dependent upon the
contextualized policies. ASX is acting from its systems of ensuring the stock prices of a company remain normal. They are therefore
concerned with the drop in stock prices of the company to about 10%, one that has never be seen for the past few years (Joseph
2014).
Then came another group or line of thought led by economist Coase. They argued the functions of the institutions are the ones that
influenced the contextualized factors. That companies or organizations made private decisions and their individual decisions, when
implemented, would affect the external factors. Therefore they reasoned that the main economic, political players are the
organization. For instance, the profit downgrade by the JB hi-fi company is the one that has led to the course of action of the ASX as
external factors. The fact causes the effect of the ASX in demanding an explanation there is a profit downgrade. The example,
therefore, proves that it’s the organization that drives the external factors (Joseph 2014).
It is from this diverse argument that institutional theory develops. The institutional theory argues that; all institutions make decisions

that are influenced by the existing environmental factors. The method refers to externalities as actors. The institutional way further
defines that externalities or actors exclude organizational history. A company can use their account in making a decision, and that
won’t be considered an externality. Apart from history, that organization can use personalities in the organization, and that would
not be an externality. The theory refers to this as path independence. The JB hi-fi has used path independence in giving their
submission about the profit downgrade. The company has failed to apologize for profit downgrade during its submissions, and this is
a proof of their path independence and not dependant on the market abilities of its share prices and stocks in the market (Zakim
2018).
The other perspective of the institutionalism is the realist perspective (Dunning 2014). Realist institutional theory acknowledges the
existence of this external factors. However, the institution shows that these actors are least of their concerns. They act in their
capacity and not concerned with the policies of the actors. In the JB hi-fi case, the company operates without considering what the
ASX will think or relate to them. They don’t focus on the profit downgrade but instead give a more exclusive report that shows, the
concern of the ASX is not the primary concern but just a little one among many. They, therefore, acknowledge that the market exists
but not by the policies of the actors (Fernando and Lawrence 2014).
References:
Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and
institutional theory. Journal of Theoretical Accounting Research, 10(1), pp.149-178.
Zakim, M., 2018. Accounting for Capitalism: The World the Clerk Made. University of Chicago Press.
Joseph, M., 2014. Debt to society: Accounting for life under capitalism (pp. 29-31). Minneapolis: University of Minnesota Press.
Knights, D. and Willmott, H. eds., 2016. Labour process theory. Springer.
Dunning, J.H., 2014. Economic analysis and multinational enterprise. Routledge.
Marker’s Comments: The marker will provide feedback here. Mark (10):
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Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 2: Use the Managerial branch of Stakeholder Theory to explain JB Hi-Fi’s reporting decisions. Make sure
you support your observations with evidence from the case study.
Stakeholders are talented people who have a say in the operations of an institution. They are entitled to various decisions in the
company. They are allowed since they provide different support to the company or organization. The support they provide includes
financial, marketing and customer base. The stakeholders include retailers, stock exchange companies, influential media and the state.
The JB hi-fi company has ASX as a stakeholder since it’s involved in selling its shares and stock prices. They are therefore entitled to
question or even demand an explanation about the profit downgrade experienced by the company. They are consequently within their
legal line when they ask an apology from the JB hi-fi electronic company (Bristow, Mowen and Krieger 2015).
The stakeholder theory, therefore, operates on this basis. The theory, however, is divided into the managerial branch.
Managerial branch theory gives powers to the organization's managers than the stakeholders. Managers are given the role in deciding
on which stakeholder is more important than the other. The managers can, therefore, choose to satisfy the expectations of an influential
media than a financial stakeholder. They will be acting within the managerial branch of stakeholder theory. In the JB hi-fi decision in
not giving an apology to the ASX as a stakeholder. The decision shows that they prefer their retailers as stakeholders than the ASX.

