Budgeting of an Organization through Financial Accounting and Reporting

ACCOUNTING AND REPORTING

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TABLE OF CONTENTS

Introduction....................................................................................1 Balance score care and Strategy Map.............................................1 Wesfarmers competitive strategies..............................................1 Objectives of the Wesfarmers.......................................................2 Balance score card.......................................................................2 Wesfarmers Strategy Map............................................................4 Sustainability Reporting...................................................................4 Integrated Reporting........................................................................7 Embracing full integrated reporting..............................................7 Budgeting.......................................................................................8 Budgeted Income Statement of Wesfarmers of 2016.....................8 Conclusion..........................................................................................10 References..........................................................................................12 A Sample Report On Accounting Essay Writing To Buy Complete Essay Writing Service from Us:

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INTRODUCTION Financial accounting is defined as the branch of accounting that focuses on keeping the track records of firm’s financial transactions (Kaplan and Atkinson, 2015). Whereas, reporting is considered as a broader concept than financial statement which apart from statements also consist of company’s annual report to stockholder, its sustainability report, integrated reporting so that smart decisions can be made. Herein, researcher focuses on illustrating financial reporting in strategic approach for Wesfarmers that is a public company operates as Australian conglomerate as well as in chemicals, fertilizers, coal mining and industrial and safety products. In this researcher focuses on company’s strategy, sustainability reporting as well as budgeting to compare the actual and budgeted performance of the Wesfarmers.

BALANCE SCORE CARE AND STRATEGY MAP Wesfarmers competitive strategies According to Michael Proter, firm’s strengths ultimately fall into one of the two headings: cost advantage and differentiation. On the basis of these headings strategies can be divided under three generic strategies: cost leadership, differentiation and focus. Looking at the functioning of Wesfarmers and the level at which it operates it is important to undertake effective and smart strategies for enhancing the business performance. Operating as conglomerate, Wesfarmers offers its wide range of products and services to Australia, UK, Bangladesh and New Zealand.

Considering the diverse business operations of Wesfarmers that consist of supermarkets, liquor, hotels, convenience stores, home improvement, office supplies, department stores and an industrial division with businesses in chemical, energy and fertilisers, industrial, coal and safety products. Herein, top level management of Wesfarmers have used Focus strategy to maintain the competitiveness of the firm in different parts where it operates. The main purpose of using this competitive strategy is that assist in concentrating on a narrow segment and within that segment Get Top -Notch Grades in Accounting Essay Writing by availing Instant Essay Writing services @ Pocket Friendly Rates.

makes valiant efforts to achieve either a cots advantage or differentiation (Brenes, Montoya and Ciravegna, 2014). The main advantage the cited attaining from using focus strategy is that it helps them increasing the number of loyal customers. On the basis of this strategy offering quality of wide range of products helps in differentiating the Wesfarmers and changing affordable prices assist the firm to attain cost advantage.

Objectives of the Wesfarmers There are various corporate objectives that cited firm focuses on achieving through the means of employing effective strategies and tactics. Following are the corporate objectives of Wesfarmers Ltd: 

Satisfying the expectations of customers through the provision of goods and services on a competitive and professional basis.



Offering and maintaining safe working environment for fulfilling basis needs and wants.



Promoting reward and growth opportunities for better performance.



Positively contributing the growth and prosperity of the countries in which Wesfarmers operates by carrying operations in smart and efficient manner and constantly seeking opportunities for expansion.



Constantly making efforts to respond customers and communities’ expectation for delivering them the best they deserve.



Emphasising on ensuring safe and secure environment.



Dealing with integrity and honesty with internal and external stakeholders of the company.

Balance score card In general it is a strategic planning and management system that is used in extensively in business and industry, government and non-profit organisation to align the activities of business with the vision and strategy of business for improving internal and external communication Get Top -Notch Grades in Accounting Essay Writing by availing Instant Essay Writing services @ Pocket Friendly Rates.

(Hoque, 2014). Balance scorecard consist of four quadrants i.e. learning and growth perspective, business process perspective, customer perspective and financial perspective.

Customer perspective utmost

Attaining

level

of

Financial perspective customer’s Enhance

business

volume

satisfaction.

diversified products and services

Providing quality of products and services

To

provide

satisfactory

by

returns

offering

to

th

shareholders (Cheng and Humphreys, 2012).

Internal business process perspective Dealing

with

internal

and

Learning and growth perspective

external Better opportunities for employees through

stakeholders with integrity and honesty.

offering better working environment.

Responding to the customers and communities Contributing the growth of community by for delivering expected services

carrying out operations efficiently and seeking opportunities for expansion.

