HI6026 - ASX Governance Principles Implementation at Woolworths Group

This report provides an analysis of Woolworths Group's adherence to the ASX Corporate Governance Principles. It examines the company's corporate governance statement and annual report for the financial year 2017, focusing on how Woolworths implements the eight essential principles outlined by the ASX. The report covers laying strong foundations for oversight, structuring the board for value, ethical conduct, financial report integrity, timely disclosures, security holder rights, risk management, and fair remuneration. Furthermore, it includes a risk assessment procedure, utilizing common size statements and ratios to evaluate the financial health and stability of the Woolworths Group, considering strategic, financial, compliance, and operational risks. The analysis concludes that Woolworths Group demonstrates compliance with the ASX Corporate Governance Principles.

Running head: ASX GOVERNANCE PRINCIPLES
ASX Governance Principles
Name of the Student:
Name of the University:
Author Note

1ASX GOVERNANCE PRINCIPLES
Executive Summary
The corporate governance principles can be defined as the system of rules, processes and
practices by which a particular corporate entity has been controlled and directed. The corporate
governance structure essentially involves the balancing of the company’s interests in regards to
the different stakeholders of business.
This particular study has chosen the corporate entity of Woolworths Group. The
Woolworths Group has been a top listed corporation of Australia and has been one of the leading
groups in regards to this particular industry. The corporate governance statement of the company
has been analyzed and other essential components have also been evaluated in this particular
study. Moreover, it has been found out that the administration of Woolworths Group has resulted
in the proper compliance with the governance principles.

2ASX GOVERNANCE PRINCIPLES
Table of Contents
Introduction......................................................................................................................................3
ASX Corporate Governance Principles...........................................................................................3
Risk Assessment Procedure.............................................................................................................6
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

3ASX GOVERNANCE PRINCIPLES
Introduction
The corporate governance principles refer to the essential principles that have been
established for the purpose of execution of the smooth business operations that is facilitated by
the corporate entities. The governance of the essentialities of business is a key factor that
contributes effectively to the success of business. In case of the corporate firms, the governance
principles are imposed and controlled by the Board of Directors. However, it must be mentioned
here that the indirect stakeholders of business also hold an opinion in case of the structuring of
the principles.
In order to evaluate the significance of the corporate governance principles in Australia,
the particular corporate entity that has been chosen for the purpose of this study is of the name
Woolworths Limited. The corporate governance statement and the annual report of Woolworths
Limited has also been analyzed and studied for the financial year of 2017, in order to understand
the significance of the principles.
ASX Corporate Governance Principles
The ASX Corporate Governance Principles apply to all the listed entities and irrespective
of the fact whether they have been operating inside or outside Australia. The phrase corporate
governance principle can be described as the framework of rules, systems and other processes
that helps in exercising the required degree of authority within the operating structure of the firm.
Moreover, the eight essential principles that seek to promote the central principle of corporate
governance has been as follows:
 Laying down of the strong foundations for oversight and management – it has been cited
by the ASX Corporate Governance Principles that an entity that is listed will have to lay

4ASX GOVERNANCE PRINCIPLES
down and effectively disclose the responsibilities of its Board of Directors and
management and the particular way in which their job is being monitored and evaluated.
The corporate governance statement that has been presented by the entity in the financial
year of 2017 essentially reflects the fact that the administration of the company has
essentially adhered to the first principle by disclosing the essentialities of the body of the
Board of Directors along with the particular roles that they play. Moreover, enough
information has also been provided in regards to the meetings the regulatory authority as
well as the structure of the Board (Beekes, Brown and Zhang 2015).
 Structure of the Board should be focused upon in order to add value – the value of the
Board should be focused upon in regards to the composition of the Board. The
administration of the Woolworths Group has also successfully adhered to the norms in
regards to the particular composition of the Board. It has been mentioned in the corporate
governance statement of the company that the Board of Directors consists of a majority
of independent non-executive directors who with the CEO possess an appropriate mixture
of skills (Beekes, Brown and Zhang 2015).
 Actions that have been restricted to ethics and responsibility – it has been further
mentioned by the ASX Corporate Governance Principles that it is the primary duty of the
listed corporate entities that they act with a standardized degree of integrity and ethics.
This has also been successfully maintained by the corporate entity of Woolworths
Limited (Beekes, Brown and Zhang 2015).
 Safeguarding the degree of integrity in regards to a financial report – the financial report
that has been prepared by a company or a listed entity should reflect a certain degree of
clarity and integrity so that the stakeholders and the other users of the financial

