Country Road Limited
The company I have selected for the purpose of this report is Country Road Limited. It is a listed Australian company that operates in the retail industry. It is a high-end store for clothing, footwear, fashion accessories and furniture. Eighty-eight percent of Country Road Limited is owned by another company, Woolworths Holding Limited, which is a South African company.
Country Road Limited had revenue of $423,791,000 in 2011 and its net profit was $18,218,000 for the same year (Country Road Limited 2011).
Disclosure Index
Accounting disclosure refers to the obligation of publishing all pertinent information regarding the business which may affect the decisions of the stakeholders of the company (Sulivan 2011). In order for a company to be listed in a particular exchange, it has to disclose all the information that the relevant regulatory body has made compulsory. The purpose of this regulation is to make the business operations of the company as fair and transparent as possible. All the stakeholders of the company do not have a thorough understanding of the financial market; therefore, the regulatory body makes sure that the companies release all the information which may help the investors and other stakeholders in understanding the operations of the company, and making educated financial decisions. Following is a comprehensive disclosure index of all the mandatory and voluntary disclosures made by the company:
Income Statement
The company is listed on the stock exchange and is required by law to disclose its earnings and expenses for the whole year. Country Road Ltd. has released its income statement in accordance with the regulations and the Net Income, obtained after adjusting for all the expenses and taxes, is $18,218,000 for the year 2011, whereas the revenue for the year was $423,791,000 (Country Road Limited 2011).
Balance Sheet
The second major disclosure is the Balance Sheet, which represents the financial position of the company for a specific point in time. It shows all the current and non-current assets, and current and non-current liabilities of the company, in addition to the shareholder’s equity. The total Balance Sheet size of the company in 2011 is $149,280,000 (Country Road Limited 2011).
Statement of Other Comprehensive Income
The company has also separately disclosed its other income. This needs to be disclosed separately from the income statement because it is not generated through the operations of the firm, and is beyond the control of the managers. The other comprehensive income of the company for 2011 is $13,327,000 (Country Road Limited 2011).
Statement of Changes in Equity
The company also discloses any changes that have occurred in the equity. Any issuance of new stock or purchase of treasury stock has to be disclosed in this section.
Statement of Cash Flows
Another major disclosure for the company is the detailed cash flow of the company. It has to be disclosed separately from the income statement because it reflects the movement of liquid cash and not accounting profit, which is of significant importance from various perspectives. During the fiscal year 2011, the company’s cash and cash equivalents increased from $2,466,000 to $14,899,000 (Country Road Limited 2011).
Corporate Social Responsibility
The company is not bound by law to disclose its CSR activities; however, since these activities are a good way to improve the company image, Country Road Ltd. has disclosed them like all the other listed companies.
Corporate Governance Statement
The company has also disclosed a detailed Corporate Governance Statement, in which it has mentioned all the high standards of corporate governance that the directors intend for the company to follow.
Structure of the Board
Country Road Ltd. has also disclosed the detailed structure of its board of directors, key management personnel, and other functional committees, as well.
Directors Report
The annual report also has a director’s report section, where the directors of the company express their understanding of the recent performance of the company, and the outlook of the next year, as well.
Significant Events after the Balance Sheet Date
Such events which are of significant importance and occur after the Balance Sheet date also have to be disclosed. However, in this case, there were no such events, so the fact that there were no such events has been disclosed.
Directors’ Interest
The shareholdings of the individual directors are also being disclosed in the annual report, and the details of all the different types of shares held by the directors have been provided.
Remuneration of the directors
The remuneration packages, both fixed and variable, of all the directors and key management personnel have been disclosed in detail, and the remuneration philosophy of the company is also disclosed.
Significant Accounting Policies
Listed companies are required by law to disclose their significant accounting policies, and Country Road Ltd. has disclosed all its significant accounting policies in the “Notes to the Financial Statements” section of the balance sheet. It explains policies such as the “Basis of Preparation”, where the general rules that have been followed while preparing the annual reports are explained. It also mentions whether the reports released are in accordance with GAAP or IFRS, which in the case of Country Road Ltd. is IFRS. This section also explains the operating segments of the company. Moreover, the definition of the assets and liabilities according to the company is also disclosed in this section.
