Financial Accounting and Reporting: of JB HI-FI Company Limited - Case Study Example

JB HI-FI Company limited Financial Analysis Name Institution 1. How many ordinary shares have been issued by the company at financial year-end? During the 2013 fiscal year every executive was issued share options. Some of these share options had exercise prices and some and some had zero exercise prices. By 12 August 2013, 989,529 options had already been vested and exercisable (The Trust Company, 2013). In addition, there was still some 600,691 options available to vested and was to become exercisable in the period 13th August 2013 to 6 September 2013 in case the volume weighted of the average share price for any of five (5) consecutive days of trading exceeded the exercise price of those given options, that ranged from $14.95 to $22.26 per option. A total of four million, eight hundred and seventeen hundred thousand and five hundred and eighty five shares (4,817,585) had been issued by the company at the end of this financial year that ended 30th June two thousand and thirteen (2013). 2. Are any of the company’s issued shares not fully paid at the end of the financial year? If so, provide details. At the end of this financial year that ended 30th June ’13, the entire executive that been issued the shares with exercise price had paid in. Those with that were issued with zero exercise price shares had no payment to make as they were not required. All the companies issued shares had been fully paid for by 30th June 2023. 3. Has the company issued any shares over the last 2 financial years? If so, provide details of those shares. Yes. The company issued shares over the past two fiscal years thus two thousand and eleven (2011) and two thousand and twelve. (2012).The following table labeled fig. 1 is an extract of the company’s report of the year two thousand and eleven (2011) and provides some all the details on the shares issued in the year two thousand eleven (2011). It shows the number of shares that the company put under option for her shareholders. I.e. the number of shares it availed to its shareholders that year and the details of the interest under options (The Trust Company, 2013). Option series No. Of shares under option Class of shares Grand date Share price at GD Expiry date Exercise price Expected volatility Dividend yield at GD Risk Free interest rate at GD Fair value at $ 1.24 1.24 2.51 3.37 3.37 - - 20 25 29 30 31 - - 13334 15000 10000 20000 10000 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 15/08/06 15/08/06 07/05/07 04/07/07 01/08/07 - - 4.79 4.79 8.75 11.36 11.20 - - 15/08/11 15/08/11 07/05/12 04/07/12 01/08/12 - - 4.81 4.81 8.47 10.90 11.25 - - 29.5% 29.5% 29.4% 29.8% 30.0% - - 1.6% 1.6% 1.0% 1.1% 1.1% - - 6.0% 6.0% 6.0% 6.3% 6.2% - - 3, 190. 434 During this year, JB HI-FI company limited availed a total of three million, one hundred and ninety thousands and four hundred and thirty four (3, 190. 4340 shares for her shareholders. Note that this is just an extract portion of the companies work in her report of the year and has some missing values. However, the total amount of the shares availed by the company to her shareholders is captured and is the exact figure. This company granted her shareholders shares in compliance with the executive and employee share option plans. This plan requires Executive and employees to be allowed to purchase ordinary shares at various issue prices provided by JB HI-FI Company limited. The average waited fair value for the share option given for that period as quoted in the JB HI-FI company’s report of the same year was five point nine three dollars ($5.93).In two thousand and ten, this figure was six point eight, eight $6.88.The black-Scholes model was used in valuing this options. This is a model of math of a financial market that contains particular derivative investment units or instruments. These units are share. In two thousand and twelve (2012) as well, JB HI-FI Company limited provided share options to her employees and executive though the share options in this fiscal/financial year required compound annual growth of between ten percent (10%) and fifteen percent (15%) per annum off the normalized two thousand and eleven (2011) earnings per share (EPS) base of one hundred and twenty four point seven cents (124.7) per share and not the statutory earnings per share (EPS) of one hundred and one point eight (101.8%).In simple terms, there was an increase it the earnings per share of the shareholders from 101.8 of the previous financial year, that is two thousand and eleven (2011) to 124.7 in the following fiscal year, that is two thousand and twelve (2012) rising up by twenty two point five cents(22.5).Conceder the following information .Note that it is an extract from the 2012 annual report of JB HI-FI Company limited (The Trust Company, 2013). Details of interests under option at the date of this report are: Option series Number of shares under option Class of share Grant date (GD) Share Price at GD $ Expiry date Exercise price $ Expected volatility Dividend yield at GD Risk-free interest rate at GD Fair value at GD $ 32 106,662 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 33 39,584 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 34 16,964 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 35 55,666 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 36 23,857 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 38 23,333 Ordinary 7/04/2008 10.01 7/04/2013 9.54 35.9% 2.3% 6.2% 3.05 40 53,333 Ordinary 23/07/2008 12.16 23/07/2013 11.76 37.6% 1.9% 6.5% 3.90 41 293,335 Ordinary 26/08/2008 13.52 26/08/2013 12.98 37.6% 2.0% 5.7% 3.86 42 73,52 Ordinary 26/08/2008 13.52 26/08/2013 12.98 37.6 2.0% 5.7% 3.86 3,900,982 In general JB FI-HI Company limited issued a total of three million nine hundred thousand and nine hundred and eighty two (3,900,982) shares to her shareholders in the financial year ending two thousand and twelve (2012). It is therefore evident from the information presented above that JB FI-HI Company limited issued shares to her shareholders in the previous two financial years (The Trust Company, 2013). 