Analysis of JB Hi-Fi's Managerial Accounting and Remuneration

This case study analyzes the managerial accounting practices of JB Hi-Fi, focusing on the evaluation of executive performance and remuneration strategies. The study examines the company's remuneration system, which includes fixed remuneration, short-term incentives (STIs), and long-term incentiv...Read More

Managerial
Accounting
A case study on JB Hi-Fi

Topic and Literature Review
 The executives and 11,800 employees CEO performance is evaluated
by the chair, with the ultimate oversight of the board
 On one meeting with the CEO and the executive is able to discuss on
the performance of the executive
 As per the setting of the remuneration for the financial year 2017
20% of the STI will be subject to the deferral and the achievement of
the STI
 The board of JB Hi-Fi recognised the group’s performance based on
the quality of motivation of people. This includes

Company Review
 Different types of intrinsic awards given by the company is identified
with bonus and gifts
 Quantitative bonus is considered with the annual growth in the EBIT
 Quantitative element of executives is based on the STI’s which were
seen to be paid for FY 2016 statutory EBIT
 Group quantitative element of executives is based on the STI’s which
were seen to be paid for FY 2016 statutory EBIT

Extrinsic rewards
 Long-term incentive plan for financial year 2016 was identified in
form of share options with no exercise prices.
 The LTI options with an exercise price and Zapos. Based on the
fluctuations of the company’s share
 Superannuation contributions by the company as per the
nonexecutive directors in the state due to the requirements are
included with the remuneration package amount
 The value of the options granted and exercised in a particular year is
calculated with fair value

Findings Summary
 Remuneration system of the selected company is deemed to be
effective in the delivery of superior performance as its executive
 Remuneration strategy of the company is furher seen to comprise a
mix of fixed remuneration along with short and long-term incentives
 The disclosures pertaining to fixed remuneration package has been
able to increase between 4% and 5%.
 Short-term incentive plan reward performance against both financial
and nonfinancial measures is seen to be evident in this case

Findings Summary
 Remuneration system of the selected company is deemed to be effective in the
delivery of superior performance as its executive
 The borders of organized the performance of the groups as per the quality and
motivation of the people, thereby including both executives and employees across the
group
 Findings has revealed that the long-term incentive plan for financial year 2016 was
identified in form of share options with no exercise prices
 The most significant factors for the control systems are seen to be included with the
various evaluations whose effectiveness depends on the information quality.

Analysis of Remuneration Methods Used
Stock Market Performance Ratio
JB HiFi
2017 2016 2015
Market price per
share (A) $23.37 $24.10 $19.48
Earnings per shares
(B) 172.1 153.8 137.9
Proposed Dividend
Per share (F) 118 100 90
Net Income (C ) 172.4 152.2 136.5
Shareholder's Equity
(D) 853.5 404.7 343.5
Cost of Sales (E) 4397.5 3089.1 2853.8
Price Earning Ratio
(A/B) 0.14 0.16 0.14
Earning Price Per
Share 172.10 153.80 137.90
Payout Ratio 69% 65% 65%
Return on Equity 20% 38% 40%

Analysis of Remuneration
Methods
 The significant nature of the achievements has been further reflected
in the executive remuneration which has increased and compared to
the previous years
 The fixed remuneration packages for the executives more than two
years increased between 4% and 5% from 2015 to 2016
 Company’s short-term incentives were depicted to be between 98%
and 100% for financial year 2016
 Financial performance of the group. The group quantitative element
of executives

Recommendation
 JB Hi-Fi has some of the effective recommendations in enhancing the
reporting measures can be seen with an augmented focus towards
performance
 It tethering included
 JB Hi-Fi used to ensure that the gathered data is not always a real
reflection of real performance which includes more than one raw
information input for attaining real picture.
 This is mainly due to the fact that data must be simple for bringing in
conclusions. In addition to this, JB Hi-Fi needs to ensure that the
analytical stream is required within the simple and understandable
graphical, tabular and angular chart which will arrive at the
conclusion in an easier way.

Conclusion
 The literature review and the topic have shown that CEO and CFO
performance is based on setting of the remuneration for the financial
year 2017 20% of the STI
 Public Companies is considered with various type of the past and
present experiences
 An appropriate analysis of the executive performance is seen to be
highlighting the future compensation and employment of the
executives
 Mix of the CEO’s executive remuneration has been determined as per
the long-term incentives and comparison of the remuneration and
short incentives.

References
 Ajmal, A., Bashir, M., Abrar, M., Khan, M.M. and Saqib, S., 2015. The effects of intrinsic and extrinsic
rewards on employee attitudes; mediating role of perceived organizational support. Journal of Service
Science and Management, 8(04), p.461.
 Bussin, M. and Lee, J., 2016. Remuneration policy and strategy guide: asset-based HR-hot button. HR
Future, 2(Feb 2016), pp.16-18.
 Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/2017%20Annual
%20Report.pdf [Accessed 6 May 2018].
 Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/2016%20Annual
%20Report.pdf [Accessed 6 May 2018].
 Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/2015%20Annual
%20Report.pdf [Accessed 6 May 2018].
 Lepper, M.R. and Greene, D. eds., 2015. The hidden costs of reward: New perspectives on the
psychology of human motivation. Psychology Press.
 Sungatullina, L.B. and Sokolov, A.Y., 2015. Applying game theory to optimize expenses for employees’
remuneration. Asian Social Science, 11(11), p.364.
 Ulber, J., Hamann, K. and Tomasello, M., 2016. Extrinsic Rewards Diminish Costly Sharing in 3‐Year‐
Olds. Child development, 87(4), pp.1192-1203.

Thank You