Introduction to the Research
Discuss about the Measurement Of Sustainability Performance In The Public Sector.
The topic which is selected for this research is “Accounting standards in Woolworths”. The “Australian Accounting Standards Board (AASB)” acts as a governing authority within Australia that analyses as well as controls the accounting standards that is applicable within the organization (Adams Muir and Hoque 2014). The organization that will be selected for necessary accounting standards implementation includes public and the private sector organizations of Australia. By means of implementation of global standards of accounting, there is observed to have increased transparency in offering necessary financial information to the stakeholders of Woolworths Company. Considering the relevance of accounting standards implementation within companies, the current research will analyze the accounting standards that are used by Woolworths in Australia. In addition, the research problems associated with the implementation and applicability of the company’s accounting standards that will be discussed and evaluated (Apostolou and Rebele 2015). Moreover, the current research will also focus in evaluating the harmonization between the domestic as well as international accounting standards employed within Australian business environment.
The company that is selected for analysis of accounting standards in Australia is Woolworths. Through the selection of this company it will be easier to understand that the accounting standards that are present in Australian organizations are regulated and developed by “Australian Accounting Standards Board (AASB)” (Apostolou et al. 2015). The Australian Accounting Standards used in this company is focused on the development of accounting standards that is applicable all over the world and facilitates the Australian companies like Woolworths to implement such standards. As per the report presented by Woolworths Group, the organization is deemed to operate within the retail business all over the nations of New Zealand and Australia. Woolworths has its business operations in several segments including clothing and general merchandise, home ware, beauty and lifestyle products, food and logistics segment along with financial services. The company operates its business through subsidiaries that includes “Woolworths Proprietary Limited” and “David Jones Proprietary Limited” (Bamber and McMeeking 2016). The company has it’s headquarter in New South Wales and is positioned as among the second largest organization within Australia in respect to its revenue. Woolworths is observed to be positioned as the 19th largest retailer all through the world in the year 2008.
The proposal is intended to analyze the accenting standards that are followed within an Australian Company that is Woolworths. Considering the same, the first part of the research proposal will introduce the research topic and the organization that is selected for this research. The second part of this research proposal will be literature review section that will explain the relevant literature presented by the researchers over previous years on the AASB framework and reporting of financial statements by Australian companies. Finally, the third section of this research proposal will explain the research methodology that will be used in this research proposal. It will explain the significant research approach, data collection process, sampling and data analysis process along with the ethical considerations that will be followed in generating suitable research outcomes for this research.
- Research Problem and Objectives
Topic Introduction
The major research problem that is highlighted in this research is focused on evaluating the financial statements of Woolworths that has been prepared as per Australian Accounting Standards. To analyses the compliance of necessary standards in Woolworths, the audit, risk, management and compliance committee has been developed in order to monitor the implementation of accounting principles along with documenting its financial statements (Berger 2018). Another concern that is to be highlighted in this research is focused on analyzing whether the auditors of the organization are aware of the recent amendments made in Australian Accounting Standards. Moreover, focus is also kept in analyzing the harmonization of domestic and international accounting standards and its efficient use within the Australian organizations.
- To analyze the financial statements of Woolworths prepared as per Australian Accounting Standards (AAS)
- To evaluate in which ways the accountants and the auditors are aware of the current amendments within Australian Accounting Standards
- To evaluate the harmonization of domestic and international accounting standards
- To analyze the ways in which company’s management has developed Audit, risk, management and compliance committees in order to reform the framework of corporate accounting
- Literature Review
Woolworths Limited, which is headquartered in Australia, is considered as the ‘for-profit’ company as the organization aims towards wealth maximization of the shareholders. Therefore, being an Australian company, Woolworths follows the rules as provided by ASIC Corporations Legislative Instrument 2016/191 wherein it uses the Australian Dollar AUD as the currency in the consolidated financial statement (Hutchinson, Mack and Plastow 2015). Despite the financial statement of each of the entity controlled by the organization uses the currency of the place it is operating inside, the consolidated is always presented in Australian currency i.e. AUD as it is the functional currency of the organization. Moreover, the currency which is translated in AUD is done using the rate of exchange at the date of such transactions. However, any difference that arises during the translation of currency process is considered within the profit or loss during the period. They are realized within the comprehensive income (Ironkwe and Ordu 2015). The financial report of the organization is prepared on the basis of the historical cost but the assets which are mentioned in the same is calculated the fair value method.This similar method is also followed to ascertain various other important elements of the financial statement such the income, financial liabilities as well as the derivatives, which is as per the Australian accounting policies. The company also follows the guidelines set by the Australian Accounting Standards and Interpretations as per the ‘Corporation Act 2001’ to prepare its consolidated financial report. The Australian Accounting Standards is very much similar the International Financial Reporting Standard (IFRS) in several features and AASB ensure that the board follows same compliance standard as per the IFRS. This reflects that the financial report which is presented by Woolworths is in accordance to the IFRS (Rao and Tilt 2016). The company prepares its consolidated statements as per the rules set by the AASB, which includes the reports of all the subsidiaries of the organization on which the company has its control and can execute its power. However, the reports exclude any kind of intra-group balances and transaction.
