澳洲会计学课程论文2.docx

1、澳洲会计学课程论文2Woolworths Ltd: A Financial AnalysisSubmitted by8 October 2010Table of Contents1.0 Executive Summary 32.0 Introduction 33.0 Key Objectives 44.0 Theoretical background 45.0 Research methodology 46.0 Research findings 56.1 Geographical comparison 56.1.1 European Union 56.1.2 The United State

2、s 56.1.3 Canada 66.1.4 Korea 66.2 Comparison of adopting IFRS before and after the crisis 66.2.1 Adoption of IFRS the cases of the United States 66.2.2. Korea 77.0 Research Limitations 88.0 Conclusion and Recommendations 89.0 References 910.0 Report reflection 101.0 Executive SummaryThis report stud

3、ies the financial statement of Woolworths and provides a valuation for the company, applying the approach suggested in the corporate finance literature, for instance, Bredley and Myers (2003). Empirical analysis showed that Woolworths is a defensive stock by applying regression analysis to the marke

4、t returns. Based on the market data, the fair valuation of the firm is A$xx. Compared to the current market price, it is xx% above/below the fair valuation based on assumptions drawn from historical market data and financial reports. The firm is therefore undervalued/overvalued. 2.0 IntroductionThis

5、 submission serves for several purposes. Historical price data of the company and the board market index are drawn from Yahoo! Finance to classify whether the stock is defensive or risky from their historical returns, based on the capital asset pricing model proposed by Sharpe (1963). Based on the s

6、lope obtained from the regression analysis, the cost of equity is determined in the preceding section. 3.0 Determine the cost of equity for the firm To determine the cost of equity of the firm, a typical approach is to consider the use of capital asset pricing model 4.0 Cash Flow Forecasts To determ

7、ine the value of the firm, a necessary step is to forecast the future cash flow. Based on the pro-forma financial statements rebuilt in the previous section, the free cash flow analysis will follow the approach suggested by Damodaran (2007) and xx (2003). 5.0 Research methodologyThis session outline

8、s the research methodologies used in this submission. First of all, a set of regions will be studied in this report to give an outlook on the pace of implementation of IFRS around the globe. Next, this submission studies whether there has been changed in adopting IFRS by investigating the corporatio

9、ns, regulatory bodies and investors. Developing regions and developed economies will be compared in adopting IFRS so as to compare the factors affecting the pace of adopting IFRS. 6.0 Research findings6.1 Geographical comparison6.1.1 European UnionEuropean Union has moved the ahead in adopting IFRS

10、compared to other countries. In June 2000, the European Commission published the document, EU Financial Reporting Strategy: The Way Forward, which suggested that all publicly listed companies prepare their consolidated accounts in accordance with IAS by 2005. Given the scale of the pledge, more than

11、 9,000 listed companies are now using IFRS when generating their consolidated financial statements, according to statistics compiled in the Danskes (2006) research. In addition, member states of the European Union (EU) allow companies to use IFRS for corporate income tax statements. Today, most EU c

12、ountries require companies to generate reports that are in compliance with local Generally Accepted Accounting Principles (GAAP) for tax purposes, but those reports dont have to be in compliance with IFRS. In practice, companies may be implementing IFRS, as local GAAP guidelines increasingly converg

13、e with IFRS.6.1.2 The United StatesThe Securities and Exchange Commission (SEC) was a supporter towards a uniform accounting standard in the world. They suggested officially that US corporations should adopt IFRS by the end of 2014. However, they have turned their view to the opposite side after the

14、 financial crisis. The ambiguous treatment methods on special propose vehicle and credit instruments remained the concern of SEC officials on adopting IFRS for US corporations. Moreover, they suggested that it incurred a huge cost for companies to change the accounting method. 6.1.3 Canada The Canad

15、ian Accounting Standards Board made a major change in 2005. They decided to adopt IFRS rather than the U.S. GAAP. The board has announced a fixed deadline of 2011 for companies to adopt IFRS in 2007. IFRS will be required for interim reports for public listed companies. 6.1.4 KoreaA domestic version

16、 of the Generally Accepted Accounting Principles (GAAP) has been adopted by Korean companies before the Asian Financial Crisis at the dawn of the last decade. However, the International Monetary Fund (IMF) advised Korean companies to improve transparency in accounting. Ever since the suggestion by t

