ACCT20074 Alphinity Investment Management\
ACCT20074: Advice on how to prepare for the final Assignment
The final assignment is in the form of a take home exam. That means that strict time limits apply, but you are not expected to present a formal report.
Format of the assignment
There will be five (5) questions, each worth 10 marks. When the assignment becomes available at 9am on Monday 21 May, all questions will be placed inside a template that includes a space for your answer and a marking rubric for each question. You must use that template to write your answers and submit via Moodle.
You should expect to write 500–600 words for each question (not including the reference list). You are not required to provide an exec summary, introduction or conclusion, but you must provide references for each question. You will see that a space is provided for references after each question.
In accordance with the advice provided in the Unit Profile, the assignment submission link will become active at 9am Monday of Week 11. It will remain open until 11:45pm on Friday of Week 12. At that time, it will shut. You will not be allowed to submit late, and there will be no late penalties.
In cases of personal or family emergencies, you may request an extension (with documentary evidence) and this will allow you to undertake this assignment during the first exam week. You should be aware that if you do this,
The case study will be the same,
The questions will be different, and
You will only have one week to complete the assessment (due to the short amount of time available for marking and uploading of results in time for certification of grades).
Clearly, it is in your interests to submit your assessment as early as you can. If you do not submit by the due time and you have not been granted an extension, you will not be able to submit.
The following is the case study to be used when answering your questions in the final assessment item.
JB Hi-Fi unapologetic on profit downgrade
By Eli Breenblat 8 May 2018
Consumer electronics giant JB Hi-Fi is sticking by its reasoning for releasing a profit downgrade buried deep within a presentation to analysts last week, rather than make a stand-alone statement to the stock exchange. This follows being hit with a “please explain” by the ASX (Australian Stock Exchange) in the wake of the earnings warning that sent its shares plummeting.
JB Hi-Fi yesterday issued its response to detailed questioning from the ASX and the presentation by chief executive Richard Murray at the Macquarie Australia Conference, where during a lengthy talk on the retailer he handed out a 3 per cent revision to its full-year net profit guidance.
The profit warning was contained on page 4 of a 14-page presentation to the conference, and when it was lodged with the ASX on the day it was titled Macquarie Australia Conference Presentation, with no reference to the profit warning.
Shares in JB Hi-Fi sank 10 per cent after the consumer electronics giant cut its profit forecast for fiscal 2018 at the conference, marking the stock’s biggest single-day fall since 2011. The ASX issued JB Hi-Fi with a series of questions over its communication of the downgrade to the market, pushing the retailer to explain why it wasn’t released as a stand-alone statement.
“The company’s revised net profit after tax guidance was a decrease of 3 per cent from the midpoint of the company’s previous NPAT guidance,’’ JB Hi-Fi said in its response to the ASX.
“JBH notes guidance in section 7.3 of Guidance Note 8 issued by the ASX which suggests that companies should treat an expected variation in earnings compared to its published guidance equal to or less than 5 per cent as not being material and presume that its guidance therefore does not need updating.
“JB Hi-Fi did not consider that the information contained in the fiscal year 2018 outlook slide would have a material effect on the price or value of the entity’s securities,” the statement said.
Bruce Smith, principal at Alphinity Investment Management, said he was “surprised” by the ASX’s query of JB Hi-Fi. “I’m surprised by it considering the announcement on earnings fell short of the ASX’s own definition of materiality,” he said. “While the share price move was a little greater than the downgrade, that was something that could not be known by the company in advance.”
Greenblat, E. (2018, May 8). JB Hi-Fi unapologetic on profit downgrade. The Australian. Retrieved from https://www.theaustralian.com.au/business/companies/jb-hifi-unapologetic-on-profit-downgrade/news-story/ba2f4f54b195a85bb201e28f4a9baf0e
Modules 1–3, plus Modules 5, 8 & 11 will not be assessed in this assessment item. You will not be required to review these modules in your preparation. There is no Module 12, it is a review week.
You should assume that each of the remaining modules will appear somewhere in the questions.
You should prepare by reviewing your text book, the lecture materials and especially your weekly workshop work.
The following is a brief guide to your review and preparation strategy:
Module 4: Normative theories of value and measurement
Know your measurement models! How is income viewed differently between models that take a financial capital maintenance approach vs. models that take a physical capital maintenance approach?
Module 6: Theories of voluntary disclosure: PAT
Yep, you know that PAT, positive theory and Agency Theory has to be here somewhere. So, you should know:
What are the differences between:
Positive accounting theory, and
Positive Accounting Theory (PAT)?
What is Agency Theory?
What is agency?
What are agency costs?
What is meant when we refer to a firm as being a “nexus of contracts”?
More broadly, you should also be able to explain the difference between positive theory and normative theory.
Module 7: Theories of voluntary disclosure: systems theories
OK, the three big theories are here, you have to know about them. In case you don’t, they are:
And for good measure, be aware of the political economy theory that underpins them.
You should also be able to explain the social contract, and how it supports one or more of the above theories.
Module 9: Positive theories concerning the use of, and response to accounting information
This is a very, very important module. Know about Capital Markets Research and the EMH.
Oh, and I do like the Brunswik Lens Model, so it is likely to be assessed too. As well as describing it, can you apply it? Very good to be able to do this in a case study. You never know! And Heuristics! I love heuristics. How could I not ask a question about heuristics?
You might also want to be able to explain how CMR research is different to behavioural research in accounting.
Module 10: Alternative perspectives of accounting
You need to know about critical theory and its relationship with critical accounting theory. What do they say about accounting? Can financial statements be truly neutral as claimed? You’ll have lots of fun with this. Also, what role do accountants play (if any) in protecting the riches of the capitalists against the workers?