Group Assignment

Topic: Companies
Assignment Topic:

Critically analyze a listed firm’s fair value accounting (IFRS 13), revenue (IFRS 15),
leases (IFRS 16), corporate governance and audit characteristics over time and
answer the research question “are Fair values and other accounting estimates a
true reflection of the company’s performance?”

Group Members: 1. Nikil Nitesh Chand - (s11178616)

2. Shritik Shamal Prasad - (s11186352)
3. Mohammed Shafeel Musharaf - (s11172537)
4. Vikrant Vinod Prasad - (s11161636)
2a. With the exception of an interest rate swap, the Group does not have any financial
instruments that are estimated at fair value. Cash, trade and other payables, and trade and
other receivables have fair values that are close to their carrying values, owing to the short
maturities of these instruments. Thus, we cannot analyze the impact the fair value gains and
losses will have on Sunland Group Limited’s profit as there are none.
2b. “When there is no market for an underlying instrument (making Level 1 and Level 2 values
unobservable) or when there is a market but just a few buyers or sellers (or both) interacting
with the underlying instrument, Level 3 valuations are recommended”(Valencia,2011). After
browsing through the financial statements of the Sunland Group Limited it was concluded that
the company does not have any fair value liabilities and only has one fair value asset which is
the investment properties. The Sunland Group Limited’s investment properties have been
valued at Level 3 for the past 5 years i.e. from the year 2016 to the year 2020. The investment
properties are valued by the internal valuers using the Directors valuation process. The Group
employed a Director's valuation method to evaluate the fair market value of investment
properties based on current prices in an active market for similar assets and the Group did not
seek independent valuations for investment properties for this reason.

Figure 1 Fair Value Assets

Fair Value Assets

$40,000,000.00
$35,000,000.00
$30,000,000.00
$25,000,000.00
Amount

$20,000,000.00
$15,000,000.00
$10,000,000.00
$5,000,000.00
$0.00
2016 2017 2018 2019 2020

As depicted in figure 1 above the fair value of assets has consistently risen however it drastically
decrease in the year 2020 from $36,500,000 to $19,900,000 which is a difference of $16,600,000.
Figure 2 Investment Properties Value

INVESTMENT PROPERTIES VALUE

$35,000,000.00

$30,000,000.00

$25,000,000.00
Amount

$20,000,000.00

$15,000,000.00

$10,000,000.00

$5,000,000.00

$0.00
2016 2017 2018 2019 2020

As shown in Figure 2 above the investment properties value has continuously increased from
the period 2016 to 2019 however there is a sharp decrease in the investment value property in
the year 2020 from $29,960,000 to $15,111,000 which is a decrease of $14,849,000. The sharp
decrease is mainly caused by the disposal of investment properties and the write off of
scrapped costs. The reallocation of inventories and the reallocation of property, plants and
equipment also played a minor role that led to the decrease of the investment properties value.

The Statement of Financial Success, often known as the Income Statement, can be used to
evaluate a company's performance. There is a Net Income if a corporation has a positive
balance after deducting all of its expenditure from its income. If the balance is negative, it is a
net loss. However, you may look at their other financial statements to get a better idea of the
organization. Because it is used to evaluate a company's stock price, Sunland Group Limited’s
earnings per share can also represent its performance. Earnings per share is divided Earnings
available to stockholders with number of outstanding ordinary shares.
3. The Corporate Governance focuses on the areas of Ethical Behavior, Environmental
Awareness, Risk Management, Corporate Strategy and Compensation. The Sunland Group has
an excellent corporate governance council the most basic principle of corporate governance are
accountability, fairness, responsibility and transparency. The company’s governance principles
show that the company is doing its best in trying to rat its shareholders and other stakeholders
in the business with fairness. The company practices a very efficient regulation which generates
deep within the organization and has a sound culture which promotes a good corporate
governance to thrive. The Sunland Group’s board carried out a satisfying job throughout the
financial year through the Audit and Risk Committee who manage and are focused on the
corporate governance issues either it be it be emerging or existing. In order to promote the
company’s accountability and responsibility strategy, the Group has company policies and
procedures to help govern their company. The policies and procedures are, Diversity Policy,
Security Trading Policy, Gender Equality Indicators, Code of Conduct, and External
Communications Policy. In terms of Risk Management this is where the Board steps in, the
Board Charter of the company is responsible for the composition duties and responsibilities of
the Board. As the heads of the company, the directors ensure that their relationship with the
stakeholders are well maintained, an as entrepreneurial leaders they put in efforts and effective
measures to enable risk to be identified, assessed and managed.