Changes in the accounting policies
Any changes that are being made in the practiced accounting policies of the firm are also being disclosed in the notes. The changes that are implemented and the changes that are proposed and to-be implemented are also disclosed in detail. The interpretation of these new policies and standards is also being given.
Detailed Accounts
In the income statement and balance sheet the provided information has to be kept very precise and brief for ease of understanding, however, the details of all the accounts and any changes in the accounts are also disclosed in the notes. For instance, in this section, the entire detail of each expense is provided, not only the net amount.
Depreciation
The depreciation standard that the company practices and the detailed accumulated depreciation account are also disclosed separately.
Earnings Per Share
The Earnings per share can be calculated by using the other information, but still for the ease of the stakeholders and the fact that all of them are not necessarily finance savvy; the company also has disclosed the EPS.
Retained Profits and Reserves
One of the key sources of funds for the company is its own reserves and retained profits. The details of these reserves and any changes that occur during the year are also disclosed in the annual report. In the case of Country Road Ltd, however, the balance in this account has gone into the negative, i.e. $3,751,000 in negative, which was $571,000 positive in 2010.
Commitments
Companies are often involved in commitments with other companies, and even though they might never actually have to fulfill any of the commitments, they still have to disclose them in the Notes section. Country Road Ltd. has several Commitments and Agreements, which it might have to fulfill if the need arises, and all of them are disclosed in detail in the annual report.
Related Party Disclosure
Disclosure is for the sake of transparency of the operations, and the operations and the financial performance of a company are greatly affected by the performance and situation of its related parties. Therefore, relevant information about the related parties is also to be disclosed. Country Road Ltd. has disclosed all of its related parties, the stakes it has in these parties, and the relevant information, as well.
Contingent Liabilities
These are the liabilities that might not have to materialize, however, they are out of the control of the management, and if the situation arises the company is liable to these liabilities. Since these are not present liabilities, they cannot be disclosed in the balance sheet section. Therefore, they are disclosed in the Notes section. Country Road Ltd. has entered a Deed of Cross Guarantee, details of which are disclosed. Also, Country Road Ltd. is involved in litigation regarding employment-related matters, the details of which are also disclosed in the report.
Financial Instruments
A company with such a broad span of operations faces a significant amount of different types of risk, such as liquidity risk, credit risk, inflation risk, market risk, interest rate risk, exchange rate risk, etc. To mitigate this risk the company indulges in certain activities. The most common of which is the use of various engineered financial instruments. The details of all such instruments and their terms and conditions are also disclosed by Country Road Ltd. All the instruments, and the type of risk each instrument intends to mitigate is mentioned in the report.
Auditor’s Report
In order to make sure that the companies follow the standards and principles set by the regulating body, they are required by law to hire an external auditor to audit all the financial reports of the company. This eliminates or minimizes the chances of financial fraud by the company (Barth & Landsman 2008). The auditor, after conducting a detailed audit of the reports, issues his statement. Whatever this statement says has to be disclosed by the company. Country Road Ltd. also has disclosed the auditor’s report. They had hired Ernst & Young as their external auditors, and Ernst & Young believes that all the information disclosed by Country Road Ltd. is a fair representation and in accordance with the relevant standards and principles.
Substantial Shareholders
The Australian Stock Exchange also requires the listed companies to disclose their substantial shareholders, which in this case are: Woolworths International (Australia) Pty Limited, and Australian Retail Investments Pty Limited, which own a combined 99.72% of Country Road Limited.
Voting Rights
The rights of all the owners of ordinary shares are also declared, in the case of Country Road Limited the owners of ordinary shares have one vote per share and they also have the right to dividends.
Employment Agreements
The agreement details of the CEO and directors have also been disclosed in the annual report.
Registered office and other contact information
Finally, at the end of the annual report, the contact details of the company and the address of the corporate office have also been disclosed.
