Financial Performance and Debt Management
Question:
Discuss About Current Issues In Accounting And Corporate Governance?
In the present essay, contemporary issues and some of the issues related to principle of corporate governance around Intueri Education group limited has been discussed. Intueri Education group limited is an Australian training and education provider that has been underperforming and application of third edition of ASX corporate governance principles is expected to turnaround its poor performance. Intueri Education Group is a player of education industry that helps in the development of employee’s skills and knowledge and qualifications of employment (Acharya et al. 2013). The stated objective of organization is to create long-term value to shareholders by enabling people to work together by way of creating opportunities. It has been ascertained that the international revenue generated by the group is lower than domestic revenue and the total revenue stood at $ 78.9 million (Amran et al., 2014). Moreover, organization’s corporate governance report and code of ethics, compliance principle and rules and some relevant disclosures regarding the use of resources have also been incorporated in the report. Identification and recognition of related issues of Group and relevant corporate governance principles have been discussed in the assignment.
The procedure that assist the organizations in conducting the financial information and business activities is incorporated in the corporate governance. An organization is able to achieve its stated objectives with the help of procedures of corporate governance principle that encompasses the interest toward stakeholders. On the other hand, situation of corporate distress arises when the creditors of company experience the financial difficulties and it also involve the situation where cost incurred exceeds revenue generated (ArAs, 2016). It can be depicted from the financial report and the statement of corporate governance of Intueri Education Group limited that in the current accounting period net loss was incurred. When compared to previous year, the current year witness declining trend in generation of revenue. In addition to this, the debt taken from bank by the Intueri Group in the current year stood at $ 70.7 million. Organization experienced increased in amount of loan borrowed and this is reflected in the figure of previous year. The amount of band debt stood at $ 53.4 million. This increase in amount of loan or amount of debt indicates increase in business risk and at the same time increased financial leverage of company (Ayuso et al., 2014).
Due to altered regulatory system on the contrary, Intueri Education Group limited experienced some of the significant impact on business. Various factors are responsible for the growth of business of the organization. The factors that is attributable to growth involves servicing of the debt of company by way of acquisitions, incorporation of some communication strategy and acquisition of colleges by the group (Bell et al., 2014). In addition to this, the delegation of relevant policies, management of risks, policies reflecting disclosures of market, other activities of business and code of ethics are addressed by the principle of corporate governance of company.
ASX Corporate Governance Principles and Risk Management
It has been recognized that Intueri Education Group limited aligns with the principles of corporate governance and this has been depicted from non-financial and financial report of the group along with activities of business of organizations. There are three principles that have been identified in related to Intueri group and this comprise of principles of managing and recognizing risks, integration of safeguard policies in corporate reporting and remunerating in responsible and fair way (Bushee et al., 2013).
Stakeholders are able to get benefit from the policies framed by companies and concerning this, it is considered crucial for the organization to incorporate safeguard integrity principle on corporate reporting. Some of the factors that is considered relevant for organizations to make proper and clear disclosure of roles and activities of independent director, about activities of members of board, engagement of member of audit, responsibilities and formation of audit committee. It is the responsibility of management of company for making disclosure of non-financial and financial transactions to encompass and incorporate corporate governance principles. Non-financial transactions or activities of the organization also form the basic component of their performance in addition to financial activities (Cheng et al., 2015).
The various component involves and encompasses in the corporate reporting of Intueri Education group limited are the policy of management and diversity policy principle along with corporate reporting. In accordance with the regulation of General accepted accounting principles, it has been indicated that reporting of financial activities of group is the responsibility of audit committee of organization. It is recommended by the audit committee and management of the Intueri group that there is no material misstatement involved in the financial information presented in the financial statements of company. However, there was no certain disclosure about the resources and the material facts that affected the and fair view and reliability of financial reports presented by company (Kim et al., 2013). Therefore, it can be concluded that the financial reporting does not completely align with the accounting standards and corporate governance principles.
The board members have set out the regulations and the disclosure of risk management policy is made according to those established regulations. Disclosure of such policies have been made concerning managing and recognition of risks in relation to corporate governance principles. Disclosure about the responsibility of the group on policies relating to health and safety measures in addition for employees, society and society of organizations. Assessment of risks is considered vital for the stakeholders and the organization needs to have established principle for managing and recognition of risks.
In the present case, it is depicted that Intueri Education group limited for managing the business risk such as creditors risk, financial liquidity and value of debt is governed by principle of corporate principles (Mason & Simmons, 2014). On the other hand, the risk related the group concerning material information did not disclose environmental factors, social sustainability and economic risks. The performance of several activities relating to external factors such as environment, economic and social, disclosure of material information and other relevant facts are required to be disclosed by the organization in accordance with the regulations of corporate governance reporting (Misangyi & Acharya, 2014).
