Corporate And Financial Accounting Principles And Applications

Accounting Standard Setting

This report emphasizes on the importance and role of corporate regulation in the disclosure of the financial information in comparison of the disclosure of the financial accounting information in a voluntary method by a manager. Besides this, it also emphasizes on the role and participation of the Australian Accounting Standards Board in the global accounting standard setting process and the reason behind the non compulsion of the members countries of IASB to follow IFRS. Along with this, it also focuses on the analysis of the items of equity present in the balance sheet of the four companies of Australia that are listed in ASX related to same industry and find out the reasons for the occurrence of the change. It also entails the information related to the comparative analysis of the debt and equity position of these four firms.  

It is identified that the regulation of public reporting for firms should be mandated by government regulations and not be disclosed by the firms in the way of usage of their goodwill, private lawsuits, gatekeepers and market discipline to access the public securities market despite of gaining adequate incentives for disclosing the information in a voluntary manner at social optimal levels. The main reason behind the reporting of the financial information should be regulated is the existence of the market failure (Leuz and Wysocki, 2016).

The regulation of the disclosure of the financial information through government regulation facilitates in the reduction in the enforcement costs, opportunistic behavior, redundancies in information production, mitigation of the risks related to externalities in case of the absence of the internalize of the consequences of their disclosure decision. Apart from this, there is an existence of the difference between countries in different aspects such as corruption, culture, institutional development and political and legal regimes. This is the reason that there is an existence of the variations in security regulations, properties of reported accounting numbers and structure of financial regulatory regimes. There is a requirement of regulating of the accounting standard setting which is considered as central element of regulation of financial disclosure. This can be done by promotion of the efficient allocation of capital as the absence of harmonization of the accounting standards results in an increase in the competition among the firms (Guay, Samuels and Taylor, 2016).

AASB took active part in the global accounting standard setting process by making modifications in IFRS in a way that removal of some options and adoption of some disclosures in the year 2007 in order to create identical requirements of the AASB. AASB has also released a new differential reporting regime released by AASB in the year 2010 named Reduced Disclosure Requirements which allows entities to follow the measurement requirements of Australian Accounting Standards (Christensen, et.al, 2015). Apart from this, there is no compulsion for the member countries of IASB to follow IFRS as the countries can make modifications in the accounting standards established by the authority as per the IFRS in order to bring uniformity with the internationally accepted standards in an effective manner.

Changes in the items of equity

The four companies selected for evaluation of the changes in the items of equity and debt and equity position for the past four years include Accent Group Ltd, Beacon Lighting Group Ltd, Baby Bunting Group Ltd and Bapcor Ltd.

Accent Group Ltd has established in the year 1981and formerly known as RCG Corporation Limited which is a regional leader in the retailing and distribution of lifestyle and performance footwear under 10 retail banners with 420 stores across New Zealand and Australia. The different brands include Podium Sports, CAT, and Stance and so on (Accent Group Ltd, 2018). Baby Bunting Group has established in the year 1979 in Melbourne and considered as a family owned business and a largest nursery retailer and one stop baby shop. The company has employed more than 700 employees across its 42 national superstores. The company targets parents with children from newborn to three years offering 6000 lines of products such as car seats, prams, safety, and baby wear and so on (Baby Bunting, 2018). Beacon Lighting Group Ltd is a retailing company founded in the year 1967 in Australia dealing in selling and distribution of lighting products in different countries like Germany, USA, New Zealand and Hong Kong. The different products offered by the company include ceiling fans, floor lamps, exteriors, chandeliers and so on. The company operates through 6 franchised stores, 5 commercial sales office and 103 company stores (Beacon Lighting, 2018). Bapcor Ltd has founded in the year 1971 and considered as a leading provider of automotive aftermarket accessories, equipment and services in Australia. The core business segment of the company includes trade, specialist wholesale and retail and services businesses. The company employs 3800 team members across 800 locations at a global level (Bapcor, 2018).

(Source: Baby Bunting Ltd, 2018)

(Source: Bapcor, 2018)

(Source: Beacon Lighting Investor Website, 2018)

(Source: Accent Group Ltd, 2018)

Issued capital is the part of the authorized equity capital which has been issued to the shareholders for the purpose of raising funds (Petty, et.al, 2015). It is identified that in case of Baby Bunting Group, there is an existence of increasing trend of issued capital which states that the company has issued capital in past four years for the purpose of expanding the business operations or meeting the working capital requirements. In a similar manner, in remaining three companies i.e. Accent Group Ltd, Beacon Lighting Group and Bapcor Group Ltd, there is an existence of similar increasing trend in the issued capital which reflects that for meeting out the day to day requirements and expansion of the business to exploit available market opportunities, the companies have issued the capital in last four years.

Share based payment reserve

Share based payment reserve is a transaction where the entity receives the goods and services in consideration for equity instruments of the entity (Petty, et.al, 2015). In context of Baby Bunting Group has issued equity shares in exchange of goods and services but it has declined over the years from $989 in the year 2015 to $132 in the year 2016 and then increased to $912 in the tear 2018.

