AF314 Corporate Accounting

GROUP ASSIGNMENT-
COMMUNICATIONS FIJI LIMITED

S11157681 Varma Shyana

S11148708 Makasiale Mele
S11096192 Ali Zohayr
S11111280 Prakash Roselyn
INTRODUCTION

Communications Fiji Limited (CFL) was established on 5th July 1985 as one of the first privately
owned commercial broadcasters in the region. Now it has become the South Pacific’s largest
broadcast organization having reach across both Fiji and Papua New Guinea. It is a publicly
listed company on the South Pacific Stock Exchange (SPX) which is 100% owned and managed
by the Pacific Islanders. The South Pacific Stock Exchange market is classified as the barometer
by which the degree of economic activity is evaluated but this is not true for Fiji since there are
only 20 entities listed. Consequently, the Fijian economy is not fully reflected. CFL’s overall
performance and good corporate governance practices that facilitate stakeholders with accurate
and reliable information provide an overview of the company's financial performance.

Therefore, this report will critically analyze CFL’s overall financial performance and its
corporate governance overtime followed by suggestions on how it can improve its performance
and practice good corporate governance by critically analyzing the entity’s financial reports. A
set of 8 consecutive financial year reports that is, 2012-2019 will be used to analyze the
Statement of Financial Position, Statement of Profit and Loss and Other Comprehensive Income,
Statement of Cash Flows, and Statement of Changes in Equity. Moreover, the report also aims to
discuss CFL’s corporate governance practices mainly focusing on its advantages and
disadvantages, ownership structure, management team, etc. Likewise, it will also evaluate the
audit report of CFL in terms of its trends, audit opinion, and other significant changes made to
the annual reports. Also, it will also identify how COVID-19 pandemic has had an impact on the
entity's operations and its overall performance.

Figure 1: The Statement of Comprehensive income for Communications (Fiji) Limited for
years 2012-2019:

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(SOURCE- COMMUNICATIONS FIJI LTD)

Figure 1.1 Graph Showing Trends from 2012-2019

(

SOURCE- COMMUNICATIONS FIJI LTD)

The graph above shows the Statements of Comprehensive income for Communication Fiji Ltd
from the year 2012-2019 which reflects the share of the results of operations of the associate.
From the year 2012 -2015, employee expenses, the compensation paid to employees fluctuated
every year which results in to increase in total expenses. There was a profit before tax, after tax,
and every year as well. However, earnings per share fluctuated. Communications Fiji Limited,
the parent company of Legend FM, FM96, Viti FM, Navtarang and Radio Sargam had
announced the group’s audited after-tax profit of $1.474 million for the financial year 31st
December 2014. The company’s pre-tax operational profit was up by 18.13% to $2.661 million.
This was driven by a record result from the CFL group’s Fiji operations of $1.368 million before
tax compared to $960,048 in 2013(LIMTED, 2013). Likewise, the entity had already a 97%
increase in its after-tax profit for the first six months of the year 2013. The consolidated after-tax

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profit rose to $707,958 compared to $359,380 2012. Again Communications Fiji Limited had
recorded a $2.231 million after-tax profit for 2012. From the year 2016 -2019, it decreased by
$48,530, increased by $89,000 and $84,000 respectively. For employee expenses, the
compensation paid to employees is increasing every year which results in increases in total
expenses. There was a loss before tax, after-tax, and earnings per share in 2016. Rather, 2017-
2019 shows profit afterward. Therefore, this table shows the normal operation of the business.
Figure 2: The Statement of Financial Position for Communications (Fiji) Limited for years
2012-2015:

(SOURCE- COMMUNICATIONS FIJI LTD)

Figure 2.1 Graph Showing Trends from 2012-2019

(SOURCE- COMMUNICATIONS FIJI LTD)

The figure displays the Statement of Financial Position for the company from the year 2012-
2019, whereby total Net Assets are equal to Total Equity. Total inventory in 2012 stood at
$47,727 while 2013 recorded a decline recording inventory of $348,920. 2014 recorded a further
decline in inventory to $ 38,279. 2015 had recorded a major decline of $ 4,734. There was only
one inventory recorded in the year 2017 amounted to $7,805 between the years 2016 to 2019.