Analysis in accordance with the Companies Act and Accounting Standards
The listed companies are bound by law to hire external auditors who study all the published financial reports of the company and check for any possible deviations from the standards and principles (Garrison, Noreen & Brewer 2010). Country Road Limited had hired Ernst & Young as their auditors, and their audit report has been disclosed. According to their audit report, all the released information by Country Road Limited is in accordance with the Corporations Act 2001. The report presents a true and fair view of the company’s financial position as of 30 June 2011, and its performance for the year ended on the same date. Furthermore, the released reports are in compliance with the Australian Accounting Standards and Corporations Regulations 2001. Also, the company claims that all the published information is in accordance with the IFRS principles, and the company is true in this declaration. The accounting policies such as depreciation and inventory valuation are pretty different between GAAP and IFRS, and the companies have some room to manipulate their financial performance in this regard; however, Country Road Limited’s accounting policies and practices are all in accordance with the mentioned set of principles. The directors of the company are also responsible for the preparation and presentation of the remuneration report, in accordance with section 300A of the corporations’ act 2001; and the published remuneration report is in accordance with all the required principles.
Abnormal items are also known as extraordinary items, they are such gains or losses which are unusual or infrequent, and have to be disclosed by the company in the annual reports (investopedia 2012). Further clarification of such items is usually provided in the Notes section (Edwards & Hermanson 2007). These abnormal items are due to unanticipated and atypical causes, which have to be disclosed separately. The company has disclosed all the other income in the statement of other comprehensive income, but there are no abnormal items. Since companies are required by law to disclose abnormal items, and there are no such items mentioned in the reports, it means that there were no such items to be disclosed.
The companies are required by law to disclose any significant after balance sheet items, as well. However, in the case of Country Road Limited, there are no such items, but the fact that there are no such items has been disclosed, both in the report body and the notes, as well.
Accounting Policy and Procedure
Yes, the company indeed has a lot of accounting policies and procedures. As mentioned in the annual report the company primarily follows all the principles mentioned in the IFRS framework, and other regulatory frameworks, as well. All the detailed accounting standards and policies that the company follows are mentioned at the beginning of the notes section. It is a very detailed note and explains all the policies that need any explanation. This section also elaborates upon any changes that have been implemented in the accounting policies during the year, and also it discloses all the changes that have been announced to take place in the near future. This provides very significant insight to the investors because certain policy changes can have quite a significant impact on the operations and financials of the company.
Yes, I believe the company is a good corporate citizen, and there are several reasons for that. First of all, the company has fairly disclosed all the information that the investors and other stakeholders might need to make educated financial decisions. Furthermore, the company also disclosed some information that it was not bound to disclose by law. Furthermore, the company is very active in helping society as a corporate citizen. As mentioned in the annual report, Country Road Limited strives to innovate and create social, ethical and environmental change. The company primarily focuses on four key areas: People, Community, Environment and Ethical Trade (Country Road Limited 2011).
The company strives to develop and train its employees, and they are guided through every stage of their career path. Employees’ opinion is also considered valuable and given due weightage. The staff is given competitive benefits and, the health and safety arrangements are also very good. The company is also committed to providing its employees equal employment opportunities, and it encourages diversity in the workforce, to enhance productivity.
Country Road Limited is also a very active corporate citizen as it makes significant donations to deserving organizations, for instance, during the last year it donated more than $55,000 to several organizations (Country Road Limited 2011). Moreover, since 2008 the company is in partnership with Redkite, which is one of Australia’s leading childhood cancer charities (Country Road Limited 2011).
The company also spends a significant amount of time, money and effort to enhance its performance from an environmental and ethical point of view.
References
Barth, ME & Landsman, W 2008, ‘International Accounting Standards and Accounting Quality’, Journal of Accounting Research, vol 23, no. 12, pp. 467-498.
Country Road Limited, ‘Annual Report 2011’, Country Road Limited, Victoria.
Edwards, JD & Hermanson, RH 2007, Accounting Principles: A Business Perspective., 3rd edn, Prentice Hall, New York.
Garrison, RH, Noreen, EW & Brewer, PC 2010, Managerial Accounting, 2nd edn, McGraw-Hill, New York.
investopedia 2012, extraordinary items, Web.
Sulivan, R 2011, Financial Reporting And Analysis, 1st edn, CFA institute, Kansas.