Retained earnings refers to the profit which is not being distributed to the shareholders as dividends and has been retained by the company for the purpose of expanding the business operations in other countries or diversifying the range of products being offered by the company (Petty, et.al, 2015). Baby Bunting Group and Beacon Lighting Group has kept some profit aside for the purpose of expanding the business operations in the form of retained earnings. It is found out that there is a decrease in the amount of retained earnings in the year 2016 in a tremendous manner which states that the company has made the investment to expand its business operations. Along with this, there is an increase in the amount of retained earnings in next three years which indicates that the company is planning to make investment in the business to avail the available business opportunities in the market. In context of Beacon Lighting Group Ltd, there is a presence of increasing trend in the amount of retained earnings held by the company which shows that the company has plans to expand its business operations. Along with this, in a case of Bapcor Ltd, there is an occurrence of the loss although it has declined over the years. In a similar manner, in case of Accent Group Ltd, there is an occurrence of accumulated loss and has declined over the years. 

Reserves are the money kept aside by the firms to meet out any contingency faced by the company in future (Petty, et.al, 2015). Except Baby Bunting Group Ltd, all the other companies have created reserves for meeting out the contingency situation faced in future by the company. It is found out that Bapcor Ltd has a negative balance in the year 2017 and 2018 which reflects that the company has used the reserve for overcoming the situation of contingency. In a similar manner, Accent Group Ltd has used the reserve in the year 2016 as there is a tremendous decline in the amount of reserve in the year 2016 in comparison to the year 2015. Apart from this, Beacon Lighting Group has a negative balance in reserves which states that the company is facing tremendous amount of risks and therefore required to make reserves to meet those contingent situations.

Retained earnings

Non-controlling interest is also known as minority interest which reflects the ownership position of the shareholder that possesses less than 50% of the outstanding shares and has no control over decisions. This means that such shareholders do not possess any voting rights (Petty, et.al, 2015). It is found out that there is an increase in the minority interests of the shareholders over the years in Accent Group Ltd. Besides this, there is a decline in minority interest in Bapcor Ltd in last two years.

Debt refers to the amount of money borrowed from one party by the other party on which a borrower has to pay interest. In context of financial accounting the debt is considered as long term liabilities of the company which it owes to other party (Petty, et.al, 2015). It is found out that Bapcor and Accent Group has a large amount of money that is considered as long term liability. This shows that these companies are heavily dependent on debt along with equity. This indicates that these companies have maintained an optimum balance between equity and debt funding. Besides this, debt equity ratio depicts the proportion of equity and debt used to finance the assets of the firm (Petty, et.al, 2015). It is found out that Baby Bunting has finance its assets by the use of equity in large quantity in comparison to debt as the debt to equity ratio is 8.6%. In a similar manner, Bapcor has financed 78% of its assets through debt as the debt equity ratio is 78%. Along with this, the debt equity ratio of Beacon Lighting is 14.5% and of Accent Group is 33.8%. Thus it can be indicated that Bapcor Ltd has strong financial position among the four companies.

Conclusion

It can be concluded that it is suitable for the companies to regulate the financial accounting and reporting by government regulations instead of allowing the manager to disclose the financial information in a voluntary manner. This is because, the government regulation has helped in aligning the changes occurred in the business environment in a effective manner. Apart from this, the financial position of Bapcor Ltd is strong in terms of debt and equity position in comparison to other three companies of retailing industry.

References

Accent Group Ltd. (2018) About Us. [Online]. Available at: https://www.accentgr.com.au/about-us/ [Accessed on: 21 September 2018].

Accent Group Ltd. (2018) Annual Reports. [Online]. Available at: https://www.accentgr.com.au/for-investors/annual-reports/ [Accessed on: 22 September 2018].

Baby Bunting Ltd. (2018) Reports and Announcements. [Online]. Available at: https://www.babybuntingcorporate.com.au/reports [Accessed on: 22 September 2018].

Baby Bunting. (2018) About Us. [Online]. Available at: https://www.babybunting.com.au/about-us/ [Accessed on: 21 September 2018].

Bapcor. (2018) About Bapcor. [Online]. Available at: https://www.bapcor.com.au/bapcor-at-a-glance [Accessed on: 21 September 2018].

Bapcor. (2018) Annual and Interim Reports. [Online]. Available at: https://www.bapcor.com.au/annual-interim-reports [Accessed on: 22 September 2018].

Beacon Lighting Investor Website. (2018) ASX Announcements. [Online]. Available at: https://www.beaconlightinggroup.com.au/asx-announcements [Accessed on: 22 September 2018].

Beacon Lighting. (2018) About Beacon Lighting. [Online]. Available at: https://www.beaconlighting.com.au/about-beacon-lighting/about-us [Accessed on: 21 September 2018].

Christensen, H.B., Lee, E., Walker, M. and Zeng, C. (2015) Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), pp.31-61.

Guay, W., Samuels, D. and Taylor, D. (2016) Guiding through the fog: Financial statement complexity and voluntary disclosure. Journal of Accounting and Economics, 62(2-3), pp.234-269.

Leuz, C. and Wysocki, P.D. (2016) The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting Research, 54(2), pp.525-622.

Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M. (2015) Financial management: Principles and applications. Australia: Pearson Higher Education.

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