5ASX GOVERNANCE PRINCIPLES
statements get a true image in regards to the financial position of the firm. As per the
annual report of the Woolworths group, it has been mentioned in the financial report of
the company that the financial statements have been prepared on the basis of the
accounting standards established by the Australian Accounting Standards Board. This
means that the financial report holds optimum degree of integrity and clarity (Clarke
2018).
 Balanced and timely disclosures – the disclosures that have been presented by a corporate
entity in the financial statements of the companies should reflect the essential procedures
and material effects on the price or the value of the securities. This has also been
successfully adhered to by the corporate entity of Woolworths Limited. This means that
the corporate entity has disclosed enough financial information in the annual report of the
company in the form of notes to the financial statements (Clarke 2018).
 Providence of the required degree of respect to the rights of the security holders – A
listed entity should give the respect to the rights of the security holders by facilitating
them with the appropriate information and facilities for the purpose of allowing them to
exercise the rights effectively. This has been mentioned in the financial statements of the
companies that the annual report has been prepared in the prescribed format as mentioned
by the Australian Accounting Standards Board. Moreover, the auditor’s report has also
seconded the fact that the annual report of the company has been prepared in accordance
to the Australian Accounting Standards Board. Therefore, the welfare of the stakeholders
of business has been ensured by the utilization of the prescribed format as established by
the accounting standards of Australian Accounting Standards Board (Clarke 2018).

6ASX GOVERNANCE PRINCIPLES
 Recognition and the management of risk – the listed entity that has been operating in the
market should lead to the establishment of a sound risk management framework that
facilitates the periodical review of the effectiveness of the framework. The corporate
entity of Woolworths consists of a risk management framework that has been mentioned
in the annual report of the company with the name material business risks. The essential
dynamics that have been considered in regards to the management of wealth are strategic
risks, financial risks, compliance risks and operational risks. This further ensures the fact
that the management of the firm has strictly adhered to the corporate governance
principles.
 Remuneration should be fair and responsible – the remuneration structure of a business
entity should be fair and responsible and should be sufficient to retain and attract
directors of the highest cadre. Moreover, a good remuneration structure should also
provide motivation to the high quality senior level executives. Moreover, it also
facilitates the alignment of the interests of the management of a corporate entity with the
welfare of the stakeholders of business. In case of the particular entity of the Woolworths
Limited it has been mentioned in the corporate governance statement of the firm that the
particular firm has adhered to the corporate governance principles (Tricker and Tricker
2015).
Risk Assessment Procedure
The auditor is required to perform risk assessment procedure in order to obtain a
reasonable understanding of the entity. The risk assessment procedure is necessary because it
helps in assessing the risk of material misstatement and develop further procedure. The company
Woolworth Group is one of the largest retail company in Australia. The Woolworth is a leading

7ASX GOVERNANCE PRINCIPLES
player in the retail sector and it has noticed increased customer satisfaction by 5.2%. It can be
seen that the overall customer satisfaction of the company has increased by 3 points to reach
78%. The overall retail market is growing and Woolworth is leading the growth. The business is
governed by general business and civil law. The main strategy of the company is to focus on the
Australian Supermarkets. The aim of the company is to provide good quality and variety
products ate cheap prices.
In the current case keeping in mind the overall situation and the company the risk
assessment tools that have been adopted are common size statement and ratios. The calculations
are provided below:
Common Size Income Statement
Particulars
2013 2014 2015 2016 2017
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Amo
unt ($
mill)
Per
cent
age
Revenue 58674
100
% 60952
100
% 60868
100
% 58276
100
% 55669
100
%
Cost of revenue 42913
73
% 44475
73
% 44345
73
% 42677
73
% 39740
71
%
Gross profit 15762
27
% 16478
27
% 16524
27
% 15599
27
% 15929
29
%
Operating
expenses
Sales, General
and
administrative 11380
19
% 11962
20
% 5511 9% 12964
22
% 13134
24
%
Other operating
expenses 10765
18
% 11172
18
% 18567
31
% 12033
21
% 11686
21
%
Total operating
expenses 22146
38
% 23134
38
% 24078
40
% 24997
43
% 24820
45
%
Operating
income -6384
-
11
% -6656
-
11
% -7555
-
12
% -9398
-
16
% -8891
-
16
%
Interest Expense 410 1% 278 0% 255 0% 246 0% 194 0%
Other income
(expense) 10009
17
% 10449
17
% 10877
18
% 11004
19
% 11217
20
%
Income before 3215 5% 3515 6% 3068 5% 1360 2% 2132 4%

