Voluntary Disclosures in Australian Corporate Sector - Case Study Example

Advanced Financial Accounting: Name: Reg No. Course: Date: 1. Acquisition a. Goodwill on acquisition According to IFRS 3, goodwill is calculated as below: Goodwill = (Consideration paid + Fair value of non-controlling interest) – (Assets acquired – Liabilities assumed) Net asset acquired=40% of (1,620,000+300,000) Net asset acquired by Ace Ltd=04*1,920,000 = 768,000.00 Good will on Acquisition by Ace=1,800,000-768,000 = 1,032,000.00       Journals         USD USD Dr: Cost of acquisition     16,200,000.00   Cr: Asset acquired       768,000.00 CR: Goodwill       1,032,000.00           b. Equity accounting consolidation adjustment entries Consolidated Statement of Financial Position USD Investment in Deuce 1,620,000.00 Other Asset 80,000.00 Liabilities - Net Assets 1,700,000.00 Share Capital 1,100,000.00 Retained Earnings 600,000.00 Total Equity 1,700,000.00 c. Estimation of carrying value for ace Carrying value for Ace= Value of asset acquired+ Goodwill at point of acquisition less amortization for the year + share of the Year profits = 768,000+1,032,000-(13200000/20) + 40% of 600,000.00 =768,000+1,032,000-51,600+240,000 = 2,091,300.00 2. Joint venture a. Journal entries Merlot Ltd Dr: Investment A/c:   100,000.00   Cr: Plant A/c:     80,000 Cr: Revaluation gain on Plant:     20,000 Malbec Ltd Dr: Investment A/c:   100,000.00   Cr: Cash A/c:     100,000         b. Adjusting journal entries under equity method 30/06/2014   USD USD Merlot Ltd     Dr: Investment A/c: 50,000.00   Cr: Cash A/c:   50,000.00 Malbec Ltd   USD USD Dr: Investment A/c: 50,000.00   Cr: Cash A/c:   50,000.00 Depreciation O Plant Dr: Depreciation A/c: 40,000.00   CR: Plant A/c:   40,000.00       Share of Annual Net Assets Merlot Ltd Dr: Investment A/c: 155,000.00   Cr: Vineyard Pty   155,000.00       Malbec Ltd Dr: Investment A/c: 155,000.00   Cr: Cash A/c:   155,000.00 c. The share of net assets will be reduces because annual maintenance fee will be part of their expenses hence reducing joint venture’s net profits. 3. Voluntary disclosures in Australian corporate sector Voluntary Disclosures in Australian Corporate Sector: Case of Paladin Energy Limited (PDN) and Woodside Petroleum Limited (WPL) Introduction Disclosure refers to the releasing of all relevant information pertinent to a company. It influences investment decision. Voluntary disclosure would simply mean provision of information about a company by its management beyond the financial requirements. It is believed that the information will be relevant to the decision-making process of the users of the particular company’s annual reports. Several regulations must be followed when reporting the voluntary disclosures. There are two types of voluntary disclosures. One of them is the corporate governance reporting and the corporate social responsibility (CSR) reporting. The corporate governance reporting should essentially reflect the shareholders’ interests. The corporate social responsibility report should reflect social responsibility. According to GRI balance principle, a report should contain both positive and negative aspects (Moskowitz, 2010). It should also show completeness and materiality. Included in the aspect is stakeholder inclusivity GRI principle. All the reports should follow laid down regulations by content as will be seen in the critical analysis of the two companies below. Paladin Energy Limited (PDL) Paladin Energy LTD is an energy company carrying energy related activities in several countries including Australia. It also operates in African countries where it mainly deals with exploration of Titanium. Among other Stock exchange markets, PDL is listed on ASX. This means that its reporting on governance and CSR should follow the regulations ASX. Woodside Petroleum Limited (WPL) WPL is the Australia’s largest independent dedicated oil and gas company. It mainly deals in Australia with a major focus in exploration and production of Oil. As a listed company on ASX, the reporting and CSR should meet the GRI and ASX reporting guide. Below is a comparative analysis of reporting on CSR and corporate governance of the two companies (WPL and PDL). Voluntary Disclosures and a comparison for the two companies The analytical comparison of the voluntary disclosures of these two companies shall be based on four main aspects of GRI guide (G4). A good governance report should show completeness and materiality, strategic perspective and usefulness. The completeness and materiality reflects the GRI balance principle. The principle emphasizes that both negative and positive aspects of the organization’s performance should be reported (Schaltegger, 2008). The GRI principle of stakeholder inclusiveness emphasizes that the stakeholders the report should detail how it has addressed the interests of all the stakeholders (Caraiani, Lungu, & Dascalu, 2015). Detail illustrates that with this principle, comes the environmental impact considerations. The usefulness of a report can be inferred from how