BAO 3309 ADVANCED FINANCIAL ACCOUNTING

SEMESTER 1 2023

CASE STUDY 1

DUE DATE: 31/3/23 ; 5pm Malaysian time

Refer to the following article, “Companies warned to brace for toughest reporting season in
decades”, available at the following link:

https://www.theage.com.au/business/companies/companies-warned-to-brace-for-toughest-
reporting-season-in-decades-20200713-p55blp.html

and answer the following questions:

1. Explain the following extract from the article from the viewpoint of the opportunistic
perspective of positive accounting theory:

“Both the  corporate regulator ASIC  and corporate governance experts have previously raised
concerns about companies using the pandemic to hide bad news or  even pump up company
profits and executive bonuses  through the claiming of stimulus packages such as JobKeeper”

2. Refer to the following extract from the article:

“He added that the AICD was also encouraging companies to be very cautious around
forward-looking statements, noting the current environment would make it very challenging
to provide accurate guidance”.

"Directors are going to have to form judgements about the clarity they can give around the
future of the business and what assumptions they can make."

Explain the role of professional judgement in financial accounting.

3. Refer to the following extracts from the article and discuss and explain them in the context
of “creative accounting”:

“The industry bodies, along with ASIC, are stressing companies to present a clear view of the
underlying performance of the business, stripping away any negative or positive impacts
brought about by the virus”.

“This includes stimulus initiatives such as JobKeeper, but also counts more obscure issues,
such as cyber security risks brought on by remote working arrangements, changes in trade
contracts with suppliers, and interruptions to supply chains”.

“The warnings also extend to executive bonuses, which are decided by company boards
following the finalisation of its full-year accounts, with the industry groups calling on boards
to exercise discretion”.

Summary:

Article 1

a) Explain …..from the view point of opportunistic perspective of PAT ( session 4)

b) Explain the role of professional judgement in financial accounting. (general)
c) Discuss and explain …in the context of “creative accunting” (general)
 BAO 3309 ADVANCED FINANCIAL ACCOUNTING

SEMESTER 2 BLOCK 2

CASE STUDY 2

DUE DATE: 31/3/23 ; 5pm Malaysian time

Refer to the following article, “Earnings season: Who will be the winners?”, available at the following
link:

https://www.theaustralian.com.au/business/wealth/earnings-season-who-will-be-the-winners/
news-story/fcfdc7831d3eeeb744a981d45a7c3bd5

and answer the following questions:

1. Refer to the following extract and explain it in the context of the benefits associated with
the voluntary disclosure of information:

“In fact, reporting seasons are mostly about changes to forecasts (and perceptions) rather
than what companies have achieved”.

“Within this framework it remains an open question as to what conclusions exactly can be
drawn from company financials and updates when macro developments remain all-
important, and unpredictability of events and outcomes high. Companies will be reluctant to
provide concrete guidance, but those who do will be rewarded”.

2. Refer to the following extract and explain it in the context of the motivations for firms to
voluntarily disclose bad news:

“Likewise, bad news is not necessarily the equivalent of a fatal blow. Investors are definitely
looking forward, in many cases to FY22 which is not one but two years away, which means
high tolerance for bad news in the short term, as long as it does not impact on FY22
estimates and derived valuations”.

3. Refer to the following extract and explain it in the context of the information content of
earnings:

“As analysts at Morgan Stanley put it: “Despite investor feedback that earnings ‘don’t
matter’ amid the COVID-19 crisis, we think FY20 earnings are important: In a world where
guidance has been withdrawn, earnings estimates are stale and earnings dispersion is very
wide … Cash flows, margins, capex and balance sheets can now come back to base.”

Summary: Article 2 (session 5)

a) Explain in the context of voluntary disclosure b)

a) explain in the context of information content of earnings.
 BAO 3309 ADVANCED FINANCIAL ACCOUNTING

SEMESTER 2 BLOCK 2

CASE STUDY 3

DUE DATE: 31/3/2023 ;5pm Malaysian time

Refer to the following article, “Call for real climate action not 'greenwashing' from big polluters”,
available at the following link:

https://www.theage.com.au/business/the-economy/call-for-real-climate-action-not-greenwashing-
from-big-polluters-20200710-p55b13.html

and answer the following questions:

1. Explain the term “greenwashing” with reference to the context of the decoupling concept of
institutional theory, referring to the following extracts:

“The surge in commitments, however, is drawing closer scrutiny and tougher questions from
investors and customers: Are they all truly green? Or are some simply “greenwashing” their
polluting activities to present themselves as environmentally responsible?”

““It’s quite easy for big companies to come out and say they are committed to climate, to say
we want net-zero by 2050,” warns Dan Gocher of shareholder activist group the Australasian
Centre for Corporate Responsibility.”

““It’s a cliche, but the devil is in the detail. How much is actually going to happen in the next
five to 10 years?””

2. Refer to the following extract from the article and explain it with reference to the social
contract concept of legitimacy theory:

"We are aiming to earn back the trust of society,” says Bernard Looney, the chief executive of
global oil major BP. “We have got to change, and change profoundly.”

3. The article refers to “carbon offsets”. Explain what they are and identify both their
advantages and disadvantages. (this is a general question, research this)

Summary: Topic session 6