Corporate Reporting
The responsibility of Audit committee is to maintain the functioning of the audit of company as the safety policies are considered by the management of Intueri Education group limited. Responsibilities and roles of key managerial personnel, key managerial personnel appointment and business function within the system of management are some of the areas of assessment performed by internal audit. It is required by Intueri Group to disclose some of the facts in the annual report and this involve potential risk assessment within the system of internal control. Such disclosure is required and needed by the group for commencing the business in terms of profitability and sustainability (Cheng et al., 2014). For making the investment and business decisions, this is considered relevant for probable investors and stakeholders, as they have to do the required analysis before doing investment. Since the organization witnessed a fall in revenue, disclosure of environmental factors and material information concerning economy is regarded as essential for company.
With regard to Intueri group limited, another identified relevant principle relates to responsible and fair remuneration. Fairly remunerating the employees and staff members’ helps, the organization is making fair assessment about the cost incurred or to be incurred and the capability of company. The reason that the overall cost attributable to the company is affected by the policy of remunerating their employees. It is because of this it is considered essential for determining the remuneration policy composition according to management and role of directors. The remuneration policy of company comprise of several components such as bonus, payments or incentive given to members or employees and other payment also comprise of contributions and earning attributable to stakeholders of company. Assessing of the policy of remuneration is regarded of utmost importance for the success and growth of business of companies (Starbuck 2014). The reason attributable to assessment of remuneration policy is eradication or elimination of some overpayment or any undue risks in respect of business executives or management of company.
The remuneration policy of Intueri Education group limited is provided in the reports of corporate gover4nance and it is depicted under the heading “Nomination and Remuneration committee”. The remuneration policy of the Intueri group has been defined and framed based on personal interest and objectives of business executives and the stated objectives of company. Group has set the revenue in their budget and in order to arrive at the set target of revenue, remuneration has been paid to the business executives based on their performance level. An organization should not increase its total cost by way of making excess payment in the form of remuneration for ensuring the commercial interest of company (Sierra?García et al., 2014). Considering the above fact, the nomination and remuneration committee regards it essential to measure the appropriate level of remuneration. This is so because, monitoring and regulation of monetary policies and framing the responsibilities and roles of directors is the objective of nomination and remuneration committee.
The remuneration paid to key management executives of the Intueri Education group limited was disclosed in the remuneration report. The report depicts that in the current financial year, there was increase in remuneration payable to executive and it increased by amount $ 600000. There was no disclosure made about clause 2.7 in the report (Tricker & Tricker, 2015). However, the company disclosed compliance of regulations with respect to code of NZX. The clause that was not disclosed by the group that performance basis and security plan and equity forms the basis of remuneration that is payable to the directors. Measurement of company’s profitability is done by taking into consideration the total cost and the cost also include salary and remuneration that is payable to executives and members of company. Business activity costs are also involved in the total costs. Hence, in order for recognizing the correct amount of remuneration and measuring it appropriately is one of the essential concern of business. This is so because the true value of overall profit of business is determined by recognition of true and correct amount of remuneration payable (Mason & Simmons, 2014).
Conclusion
Remuneration payable to the director of the group comprised of directors fess and other payment made in the form of benefits and salaries given. In the current financial year, the remuneration payable in the form of director’s fees include the amount of $ 275,220. The amount payable in the form of salaries and benefits stood at amount $ 697,199. In addition to this, Intueri group according to equity plan and the level of performance made no disclosure of remuneration payment. In order to create long-term value to the stakeholders, the group has made disclosure about the scheme of share of employees for management executives. Moreover, company about the amount that is spent on some other business activities, accommodation and travelling activities made no disclosure ((Peters & Romi, 2014). Therefore, for the investors required to make the investment decisions, the group corporate governance report does not reflect the material and relevant information.
It is required by the Intueri Education group limited to make the report of financial as well as non-financial information as per the corporate reporting structure as per ASX principles. It is required by the group to review the generation of business and monitor the overall costs. Concerning this, Intueri should make timely and balanced disclosure of all the matters concerned as it will have impact on price of securities of company. For the disclosure of non-financial information, should be made in accordance with ASX 200 principles for sustainability reporting, as it will address all the material issues affecting the operations of company. Organization also needs to incorporate AA1000AS that would lead to effectively reporting of performance of company.
Conclusion:
The corporate reporting influences the investment and business decisions of the annual report users. Assessment of the material information regarding the non-financial and financial activities needs to be significantly addressed so that users evaluate performance ability of the organization. It is required by company to report on its regulations, ethics and principles of code of conduct in the corporate governance report regarding non-financial factors. It is clear evident from the above discussion that Intueri education group failed to consider the remuneration report encompassing the amount of revenue paid along with the audit report. Therefore, it can be concluded that for enabling stakeholders to take proper business decisions, proper disclosures and appropriate disclosures are considered essential.
Reference:
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