it reflects the GRI and ASX principles of clarity, Reliability accuracy, timeliness and comparability. The principle of comparability would mean that similar aspects for similar companies should be comparable (Laasch & Conaway, n.d.). This section reviews the annual governance report and the CSR report of the two companies. Annual governance report The annual reports under review for the two companies (PDL and WPL) are the annual governance reports for the year 2015. The PDL annual governance report was downloaded and can be found at http://www.asx.com.au/asxpdf/20150828/pdf/430wmlcqmbp5b5.pdf and the WPL annual report on corporate governance http://www.woodside.com.au/Investors-Media/announcements/Documents/17.02.2016%202015%20Annual%20Report.PDF The WPL report on corporate governance gives a comprehensive report about the stakeholders. It gives necessary details about the governance structure that would be expected. In the report, key performance highlights are made clear and the future objectives listed down. The WPL report meets the basic standards in totality and beyond. The PDL report meets the basic ASX. Comparing with the WPL, an investor would find more detail in the WPL than PDL. From the fact that none of the reports discloses failure of adherence to any of the ASX recommendations, it is presumed that they have all complied with the basic recommendations of ASX report recommendations. However, the PDL report does not give any detail nabout the achievement in environmental reporting as would be required. Failure to report and failure to document it in the report makes the report less complete (Du Plessis, Hargovan, Bagaric, & Harris, n.d.). With this, in fact it violets the ASX reporting basics. The WPL meets all the ASX including a clear focus on the stakeholders and how their interests will be addressed. To a smaller extent, WPL gives a not so clarified impression of the negative aspects on governance in terms greenhouse adherence. PDL report emphasizes more on the positive aspects. Corporate social responsibility (CSR) The CSR reports for PDL for the year 2015 was found at http://www.paladinenergy.com.au/getfile.aspx?Type=document&ID=14711&ObjectType=3&ObjectID=3421 and that of WPL was found at http://www.woodside.com.au/Investors-Media/announcements/Documents/18.03.2016%202015%20Sustainable%20Development%20Report.pdf .The sustainability report by both the companies lists down and creates a clear impression of the adherence to the GRI standards on sustainability. Each of the reports reflects that the organizations are in full adherence of the environmental and economic sustainability programmes as guided by the G4 guide (G4, 2016) concerning oil and gas. The reports have dully addressed the GRI requirements earlier mentioned including the materiality complex, reliability and timeliness. The use of figures necessitates comparability with other companies. However, the PDL report shows more readability compared to WPL due to the presentation of the reports. The differences in the reported figures shows equal measure in responsibility as the reported figures are in accordance with the required thresholds for the products made by respective companies, especially environmental measures. However, the GRI balance principle is not fully adhered to. None of the reports reflects a detailed documentation on the negative aspects of the company’s performance. There is more emphasis on the positive performance with only WPL giving a figurative impression of environmental problem of greenhouse emission. PDL, in fact, only focuses on the positive aspects. On this GRI principle it can be concluded that none of the companies has shown good reporting practice. Conclusion As big companies, the two adhere to the standard ASX and GRI reporting practice. The governance and sustainability reports can be relied on by investors since they provide sufficient information. On the other hand, the failure to meet the GRI balance principle makes them less sufficient in practice. As such, the companies need to greatly consider including, may be not in full detail, the reports on the negative aspects of governance and sustainability. References Caraiani, C., Lungu, C., & Dascalu, C. (2015). Green accounting initiatives and strategies for sustainable development. Hershey, PA: Business Science Reference. Du Plessis, J., Hargovan, A., Bagaric, M., & Harris, J. Principles of contemporary corporate governance. G4, G. (2016). Retrieved 29 April 2016, from https://www.globalreporting.org/resourcelibrary/GRI-G4-Oil-and-Gas-Sector-Disclosures.pdf Laasch, O. & Conaway, R. Principles of responsible management. Moskowitz, M. (2010). The World Guide to CSR: A Country-by-Country Analysis of Corporate Sustainability and Responsibility - Edited by Wayne Visser and Nick Tolhurst. Business And Society Review, 115(4), 495-498. http://dx.doi.org/10.1111/j.1467-8594.2010.00374.x Schaltegger, S. (2008). Environmental management accounting for cleaner production. [Dordrecht, Netherlands?]: Springer Science + Business Media B.V. Read More