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The assignment must be completed as a group assignment for face to face students.Distance students have the option of doing it as a group or can also submit as an individual assignment, if you are unable to form a group online. Face to face students will be allocated into groups of 2-3 members by your respective Lecturer. Distance students can form groups themselves via the discussion forum on Moodle. There is no specific writing style required such as a report or an essay for answering the questions.

Before starting this assessment please read information provided in the Plagiarism and Academic Misconduct tab on Moodle. Students are to exhibit knowledge of the subject matter by demonstrating:

Understanding and the ability to analyse and interpret the information provided from an accounting perspective
Classification, interpretation and analysis of accounting statements
Demonstrating accuracy in presenting accounting information by providing a sequence of information, structure and continuity
Breadth of quality of research by using a minimum of 6-8 references, use of appropriate grammar and good language
Correctly using the APA referencing system to cite academic sources in-text and in the reference list.

The Offered Trip and Business Ethics

Based on the provided case study, it could be stated that Marcus Samuel has been offered a trip on the part of Joanna Ria, the salesperson for IT Solutions Limited. The primary intention is to provide a thorough demonstration of the software package of the software package of the organisation in detail. However, the individual was offered to take his family in the trip as well and IT Solutions Limited would bear all the expenses. In addition, there are many other vendors like IT Solutions Limited producing the same software package and Marcus Samuel is the in-charge of assessing all these packages. After careful evaluation of all the packages, the most effective one would be recommended to the clients.

Under these circumstances, it is advisable to Marcus Samuel to avoid the trip offered on the part of IT Solutions Limited. This is because the organisation is offering the tour for the entire family of Marcus Samuel along with visiting popular places of the nation. This might be viewed in the form of bribe to Marcus Samuel so that the individual selects its software package and recommends the same to the clients (Loeb, 2015). In addition, this free trip might have impact on the selection of the software package in the mind of Marcus Samuel and hence, biased decision might be provided. Thus, in order to maintain ethical integrity and moral values, Marcus Samuel should not avail this family trip offered on the part of IT Solutions Limited.

It has been observed from the case study that Marcus Samuel works for Rook Technologies Limited as a software consultant. Hence, the individual is obliged to follow the rules and instructions of its current organisation (Grace & Cohen, 2015). However, if the trip was solely for business purpose, Rook Technologies might have allowed Marcus Samuel to visit Los Angeles to evaluate the software package in detail. As the organisation is intending to recommend the best software package, it is necessary to evaluate all the proposed packages in detail. Thus, if IT Solutions Limited bears only the expense of Marcus Samuel to stay in Los Angeles for detailed demonstration of its software, there would be no violation of business ethics.

However, the trip is offered to the entire family of Marcus Samuel, which does not conform to the ethical principles of the organisation (Blanthorne, 2017). This is because the management of Rook Technologies Limited might view such offer as bribe provided to its software consultant. In addition, such offer might have direct influence on the decision-making process of Marcus Samuel. If the software consultant feels satisfied with the trip, decision might go in favour of IT Solutions Limited even though other software packages might be superior, if assessed with integrity and honesty (Das, 2015). Such biased decision could have direct impact on the brand image of Rook Technologies Limited, if the clients do not feel satisfied by using the software product of IT Solutions Limited. Hence, considering all the factors, Rook Technologies Limited would not allow Marcus Samuel to go on the trip.

Code of Conduct for Organisational Decisions

In the words of West (2018), code of conduct provides guidance to the managerial decisions developing a common framework based on which the decisions are made. This would enable in developing effective understanding of the boundaries within the organisation and the benchmarks to interact with key stakeholders. In addition, such code of conduct would help to safeguard the reputation of Rook Technologies Limited and legal standing, if any particular employee breaches the code under any circumstances.

On the other hand, the code of conduct has certain advantages for IT Solutions Limited and they are discussed briefly as follows:

  • With the help of code of conduct, IT Solutions Limited could develop a workplace culture, in which there would be equality in employee treatment. This is because the staffs would be provided with equal opportunities for career advancements; thus, enhancing the overall working environment.
  • Code of conduct like zero tolerance policy for providing and receiving bribes would help in developing work culture and thus, the costs related to lawsuits and fines are minimised.