They, therefore, prefer to satisfy the expectations of the retailers than the ASX (Boley, McGehee, Perdue and Long 2014).
Importantly the managerial branch of stakeholder theory determines the bond between the organization and the various
stakeholders. Closer friendships and relationships would mean the managers give a lot of preference for the stakeholder with the most
intimate ties. Therefore, when the managers don’t satisfy the expectations of a stakeholder, it, therefore, means they are not in the
proper relationship at all with the organization. The JB hi-fi company, therefore, does not have a good relationship with ASX. This
lousy relationship is proven by the fact that they decline to give an apologetic explanation to the ASX even when they know that the
ASX is entitled to questioning their decisions (Olusanya 2016).
Managers have the power to analyse a stake holders concern. After analysis, they are not obliged to work with by the
expectation of the stakeholder. They are supposed to act by the decision that focuses on improving the company and the stakeholder. It
is the interest of the company that should come first before the expectations of the stakeholder (Rosenbloom 2016). A stakeholder
might have raised a valid concern, but the matter might affect the operations of an organization. The moment it touches the services,
the managers are allowed to sideline such an interest. Such is the case with the JB hi-fi company from the case study. The managers
have recognized the benefits of the ASX. They, however, feel the reaction of an apology will interfere with policies of the firm
especially by stock prices and share prices. They, therefore, act in the best interest of the company which is to keep mum about the
apology demanded by the ASX company. The decision, therefore, is taken in the best interest of the company and not a stakeholder

who is also very vital (Hall, Pennington and Lueders 2014).
References:
Hall, J.A., Pennington, N. and Lueders, A., 2014. Impression management and formation on Facebook: A lens model approach. New
Media & Society, 16(6), pp.958-982.
Olusanya, O., 2016. Emotions, decision-making and mass atrocities: through the lens of the macro-micro integrated theoretical model.
Routledge.
Boley, B.B., McGehee, N.G., Perdue, R.R. and Long, P., 2014. Empowerment and resident attitudes toward tourism: Strengthening the
theoretical foundation through a Weberian lens. Annals of Tourism Research, 49, pp.33-50.
Bristow, D.N., Mowen, J.C. and Krieger, R.H., 2015. The quality lens model: A marketing tool for improving channel relationships. In
Proceedings of the 1994 Academy of Marketing Science (AMS) Annual Conference (pp. 397-401). Springer, Cham.
Rosenbloom, D.H., 2016. 3a. Public Administrative Theory and the Separation of Powers. In The Constitutional School of American
Public Administration (pp. 78-94). Routledge.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.

Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 3: To what extent do current share prices anticipate future earnings announcements? Use the case
study to support your answer.
Share prices can be used to a considerable extent to predict future earnings. This is because of the following reasons;
Share prices determine the cash flow operation of a company at that moment. With increased share prices there is proof that
there is improved cash flow within the company or organization. It is likely that a company with improved cash flow will fetch prices
in the stock exchange market. The market prices when they are carried is a proof that the future earnings will improve. This is far most
the most empirical way of determining future earnings depending on share prices. The method is called the effective formula of cash
flow. In the JB hi-fi case, the concern by ASX is justified. The drop of the company’s share price by about 3% off the midpoint sales
of the previous means there is reduced cash flow in the company. This reduced cash flow, therefore, predicts that the future earnings of
the company might go down (Fernando and Lawrence 2014).
The stock analysis of the company can be used to predict future earnings of the company. The company can determine factors
that have led to the share price. When the elements are determined, they are improved over time. It is therefore likely that improvement
of such factors will lead to improved future earnings. Such factors include attracting more investors. Promoting the company’s cash

flow and other strategic decisions made by the company. The prediction by ASX is justified concerning the drops of share prices of the
JB hi-fi electronic company. The company is thus right in feeling that the organization is applying a strategy that is not working for
them. The ASX is therefore forced to question the policy of the company. They think the JB hi-fi is using an approach that is affecting
their stock prices and that will lead to dropped future earnings (Vijitha and Nimalathasan 2014).
Stock prices are essential in attracting investors to the company. Investors observe share prices, and if they are right and favourable,
they decide to invest in the organization. When investors come to the company, it is very likely that the future company earnings will
go up since they give the company financial boost. On the other hand drop in share prices will lead to the withdrawal of some
investors. Other investors will also sell their shares. This will, therefore, lead to the decline in future earnings. The next gains are likely
to drop. The concern also applies to JB hi-fi whose share prices have dropped significantly (Felimban and Nguyen 2018). These drop
in share prices, therefore, means that there is the likelihood of many investors selling their shares or withdrawing their contract with the
company. Once they sell their shares or withdraw the future earnings of the JB hi-fi won’t remain the same again. This is proof that
share prices can predict future earning based on investors and share price holders (Kim and Zhang 2016).
The strength of a stock market which holds the share prices can be used to predict the future earnings of the companies under it.
A strong stock market like the ASX is likely to have huge organizations at the top of its listings. Therefore if a company drops its share
prices, it’s a proof of how the company’s future earnings could easily fall (Motokawa 2015).
References
Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and
institutional theory. Journal of Theoretical Accounting Research, 10(1), pp.149-178.