Moreover, the Board has other responsibilities which include, strategic guidance and effective
oversight of management, observing monetary execution including the preparation of financial
statements and reports, observing every individual’s jobs and duties of the Board which
includes the secretary and the senior executives of the company, assessing and promoting
diversity across the organization and also assess the performance of the executive directors.

To add on, the Sunland Groups cooperate governance included ethical behaviors which is that
the company takes good interest in diversity. The Sunland group stated in their reports that a
diverse workforce becomes a competitive advantage and that the company will only succeed if
the workers are successful and are able to deliver. The company’s aim is to promote the human
capital of all its employees, adapt a friendly workplace with a sound culture characterized by
behaviors which benefit all the staff, the company advises all the employees to be aware of
their rights and responsibilities with regards to fairness and lastly, the Sunland Group also looks
to creating and maintaining a work environment which highly values the contributions of the
workers despite their diverse backgrounds. The company could improve more on this aspect of
their governance, in terms of diversity and ethical behavior, the company should try to increase
the number of females employed in the company. As the report shows that only 25% of the
overall and only 1 female is employed as a Non-Executive Director and three female in General
and Senior Managers whereas the rest are other management employees and administration.
This could be all changed if the company starts to employ more females in the organization and
this will overall reflect on the fairness which exists within the Sunland Group’s Limited.

Corporate Governance is the system by which companies are directed and controlled. The
board of Directors is the main body which is responsible for he governance of their companies.
The Sunland Groups 2016 annual report shows that the company has 5 directors which are, Mr.
Soheil Abedian, Mr. Sahba Abedian, Mr. Ron Eames, Mr. Craig Carracher and Mr. Christopher
Freeman and surprisingly all are men and all of them are still employed as directors in 2017 but
in 2018 a female joined the team of gentlemen’s as a Non-Executive Director who was
appointed on the 15th January 2018, her name is Mrs. Rebecca Frizelle. Hence, from 2018-2019
there were 6 directors with 5 male and 1 female until recently, n the late 2019 21 st September
the board of directors added another member which was a male, Mr. Vahid Saberi increased
the number of males as directors to 6 male members.

The Chairman and the Executive Director of Sunland Group, Mr. Soheil Abedian announced in
his 2016 report annual report a 5% increased profit from 2015 which $30.1 million to $31.5
million. And again in 2017 the Chairman declared a 12% increase in the net profit which is from
$31.5 million to $35.3 million which is very favorable for Sunland Group. Furthermore, in 2018
the company had an unfavorable year as the annual report portrays a decrease in net profit by
11% compared to 2017 of 435.3 million to $31.3 million. In 2019Mr. Soheil declared a net profit
after tax of $17.7 million following an NRV adjustment of bayside project. Lastly, in 2020 the net
profit after tax adjustments which accumulated to $13.9 million to the value of certain projects.
The Sunland Group has 5 Board members in 2016 and 2017, who all happen to be all directors
of the company. The two Executive Directors of the company who are Mr. Sahba Abedian who
was appointed in January 2001 and Mr. Soheil Abedian who is a well-known Chairman and the
Executive Director who was appointed in March 1994 and both of the members are dependent
of the Board of the directors. Dependent members means that the member has a material
interest in a company. However, there are three gentlemen who are employed as the Non-
Executive Directors in the company who are, Mr. Ron Eames who joined the group in March of
2006, Mr. Craig Carracher who was employed on the July 2010 and lastly, Mr. Chris Freeman
who joined in January 2015. All three members are considered the independent members of
the board. Being an independent member means that the members who have no material
interests in a company. In 2018 and 2019 the board members had inclusion of 6 th member who
is the 1st female Mrs. Rebecca Frizelle. The board of Directors had 6 members till in the late
2019 as showed in the 2020 annual report that another gentlemen named Mr. Vahid Saberi
joined that Board of Directors as an independent member.