Overview of the Company
Revenue, being the most significant element is ascertained at its fair value after any of risk or reward associated with the same is transferred to the customers in case when the value of the revenue is gauged as is reliable. The cash and its equivalents are only considered with its genuine maturity (Schaltegger and Burritt 2017). When it comes to the inventory, the cost is ascertained on weighted average basis inclusive of rebate from suppliers, settlement discount plus other costs included. Tax, being another item of equal significance, is considered in the financial statement. The revenue generated, expenses as well as the assets are measured as net of Goods and Service Tax (GST). The receivables and payables are also recognized within the tax system which the standard follows. Moreover, the deferred tax amount which is receivable or payable is included within the assets or liabilities of the consolidated financial statement (Wiedmann, Chen and Barrett 2016).
The amendments that have been done by the Accounting Standards and Interpretation “AASB” are made well known to the accountant as well as the auditors as the company complies with the rules set as it looks forwards to maximize its wealth in the most ethical way (Klettner, Clarke and Boersma 2014). There are several amendments that have been included into the accounting standards of Woolworths which are concerned with the identification of tax assets for unrealized losses, realization of assets among the investor and its associates or joint venture, amendments of disclosures, earnings from the contracts made, amendments within the financial instruments as well as the gauging the share-based payments. Furthermore, as referred by AASB 16 and AASB 17, the leasing and insurance contract is still awaiting its implementation in the accounting policy of Woolworths (Mayne 2017).
The revenues from contracts with the customers has been explained within AASB 15 wherein the contracts regarding the goods and service is needed to be identified as separate performance obligation in a transaction a price is allocated to such obligations. Moreover, the revenues are only needed to be identifies when the goods and service is received by the customers. Moreover, the previous standard, AASB 139 which is identified as the guideline set for Financial Instrument: Recognition and Measurement is replaced by a new standard that is AASB 9. This law has provided a set of rules for the new model for impairment of financial assets and certain other debt instrument which measures the same through its fair value.
Structure of Proposal
The company has currently considering the lease agreement very significantly and carefully. As per the AASB 117 guidelines, the company has differentiated between the operational as well as the financial leases. Woolworth Limited might involve the gross investment which is the lease payment that is inactivated by the lessor as per the contract. The leases associated with the organization is recognized and measured as per the AASB 117 compliance. The guidelines set shows that the lease will be considered once the lease term is commenced when the lessor might actually start using the leased assets at its will. This will be notified within the report as the initial identification of lease (Oulasvirta 2014). The value of the leased assets will be measured on the basis of proportion of reduction in the obligations that are outstanding and the financial charges. As per the rules of the standards, the financial charges will be checked in every financial period and the same will be considered with the unutilized liability balance. The contingent rents will be charged as soon as they are incurred. A deposition expense will be created as a measurement for the depreciation of the leased asset in each of the reporting period (Simnett and Huggins 2015). Such amendments have been done by the Australian Accounting Board and considered by Woolworths Limited so as to remain in line with new rules. The accountant and auditors of the organization are well equipped with the new knowledge and are practicing under the same to remain competitive in the market.
Though there are certain differences between the Australian Accounting Standards and the International Accounting Standards, but for most of the part the AASB incorporates the guidelines similar to the IFRS which could be identified as the agent of harmonization between the AAS and IAS. AASB and IAS had its differences in the notion of business combination but the same has been absorbed by the Australian board as they amended which has been mentioned in AASB 3 (Martinov-Bennie, Soh and Tweedie 2015). The difference has also been noticed in the cash flow formation wherein the Australian board follows the direct method whereas the International Accounting Standard follows both the direct as well as the indirect method. Here, Woolworths also follows as per the method mentioned in the Australian board. The methods of the cost flow computation do not affect the outcome significantly, hence both are accepted globally. Moreover, as per the Australian board, the financial statement is needed to be consolidated by the parent firm but the same is not necessary in case of International Accounting Standard as it is prepared after all the subsidiary submit their reports. The reporting date as per the Australian standards is that the subsidiary must have the same reporting date as the parent company but in international standard, the subsidiary may happen to follow other reporting date (Preiato, Brown and Tarca 2015). Though there are various other differences even in the component of financial statement such as the in the Australian standards, requires the organization to prepare the Statement of Changes in Equity or a Statement of Recognized Income and Expense despite the fund has no equity. Even the schedule of investment is also not required to be presented in the reports of Australian companies (Sierra?García, Zorio?Grima, and García?Benau 2015).