However, the code of conduct might have certain drawbacks for IT Solutions Limited, which is demonstrated as follows:

  • Developing code of conduct might be expensive and time-consuming for the organisation, as it needs to appoint an ethics officer and the commitment of its financial and personnel resources (Spence & Carter, 2014).
  • In case, the management team intends to apply its own edition of corporate ethics in managing the departments, this could lead to confusion within the internal environment.

As commented by Nielsen, Mitchell & Nørreklit (2015), consolidated income statement could be defined as the statement, which takes into account expenses, revenue and income of a parent firm and its subsidiaries. Thus, it presents the overall picture of the entity, instead of its individual segments. Any amount owed between the segments is not taken into consideration. In other words, it could be stated that this statement discloses only income and expense activities, which are from outside of the corporation. Any revenue made on the part of the parent organisation, which is an expense of a subsidiary, is not taken into account in the consolidated income statement. This is because there is absence of any net change in the income statement. The revenue made from one unit is offset due to the expenses in other unit. Thus, in order to avoid inflated income, there is omission of revenues generated from the internal sources (Hoyle, Schaefer & Doupnik, 2015).


In order to prepare the consolidated income statement, Greencross Limited follows certain basic principles, which are elucidated as follows:

  • The expenses and revenues of the parent and its subsidiaries are added together. If the subsidiary is acquired in the process of the financial year, income and expenses are time apportioned in the process of consolidation.
  • The intra-group sales and purchases are excluded.
  • The unrecognised profit held in ending inventory associated with intergroup trading is excluded.
  • The profits, which are attributable to non-controlling interests, are computed.
  • After arriving at the net profit, it is divided between the non-controlling interests and amount attributable to stockholders of the group.

Particulars

2016 (in $'000)

2017 (in $'000)

Cash and cash equivalents

             62,583

             57,683

Provisions:

Short-term provisions (A)

             20,990

             21,739

Long-term provisions (B)

             22,249

             21,501

Total provisions (A) + (B)

             43,239

             43,240

Inventories

             92,002

             97,503

Property, plant and equipment

           156,867

           187,783


Table 1: Reporting value of the chosen items of Greencross Limited for the years 2016 and 2017

(Source: Greencross Limited, 2018)

Cash and cash equivalents are considered as current assets, since it reports the value of the assets of an organisation, which are cash or could be liquidated into cash immediately. In case of Greencross Limited, these could be in the form of marketable securities, commercial paper and bank accounts, which have a maturity period of three months or less (Collier, 2015). A provision could be defined as an amount that is kept aside in the books of accounts of an organisation for covering any future liability. It is not a type of saving, even though it is kept to meet any future obligation. This is because it would minimise the equity balance of Greencross Limited. Since Greencross Limited is an Australian organisation, it follows International Financial Reporting Standards (IFRS), in which provision is considered as a liability. Thus, provision made for income tax is considered as liability for income tax payable in Greencross Limited. This is considered a short-term provision while long-term provisions for the organisation include provisions for renewals, repairs and depreciation.

Reporting Principles of Greencross Limited


In case of inventory, it is necessary to consider the items included in it. Inventory denotes those assets, which are held for sale in the normal business course. These include finished products, work-in-process, supplies and materials used in production. Depending on the nature of the business, it could be able to determine the time taken to sell inventory (Gong, 2017). However, inventory is utilised mainly for generating cash and cash equivalents, which is the main reason behind its classification as current asset. The valuation of inventory is made either at net realisable value or cost, whichever is lower. For property, plant and equipment, they are considered as tangible fixed assets. This is because they are held for the internal use of the organisation, since they are expected to fetch economic benefits for the organisation for more than one year. For Greencross Limited, property, plant and equipment could be in the form of buildings, land, vehicles and machinery and their economic lives tend to vary between 5 years and 30 years.

Item

2016 (% change)

2017 (% change)

Summary

Gross margin percentage

2.41%

-0.53%

Although the sales revenue of the organisation has increased in 2017, the cost of sales has increased in tandem as well. This is a measure of profitability, which helps in determining the income after deducting the cost of goods sold (Loughran & McDonald, 2016). Thus, a slight decline in profit level could be observed for Greencross Limited.

Operating expenses

12.30%

10.88%

 As observed, it could be stated that the operating expenses of the organisation have experienced an increasing trend over the years, even though the rise is lower in 2017 in contrast to 2016. This is because the organisation has experienced an increase in employee benefits expense, depreciation and amortisation, occupancy cost and marketing cost.