Balance scorecard is a comprehensive performance monitoring tool that assist in measuring all the critical factors for the success of firm’s strategy.

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Wesfarmers Strategy Map

Financial

Customers

Internal Business Process

• Provide Satisfactory Returns • Increase business volume

• Offering Quality of Products • Attaining utmost level of customer's satisfaction

• Resproning to stakholders expectations • Promoting honesty and intergrity at each level of business fro dealing with internal and external stakeholders

• Positively contributing towards Community Learning and • Better working environment for workers growth Growth

(Developing Strategy Map, 2016)

SUSTAINABILITY REPORTING From the annual report of Wesfarmers, researcher has been able to evaluate that, company will only be sustainable if it continues its financial success. However, management is making valiant efforts to address issues which are significant in their own right and ultimately influence financial outcomes. The evidence of sustainability in the corporate aim and objectives reflects Get Top -Notch Grades in Accounting Essay Writing by availing Instant Essay Writing services @ Pocket Friendly Rates.

through the long term value creation on which management of Wesfarmers emphasises (Bebbington, Unerman and O'Dwyer, 2014). However, for the managerial level people, sustainability is about understanding and managing their impact on the community and the environment so as to make sure that company in long term perspective will still be creating the value in the future.

Further, the sustainability issues are managed at a divisional level and overseen by the Wesfarmers Board through regular reporting. However, targets are set by the divisions in relation to some sustainability matters as well as firm’s annual risk process identifies and addresses the risks and uncertainties associated with sustainability (Hahn and Kühnen, 2013). Evaluating the sustainability report 2015 of Wesfarmers Ltd it has been observed that, Board of Directors aim to operate businesses in accordance with 10 community and environmental impact principles which are relating to the five significant areas i.e. people, sourcing, community, environment and governance. With the help of materiality process, Wesfarmers ensures in review of the issues affecting to the stakeholders as well as addressing these issues for maintaining long term relationship. On the basis of this report, researcher identified that Wesfarmers signed United Nations Global Compact (UNGC) in order to reinforce firm’s commitment towards the defined principles (Sustainability Report 2015 Wesfarmers, 2016).

People: 

Safety: Wesfarmers maintain a relentless focus on offering safe and secure working environment to its employees. However, it is one of the highest priority for the frim. In year 2015 company achieved 7.5% improvement in TRIFR from last year. Whereas, LTIFR decreased by 5.2% this year from 7.7 to 7.3% driven by improvement across most businesses. Initiative of “nurse on call” for injury care service for team. On the other hand, hazard spotter app has been developed for in-store iPods as well as introduced injury management process (Bonilla-Priego, Font and del Rosario Pacheco-Olivares, 2014).

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

People development: Herein, management focuses on providing opportunities for people to enhance their job performance and develop their careers. Further, initiatives like new executive orientation for new general managers and executive development program for future potential executives across the group.



Diversity: Company strive to create an inclusive work environment with particular attention to gender diversity. Herein, management ensures pay equity and improve talent management for enhancing the overall employee performance across group.

Sourcing: 

Suppliers: Maintaining relationship with 15000 supplier across the group is significant priority of Wesfarmers (Sustainability Report 2015 Wesfarmers, 2016). Herein, main focus of management is to increase the efficient and cost competitiveness of supply chain so that products can be offered to customer at lower prices.



Ethical Sourcing: BOD strive to source products in a responsible manner while working with suppliers to improve their social and environmental practices. However, 2139 approved factories, 1500 conditional approached factories and 210 factories were due for re-audit. Whereas, only 39 critical breaches across the factories in Wesfarmers audit programmes (Frias‐Aceituno, Rodriguez‐Ariza and Garcia‐Sanchez 2013).

Community: 

Product safety: Company’s commitment to offer safe products to consumers is given great importance. It is the base on which Wesfarmers strive to sustain for longer period of time.



Community contribution: Herein, company aims to meet basic need of society such as food, clothing, tools and providing nearly one in every 59 working Australians.

Environment:

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

Climate change resilience: In this Wesfarmers aim to reduce the emission intensity of business and enhancing its resilience to climate change. Company’s greenhouse gas emission intensity has improved by 37% over five years (Sustainability Report 2015 Wesfarmers, 2016).



Waste and water use: In this company purpose is to reduce the waste and make optimum utilisation of water. Recycling of 136093 tonnes waste material in 2015 is one of the biggest statement by the company.

Governance: 

Corporate governance: BOD abide varied rules and regulations to direct and control its business operations across group.