8ASX GOVERNANCE PRINCIPLES
income taxes
Provision for
income taxes 960 2% 1057 2% 930 2% 520 1% 650 1%
Minority interest 5 0% 7 0% -9 0% -1113 -2% 60 0%
Other income 5 0% 7 0% -9 0% -1113 -2% 60 0%
Net income from
continuing
operations 2255 4% 2458 4% 2137 4% 840 1% 1482 3%
Net income from
discontinuing
ops 10 0% 0% 0% -3188 -5% 111 0%
Other -5 0% -7 0% 9 0% 1113 2% -60 0%
Net income 2259 4% 2452 4% 2146 4% -1235 -2% 1534 3%
Net income
available to
common
shareholders 2259 4% 2452 4% 2146 4% -1235 -2% 1534 3%
Common Size Balance Sheet
Assets
2013 2014 2015 2016 2017
Amo
unt
($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Amou
nt ($
mill)
Perc
enta
ge
Current
assets 6226 28% 7175 32% 7661 34% 7427 33% 6994 31%
Non-
current
assets
1602
4 72% 17030 77% 17676 79% 16075 72% 15922 72%
Total
assets
22,2
50
100
% 24,205 100
% 25,337 100
% 23,502 100
% 22,916 100
%
Liabiliti
es
Current
liabilitie
s
6,86
6 31%
7,558
34% 9,169 41% 8,993 40% 8,824 40%
Non-
current
liabilitie
s
6,08
4 27% 6,122 28% 5,036 23% 5,728 26% 4,216 19%
Total
liabilitie
s
12,9
50 58%
13,680
61%
14,205
64%
14,721
66%
13,040
59%
Stockhol 9,30 42% 10,525 47% 11,132 50% 8,781 39% 9,876 44%

9ASX GOVERNANCE PRINCIPLES
ders'
equity 0
Total
liabilitie
s and
Equity
22,2
50 100
% 24,205
100
% 25,337
100
% 23,502
100
% 22,916
100
%
Statement Showing Ratios
Particulars Formula 2013 2014 2015 2016 2017
Balance Sheet ratio
Current Ratio Current Assets/ liability 0.91 0.95 0.84 0.83 0.79
Debt equity ratio Debt/ Equity 0.6542 0.5817 0.4524 0.2437 0.4269
The table above shows the common size Income statement and balance sheet. The
calculation above shows the balance sheet ratios. It can be seen that liquidity of the company is
declining as indicated by the current ratio. This could indicate an area of risk that should be
considered. The analysis of the common size income statement indicates that the selling and
administrative expenses is showing fluctuation over the years. This indicates an area of risk that
the auditor should focus (Tricker and Tricker 2015).
Conclusion
The conclusion that can be derived from the above discussions is that the corporate entity
of Woolworths has successfully adhered to the principles of the corporate governance principles

10ASX GOVERNANCE PRINCIPLES
as established by the Australian financial entities. Moreover, the particular risk assessment
procedure that has been undertaken reflect the fact that the firm has been sufficient amount of
risk in regards to the liquidity of the company.

11ASX GOVERNANCE PRINCIPLES
References
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disclosures in Australia: A re‐examination. Accounting & Finance, 55(4), pp.931-963.
Christensen, J., Kent, P., Routledge, J. and Stewart, J., 2015. Do corporate governance
recommendations improve the performance and accountability of small listed companies?.
Accounting & Finance, 55(1), pp.133-164.
Clarke, A., 2018. 'Culture'and its place in the corporate governance puzzle. Governance
Directions, 70(1), p.10.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Poulton, E., Barnes, L. and Clarke, F., 2017. The labyrinth of international governance codes:
The quest for harmonization. The Journal of Developing Areas, 51(3), pp.425-435.
Safari, M., 2017. Board and audit committee effectiveness in the post-ASX Corporate
Governance Principles and Recommendations era. Managerial Finance, 43(10), pp.1137-1151.
Shimeld, S., Williams, B. and Shimeld, J., 2017. Diversity ASX corporate governance
recommendations: a step towards change?. Sustainability Accounting, Management and Policy
Journal, 8(3), pp.335-357.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.