Financial Statements of Woolworths done as per with the Australian Accounting Standards
However, the similarities between the two harmonize the differences as most of the Australian Accounting Standard rules are adopted from the IFRS. Within the components of financial statement, the elements of each component reflect similar objective. All the line items within a balance sheet in the IFRS system reflect similarity with that of the AABS. The current and non-current assets and liabilities are reported within the balance sheet except on the basis of liquidity (Preiato and Tarca 2015). Moreover, the classification of the financial instruments is also done in a similar manner. The income statement is also same wherein the line items are reflected on the income statement and expenses are required to be shown as per their nature as mentioned in the International Accounting Standards. In both the standards, the profit or loss of the subsidiary is referred to as minority interest and is disclosed separately. The recognition of interest and dividend is also done in a similar manner wherein both the standards identify it using the effective method of interest from the purchase date and the dividend are identified when the right to receive the payments is established, generally on the date of ex-dividend. Moreover, there were several other differences earlier but the same were harmonized when the Australian Accounting Standards made few amendments to come in parity with the International Accounting Standard (Wiedmann and Barrett 2016).
Woolworths Limited has a particular approach towards the improvement of shareholder’s wealth as well as the brand name of the organization by maintaining its value in the market. The value creation of Woolworths is closely monitored by its shareholders and they even implement strategies to do the same with ease. The risks that are associated with the shareholders of Woolworths Limited are very efficiently handled by the senior management of the company (Loyeung et al. 2016). “Audit, Risk Management and Compliance Committee (ARMCC)” is the committee founded by the directors of the organization which helps the managers to maintain the company’s framework which includes the management of risk as well as the internal auditing process. The board also monitors the internal audit team very closely to ensure that the ethical standards of the company are maintained. The company also has a team of external auditors who recommend the board regarding the selection as well as appointment of the external directors or partners (Watty et al. 2014). The ARMCC also ensures that the internal and the external audit teams are coordinating efficiently. They also look closely to any issues raised regarding the auditing. This also ensures that the external auditor is not occupied in any such activities that might impact the organization.
Accountants and Auditors are aware regarding the recent amendments in the Australian Accounting Standards
The process of risk management is taken very seriously in Woolworths Limited. In order to identify the material risk of the company, this committee reviews the policies of the organization and takes effective measures to counter the same. They also evaluate the statement of annual corporate governance to identify any risk associated with the management. It also monitors the exposure of the organization to risks of fraud. Moreover, the company also looks after the strategies made to avert risk or manage the same. The arrangement of transferring the risk is also taken care of through insurance. Furthermore, the committee also makes the contingency plans for any issue that may arise during operations. It also reviews the anticipated change in the business as well as economic environment which might add risk to the company’s profile. Additionally, ARMCC looks after the efficiency of the policies and practices which are related to the compliance of the organization. It might include the rules, regulations as well as usage of accounting standards. It also ensures that any change in the rules and regulations of the organization is implemented effectively. In order to remain competitive, the committee also reviews the half-yearly as well as annual financial reports that are presented by management of the organization while trying to incorporate the opinion of the external auditors. The approval of the financial; statement is also done through the committee (Henderson, Peirson, Herbohn and Howieson 2015). They also look into any issues regarding the financial reporting and undertake appropriate step to solve the same to ensure the profit maximization of the shareholders. The committee also recommends the board of directors of Woolworths of adopting any accounting policies which might turn out to be beneficial for the company as a whole. Hence, this serves as the main pillar behind the success of Woolworth Limited.
The research type is deemed to be descriptive that can effectively facilitate in evacuating the relevant accounting standards implemented within Woolworths Company. Descriptive research will explain that by means of implementation of global standards of accounting, there is observed to have increased transparency in offering necessary financial information to the stakeholders of Woolworths Company (Brown, Preiato and Tarca 2014). This method is used in this research for the reason that it can facilitate in describing the characteristics related with a process or population that is considered for this study. Descriptive research type used in this research can facilitate in describing situation within the company regarding financial statements preparation in compliance with Australian Accounting Standards. It can also facilitate in making suitable anticipations regarding the use of new accounting standards. Focusssed on the same, survey method will be used as this is one of the forms of descriptive research type. Descriptive research type serves as a scientific method that encompass describing and observing the behavior of the auditors and the accountants in preparing financial statements as per accounting standards without impacting relevancy of the research in any way.