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Therefore, 2012 recorded total equity of $ 10, 250,542 which remained constant for 2013.
However, 2014 and 2015 recorded an increase in total equity to $ 11,115,135 and $ 11,863,656
respectively. Whereas, 2016 and 2017 noted a further decline of $10, 025,744 and $10,852,798
respectively. However, an increase was shown in 2018 to $12,657,800 which further increased to
14,170,360 in 2019.
Figure 3: Statements of Cash Flows for Communications (Fiji) Limited for years 2012-
2019:

Cash and Cash Net cash from Net cash from financing Net cash from investing
Year Equivalents operating activity activity activity
2012 1,080,685 3,332,188 - 1,074,590 - 1,837,440
2013 222,065 1,773,592 - 1,337,809 - 1,224,971
2014 190,018 2,505,990 - 813,881 - 1,731,668
2015 432,845 2,819,763 - 1,028,195 - 1,568,108
2016 1,405,902 2,662,849 1,306,827 - 3,023,482
2017 2,055,770 2,821,764 - 2,396,217 205,862
2018 1,069,433 4,365,276 - 3,594,964 - 1,774,600
2019 611,169 3,045,143 - 1,624,078 - 1,875,611
(SOURCE- COMMUNICATIONS FIJI LTD)
Figure 3.1 Graph Showing Trends from 2012-2019

(SOURCE- COMMUNICATIONS FIJI LTD)

The graph above shows the Statement of Cash Flows for the Company from the year 2012-2019.
Years 2012-2015, the amounts of Net Cash from operating activity from all the years showed
positive results however the Net cash from a financing activity and Net cash from investing
activities, significantly proved with negative figures. Thus, in surveying an incentive being used,

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the assessed future incomes are limited to their current worth utilizing a pre-charge markdown
rate that reflects current market evaluations of the time estimation of cash and the dangers
explicit to the resource. However, 2016-2019, the amounts of Net Cash from operating activity
from all these years shows positive results whereas the Net cash from financing activity, the year
2016 shows a positive figure and the rest had negative figures. To add on, the Net cash from
investing activities amounts on 2016 had negative figures, 2017 was positive while 2018 and
2019 had negative figures. Hence, these classifying cash flows are separately disclosed and
classified consistently across periods.

Figure 4: The Statement of Changes in Equity for Communications (Fiji) Limited for years
2012-2019:

(SOURCE- COMMUNICATIONS FIJI LTD)

Figure 4.1 Graph Showing Trends from 2012-2019

(SOURCE- COMMUNICATIONS FIJI LTD)

The figure above shows the Statement of Cash Flows for the Company from 2016-2019. 2012
recorded total equity of $ 10, 250,542 which remained constant for 2013. However, in 2014 and
2015 recorded an increase in total equity to $ 11,115,135 and $ 11,863,656 respectively.
Whereas, 2016 and 2017 noted a further decline of $10, 025,744 and $10,852,798 respectively.
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However, an increase was shown in 2018 to $12,657,800 which further increased to 14,170,360
in 2019. As such the share capital remained at $3,558,000 from 2012 to 2016 which later
changed in 2017 and remained constant till 2019 recording a total of $3,619,500.
CORPORATE GOVERNANCE
The importance of corporate governance is clearly marked by landmark cases such as The
Volkswagen Scam, ICICI Bank, Fuji Xerox New Zealand, and Satyam Computers. Corporate
governance is a set of rules, processes, and practices used to control and direct the entity by
balancing interests of stakeholders such as shareholders, management, customers, the community
at large, etc[ CITATION San08 \l 1033 ]. The Pacific Corporate Governance Institute (PCGI) is a
non-profit independent body that works towards stimulating the principles of good corporate
governance to Fiji and the Pacific. Its integral role is to raise standards of governance which will
enable Fijian entities to improve profitability and risk management[ CITATION Aut06 \l 1033 ].
CFL since it is a listed entity is required to adapt to the Reserve Bank of Fiji Corporate
Governance Codes which includes the 10 principles of good corporate governance. These
include Principle 1: Establish clear Responsibilities for Board oversight. Hereby, CFL has
initiated the separation of duties and a board charter in early 2019. Principle. 2: Constitute an
effective Board. A balance board composition has been created with Executive and Non-
Executive directors of which 1/3rd of a total number of directors are independent directors with a
50-50 gender diversity composition of men and female. Principle 3: Appointment of a Chief
Executive Officer. Mr. William Parkinson, a qualified and suitable chief executive officer/
managing director has been appointed. Principle 4: Board and company secretary. Ms. Seini
Tinaikoro has been appointed as the board and company secretary. Principle 5: Timely and
balanced disclosure. CFL ensures that its annual reports, payments to directors and senior
management are continuously disclosed in a timely manner and on the SPX and the entity
website. Principle 6: Promote ethical and responsible decision-making. Principle 7: Register of
interests/ conflicts of interest. Principle 8: Respect the rights of Shareholders. CFL ensures that
there is effective communication with the shareholders, through online publications on the
website, grievance redressal mechanism, and a place for shareholder complaints. Principle 9:
Accountability and audit. The internal and external audit is carried out with a rotation of external
auditors and audit committees. Principle 10: Recognize and manage risk. A Risk Management
policy and Whistle Blower Policy has been initiated by the entity while referring to SPX Rules or

