澳洲会计学课程论文2.docx

澳洲会计学课程论文2.docx

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澳洲会计学课程论文2

WoolworthsLtd:

AFinancialAnalysis

Submittedby

8October2010

TableofContents

1.0ExecutiveSummary3

2.0Introduction3

3.0KeyObjectives4

4.0Theoreticalbackground4

5.0Researchmethodology4

6.0Researchfindings5

6.1Geographicalcomparison5

6.1.1EuropeanUnion5

6.1.2TheUnitedStates5

6.1.3Canada6

6.1.4Korea6

6.2ComparisonofadoptingIFRSbeforeandafterthecrisis6

6.2.1AdoptionofIFRS–thecasesoftheUnitedStates6

6.2.2.Korea7

7.0ResearchLimitations8

8.0ConclusionandRecommendations8

9.0References9

10.0Reportreflection10

1.0ExecutiveSummary

ThisreportstudiesthefinancialstatementofWoolworthsandprovidesavaluationforthecompany,applyingtheapproachsuggestedinthecorporatefinanceliterature,forinstance,BredleyandMyers（2003）.EmpiricalanalysisshowedthatWoolworthsisadefensivestockbyapplyingregressionanalysistothemarketreturns.Basedonthemarketdata,thefairvaluationofthefirmisA$xx.Comparedtothecurrentmarketprice,itisxx%above/belowthefairvaluationbasedonassumptionsdrawnfromhistoricalmarketdataandfinancialreports.Thefirmisthereforeundervalued/overvalued.

2.0Introduction

Thissubmissionservesforseveralpurposes.HistoricalpricedataofthecompanyandtheboardmarketindexaredrawnfromYahoo!

Financetoclassifywhetherthestockisdefensiveorriskyfromtheirhistoricalreturns,basedonthecapitalassetpricingmodelproposedbySharpe（1963）.Basedontheslopeobtainedfromtheregressionanalysis,thecostofequityisdeterminedintheprecedingsection.

3.0Determinethecostofequityforthefirm

Todeterminethecostofequityofthefirm,atypicalapproachistoconsidertheuseofcapitalassetpricingmodel

4.0CashFlowForecasts

Todeterminethevalueofthefirm,anecessarystepistoforecastthefuturecashflow.Basedonthepro-formafinancialstatementsrebuiltintheprevioussection,thefreecashflowanalysiswillfollowtheapproachsuggestedbyDamodaran（2007）andxx（2003）.

5.0Researchmethodology

Thissessionoutlinestheresearchmethodologiesusedinthissubmission.Firstofall,asetofregionswillbestudiedinthisreporttogiveanoutlookonthepaceofimplementationofIFRSaroundtheglobe.Next,thissubmissionstudieswhethertherehasbeenchangedinadoptingIFRSbyinvestigatingthecorporations,regulatorybodiesandinvestors.DevelopingregionsanddevelopedeconomieswillbecomparedinadoptingIFRSsoastocomparethefactorsaffectingthepaceofadoptingIFRS.

6.0Researchfindings

6.1Geographicalcomparison

6.1.1EuropeanUnion

EuropeanUnionhasmovedtheaheadinadoptingIFRScomparedtoothercountries.InJune2000,theEuropeanCommissionpublishedthedocument,EUFinancialReportingStrategy:

TheWayForward,whichsuggestedthatallpubliclylistedcompaniespreparetheirconsolidatedaccountsinaccordancewithIASby2005.Giventhescaleofthepledge,morethan9,000listedcompaniesarenowusingIFRSwhengeneratingtheirconsolidatedfinancialstatements,accordingtostatisticscompiledintheDanske’s（2006）research.

Inaddition,memberstatesoftheEuropeanUnion（EU）allowcompaniestouseIFRSforcorporateincometaxstatements.Today,mostEUcountriesrequirecompaniestogeneratereportsthatareincompliancewithlocalGenerallyAcceptedAccountingPrinciples（GAAP）fortaxpurposes,butthosereportsdon’thavetobeincompliancewithIFRS.Inpractice,companiesmaybeimplementingIFRS,aslocalGAAPguidelinesincreasinglyconvergewithIFRS.

6.1.2TheUnitedStates

TheSecuritiesandExchangeCommission（SEC）wasasupportertowardsauniformaccountingstandardintheworld.TheysuggestedofficiallythatUScorporationsshouldadoptIFRSbytheendof2014.However,theyhaveturnedtheirviewtotheoppositesideafterthefinancialcrisis.TheambiguoustreatmentmethodsonspecialproposevehicleandcreditinstrumentsremainedtheconcernofSECofficialsonadoptingIFRSforUScorporations.Moreover,theysuggestedthatitincurredahugecostforcompaniestochangetheaccountingmethod.

6.1.3Canada

TheCanadianAccountingStandardsBoardmadeamajorchangein2005.TheydecidedtoadoptIFRSratherthantheU.S.GAAP.Theboardhasannouncedafixeddeadlineof2011forcompaniestoadoptIFRSin2007.IFRSwillberequiredforinterimreportsforpubliclistedcompanies.

6.1.4Korea

AdomesticversionoftheGenerallyAcceptedAccountingPrinciples（GAAP）hasbeenadoptedbyKoreancompaniesbeforetheAsianFinancialCrisisatthedawnofthelastdecade.However,theInternationalMonetaryFund（IMF）advisedKoreancompaniestoimprovetransparencyinaccounting.EversincethesuggestionbytheIMF,Koreancompanieshaveinvestigatedtointegratetheirfinancialstatementstointernationalstandard.TheystartedplanningandcametoadoptIFRSgradually.

