Contemporary Accounting Issues: Wesfarmers & Woolworths Limited

Wesfarmers Limited complies with AASB and conceptual framework. Wesfarmers Limited remains consistent with the approach in response to IASB exposure draft (Wesfarmers.com.au. 2016). Wesfarmers Limited models 2013 Exposure Draft shown in the financial statements as well as implemented on business systems and reporting. Wesfarmers appreciates for receiving invitation for participating for IASB outreach program on lease projects in the year 2012.

On the contrary, Woolworths Limited mainly renders opportunity in discussing the concerns especially from the initial comment letter (Weil, Schipper and Francis 2013). The comment letter highlights property leases for lessees as per the proposed leasing standard. This organization treated all leases in form of financing alternatives coming as economic reality. Woolworths Limited maintains IAS 17 mainly because of on-balance-sheet recognition of leases for consistent accounting treatment (Woolworthslimited.com.au. 2015). It mainly treats economic implications for similar arrangement like long-term supply arrangements as well as service contracts.

Conceptual framework revision including Prudence for addressing disparity in Corporate Reporting

Introduction of prudence and reliability in conceptual framework mainly helps in addressing disparity in corporate reporting in variety of ways (Wesfarmers.com.au. 2016). Most of the options address disparities with the help of accountability as well as fair representation of financial statements (Woolworthslimited.com.au. 2015). This particular strategy helps for increasing the simplicity of financial statements as well as improving the understandability by the potential users. Disparities in annual reports are main cause behind the issues of accountability as well as fair presentation of financial statements (Pratt 2013). It is presented in regard with requirements of AASB Standards as well as IASB through IFRS.

However, introduction of prudence as well as reliability in conceptual framework mainly aims at ensuring reliability of financial information. This improves user’s information as well as has ability in deriving conclusions from the reports in aiding final decision-making process. Addition to that, prudence in financial statements ensuring that there is fair presentation of financial information regarding the company (Horngren et al. 2013). It mainly reflects true as well as fair view of financial positions and operations for a given period. Finally, it assists in corporate reporting as well as governance for Wesfarmers Limited and Woolworths Limited.

Compare and contrast from the annual reports of Wesfarmers Limited and Woolworths Limited

Excluding asset sales, Wesfarmers mainly lifted profit at a rate of 6.1% in the financial year 2014 at $2.39 billion. Cole pre-tax earnings arrive at $167 billion (Wesfarmers.com.au. 2016). On the other hand, Australia revenue considered as the second-largest supermarket rising to 4.5% to $37.4 billion. Office works earnings come at 10.8% to $ 103 million. Kmart profit arrives at 6.4% ranging with $ 366 million (Horngren et al. 2012).

As far as Woolworths is concerned, group sales arrives at 4.7% ranging to $60.8 billion as well as net profit at 8.5%. Rise in normalized earnings especially from food, liquor as well as petrol operations. Liquor sales rise to 4.6% ranging to $7.4 billion. Hotels deliver at $1.47 billion in the given financial year (Henderson et al. 2015).

Wesfarmers has shaded Woolworths considers as an investment in recent years. In accordance with Stock Doctor Database, Wesfarmers generates total return involves capital gains plus dividends. It arrives at 15.8% in past 12 months. From the past three years, it is observed that Wesfarmers delivered 20% a year for more than 5 years (Harrison et al. 2014). Woolworths Limited is the 12-month return generated from 6.8% for five-year financial year.

By comparing Wesfarmers Limited and Woolworths Limited, share prices of Woolworths Limited slumps at 23% and shares and latter manages to limit their losses less than 2% (Woolworthslimited.com.au. 2015).

Identification of disclosures of Wesfarmers Limited and Woolworths Limited

It conducted ways in accordance with AASB and IASB requirements on accounting in case of expenses. Both Wesfarmers Limited and Woolworths Limited make the disclosures of Executive Compensation as well as employee benefits at the same time. As far as AASB is concerned, it requires listed companies in Australian Stock Exchange for disclosing all employee benefits as well as executive compensation plans per year (Graff 2015). This mainly aims at improving in the major aspects of corporate governance in Wesfarmers Limited and Woolworths Limited. From major disclosures, companies improve in integrity as well as accountability in business operations for improving in the overall performance (Wesfarmers.com.au. 2016).

This paragraph explains Conceptual Framework stating the main purpose of annual reports. It provides users for using such reports for gaining information for final decision-making process. Cooperate disclosures in according with AASB and IASB entailing management disclosures as well as financial statements (Edwards 2013). It aims at presenting financial information for the companies. As per the requirement by AASB and IASB, financial statements require support from notes o accounts. This particular notes to the accounts aims at offering descriptions to accounts providing information to financial statements. Main notes to the accounts helps users regarding accounts for understanding the financial information in the most appropriate way (Wesfarmers.com.au. 2016).

