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School of Accounting ACCT3004 Company Accounting Sem 2 2017 - Bentley, CTI & Miri Internal Students Group Comprehensive Assignment (35%) Due 5pm, 23rd October 2017 TOPIC: CORPORATE GOVERNANCE, RELATED PARTY TRANSACTIONS AND CORPORATE FAILURES This assessment will be a group assessment, with each group consisting of 5 STUDENTS who are all in the same tutorial groups. Note this assessment has a teamwork evaluation component which contributes to the mark. The assessment CANNOT be undertaken individually. The assessment consists of four different components; Part A: Corporate Governance Part B: Related Parties Part C: Corporate Failure Teamwork Component Total 10 Marks 5 Marks 15 Marks 5 Marks 35 Marks GENERAL BACKGROUND Willbed Ltd (\"Willbed\") has grown significantly since it was started over 30 years ago by brothers Sam and Mack Peterson. The business started out as a general export business but soon specialised in the exporting to live animals and grains to overseas markets. Today, the business is considered a market leader in the live export trade, owning several purpose build ships designed to carry live cattle. In addition, the company has a network of meat processing facilities and owns a number of properties where they directly grow grain for export. In order to fund the expansion of the business, Willbed converted from a Pty Ltd to a Limited company approximately ten years ago to allow it to raise money from a select number of shareholders which included key customers, employees and other wealthy investors involved in the industry. Despite the company being a Limited company which is now considered to be a reporting entity, the company in many ways is still operating as a family company without many of the sophisticated corporate governance procedures and processes in place. Communication with existing shareholders currently consists of a quarterly lunch where various updates are provided. The Board currently consists of; 1) Sam Peterson - Founder 2) Mack Peterson - Founder 3) Steve O'Neil - General Manager 4) Alex Pho - 30% Indonesian shareholder and key customer Willbed's growth has not been without controversy with several animal rights groups being very vocal in their criticism about their treatment of animals, both whilst transporting them and how they are ultimately slaughtered in the exported countries by their customers. On occasion, this has led to much unwanted media and Government regulatory attention. PART A (10 marks) Now in their 60's, Sam and Mack would like to retire in the next few years but currently have most of their wealth tied up in their Wellbed shares which are difficult to sell. In addition, they would like to build another purpose built boat and require approximately $5m of funding for this. On advice from their external accountant Paul, they determine that listing Wellbed will allow them to both provide a market for them to sell their shares as well as raise the funds for the new boat. Page 1 of 7 They are aware that listing on the ASX will require them to comply with the ASX's Corporate Governance Principles, in particular - Principle 2: Structure the Board to Add Value and - Principle 2.2: Develop a Board Skills Matrix. Once they list on the ASX, only Steve O'Neil, who will be promoted to become the new CEO, wishes to remain as a director. Sam and Mack will become General Managers of the Live Cattle and Grain divisions of the business respectively. The current board has asked you for assistance in structuring the new Board for when the company is listed. REQUIRED Compile a Board Skills Matrix for the ideal recommended board structure for Willbed once it is listed. The board should consist of eight (8) members. You may want to set out your answer as per the below table; Board Member Age/Gender Independent Executive (Yes/No) (Yes/No) Qualifications Experience Description of background Explain how you think your proposed board complies with Principle 2 of the Corporate Governance principles (max. of 1 page) PART B (5 marks) As part of getting Willbed ready for listing, a number of transactions with associated stakeholders are being put in place. Paul, their external accountant, has warned them that AASB 124 may require these transactions to have additional disclosures in the financial statements. Steve O'Neil has provided Paul with a list of the following transactions that he is unsure of whether or not require specific disclosure under AASB 124. Rent paid to S&M Superannuation fund which has Sam and Mack as the only members. The rent is for the business premises in Fremantle and is set at a commercial rate of $150,000 per annum. One of the farms currently owned by Willbed is to be sold to Jessica Peterson (Sam's wife) for $4m prior to the listing. This amount came from an independent valuation of the property that was undertaken. Jessica does not have the funds to purchase this currently but the board has provided her with a period of 12 months to find the finance to pay for it. Interest will be charged at 10% which is above what Willbed could obtain from the bank. Jasmine, the graduate accountant employed by Willbed has been having a few financial issues following a divorce so Willbed has lent her $50,000 as a temporary loan which attracts interest of 15%. Jasmine does not have any shares in Willbed. Alex Pho currently has an ongoing contract in place with Willbed for the supply of cattle at discount of 5% to the market price of cattle. It is expected that after the listing, his shareholding will be diluted from 30% to 5% and he will no longer be a director. REQUIRED Prepare the related party note for Willbed. Explain any exclusions that you have made. Page 2 of 7 PART C (15 marks) REQUIRED You work for a large insolvency firm which has been asked to provide a Formal Report to ASIC explaining both the financial and non-financial warning signs that company boards should be aware of for a potential corporate failure. Your report should include the use of one (1) recent corporate failure as an example of how these warning signs could have been used to predict the corporate failure. In order to do well in this report, students are expected to Include both financial and non-financial warning signs. The financial warning signs should include the calculation of the z-score and key financial ratio's of the corporate failure that you have chosen to use as your example. The data used for any financial calculations should be submitted as an Appendix The report needs to be well referenced with a