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Companies Act[ CITATION FIJ191 \l 1033 ]. The principle-based approach is recommended
since it reduces compliance costs and greater flexibility. Hereby, the “comply or explain”
approach is used which ultimately leads to an improved corporate governance approach in CFL
and Fiji.

The table below provides detailed information on the practice of good corporate governance by
CFL from 2012-2019.

Figure 1.0 Company Information 2012-2019

(Country)Address (City)

directorsNo of executive

No. of audit committee

No. Board of directors

No. of independent

No. Male directors

No of independent
MD/ CEO Duality
Company Name

audit committee
IndustrySector/
Date Listed

members

members
directors
Code
Year

2012 Communic CFL 20/12/ Telecommunication Suva No 5 2 1 1 1 4

ations (Fiji) 2001 s and Media Fiji
Limited
2013 Communic CFL 20/12/ Telecommunication Suva No 4 1 1 1 1 3
ations (Fiji) 2001 s and Media Fiji
Limited
2014 Communic CFL 20/12/ Telecommunication Suva No 4 1 1 1 1 3
ations (Fiji) 2001 s and Media Fiji
Limited
2015 Communic CFL 20/12/ Telecommunication Suva No 4 1 1 1 1 3
ations (Fiji) 2001 s and Media Fiji
Limited
2016 Communic CFL 20/12/ Telecommunication Suva No 6 2 1 1 1 4
ations (Fiji) 2001 s and Media Fiji
Limited
2017 Communic CFL 20/12/ Telecommunication Suva No 6 2 1 1 1 4
ations (Fiji) 2001 s and Media Fiji
Limited
2018 Communic CFL 20/12/ Telecommunication Suva YES 6 2 1 1 1 3
ations (Fiji) 2001 s and Media Fiji
Limited
2019 Communic CFL 20/12/ Telecommunication Suva YES 6 2 1 1 1 3
ations (Fiji) 2001 s and Media Fiji
Limited
(SOURCE- COMMUNICATIONS FIJI LTD)
With reference to Figure 1.0, it depicts that Mr. William Parkinson, not the chief executive officer duality
however in the year 2018-2019 he had the CEO duality. He was also the managing director/ chairman
since he was one of the largest shareholders. The number of board of directors and independent directors
in the year 2012 was 5 board of directors and 2 independent directors however in the year 2014 it was
reduced to 4 and 1 respectively which then both remained constant from the year 2013-2015. Likewise,
the number of board of directors and independent directors remains constant from the years
2016-2019 of 6 and 2 members respectively. The board plays an integral role in setting corporate
strategies to enhance the value of shareholders and as well as assess organizational controls and

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accountability systems. The decisions made by the board must safeguard the interests of the
shareholders. Since it is a dispersed ownership structure it has various advantages linked to it.
However, since Parkinson Holdings Ltd is the major shareholder, it holds a total of 52.51% of the
shares in the entity. Holding such a large proportion of the shares will indicate that it has a major
contribution towards the company and may prove to be risky for the entity.
Therefore, it can be argued that the entity has a concentrated ownership structure when
considering the amount of shares held by Parkinson Holdings Ltd. Practicing good corporate
governance have brought about for the entity encouraging positive behavior among all the
stakeholders, minimized cost of capital, improved top-level decision making, assured internal
controls enabled better strategic planning and attracted qualified talented directors over the years.
They have also as part of good practice and governance have recreated the Audit Risk Sub-
Committee which is chaired by Ms. Josephine Yee Joy (independent director) and Ms. Thelma
Savua [ CITATION FIJ191 \l 1033 ].