Revenue growth

13.80%

11.43%

 Greencross Limited has experienced a slight fall in revenue growth even though the overall revenue has increased in 2017. This is because there has been slight decline in veterinary services in the operating market.

NPAT

74.61%

22.46%

 Even though there is increase in net profit over the year, there has been significant decline in the growth rate of NPAT. This is because of the rise in operating expenses and cost of goods sold.

Finance cost

17.72%

-10.77%

 There has been significant decline in finance cost due to the fall in operating profit before tax.

Non-current assets

5.77%

7.25%

 The increase in non-current assets is observed due to the significant increase in property, plant and equipment and intangible assets. This denotes that the brand image of the organisation has increased in the market (Benson, Faff & Smith, 2014).

Number of stores and veterinary clinics at the end of the year

10.00%

8.64%

 The trend shows that the organisation has started to expand its stores in Australia and New Zealand, since the number of attendees has increased over the year.

Cash flow from operating activities

435.27%

-4.64%

 It could be observed that the cash flows from operating activities have increased over the year, since the supplier payments have increased along with income taxes. Thus, there has been slight decline in working capital base of the organisation which have negative impact on liquidity (Gippel, Smith & Zhu, 2015).


Table 2: Changes in the values of selected items of Greencross Limited for the years 2016 and 2017

(Source: Greencross Limited, 2018)

Many organisations provide package to the shareholders every year including the financial statements; however, it provides additional information that the organisations want their shareholders to know. However, Greencross Limited undertakes additional steps by including reports on the overall business progress and the reasons behind its current choices. This enables the shareholders about their expectations from the business and the way they are met previously (Floyd & List, 2016).

It has been identified that every organisation has its own dividend structure and the shareholders are provided with a certain portion of profit made. Since the dividend structure of Greencross Limited is based on income and revenue, the shareholders could be able to obtain an insight of the amount to earn in the form of dividend. However, if dividend payouts are minimised, they would like to know the amount being spent on other activities (O'Hare, 2016).

Looming threats:

The shareholders are provided with comparative financial statements in order to ensure openness and honesty regarding its financial choices. However, such information could provide the shareholders with an opportunity of identifying threats to the solvency or existing position of Greencross Limited. Thus, the comparative financial statements could reveal rising debt, misuse of investments and risky investments, which could increase the suspiciousness of the shareholders and they might sell their shares, if they believe that the business performance is on the declining scale.

References:

Benson, K., Faff, R., & Smith, T. (2014). Fifty years of finance research in the Asia Pacific Basin. Accounting & Finance, 54(2), 335-363.

Blanthorne, C. (2017). Designing a Theme-Based Ethics Course in Accounting. In Advances in Accounting Education: Teaching and Curriculum Innovations (pp. 135-140). Emerald Publishing Limited.

Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Das, M. (2015). Need, Relevancy and Impact of Ethics Education on Accounting Profession.

Floyd, E., & List, J. A. (2016). Using field experiments in accounting and finance. Journal of Accounting Research, 54(2), 437-475.

Gippel, J., Smith, T., & Zhu, Y. (2015). Endogeneity in Accounting and Finance Research: Natural Experiments as a State?of?the?Art Solution. Abacus, 51(2), 143-168.

Gong, J. J. (2017). Ethics in Accounting: A Decision-Making Approach.

Grace, D., & Cohen, S. (2015). Business ethics.

Greencross Limited. (2018). Greencrosslimited.com.au. Retrieved 26 March 2018, from https://www.greencrosslimited.com.au/

Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.

Loeb, S. E. (2015). Active learning: An advantageous yet challenging approach to accounting ethics instruction. Journal of Business Ethics, 127(1), 221-230.

Loughran, T., & McDonald, B. (2016). Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), 1187-1230.

Nielsen, L. B., Mitchell, F., & Nørreklit, H. (2015, March). Management accounting and decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No. 1, pp. 64-82). Elsevier.

O'Hare, J. (2016). Analysing Financial Statements for Non-specialists. Taylor & Francis.

Spence, C., & Carter, C. (2014). An exploration of the professional habitus in the Big 4 accounting firms. Work, Employment and Society, 28(6), 946-962.

West, A. (2018). After virtue and accounting ethics. Journal of Business Ethics, 148(1), 21-36.

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