Furthermore, in 2016 the Sunland Group held 6 board meetings throughout the year which 4 of
members attended all who are, Mr. Sahba Abedian, Mr. Soheil Abedian, Mr. Ron Eames and Mr.
Chris Freeman. The fifth member Mr. Craig Carracher who made it to 5 of the board meetings.
The Audit Committee held 2 meetings which only 3 members of the board attended and only
two members Mr. Ron Eames and Mr. Chris Freeman attended both the meetings whereas Mr.
Craig Carracher attended only one. In 2017 the board held 7 meetings out of which only 3
directors attended all 7 meetings who were Mr. Sahba Abedian, Mr., Ron Eames and Mr. Chris
Freeman whereas Mr. Soheil Abedian attended 6 and Mr. Craig Carracher attended 5. And again
in 2017 the Audit committee held 2 meeting which only 2 members attended fully, Mr. Ron
Eames and Mr. Chris Freeman whereas Mr. Craig Carracher made it only to one audit meeting.
The 2018 annual report showed that now there are 6 members of the board and they had 5
board meetings from which the new member Mrs. Rebecca Frizelle attended only 2 and the
rest of the gentlemen’s attended all the board meetings. The Audit Committee in 2018 held 2
audit meeting which was both attended by Mr. Ron Eames and Mr., Craig Carracher whereas
Mrs. Frizelle attended only one and Mr. Freeman was unable to attend one meeting during the
year but did participate in the preparatory exchange between committee members and
company officers. The Directors meeting in 2019 held 4 board meetings and all the members
did attend all 4 meetings except Mr. Carracher who missed out on one board meeting during
the year but did participated in the preparatory exchanges between committee members and
company officers in accordance with the governance process outlined in the corporate
governance statement. There were 2 audit committee meetings which all 4 Non-Executive
Directors attended. Finally, in 2020 the board held 7 meetings and the audit committee held 2
meeting. Four of the board members successfully attended all the meeting except for Mr. Craig
Carracher and Dr. Vahid Saberi who attended 2 and 5 meetings. For the Audit meeting only two
of the members were able to attend both the meetings, Mr. Eames and Mrs. Frizelle whereas
Mr. Freeman held 2 audit meetings and attended only one, Mr. Carracher held 1 and attended
only one and lastly, Dr. Saberi held and attended only 1.

4. The company’s financial activities shows that its financial trend has been rapidly decreasing
after 2017. The reason for this is that after 2017 the company were not achieving their targeted
revenue from the sale of properties which also means that they were having lower profits. The
lowest turnover of the company was in year 2020.

The opinion given by auditors are unqualified. The auditor approves that the companies
operation are in good compliance with government’s principles and its act. The auditor as state
that the company has presented its financial reports in accordance to the Corporations Act
2001. The auditor as also conducted the audit in accordance with Australian Auditing Standards
which states that it is free from misstatements. Overall it is a clean audit report if the company
without any violation of regulations.

The accounting policies adopted are consistent with those of the previous financial year, except
for the policies if AASB 16 Leases and Transition to AASB 16. The company restates the
comparative information throughout the financial statements. In the opinion of the directors
there were no significant changes in the state of affairs of the consolidated entity that occurred
during the year. The principal activity of the company are residential property development and
construction. However there was no significant change in the principal activities of the Group.
The issue of the company is that revenue from the Group’s investment properties and other
income generating assets had decreased, because of the sale of Lakeview Retail Centre in
August 2019 and also the impact on rent relief Sunland provided to retail and commercial
tenants during Covid-19. Throughout the year of 2020, the company board, through the audit
and risk committee, has continued to manage and focus on the existing and emerging
government issues.

Non-audit services were provided by Ernst & Young (the entity’s auditor at the time) as
disclosed in note 28 to the financial statements. In accordance with a resolution of the Audit
and Risk committee, the Directors are satisfied that the provision of the non-audit services is
compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The nature and scope of each type of non-audit service provided means
that audit independence was not compromised. The audit fees were paid less compare to the
non-audit fees. In year 2020 audit fees has been decrease because of less profits whereas non
audit fees has been increase by the tax. On 7 August 2019, the Group completed the sale of the
Lakeview retail Centre in Mermaid Waters for $20,000,000, resulting in an after non audit tax
profit of $6.3 million. It was sold on the level 3 fair value strategy. In 2019 the company has
benefit from non-audit fees (tax expense/benefits) by the amount of $7674 whereas, in 2020
the company has made a loss of $1386 on the non-audit fees.