AUDIT REPORT AND ITS TREND

Ernest & Young had been the Group’s auditors since the Company’s inception. However, in
2019, BDO was appointed as the new auditor for the firm. In the 8 years analyzed from 2012 to
2019, the auditors provided an unqualified opinion; implying that the financial reports had
provided a true and fair report of the Group. The auditors also stated that the company did not
face any going concern problems. In 2013, the 2011 and 2012 financial statements were restated
as the trade debtors in the PNG subsidiary, PNG FM Ltd, was distorted. Since the discrepancies
were material, the 2011 and 2012 financial reports had been restated by the Group, and
significant disclosures were made in 2013 financial reports. Over the years, the Group has
adopted various accounting policies. The Group dominantly uses International Financial
Reporting Standards to prepare its financial statements. IFRS has been updating and revising the
policies as required. A major policy adopted by the Company was IFRS 16 relating to leases. The
adoption of this policy resulted in a decrease in operating profit as higher interest was calculated
in the early years of the lease term. Another disclosure was made in the Director's Report of 2016
Financial Reports. In 2016, Tropical Cyclone Winston had hit Fiji and had damaged the
company’s transmitters worth around $232,551.

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COVID-19 SPELL OVER CFL

CFL, like any other business in this pandemic has been significantly affected. In the half-year
financial statement for the period to 30 th June 2020 released on 26th August 2020, CFL has
announced that there is a significant decrease in its profits (Communications Fiji Ltd, 2020).
Profits are down by 65% for the same period last year.

For the six Increase/ For the six

month Decrease month
period ended 30 % period ended 30
June 2020 June 2019
$ F$
Sales Revenue 4,477,019 -17% 5,410,227
Total Operating Revenue 4,822,338 -20% 6,016,326
Net Profit before Tax 244,050 -60% 607,960
Net Profit after Tax 166,403 -65% 478,816
[CITATION Sta20 \l 1033 ]
In light of Covid-19 Pandemic, the board has taken various steps in order to maintain the
Company’s cash-flow and minimize cash outflows. No dividend was paid for the year 2020. The
board also did not announce any final dividend to be paid. CFL has also had an increase in the
cash reserves available to the Company while abstaining to purchase of fixed assets. The board
also announced that unnecessary costs will be minimized as part of cost-cutting measures. The
board chairman, Mr. William Parkinson also announced in the 2020 AGM that the Group expects
that the profit for the following year to be halved (Communications Fiji Ltd, 2020). CFL also
launched a charitable initiative, “Hands Across Fiji” in order to assists Fijians who had been
affected by Covid-19 pandemic. A similar initiative, Barter for Better PNG has also been
launched for Papua New Guinea.
CONCLUSION
In a nutshell, CFL has disclosed detailed financial and corporate governance data through its
financial reports which are reliable and valid. Therefore, this report has critically analyzed CFL’s
overall financial performance and its corporate governance while practicing good corporate

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governance by critically analyzing the entity’s financial reports. A set of 8 consecutive financial
year reports that is, 2012-2019 have disclosed the major financial statements which provided
relevant information on company performance over the years. Likewise, the entity has
incorporated good corporate governance into its daily operations which will prove to be
beneficial over the years. However, the pandemic Covid-19 has proven to have negative impacts
on the entity to which it has taken various steps to various steps in order to maintain the
Company’s cash-flow and minimize cash outflows.

(Number of words- 2478)

References
Bhagat, S. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 257-273.

Communications Fiji Ltd. (2020). ANNUAL GENERAL MEETING RESOLUTIONS. Communications Fiji Ltd.

Communications Fiji Ltd. (2020). Statement to the South Pacific Stock Exchange. Communications Fiji Ltd.

L.Gillan, A. l. (2006). Recent Developments in Corporate Governance: An Overview. Journal of Corporate

Finance, 381-402.

LIMITED, C. F. (2012). COMMUNICATIONS FIJI LIMITED 2012. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, C. F. (2013). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, C. F. (2014). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, C. F. (2015). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, C. F. (2016). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, C. F. (2017). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOVCK EXCHANGE.

LIMITED, C. F. (2018). COMMUNICATIONS FIJI LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

LIMITED, F. C. (2019). FIJI COMMUNICATIONS LIMITED. SUVA: SOUTH PACIFIC STOCK EXCHANGE.

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