minimum of eight (8) quality references. A quality reference includes academic articles and excludes references such as Investopedia. You are expected to reference any liquidators reports used. Chicago referencing style is for in-text and end-text referencing. More information can be found on this style from the Library web site: http://libguides.library.curtin.edu.au/referencing. Structure of the report The report should be a maximum of five (5) pages in length which excludes any references and appendices ie 5 pages plus references and appendices. Please refer to the structure guide in Chapter 10 of the required Business Communications Textbook for assistance in structuring your report. At a minimum, your report should include a) Executive Summary b) Introduction c) Body d) Conclusion TEAMWORK COMPONENT Groups will be formed in Week 3. There is NO option to complete this assessment individually. Teamwork is an important attribute that employers are looking for in graduates. Therefore, teamwork will be assessed in the presentation with each team member assessing each other's ability to work in a team. The average of this mark will be taken. The teamwork evaluation sheet is confidential and should therefore be submitted individually. One of your first tasks as a group is to complete a team contract which will form the rules of how you will work together. This needs to be submitted with your written report. If you are having problems with your team mates, this team contract should deal with how to resolve these at first instance. SUBMISSION REQUIREMENTS Each group needs to submit One Group Assignment Cover Sheet Parts A, B & C (with references for Part's A & C) via Turnitin AND the separate Blackboard submission point. Only one person per group needs to submit this and it should be in one file. One Team contract Completed Teamwork peer evaluation sheet (one per person) Page 3 of 7 The submission of the main word document is to be made both via Turnitin and the other Blackboard submission point with the individual peer evaluation reports separately emailed to your lecturer for confidentiality purposes. Originality reports displaying (%) of similarity can be viewed by students to ensure they have referenced where appropriate and not plagiarised. IMPORTANT - The file name of the word document and the submission title in Turnitin needs to reflect your location and group number. For example; BEN_Group Number FO_Group Number Mal_Group Number Mau_Group Number SING_Group Number The GROUP assignment coversheet should be signed by each student in the group indicating that the work submitted is their own work. University policies and procedures for academic misconduct and plagiarism will be applied. Further information is available at www.academicintegrity.curtin.edu.au. Unsigned declarations will not be accepted. A copy of the Assignment Cover sheet is on Blackboard. Page 4 of 7 Marking Guide Student Name: ____________________________________Student No. ____________________________ Tutor: ___________________________________________Tutorial Day/Time: _______________________ Group Number: ________________ No of Marks Mark Component 8 One mark for appropriateness of each suggested board member ie 8 board members in total 1 Quality of explanation of compliance with Corporate Governance Principle 1 Quality of overall suggested board 4 Identifying and explaining the correct treatment for each of the four (4) transactions. One mark for each transaction. 1 Format and general appropriateness of the disclosure note. 1 Format of the report 1 Appropriateness of language, communication style, syntax, grammar and flow of the report 1 Quality of introduction and conclusion 1 Quality of executive summary 2 Quality, number and usage of appropriateness of references 3 Demonstration of critical thinking and analysis 2 Quality of integration of the recent corporate failure example 1 Calculation of z-score and key financial ratios 3 Quality of general financial and non-financial warning signs Teamwork mark 5 Average of team work awarded Total 35 Marks Part A (10 Marks) Part B (5 Marks) Part C (15 Marks) Page 5 of 7 PEER EVALUATION FOR GROUP COMPREHENSIVE ASSIGNMENT Campus Location: Team Number: Tutor's Name: Tutorial Time: Tutorial Venue: Your Name: Your Student Number: Confidential The peer evaluation is confidential and will not be shared with team members. Each team member is to complete a peer evaluation form and submit it on an individual basis to your tutor on the same day as the due date of the team presentation. The tutor will collate the peer evaluation forms with the submitted written reports Instruction Write the name of each of your group members in a separate column and grade them out of 5 for each criteria. Total the numbers in each column. Your evaluation of fellow team member's performance Evaluation Criteria Rate a score out of 5 (1 = poor, 5 = excellent) Did they attend every team meeting? (note that a team member will automatically receive a zero participation mark if they did not attend any of the team meetings) Completed individually assigned tasks on time and in a quality manner and was punctual to team meetings. Demonstrated a capacity to listen, communicated effectively and was responsive to feedback/criticism. Contributed significantly to the success of the assignment. TOTAL (max 15) Fellow Team member's name: Fellow team member's name: Fellow Team member's name: Fellow Team member's name: Y/N Y/N Y/N Y/N 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 1/2/3/4/5 Page 6 of 7 PEER EVALUATION FOR TEAM PRESENTATION (CONTINUED) Feedback on team dynamics: 1. How effectively did your team work? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 2. Were the behaviors of any of your team members particularly valuable or detrimental to the team? Explain. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 3. What did you learn about working in a team from this assignment that you will carry into your next team experience? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ I____________________________(name and surname) undertake that the above is a true and fair reflection of my experience of working with my team in the team presentation. _______________________________ _________________ Signed Date For administration only This team member's name & student number Evaluation by other team members Team member 1 (max of 15): Team member 2 (max of 15): Team member 3 (max of 15): Team member 4 (max of 15): Total: (max of 60) Average (total / 12), transferred to final mark Page 7 of 7