INTEGRATED REPORTING Embracing full integrated reporting In context to the core concepts of sustainability which focuses on maintaining the economic position of the company within the target market. Whereas, integrated reporting concerns about the value creation for the firm over a period of time (de Villiers, Rinaldi and Unerman, 2014). It can be defined as the concise communication about how Wesfarmers Ltd strategy, governance and performance leads to creation of value over the short, medium and long term. According to the BOD of Wesfarmers, roadmap to integrated reporting based on three fundamental foundations i.e. 

Materiality analysis: Wesfarmers ensures in review of the issues affecting to the stakeholders as well as addressing these issues for maintaining long term relationship.



Value creation: It is the second key component of company’s roadmap which consist of circular process and depends upon the seven interlinked building blocks i.e. stakeholders,

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their key messages, risk, strategy, value drivers (what activities influence the achievement of strategic objectives), performance and impact. 

Evaluating impact: In doing so management has to translate the value creation process into management information system and processes on the basis of which Wesfarmers Ltd can measure its performance and make sound and smart decisions (Frias‐Aceituno, Rodriguez‐ Ariza and Garcia‐Sanchez, 2013).

BUDGETING Budgeted Income Statement of Wesfarmers of 2016 Consolidated Income Statement Particular

2015

2016

Revenue

62447

68692

Raw materials and inventory

43054

46498

Employee benefits expense

8195

8851

Freight and other related expenses

1019

1101

Occupancy-related expenses

2637

2848

Depreciation and amortization

1219

1317

41

44

Expenses

Impairment expenses

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Other expenses

2941

3176

Total expenses

59106

63834

Other income

330

330

Share of profit/(losses) of associates and joint ventures

82

82

412

412

EBIT

3759

5269

Finance costs

315

330.75

Profit before tax

3444

4938

Income tax expense

1004

1124

Profit from continuing operations

2440

3814

Variance analysis On the basis of above depicted budgeted income statement of Wesfarmers it can be said that the estimated figures for income statement will assist the course of cited firm in generating better return of net profit after the financial year. Increasing the revenue by 10%, company will generate the volume of $68692 million. Revenue for the firm consist of sale of goods i.e. merchandise through retail operations, fertilizers and specialty gases, coal both nationally and international and LPG and LNG are the major source of sales. Further, rendering services, interest, dividends and operating lease rental revenue are the major source of income for the company.

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On the other hand, there are several expenses that Wesfarmers occurred during the course of reporting period and in order to raise the revenue by 10% BOD has estimated 5% increase in overall expenditure. Employee are entitled to benefit such as retirement, disability or death from the group’s superannuation plan which increases the expenditure for firm to significant level as $8195 in 2015 to $8851 in 2016. Furthermore, operating leases and contingent rental payments are the major expenses for the firm. In order to offer more, firm have to produce more thus, expenses relate to raw material increases to $46498 million. Further, maintaining the other income and Share of profit/(losses) of associates and joint ventures to constant figures overall expenditure of Wesfarmers, EBIT has shown better result of $5269 million. Thereafter, increase in finance cost by 5% which company has incurred higher expenses apart from interest charges due to which Profit before tax shown increasing result of $4938m in 2016 as compared to $3444m in 2015.

Furthermore, BOD has estimated 12% increase in income tax which is a significant number and this is because of the fact that, there is increase in current taxes and deferred taxes. Therefore, despite of increase in overall expenditure of firm, 10% hike in revenue has helped the course of Wesfarmers in achieving profit of $3814m which is significant figure for a conglomerate company.

CONCLUSION In summing up the report researcher assessed that, sustainability report is one of the major document that Wesfarmers have provided for the sake of its stakeholders. On the basis of balance scorecard different KPI’s for each quadrant has been identified that clearly indicates the value creation of company in near future. Lastly, through the means of budgeted consolidated income Get Top -Notch Grades in Accounting Essay Writing by availing Instant Essay Writing services @ Pocket Friendly Rates.

statement 2016, researcher has been able to understand the current year performance of cited company.

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REFERENCES 

Bebbington, J., Unerman, J. and O'Dwyer, B., 2014. Sustainability accounting and accountability. Routledge.



Bonilla-Priego, M.J., Font, X. and del Rosario Pacheco-Olivares, M., 2014. Corporate sustainability reporting index and baseline data for the cruise industry. Tourism Management. 44. pp.149-160.

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Brenes, E.R., Montoya, D. and Ciravegna, L., 2014. Differentiation strategies in emerging markets: The case of Latin American agribusinesses. Journal of Business Research. 67(5). pp.847-855.



Cheng, M.M. and Humphreys, K.A., 2012. The differential improvement effects of the strategy map and scorecard perspectives on managers' strategic judgments. The Accounting Review. 87(3). pp.899-924.



de Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal. 27(7). pp.10421067.



Developing

Strategy

Map,

2016.

[PDF].

Available

through:

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