17、he IMF, Korean companies have investigated to integrate their financial statements to international standard. They started planning and came to adopt IFRS gradually. 6.2 Comparison of adopting IFRS before and after the crisis6.2.1 Adoption of IFRS the cases of the United StatesWith the green light f

18、rom the SEC, U.S. corporations were welcome to the new accounting standards instead of U.S. GAAP. With the intensification of the globalization, more and more U.S. corporations seek business from overseas. Overseas investments account for an increasing portion of top line and bottom line of the fina

19、ncial statements for US corporations. According to a survey done by the U.S Treasury, overseas equity investment showed a big jump in this decade. Equity investment in Europe doubled in 3 years time between 2003 and 2006. Therefore, there was an urgent need for them to adopt IFRS to give investors m

20、ore transparency on their financial positions. Before the financial crisis, the SEC took an aggressive position on the harmonization of IFRS. It offered a road map to migrate GAAP to IFRS that would lead to all public companies reporting under IFRS by 2014. Multinational companies were given permiss

21、ion to adopt IFRS before the purposed deadline. However, in a recent speech by SEC Director of Corporate Finance, White, he claimed that the IFRS should not be considered as the universal accounting standard. In his speech, White (2008) commented that He also commented that the SEC cannot see a sing

22、le rationale for why the Commission should be looking at IFRS for U.S. companies. This indicated that without a strong support from the regulatory body, US corporations stepped backward to a further integration of accounting standards after the crisis. Raising concerns from the corporate side have b

23、een spotted on the plan from the corporate side. According to a survey conducted in 2008 to financial professionals, close to half of respondents questioned about the current time line of implementing IFRS. Additional costs incurred in the preparation of financial statements, together with economic

24、slowdown, made companies burden heavier. There has been heated debate among accounting professionals and other stakeholders about the financial reporting quality and the additional costs incurred by corporations in adopting IFRS. Fuelled by the financial crisis, extra costs in adopting IFRS becomes

25、the major concern in budget planning in the U.S. corporations. 6.2.2. KoreaKorea sets an example of how integration of international accounting standard pick up its pace in speed after the global financial crisis. According to the Association of Korea Listed Companies, almost two-third of public lis

26、ted companies has completed their internal investigation to the implementation of IFRS. By 2011, financial companies, such as banks, insurance companies and brokerage firms have obliged to publish their financial statements in compliant with IFRS.7.0 Research LimitationsThis submission compares the

27、pace of adopting IFRS in various regions in the world. Our analysis is limited to studying the implementations of IFRS in a selected sample set of countries only. As mentioned in Sletten and Ramanna (2010), accounting standards represent equilibrium, and they co-develop with economic, political, and

28、 cultural institutions. (Hail, Leuz, and Wysocki, 2009). Cultural factors and shareholding structures should also be taken into consideration when this topic is studied. 8.0 Conclusion and RecommendationsFew will disagree that the consensus of reaching some form of uniform accounting standard is ess

29、ential for the healthy development of business community. Exactly how much is a long-unresolved issue. And few would dispute that widening globalization of markets and politics implies some narrowing of rule differences among nations, though here too the optimal degree of uniformity is far from clea

30、r. The degree of harmonization, however, depends on the tangible economic benefits of corporations by adopting uniform accounting standards in the region. 9.0 ReferencesChoi, F., Frost D.S., and Meek, G. K, (1999) International Accounting, New York: Prentice Hall, Upper Saddle River. Clarkson, P., J

31、. Guedes and R. Thompson (1996), On the Diversification, Observability, and Measurement of Estimation Risk, Journal of Financial and Quantitative Analysis, March, pp. 69-84.Daske, H. (2006) Economic Benefits of Adopting IFRS or US-GAAP Have the Expected Cost of Equity Capital Really Decreased? Journ

32、al of Business Finance & Accounting, 33(3) & (4), pp. 329373Diamond, D. W. and R. E. Verrecchia (1991), Disclosure, Liquidity, and the Cost of Capital, Journal of Finance, Vol. 46, No. 4, pp. 1325-1359.Hail, L., C. Leuz, and P. Wysocki. (2009). Global accounting convergence and the potential adoption of IFRS by the United States: An analysis of economic and policy factors. Working Paper, available on SSRN.Lawrence, S. (1996), International Accounting. London: International Thomson Business Press.Ramanna, K., and Sletten, E. (2