4. What is the amount of cash that has flowed to the company from share issues over the last 2 financial years? Yes. The company issued shares over the past two fiscal years thus two thousand and eleven (2011) and two thousand and twelve. (2012).The following table labeled fig. 1 is an extract of the company’s report of the year two thousand and eleven (2011) and provides some all the details on the shares issued in the year two thousand eleven (2011). It shows the number of shares that the company put under option for her shareholders. I.e. the number of shares it availed to its shareholders that year and the details of the interest under options (The Trust Company, 2013). Option series No. Of shares under option Class of shares Grand date Share price at GD Expiry date Exercise price Expected volatility Dividend yield at GD Risk Free interest rate at GD Fair value at $ 1.24 1.24 2.51 3.37 3.37 - - 20 25 29 30 31 - - 13334 15000 10000 20000 10000 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 15/08/06 15/08/06 07/05/07 04/07/07 01/08/07 - - 4.79 4.79 8.75 11.36 11.20 - - 15/08/11 15/08/11 07/05/12 04/07/12 01/08/12 - - 4.81 4.81 8.47 10.90 11.25 - - 29.5% 29.5% 29.4% 29.8% 30.0% - - 1.6% 1.6% 1.0% 1.1% 1.1% - - 6.0% 6.0% 6.0% 6.3% 6.2% - - 3, 190. 434 During this year, JB HI-FI company limited availed a total of three million, one hundred and ninety thousands and four hundred and thirty four (3, 190. 4340 shares for her shareholders. Note that this is just an extract portion of the companies work in her report of the year and has some missing values. However, the total amount of the shares availed by the company to her shareholders is captured and is the exact figure. This company granted her shareholders shares in compliance with the executive and employee share option plans. This plan requires Executive and employees to be allowed to purchase ordinary shares at various issue prices provided by JB HI-FI Company limited. The average waited fair value for the share option given for that period as quoted in the JB HI-FI company’s report of the same year was five point nine three dollars ($5.93).In two thousand and ten, this figure was six point eight, eight $6.88.The black-Scholes model was used in valuing this options. This is a model of math of a financial market that contains particular derivative investment units or instruments (The Trust Company, 2013). These units are shares. In 2012, JB HI-FI Company limited provided share options to her employees and executive though the share options in this fiscal/financial year required compound annual growth of between ten percent (10%) and fifteen percent (15%) per annum off the normalized two thousand and eleven (2011) earnings per share (EPS) base of one hundred and twenty four point seven cents (124.7) per share and not the statutory earnings per share (EPS) of one hundred and one point eight (101.8%).In simple terms, there was an increase it the earnings per share of the shareholders from 101.8 of the previous financial year, that is two thousand and eleven (2011) to 124.7 in the following fiscal year, that is two thousand and twelve (2012) rising up by twenty two point five cents(22.5).Conceder the following information .Note that it is an extract from the 2012 annual report of JB HI-FI Company limited. Details of interests under option at the date of this report are: Option series Number of shares under option Class of share Grant date (GD) Share Price at GD $ Expiry date Exercise price $ Expected volatility Dividend yield at GD Risk-free interest rate at GD Fair value at GD $ 32 106,662 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 33 39,584 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 34 16,964 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 35 55,666 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 36 23,857 Ordinary 20/08/2007 11.02 20/08/2012 11.00 31.2% 1.1% 6.1% 3.15 38 23,333 Ordinary 7/04/2008 10.01 7/04/2013 9.54 35.9% 2.3% 6.2% 3.05 40 53,333 Ordinary 23/07/2008 12.16 23/07/2013 11.76 37.6% 1.9% 6.5% 3.90 41 293,335 Ordinary 26/08/2008 13.52 26/08/2013 12.98 37.6% 2.0% 5.7% 3.86 42 73,52 Ordinary 26/08/2008 13.52 26/08/2013 12.98 37.6 2.0% 5.7% 3.86 3,900,982 In general JB FI-HI Company limited issued a total of three million nine hundred thousand and nine hundred and eighty two (3,900,982) shares to her shareholders in the financial year ending two thousand and twelve (2012). It is therefore evident from the information presented above that JB FI-HI Company limited issued shares to her shareholders in the previous two financial years. 