Vijitha, P. and Nimalathasan, B., 2014. Value relevance of accounting information and share price: A study of listed manufacturing
companies in Sri Lanka. Merit Research Journal of Business and Management, 2(1), pp.1-6.
Kim, J.B. and Zhang, L., 2016. Accounting conservatism and stock price crash risk: Firm‐level evidence. Contemporary Accounting
Research, 33(1), pp.412-441.
Motokawa, K., 2015. Human capital disclosure, accounting numbers, and share price. Journal of Financial Reporting and Accounting,
13(2), pp.159-178.
Felimban, R., Floros, C. and Nguyen, A.N., 2018. The impact of dividend announcements on share price and trading volume:
Empirical evidence from the Gulf Cooperation Council (GCC) countries. Journal of Economic Studies, 45(2), pp.210-230.
Marker’s Comments: The marker will provide feedback here. Mark (10):
0
Exceeds Expectations
(High Distinction) 85-100%
Exceeds Expectations
(Distinction) 75 - 84%
Meets Expectations
(Credit) 65 – 74%
Meets Expectations
(Pass) 50 – 64%
Below Expectations
(Fail) below 50%
Demonstrates a balanced and very
high level of detailed knowledge of
core concepts by providing a very
high level of analysis. Utilises
current, appropriate and credible
sources.
Demonstrates a balanced and high
level of knowledge of core
concepts by providing a high level
of analysis. Utilises mostly current,
appropriate and credible sources.
Demonstrates a good level of
knowledge of some of the core
concepts by providing some level
of analysis. Utilises some current,
appropriate and credible sources.
Demonstrates limited knowledge of
core concepts by providing a
limited level of analysis. Utilises
few current, appropriate and
credible sources.
Demonstrates little, if any,
knowledge of the core concepts
with extremely limited, if any,
analysis. Utilises little, if any,
current, appropriate and credible
sources.
Quality of writing at a very high
standard. Paragraphs are
coherently connected to each
other. Correct grammar, spelling
and punctuation.
Quality of writing is of a high
standard. Paragraphs are mostly
well structured. Few grammar,
spelling and punctuation mistakes.
Quality of writing is of a good
standard. Few grammar, spelling
and punctuation mistakes.
Some problems with sentence
structure and presentation
Frequent grammar, punctuation
and spelling mistakes. Use of
inappropriate language.
Quality of writing is at a very poor
standard so barely
understandable. Many spelling
mistakes. Little or no evidence of
proof reading.
The assessment presents a
detailed and focused summary of
the ideas presented; drawing clear
and well thought-out conclusions.
The assessment presents a fairly
detailed and focused summary of
the ideas presented; drawing fairly
clear and well thought-out
conclusions.
The assessment presents a
somewhat detailed and focused
summary of the ideas presented;
providing some evidence of
conclusions.
The assessment provides limited
detail with no clear summary of the
ideas presented; drawing limited
conclusions.
The assessment fails to provide
any clear evidence of the ideas
presented; drawing no clear
conclusions.

Question 4: Show how the Brunswik Lens Model might be used to explain an investor's decision about whether
to buy or sell shares in JB Hi-Fi following their downgrade “announcement”.
Decision making about business matters can be challenging and quite complicated. Investors looking to sell shares of the
company might regret if the company later makes significant growth. They also are likely to gain if the company will then form the
profit. This complexity in decision making can be solved by following a decision-making model. The Brunswick decision-making
model, therefore, can be used.
The model has significant subsections that would help to make an informed decision about the selling or retaining shares of the
JB hi-fi company.
The first significant subsection is considering the basics facts that underlie the decision. These basics facts include the
necessary events that underlie. In financial situations like the case of JB hi-fi company, the investors might consider looking at critical
financial statements. The financial statements should have any biased information , therefore, includes; profit and loss account book,
liabilities and assets book and investor’s book (Hall , Pennington and Lueders 2014).
The investors will, therefore, decide after keen analysis of this essentialities. Their decision will, thus, be evidenced by such
documents.
Secondly, the model prefers that at this stage there should be a pre-decision made. This decision is referred to as the underlying