6.2ComparisonofadoptingIFRSbeforeandafterthecrisis

6.2.1AdoptionofIFRS–thecasesoftheUnitedStates

WiththegreenlightfromtheSEC,U.S.corporationswerewelcometothenewaccountingstandardsinsteadofU.S.GAAP.Withtheintensificationoftheglobalization,moreandmoreU.S.corporationsseekbusinessfromoverseas.OverseasinvestmentsaccountforanincreasingportionoftoplineandbottomlineofthefinancialstatementsforUScorporations.AccordingtoasurveydonebytheU.STreasury,overseasequityinvestmentshowedabigjumpinthisdecade.EquityinvestmentinEuropedoubledin3yearstimebetween2003and2006.Therefore,therewasanurgentneedforthemtoadoptIFRStogiveinvestorsmoretransparencyontheirfinancialpositions.

Beforethefinancialcrisis,theSECtookanaggressivepositionontheharmonizationofIFRS.ItofferedaroadmaptomigrateGAAPtoIFRSthatwouldleadtoallpubliccompaniesreportingunderIFRSby2014.MultinationalcompaniesweregivenpermissiontoadoptIFRSbeforethepurposeddeadline.

However,inarecentspeechbySECDirectorofCorporateFinance,White,heclaimedthattheIFRSshouldnotbeconsideredastheuniversalaccountingstandard.Inhisspeech,White（2008）commentedthatHealsocommentedthattheSECcannotsee‘asinglerationaleforwhytheCommissionshouldbelookingatIFRSforU.S.companies’.Thisindicatedthatwithoutastrongsupportfromtheregulatorybody,UScorporationssteppedbackwardtoafurtherintegrationofaccountingstandardsafterthecrisis.

Raisingconcernsfromthecorporatesidehavebeenspottedontheplanfromthecorporateside.Accordingtoasurveyconductedin2008tofinancialprofessionals,closetohalfofrespondentsquestionedaboutthecurrenttimelineofimplementingIFRS.Additionalcostsincurredinthepreparationoffinancialstatements,togetherwitheconomicslowdown,madecompanies’burdenheavier.TherehasbeenheateddebateamongaccountingprofessionalsandotherstakeholdersaboutthefinancialreportingqualityandtheadditionalcostsincurredbycorporationsinadoptingIFRS.Fuelledbythefinancialcrisis,extracostsinadoptingIFRSbecomesthemajorconcerninbudgetplanningintheU.S.corporations.

6.2.2.Korea

Koreasetsanexampleofhowintegrationofinternationalaccountingstandardpickupitspaceinspeedaftertheglobalfinancialcrisis.AccordingtotheAssociationofKoreaListedCompanies,almosttwo-thirdofpubliclistedcompanieshascompletedtheirinternalinvestigationtotheimplementationofIFRS.By2011,financialcompanies,suchasbanks,insurancecompaniesandbrokeragefirmshaveobligedtopublishtheirfinancialstatementsincompliantwithIFRS.

7.0ResearchLimitations

ThissubmissioncomparesthepaceofadoptingIFRSinvariousregionsintheworld.OuranalysisislimitedtostudyingtheimplementationsofIFRSinaselectedsamplesetofcountriesonly.AsmentionedinSlettenandRamanna（2010）,accountingstandardsrepresentequilibrium,andtheyco-developwitheconomic,political,andculturalinstitutions.（Hail,Leuz,andWysocki,2009）.Culturalfactorsandshareholdingstructuresshouldalsobetakenintoconsiderationwhenthistopicisstudied.

8.0ConclusionandRecommendations

Fewwilldisagreethattheconsensusofreachingsomeformofuniformaccountingstandardisessentialforthehealthydevelopmentofbusinesscommunity.Exactlyhowmuchisalong-unresolvedissue.Andfewwoulddisputethatwideningglobalizationofmarketsandpoliticsimpliessomenarrowingofruledifferencesamongnations,thoughheretootheoptimaldegreeofuniformityisfarfromclear.Thedegreeofharmonization,however,dependsonthetangibleeconomicbenefitsofcorporationsbyadoptinguniformaccountingstandardsintheregion.

9.0References

Choi,F.,FrostD.S.,andMeek,G.K,（1999）‘InternationalAccounting’,NewYork:

PrenticeHall,UpperSaddleRiver.

Clarkson,P.,J.GuedesandR.Thompson（1996）,‘OntheDiversification,Observability,andMeasurementofEstimationRisk’,JournalofFinancialandQuantitativeAnalysis,March,pp.69-84.

Daske,H.（2006）‘EconomicBenefitsofAdoptingIFRSorUS-GAAP–HavetheExpectedCostofEquityCapitalReallyDecreased?

’JournalofBusinessFinance&Accounting,33（3）&（4）,pp.329–373

Diamond,D.W.andR.E.Verrecchia（1991）,‘Disclosure,Liquidity,andtheCostofCapital’,JournalofFinance,Vol.46,No.4,pp.1325-1359.

Hail,L.,C.Leuz,andP.Wysocki.（2009）.‘GlobalaccountingconvergenceandthepotentialadoptionofIFRSbytheUnitedStates:

Ananalysisofeconomicandpolicyfactors.’WorkingPaper,availableonSSRN.

Lawrence,S.（1996）,‘InternationalAccounting’.London:

InternationalThomsonBusinessPress.

Ramanna,K.,andSletten,E.（2