5. List the different types of reserves, and their amounts, recognized by JB HI-FI Limited in its consolidated statements at the end of the financial year. Basically, reserves refer to the liquid assets held by a government, a bank or company with the intention of settling expected payments and/or emergency needs in future. In 2013’s financial year, JB HI-FI Company realized reserves from several sources. The following are the types of reserves at the disposal of this company in the 2013 financial year. Hedging reserves-interest rate swaps, equity settled benefits hedging reserves-net investment and foreign currency transaction reserve among others. The following table shows their corresponding amounts recognized by JB HI-FI Company. Consolidated 2013 2012 $'000 $'000 Hedging reserve - interest rate swaps (647) (1,447) Equity-settled benefits 13,922 11,242 Hedging reserve - net investment 850 850 Foreign currency translation reserve (1,138) (4,300) Other reserve (1,225) 1,225) This was before these reserves had undergone any movements. After the movements, there were some slight alterations in this value. The following table shows the movements the reserves underwent and their values after the movements. Movements: Hedging reserve - interest rate swaps Balance 1 July (1,447) (624) (Loss)/gain recognized (65) (2,016) Deferred tax 20 605 Transferred to profit or loss 1,210 840 Deferred tax (365) (252) Balance 30 June Equity-settled benefits Balance 1 July 11,242 9,881 Option expense 2,680 1,241 Employee share options - income tax - 120 Balance 30 June Hedging reserve - net investment Balance 1 July 850 850 Gain/ (loss) recognized - - -Balance 30 Jun Foreign currency translation reserve Balance 1 July (4,300) (4,854) Currency translation differences arising during the year Balance 30 June (1,138) (4,300) Other reserve Balance 1 July (1,225) (1,225) Gain/ (loss) recognized - - Balance 30 June (b) Retained earnings Movements in retained earnings were as follows : Consolidated 2013 2012 $'000 $'000 Balance 1 July 117,689 90,079 Profit for the year attributable to owners of the Company 116,383 104,641 Dividends provided for or paid (65,263) (77,031) Balance 30 June 6. Provide details of any movements in these reserves over the last financial year. The last financial year of 2023 is the year 2012. In the year 2012,the following reserves were at the disposal of JB HI-FI Company: Hedging reserve - interest rate swaps, Equity-settled benefits and Foreign currency translation reserve among others that were collectively referred to as ‘others’ in the financial report of that fiscal year. The table below gives their monetary values and the details of their movements plus their final value after movements (The Trust Company, 2012). Consolidated 2012 2011 $'000 $'000 (a) Reserves Hedging reserve - interest rate swaps (1,447) (624) Equity-settled benefits 11,242 9,881 Hedging reserve - net investment 850 850 Foreign currency translation reserve (4,300) (4,854) Other reserve (1,225) (1,225) 5,120 4,028 Movements: Hedging reserve - interest rate swaps Balance 1 July (624) (234) (Loss)/gain recognized (2,016) (858) Deferred tax 605 258 Transferred to profit or loss 840 300 Deferred tax (252) (90) Balance 30 June (1,447) (624) Equity-settled benefits Balance 1 July 9,881 7,254 Option expense 1,241 4,519 Transfer to share capital (options exercised) - (2,167) Employee share options - income tax 120 275 Balance 30 June 11,242 9,881 Foreign currency translation reserve Balance 1 July (4,854) (2,772) Currency translation differences arising during the year 554 (2,082) Balance 30 June (4,300) (4,854) Hedging reserve - net investment Balance 1 July 850 850 Gain/(loss) recognized - - Balance 30 June 850 850 Other reserve Balance 1 July (1,225) (1,225) Gain/(loss) recognized - - Balance 30 June (1,225) (1,225) 7. How much has been paid in dividends on all shares in the current financial year? A fifty point zero (50.0) cent per share interim dividend was paid to the ordinary shareholders that had fully paid on 8th March two thousand and thirteen (2013).The directors then declared the final dividend payment of twenty two point zero (22.0) cents per share that had to be paid to the fully paid holders of ordinary shares on 6th September 2013 (The Trust Company, 2012). Both Dividends were franked to one hundred percent (100%) at the thirty percent (30%) rate of corporate income tax. The total seventy two point zero (72.0) cent dividend per share for that financial year represents a payout ratio of sixty percent (60%) and above of the full year earnings. The amount of dividends that had been paid for at the end of this fiscal year is t during the 2013 financial year was 87,031. Determine the amount of dividends recommended to shareholders at the end of the year. The amount of dividend that had therefore been recommended to shareholders at the end of that year is the sum of the 50.0 cents interim dividend per share that they were paid on 8th March two thousand and thirteen (2013) and the twenty two point zero (22.0) cents per share that the director declared as the final dividend paid to the fully paid shareholders on 6th September 2013. All this amounts to seventy two point zero (72.0) cents (50.0 + 22.0=72.0) which is the figure for the amount of dividends that was recommended to the shareholders at the end of that financial year. There was a positive movement in this amount of recommended dividends from the previous year two thousand and twelve (2012) where it was recommended to be was sixty five point zero (65.0) cents by the directors. A calculation of the movement gives us positive ten percent (+10.8%); (72.0-65.0=7.0=10.8%) cents (The Trust Company, 2012). Reference List: Collins, W., & Mckeith, J. (2010). Financial accounting and reporting. Maidenhead, McGraw-Hill Higher Education. The Trust Company. (2012). Half-year financial report; For the half-year ended 31 December 2012. Sydney NSW: The Trust Company. Read More