Canberra Uni CIA 11217 Reflective Report: Earnings Management

This reflective report analyzes earnings management techniques and corporate governance practices, focusing on the annual report of AGL Energy Ltd. The report explores various earnings management methods, including income smoothing, big bath write-offs, and the choice of accounting policies. It evaluates AGL's corporate governance framework, highlighting its strengths in minimizing earnings manipulations through board structure, independence of non-executive directors, and the effectiveness of committees like the Audit & Risk Management Committee and People & Performance Committee. The report also discusses the application of conservatism in accounting practices and assesses the potential for future earnings manipulations based on the company's current governance structure and the effective performance of its committees. The analysis provides insights into how corporate governance mechanisms can mitigate the impact of earnings management techniques and ensure transparent financial reporting.

Reflective Assignment
The core of earning management was learned during the course. Further, I also got to know
about the acts done by organizations to manage earnings. I enhanced my knowledge about
different techniques of earning management which comprises Income smoothing, Big bath
write-offs, real activities management and choice of accounting policy and accrual
accounting . I evaluated corporate governance statement of AGL Energy Ltd and assessed
that the corporate governance framework, policies and procedures of company represent high
standard of corporate governance. Depreciation accounting, which is part of earning
management, is supported theory to real world. As it is one of the significant expenditure due
to which cost of an asset can be claimed as expense along with any wear and tear relating to
asset. I learned the concept of conservatism deeply, and same can be applied in accounting of
service revenue, advertising and marketing cost, inventory and accounts receivable. Income
smoothing and Big Bath write off are the techniques assisted me in ascertaining the manner
in which these techniques are applied by the management to hide the exact details relating to
financial operations of company. As income smoothing technique is applied to hide the actual
fluctuation in case management assesses that the performance of future years may fluctuate.
Further, Big Bath write off method is applied when there is change in management and assets
or operational units are required to be written off, outgoing management is blamed for same.
I also got to know that the impact of these impacts can be reduced through effective corporate
governance mechanism.
In the case of AGL Energy Ltd reviewing and approving strategies are applied in order to
initiate significant plans of organization. Further, the independence of each non-executive
director is assessed through the financial year. Even materiality is assessed on case to case
basis through application of general materiality threshold so that appropriate decision can be
taken. The board consist appropriate mix of skills which enable the management to attain
strategic objectives and minimize earning manipulation. The company consist nomination
committee, Safety, Sustainability & Corporate Responsibility Committee, Audit & Risk
Management Committee and People & Performance Committee so that corporate governance
could be strengthened and accountability and positive culture could be sustained in
organization. There are no indications of earning manipulations in case of AGL Energy Ltd
to be undertaken in future as all the four committees are effectively performing their
obligation under its Charter.