The following is an extract of an article discussing the importance of companies disclosing information in annual reports.
Companies are still failing to provide a full and clear picture of their company's financial position, potentially breaching the law and losing investors. KPMG's chairman, Peter Nash, says the most successful businesses use management and commentary to communicate their stories to investors and ensure they meet their obligations under the Corporations Act. . . He says that the use of management commentary gained prominence after the global financial crisis but that many businesses still fail to use it properly, sometimes withholding information considered commercially sensitive... A KPMG report released this year analysed the 50 largest listed companies' most recent annual reports and found some failed to provide key performance indicators adequately and in some cases understated their risk.
a. Review the management commentary and discussion in the 2011 annual report of JB Hi-Fi Ltd. Critique whether the information:
i) Is transparent
ii) Easy to understand
iii) Discusses strategy
iv) Articulates key performance indicators and their links to strategy.
b. Locate the international or Australian accounting standard on management discussion and commentary and describe the important attributes that should be present.
c. For the retailer that you selected in c, calculate its profitability ratios and determine if they are consistent with what is being reported.
d. In reviewing the 2011 performance of JB Hi-Fi Ltd, mention was made of a significant item associated with the write-down of assets in the Clive Anthonys business. Companies are required to disclose information that is likely to have an impact of share price to the Australian Securities Exchange (ASX). Locate the announcement made by JB Hi-Fi Ltd to the ASX and discuss the content of this announcement and how you expect the share price to respond to this news. Review the impact of this announcement on the share price of JB Hi-Fi Ltd.