Key audit matters are those matters that, in the auditor’s professional judgment, were of most
significance in their audit of the financial report of the current period. These matters were
addressed in the context of their audit of the financial report as a whole, and in forming their
opinion thereon, and they do not provide a separate opinion on these matters. According to the
auditor the inventory represents a significant balance in the statement of financial position for
Sunland Group Limited. Inherent to these items being held at cost is the risk that the carrying
amount is not recorded at the lower of its cost or net realizable value as required under
AASB102.
5. A company’s director is needed to function definitely and lawfully and make judgments for
the well-being of the company’s and in addition to its members (shareholders). What is the
duty of a company’s director? Directors has quite a few process that desires to be done, like
handling daily activities and searching on the business enterprise finances. Some of the number
one duties are first of all figuring out the company’s strategic goals and policies. Secondly
tracking the development toward reaching the goals and policies. The company we are doing
research on is SGL (Sunland Group Limited), and there are five annual reviews/reports for our
connection to examine the Directors of this firm. To start with the five annual reviews/reports
which were given were from 2016-2020. The directors were getting in and out of the company,
so it became difficult for us to decide whether or not those directors are certified in doing
truthful valuation of investments or no. Firstly, looking at Soheil Abedian he is the Chairman
(Executive Director) - Director since March 1994. He has done Dip Arch Masters, has Degree in
Architecture with Honours (University of Graz, Austria), is an Honorary Professor Griffith
University (Business School - Gold Coast) and an Adjunct Professor Bond University
(Architecture School) Doctorate of Bond University. Mr Soheil Abedian was educated in Graz,
Austria and moved to Queensland's Gold Coast in 1983 where heco-founded Sunland Group to
develop luxury housing projects. He has over 35 years' experience in architectural design,
construction, and project management across a wide range of developments. Secondly, Sahba
Abedian, he is the Managing Director - Director since January 2001. He is qualified from LLB
(Bond University). Mr Sahba Abedian is a qualified lawyer and was admitted into the Supreme
Court of Queensland in 1998 as a solicitor. He joined Sunland Group in April 1998 as legal
counsel/company secretary. In January 2000, he established the Group’s Victorian. Then comes
the Non-Executive Directors. First one is Mr Ron Eames - Director since March 2006. Has done
LLB (Queensland University of Technology). Mr Eames is a partner in the Brisbane offices of law
firm Holding Redlich and brings to the role more than 25years’ experience in the legal sector,
specializing in front-end project work and project structured financing in the energy, resource,
construction, and tourism industries. Mr Eames is a member of the Australian Institute of
Company Directors. Mr Eames is the chair of Sunland’s Audit and Risk Committee. Second one
is Craig Carracher. Non-Executive Director - Director since July 2010. Has done LLB (Sydney),
University Medal; BCL, Oxon, 1st Class Hons. Craig Carracher has extensive transactional and
management experience, having spent much of the past decade living, working, and investing
in Asia as Managing Partner of a leading Australian law firm, Group General Counsel for
Consolidated Press Holdings Limited, and CEO of its Asian private equity interests. He is a
member of Sunland’s Audit and Risk Committee. Third one is Chris Freeman AM FAICD. He is
also a Non-Executive Director - Director since January 2015. He has done Bachelor of
Commerce (University of Queensland) FAICD. Mr Freeman has significant company directorship
experience in Australia and abroad in the property and finance sectors. His former roles include
Director and Chair of Watpac Limited from 2011 until 2014. Mr Freeman previously held the
positions of Executive Chair United Arab Emirates and United Kingdom and Chief Executive
Queensland for the Mirvac Group Limited. He has held executive roles in the finance sector,
particularly in the property, corporate and agribusiness markets. He is a Director of Brisbane
Airport Corporation Limited and Chair of the Queensland Symphony Orchestra. Mr Freeman is a
member of Sunland's Audit and Risk Committee. Last director of this company is Rebecca
Frizelle. She is a Non-Executive Director - Director since January 2018. She is also Member of
the AICD. Mrs Frizelle is the Chief Operating Officer of Frizelle Prestige and has extensive
experience in executive management. Mrs Frizelle is a Director of the Griffith University
Advisory Board, Audi Australia Foundation Board, and St Hilda’s School Foundation. Mrs Frizelle
is a member of Sunland’s Audit and Risk Committee. All these directors qualify for level 3 fair
valuation as well as their abilities in fair value assets are also applicable and they all are well
qualified for it.
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