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Management Accounting Issues Of Wesfarmers

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Explain Management Accounting Issues of Wesfarmers?




We are a team of graduate students. We have been given the responsibility to look into the major management accounting issues that Wesfarmers is facing. We have been instructed to analyze and evaluate the management accounting issues of your organization and to provide suitable recommendations on the discussed issues.

It can be seen that Wesfarners has been suffering from massive management accounting issues in the various aspects of the business operations. Certain reasons are there behind various kinds of management accounting issue of the organizations. Some of those major issues are the Target scandal, the worldwide economic slowdown and others. All these reasons have contributed to a major decline of the financial position of the company. One of the major cases of Wesfarmers that hurt the financial condition of the company the most is the Target Scandal. Target is one of the major business units of Wesfarmers and the company has earned significant amount of profit as well as revenues from this part of the business. As per the boss of Wesfarmers, Richard Goyder, due to all of these management accounting issues of the business organization, the company has been facing some massive obstacles at the time of the business operations. Some of those effects are the continuous increasing pressure on the organization, the deflation in the food prices of the company and others. One of the most crucial negative effects is that the company has almost lost the faith of the customers in the retail market of Australia. The core reason behind all these issues in the company is the fault of accounting procedures of the company.

Wesfarmers had to face significant amount of management accounting problems at the time of the Target scandal. In an open report, the company has confirmed that $18.1 million of the rebate of the suppliers have been inflated artificially in the Target scandal. Apart from this, the company has also made the confirmation that almost 10 people of the organization was involved with the Target scam. Based on the investigation of the company with audit giant EY, it has been seen that 31 of the suppliers of the company did not comply with the accounting policies and operation standards of the company. As per the view of the company, there was a major fault in the cash flow of the business organization at the time of this major fraud. At the time of the Target fraud, the earning of the company in the financial books of the organization was $74 million. However, after the audit process of the organization, it was conferment that the actual amount of the earning was $53 million. From this, it can be seen that there was a massive fault in the accounting procedure of the business organization. To make manipulation in the financial statements of the companies is not an easy task and without the help of the people of the organization, this process is not possible. Hence, it can be understood that the company had a weak internal control system. In the current scenario, it can be seen that Wesfarmers along with Target is working on their various management accounting procedures and they are working to unwind the arrangements with the suppliers of the organizations.


However, from the article, it can be seen that the Wesfarmers boss, Mr. Goyder is very much optimistic about the future performance of the company. Mr. Goyder has mentioned that it is not easy at the position to predict the future of the organization at the current satiation of the company. However, the company has been successful to implement the strategy of hedging in reducing the financial risk of the business organization. It can be seen that the company has been working towards betterment of the current financial situation of the company. However, there are still certain areas of the financial position of the company that are acting like obstacles in the way of the growth of the company. The profit of the company has plunged 83 percent to $407 million and this is the lowest results since 2002. The profit of the company is dragged down by $2.1 billion and it is a massive blow for the organization. Apart from target, one of the major subsidiary Wesfarmers, Coal has registered the lowest profit in the recent time.

However, certain positives are still there in the financial position of the organization. It can be seen that the balance sheet of the company is in a strong position. Hence, it is recommended to Wesfarmers to put more cash into the business operations of the organization in order to meet the current obligation of the company. Another positive side of the financial operation of the organization is a soft growth in Coal. At the most difficult financial time of the organization, the earnings of Coal have grown by 4.3% to $1.86 billion. At the financial difficulty of the organization, Wesfarmers needs to take effective steps to strengthen the growth in Coal along with the others sectors of the organization. In addition, it is recommended that Wesfarmers needs to employ effective auditing strategy so that the massive accounting scandals can be avoided. It is the responsibility of the auditors to conduct a thorough inspection of the financial documents of the organization so that the accounting errors can be spotted. It can be seen that the food and liquor sales of the organization has taken a d-growth from 4.4% to 2.8% and it is amounted to $39.2 billion. Hence, it is recommended that the Wesfarmers needs to make proper business strategies to strengthen the growth of liquor and food. It is also recommended that the organization needs to develop effective accounting as well as financial strategies to fight with the global economic recession along with inflation. Overall, it is recommended that the company needs to employ an overall financial strategy to survive the financial turmoil of the company.



Ahadiat, N., 2013. In search of practice-based topics for management accounting education. Available at SSRN 2355853.

Bodie, Z., 2013. Investments. McGraw-Hill.

Cuganesan, S., Dunford, R. and Palmer, I., 2012. Strategic management accounting and strategy practices within a public sector agency. Management Accounting Research, 23(4), pp.245-260.

Financial Review. (2017). Wesfarmers eyes return to form. [online] Available at: [Accessed 20 May 2017].

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), pp.50-71.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7), pp.414-428.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and relevance. Critical perspectives on accounting, 23(1), pp.54-70.

Ward, K., 2012. Strategic management accounting. Routledge


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