Mixed research approach is used in analyzing the accounting standards used in Woolworths. Qualitative and quantitative research approach is used in this research. Qualitative research approach is used for the reason that it can facilitate in using the unstructured and semi-structured techniques (Brown and Tarca 2014). It can also facilitate in uncovering trends within opinions and thoughts along with offering deeper view within the research problem identified. Quantitative research approach used in this research indicates the information that is analyzed in gathering information in consideration to research results. Moreover quantitative data can also facilitate in offering relevant information on the human inclination subject and it needs larger sample size for analysis. Considering the same, employees working within Woolworths are selected analyzing the effectiveness of accounting standards used in the company.
Both the primary as well as secondary data will be collected in analyzing the proper use of accounting standards within the Woolworths Company. Primary data in this research will be gathered through the questionnaire survey method (Collier 2015). Questionnaire research instruments is used in gathering primary data for the reason that it is cost efficient and facilitates in attaining rapid responses as this is distributed to all the respondents at a simple time. Secondary data will be gathered through use of the past research papers, articles, journals, books, journals along with the Woolworths company and government websites. Moreover within the current research, the data regarding the applicable accounting standards will be gathered from the literature review. The secondary data that will be gathered is deemed to be related with the findings of the research and the related research objectives.
Qualitative data collection will be conducted through interview process. Through implementation of this process, data will be gathered through conducting interview process with 5 selected managers of Woolworths Limited. In the interview process relevant questions regarding the accounting standards used in the company will be asked. Moreover, they will also be asked questions regarding the domestic as well as international accounting standards applicable within the company and whether the auditors are aware of the regular amendments within the Australian Accounting Standards (Chatfield and Vangermeersch 2014).
Quantitayuve data collection will be carried out by means of survey process in which questionnaire will be distributed to 21 employees of Woolworths. The questionnaire will have both the open and close ended questions that will have questions regarding the related research objects based on applicable accounting standards in the companies. The questionnaires will be distributed to the company’s employees by means of email and they will be given a time period of seven days for reverting back with answers within the questionnaire form.
Sampling serves as an effective process within which he targeted respondents for the research is selected from a huge population of likely survey participants. Sampling process used in this research can facilitate the researchers in selecting the most suitable primary data source for gathering reveal information that is aligned with the set aim and objectives of the research (Cereola, Nichols and Street 2017). Process of simple random sampling will be employed in the investigation of accounting standards used within Woolworths, Australia in order to carry out survey with the professionals. This method of sampling is used in this investigation for the reason that equal chances for the respondents for getting selected within the survey in this research. For this reason, quantitative data has been gathered from huge sample population through using simple random sampling. It has also been considered that the quantitative evaluation needs relatively larger sample size for attaining as well as evaluating responses gathered from the research respondents. Considering same, sample size of 5 manager’s ad 21 employees from the selected organization Woolworths has been chosen to gather viewpoints on effective use of accounting standards in their company.
The qualitative data that will be gathered in this research will be analysed through carrying out thematic analysis. This can facilitate in analyzing the recognized patters or themes along with examining them within data. It can effectively analyses the qualitative information for attaining knowledge systematically regarding perception o an individual, situation, organization or its culture (Camfferman and Zeff 2015).
The quantitative data that will be gathered through questionnaire survey will be analyzed through employing several relevant analytical techniques. In this consideration, it is gathered by the researcher that effective selection of the statistical data analysis tools can facilitate in attaining suitable and pertinent research findings. In addition, it can also facilitate the researcher in ensuring the transparency along with proper interpretation of the composed data. The quantitative data that will be analyzed will be presented in the form of tables and graphs that can simplify the process of analysis in this research. MS Excel application will be used in carrying out correlation and regression analysis that can facilitate in converting respondents viewpoint within a percentage that can anticipate respondent insight trends.
In carrying out analysis of accounting standards used in Woolworths the researcher will make sure that suitable ethical standards are used in completion of this research. In maintaining the ethical consideration within the research, the researcher will make sure that the individual will follow suitable code of conduct in carrying out all the necessary processes within the method of data collection (Brusca and Martínez 2016). It is also ensured that the secondary has been collected from reliable and authentic sources that ensure validity of the research findings. In maintaining ethical norms, the researcher has also avoided asking delicate questions in the survey process and mutual permission has been taken from them to take part in the survey process. In addition, the identity of the survey participants have been kept confidential because of security reasons within which no utilization of the research statements has been entertained from the behalf of the researcher in this exploration.
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