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Question:

Discuss About The Financial Crisis Scenario Faced Surf Stitch?

 
Answer
Introducation

Identification of the financial crisis is mostly done from the annual report submitted by Surfstitch Ltd in which the decrease of capability of operations is portrayed after Justin Cameron exited in 2015 (surfstitchgroup.com 2017). Moreover, Surfstitch Ltd had a weak management which could not control the incremental expenses which hampered the financial condition of the organization. In addition to this, the organization had very high costs of distribution, administration and sale which were ever increasing and affected the net profit of the organization. These cumulative expenses restricted the company from making any significant profits which could have held its financial activities together in the future. These factors caused the rise of predicament in context of the financial strength of the organization.

Determining the intangible asset goodwill and investment in subsidiary and cash position during the year 2015

The assessment of the yearly report of Surfstitch Ltd for 2015 primarily represented goodwill of $73,832,000 (surfstitchgroup.com 2017). Moreover, the subsidiary investment was principally recognized at $70,197,000 and the cash & cash equivalent point of Surfstitch Ltd was discovered at $40,837,000 (surfstitchgroup.com 2017).

 
Determining the impairment costs, selling & distribution and administrative expenses in the profit and loss statement during the year 2016:

In 2015, there was no mention of the impairment costs in the respective annual report, whereas in 2016 the damage cost increased to $88,999,000, as depicted in the annual report (surfstitchgroup.com 2017). Additionally, the assessment of annual report also showed an addition in the selling and circulation levels of $44,683,000 in 2015 and $101,268,000 in 2016 for Surfstitch Ltd (surfstitchgroup.com 2017). Moreover, the administrative expenses of Surfstitch Ltd in 2015 essentially mounted to $7,424,000 and in 2016, it stood at $49,237,000 (surfstitchgroup.com 2017). Hence, organisation total financial steadiness deteriorated over the period of two years, which majorly hampered its financial strength.

Relevant recommendations whether to buy, hold or sell Surfstitch Ltd shares and why:

Annual report and complete specified expense evaluation of Surfstitch Ltd can majorly help in pinpointing will give the validation of finance of the company. Hence, it can be noted that achieving financial stability in the near future is not possible for the organization. Moreover, the recent predicament of finance of Surfstitch Ltd is downgrading, which has a negative impact on the capacity of profit generation (Au.finance.yahoo.com 2017). The stability of finance in recent times of Surfstitch Ltd is decreasing, as there is acceleration in its expenses. Losses of Surfstitch Ltd has speeded up in 2016 as compared to 2015. Identification of the relevance can be achieved by evaluation.

When the share price of Surfstitch Ltd was evaluated, it was found that share market value of the company is on decline. Due to this there is a decrease in inclusive stability in finance of the company and badly affecting the main sources of income creation capacity of Surfstitch Ltd (Au.finance.yahoo.com 2017). Prices of share have fallen gradually in 2 years and investors are reluctant in making further investments in the company. In addition to this, investors are inclined to sell the shares of Surfstitch Ltd as company is not looking in a good shape.

Mentioning about: Why is it necessary to have a continuous reporting regime for disclosure entities and is it effective?

When the evaluation of the data given to identify the importance of disclosure in continuation was done it showed the main reason for the regime of constant reporting. The help which the company got by the Australian authorities to reduce greater manipulations was of measure of nonstop disclosure. This was done by the organization and was much needed. Surfstitch Ltd got evaluated its case which assisted in focusing on the unethical information shared by the shareholders. In addition to this, financial strength of Surfstitch Ltd is majorly determined by the measures of continuous disclosure. This showed that the organization is accountable for revealing every important information in context of the decisions effecting growth of the company. In the light of this, Feigin, Scott and Scott (2016) state that applying measures of continuous revelation can assist in finding out financial transfers of the company. 

Disclosures were the main discovery when evaluation of the research paper is done in 2000. This effort assisted in finding out the importance and feasibility of the future disclosure forecast which was done by Surfstitch Ltd to show their financial transfers. The research paper was constructed in such a way to show the relevant data of the Surfstitch Ltd in the year 2000 (surfstitchgroup.com 2017). It was found out that there was no proper method followed by the Australian Government in conducting this process. The research paper was compiled using the old data and no specifics were mentioned by the ATO. Whereas, Beekes, Brown and Zhang (2015) stated that some organizations use the measure of disclosure of enhance their prices of shares which in turn increase their capital in market.

Earlier of the corporations offered data in their annual report without satisfactory research and assessment, Therefore, the predictable evaluation of the enterprises were not acceptable, which led to the use of trustworthy estimation methods by the organization (Lewis 2015). Accordingly, the application of constant discovery measure needs to be directed, as the applicable changes in the annual report could be acknowledged. The article establishes the use of unremitting admission technique could sooner or later permit the investor to find the applicable changes in the annual report. This has to be done for making decisions by the management. Seamer (2014) declared that with the support of continuous disclosure method shareholders are capable to recognize the fluctuations in revenue and total profit that could be produced by the organization.