Remuneration report

Executive compensation in both the companies (Wesfarmers Limited and Woolworths Limited) is conducted with the help of share plans, incentives, bonus payments as well as salaries rewarded for services offered to companies for given financial period (Wesfarmers.com.au. 2016). There mainly exists remuneration committee setting compensation packages for employees (Deegan 2013). Corporate governance mainly requires companies in disclosing amount that the employees compensated for services offering to firm. Remuneration policies of both the companies include structure for senior executives based upon key principles. This means attracting as well as retaining best people for job. It positions in giving fixed remuneration for the market median from top-level Executives. It is one of the significant portion presented in the executive remuneration resulted as satisfactory return to shareholders for future analysis purpose.

Inventory

Table: Inventories of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

Graph: Inventories of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

From the above table and graph, it highlights inventories of Wesfarmers Limited and Woolworths Limited for the year 2014 and 2015 (Wesfarmers.com.au. 2016). Wesfarmers Limited has more inventories in comparison with Woolworths Limited for given study (Deegan 2012). This means that Wesfarmers can easily manage with the inventories within the stipulated time.

Accounts Receivable

Table: Accounts Receivable of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

Graph: Accounts Receivable of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

From the annual report, it is easy to view at the accounts receivable of Wesfarmers Limited and Woolworths Limited for the year 2014 and 2015. Wesfarmers Limited has higher accounts receivable in comparison with Woolworths Limited (Deegan and Ward 2013). This means that Wesfarmers Limited has access towards maintaining short-term obligations in the most appropriate way (Wesfarmers.com.au. 2016).

PPE (Property, Plant and Equipment)

Table: Property, Plant and Equipment of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

Graph: Property, Plant and Equipment of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

The above graph indicates the fixed assets such as Plant, Property and Equipment for the company named as Wesfarmers Limited and Woolworths Limited for the year 2014 and 2015 (Woolworthslimited.com.au. 2015). Both the companies have negative PPE intangible that means these companies requires acquisition of fixed assets in the upcoming financial year (Bevis 2013).

Liability

Table: Total Liabilities of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

Graph: Total Liabilities of Wesfarmers Limited and Woolworths Limited

(Source: Created by Author)

Total Liabilities of Wesfarmers Limited and Woolworths Limited had been demonstrated with the help of tables and graphs in the year 2014 and 2015 (Woolworthslimited.com.au. 2015). This means that Wesfarmers Limited has less liabilities implying favorable condition for business organization.

Lease

In case of Wesfarmers Limited, 15-year lease to Wesfarmers subsidiary for options. Wesfarmers Limited turnover at $ 62.4 billion in the year 2015

Woolworth Limited has 12-year lease towards options for attainment of future goals and objectives (Woolworthslimited.com.au. 2015).

Taxation

Wesfarmers Limited follows log-term incentive metric (Wesfarmers.com.au. 2016). On the contrary, Woolworths Limited redesigns increase in level of transparency as far as possible (Woolworthslimited.com.au. 2015).

Transfer Pricing

Figure: Change in stock prices in Wesfarmers Limited

(Source: Beatty and Liao 2014)

From the above stock price chart, it is evident that changes arrives at 0.49% and priced at $42.27 (Wesfarmers.com.au. 2016).

Figure: Change in stock prices in Woolworths Limited

(Source: Barth 2015)

From the above stock price chart, it is evident that changes arrives at 0.43% and priced at $23.10 (Woolworthslimited.com.au. 2015).

Conclusion and Recommendations

At the end of the study, it is easy to understand the fact that Wesfarmers Limited and Woolworths Limited based in Australia. Proper emphasis has been taken to conduct detailed Executive remuneration within the stipulated time. Entire study explains regarding Director Remuneration report in both the companies named as Wesfarmers Limited and Woolworths Limited. It is recommended to Woolworths Limited in managing inventory in the most appropriate way. Wesfarmers Limited and Woolworths Limited requires asset acquisition by purchasing assets that are more fixed in the near future. Annual reports signify the basis of financial accounting reports and qualitative characteristic of financial reporting for future analysis purpose. It briefly investigates regarding the remuneration concepts based on basic pay and incentive earned by following Executive Directors.

Reference List

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Wesfarmers.com.au. (2016). Reports. [online] Available at: https://www.wesfarmers.com.au/investor-centre/company-performance-news/reports [Accessed 9 Aug. 2016].

Woolworthslimited.com.au. (2015). Reports - Woolworths Limited. [online] Available at: https://www.woolworthslimited.com.au/page/Invest_In_Us/Reports/Reports [Accessed 9 Aug. 2016].