 


The complete evaluation of the article “Australia’s continuous disclosure system: clear or confused?” helps in revealing the actual confusion created by the continuous disclosure system (Au.finance.yahoo.com 2017). Moreover, the article establishes that the method of continuous disclosure which has been applied by the ASX enhances the confusion among investors with respect to operations of Surfstitch Ltd.The unlawful methods that could be applied by the company in assistance with methods of continuous disclosure were mentioned in the article. In addition to this, the article does the evaluation of methods adopted by David Jones for snow balling demand for the corporation, whose claim for the takeover bid could be known (Au.finance.yahoo.com 2017). Moreover, the research directed by David Jones majorly portrayed the actual discourse in relation to the takeover bid made mandatory for enhancing the demand of company’s shares in the minds of interested investors. These trials assisted in finding out the influence of methods of nonstop disclosures, which could be organized by Surfstitch Ltd.The author tries to focus on the listing rules of 3.1.A.3, in which methods could be pinpointed which are required to be preserved by the organization before revealing any original material. Hence it can be stated here that the organization with the help of methods of nonstop disclosure are able to show the modifications in the annual report. Therefore it can be said that methods adopted by David Jones could assist in creating some methods which can help in reduction of manipulative techniques applied by the companies. David Jones surely identified the complete lacunae in the nature of continuous disclosure being used by Surfstitch Ltd (surfstitchgroup.com 2017). In the light of this Price (2014) states that ASX in accordance with methods of continuous disclosure are capable to target the relevant organizations which are in compliance with regulations of the Australian division of Security Exchange. Therefore, in the following article it is clearly given that AASB will take necessary actions for regulating the information of disclosure which have been accessed by the organizations through ASX portal (Au.finance.yahoo.com 2017). Hence, proper measures and opinions have to be taken by the ASX for reducing the wrong methods used by companies.

Rules are defined in the organization which needs to be adhered with before moving up to the requirements for disclosure written by the ASX (Au.finance.yahoo.com 2017). Moreover, the methods of continuous revelation of the adequate requirements need an evaluation with specific criteria. This is required for helping the companies to establish the reliability of data which has been disclosed. Criteria of disclosure are:  

  • Information of the organization is a trade secret.
  • Information disclosure breaches any specific law.
  • Make it a point about the information of internal management which is generated.
  • If there is incomplete information of the consultations and suggestions.
 


After that, conclusions derived from the assessment of above mentioned criteria, corporations are not supposed to disclose unconfirmed data to the investors. This reduces the enhanced methods which are wrongful and can majorly damage the share prices of the companies. Therefore, applying methods of disclosure which are repetitive is highly required in Australia, as they assist in the reduction of consequences of 2008 financial status. Moreover, it supports in decreasing the influences, which are intentionally orchestrated by the organization to increase their share price. Again, the method of disclosure which is repeated is written in the “Continuous Disclosure: an arbitrage guide”, it emphasizes on different types of methods, applied by establishments to effectively publish appropriate news through ASX platform. Significant information displayed, which can be revealed by the enterprises to their shareholders. In the light of this, it is stated that ASX platform could satisfactorily be deployed by the companies for imparting important inflation information to its stakeholders, which can determine the nature of the financial report.

 


Hence, it can be asserted that use of methods of repetitive disclosure permits the investors to choose the adequate influence of news, which can alter the nature financial position of the organization. Additionally, the measures of repetitive disclosure can also support in increasing authenticity of the evidence reported by the company. Annual reports of the companies were wrongfully made to show false information about the upcoming profits of the companies during the financial crisis. Hence, the methods being adopted by ASX is consistent in reducing wrong methods practiced by organizations to create an unethical financial report.Therefore, disclosure practices could be applied with some specific restrictions, when it comes to providing data concerning verbal agreement. All the statements and declarations should be realized with a written agreement which is overseen by the experts of the organization. This can majorly decrease the chances of forgery practiced by the organizations. Thus, it can be concluded that use of disclosure methods is a sustainable and mandatory approach for every organization that is conducting business in Australia and is a public listed company.

There are many important points in this article such as the research paper and the disclosure methods of ASX which establishes proper methods which should be practiced by the authorities of Australian government which are of dire need to monitor business in organizations. Therefore it can be said that the use of repetitive methods of disclosures with certain limitations on false display of news can be implemented. There is a need for developing Article 3A for decreasing the practice of wrongful methods used by the companies as stated by David Jones. It can majorly reduce the risk of investors in the business.;

 
References

Au.finance.yahoo.com 2017. SRF.AX: Summary for SURFSTITCH FPO - Yahoo Finance. [online] Au.finance.yahoo.com. Available at: https://au.finance.yahoo.com/quote/SRF.AX [Accessed 13 Sep. 2017].

Beekes, W., Brown, P. and Zhang, Q., 2015. Corporate governance and the informativeness of disclosures in Australia: a re?examination. Accounting & Finance, 55(4), pp.931-963.

Feigin, A., Feigin, A., Ferguson, A., Ferguson, A., Grosse, M., Grosse, M., Scott, T. and Scott, T., 2016. Evidence on why firms use different disclosure outlets: Purchased analyst research, investor presentations and Open Briefings. Accounting Research Journal, 29(3), pp.274-291.

Lewis, K., 2015. Changes to Continuous Disclosure Guidance Note 8. Governance Directions, 67(10), p.584.

Mayorga, D., 2013. Managing continuous disclosure: Australian evidence. Accounting, Auditing & Accountability Journal, 26(7), pp.1135-1169.

Price, J., 2014. Continuous disclosure. Governance Directions, 66(1), p.6.

Prokofieva, M., 2014. Twitter-based dissemination of corporate disclosure and the intervening effects of firms' visibility: Evidence from Australian-listed companies. Journal of Information Systems, 29(2), pp.107-136.

Seamer, M., 2014. Does Effective Corporate Governance Facilitate Continuous Market Disclosure?. Australian Accounting Review, 24(2), pp.111-126.

surfstitchgroup.com 2017. World Leaders in Action Sports Retail. [online] Surfstitchgroup.com. Available at: https://www.surfstitchgroup.com [Accessed 13 Sep. 2017].

Truong, T.P. and Nguyen, N.N., 2017. Regulatory Enforcement, Financial Reporting Quality and Investment Efficiency: A Pitch. Accounting Research Journal, 30(1).

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