This assignment is based on the consolidated financial statements of David Jones Limited (DJS), a retailer listed on the Australian Securities Exchange. You will need to access the 2012 and 2011 annual reports for DJS, which contain financial information pertaining to 2011-2012 (2012 annual report) and 2010-2011 (2011 annual report), and are available at ‘Assessment’ on the course Blackboard site. Additional data relating to DJS’s market performance are contained within this document (at the relevant question). This assignment is worth 20% of the total assessment for this course.

NOTE: You must adhere to the following requirements in completing this assignment:

• For the ratio analysis required in Question 16 of this assignment, you must provide full supporting calculations – if supporting calculations are not provided, the corresponding analysis will not be marked and you will be awarded zero for this question.

• Ratios should be calculated according to the formulae provided in your textbook and rounded to one decimal place.

• Your assignment must be appropriately referenced using the Harvard Style referencing system – please refer to guidelines provided at https://www.dlsweb.rmit.edu.au/bus/public/referencing/index.html

Penalties for inadequate or incorrect referencing will apply.

• Note this assignment is to be completed as an individual assignment. All submitted assignments will be automatically forwarded to Turnitin and subjected to an assessment of authenticity/originality, so please ensure your submission is your own individual work – severe penalties will apply for work that is not original/individual. Please refer to the Academic Integrity presentation available at ‘Assessment’ on the course Blackboard site.
• Do not include the wording of the assignment questions in your submission – if you do so, Turnitin will recognise this as plagiarism.

• Your assignment must be submitted electronically by the due date.Late submissions will be marked as if submitted on time, then the mark awarded will be reduced by 10% (of total available marks) for each day or part-day that the assignment is late. For example, if your assignment is one day late then you will be penalised 10% of 20 marks which is 2 marks. Assignments that are late by 7 days or more will not be marked and will be awarded zero unless a formal extension of time has been granted.
• Extensions of time will only be granted in cases of exceptional and genuine hardship (which does not include inconvenience, poor planning, pressure from work or work commitments), and all applications must be accompanied by appropriate documentation. Applications for extensions of 7 calendar days or less (from the original due date) should be made via the Application for Extension of Time for Submission of Assessable Work form and forwarded to the Course Convenor (at [email protected]) at least one working day before the due date for submission. Applications for extensions of more than 7 days should be made (on-line) at least 2 working days prior to the due date using the Special Consideration process. For information and relevant forms please refer to

http://www.rmit.edu.au/browse/Current%20students%2FAdministration%2FForms%2FAssessment/

Individual Assignment – David Jones Limited (DJS)

Note: This assignment is scored out of 100 marks and will be scaled to a mark out of 20.

Introduction:

The annual report provides a company’s directors and senior executives with a means of communicating to shareholders (and other interested parties, such as financial analysts, investment fund managers, potential shareholders, banks, customers, the media, etc.) a vast array of information relating to the company’s activities over the past year. Like most company annual reports, David Jones Ltd’s annual report contains much more than just the company’s financial statements. As well as the statement of comprehensive income, statement of financial position, statement of changes in equity and cash flow statement, David Jones Ltd’s annual report includes a Corporate Sustainability Report and a Corporate Governance Statement, as well as the Chairman’s and Chief Executive Officer and Managing Director’s Report, the Directors’ Report, the Independent Audit Report, and much more. The aim of this assignment is to introduce you to the structure and format of a typical Australian company annual report, and to encourage you to explore the report in order to appreciate the range of information presented, how some of this information has been prepared, and how it can be used in a decision making context.

Before commencing this assignment, it is recommended that you read the article at:

http://www.reportwatch.net/report-essentials/the-annual-report-a-reputation-management-vehicle/14/

which attributes another role to the corporate annual report – that of a corporate “reputation management device”.

REQUIRED:

Refer to the 2012 annual report for David Jones Ltd (DJS) and answer the following questions. (To answer some questions, you will need to also refer to the 2011 DJS annual report.)

Question 1   (4 marks)

(a)    What type of business structure is DJS? (Sole proprietor, partnership, private company or public company?)     (1 mark)

(b)   Indicate 3 features of DJS’s financial statements that support your choice.     (3 marks)

Question 2   (2 mark)

(a)    Refer to DJS’s statement of financial position and identify the 2 items that have the same dollar value.     (1 mark)

(b)   Use the accounting equation (Assets – Liabilities = Equity) to explain why these 2 items have the same dollar value.     (1 mark)

Question 3   (2 marks)

Why are DJS’s financial statements referred to as “consolidated” statements?

Question 4   (2 marks)

On DJS’s statement of financial position, why are ‘Interest bearing liabilities’ reported as both current liabilities and non-current liabilities?

Question 5   (7 marks)    

(a)    Name the 3 components of Equity shown on DJS’s statement of financial position and explain how each has arisen.     (3 marks)

(b)   What was the dollar amount of DJS’s total equity in 2011 and in 2012?     (1 mark)

(c)    Which financial statement explains the change in total equity between 2011 and 2012?               (1 mark)

(d)   Explain this change in your own words.     (2 marks)

Question 6   (3 marks)

(a)    What is the dollar amount shown on DJS’s statement of financial position for ‘Inventories’?         (1 mark)

(b)   Refer to Note 1 (para. 1.1 and para. 1.17) and explain the valuation method used by DJS for inventories of finished goods.     (2 marks)

Question 7   (8 marks)

(a)    What is the dollar amount shown on DJS’s statement of financial position for ‘Property, plant and equipment’ (PPE)?     (1 mark)

(b)   Refer to Note 1 (para. 1.18.1) and identify the valuation method used by DJS for its PPE.           (2 marks)

(c)    Now refer to Note 13 and list the 6 different classes of PPE carried by DJS.     (2 marks)

(d)   How much depreciation expense was recorded for ‘Computer equipment’ in 2012?     (1 mark)

(e)    What is the total amount of depreciation that has been recorded for this equipment since it was acquired?     (1 mark)

(f)    What is the difference between ‘depreciation’ and ‘amortisation’?     (1 mark)

Question 8   (4 marks)

(a)    What is the dollar amount shown on DJS’s statement of financial position for ‘Receivables’?      (1 mark)

(b)   Now refer to Note 9 and identify: (i) the total amount owed by suppliers; (ii) the allowance for doubtful debts; (iii) the amount David Jones expects to receive from suppliers.     (3 marks)

Question 9   (3 marks)

(a)    Refer to Note 14 to DJS’s financial statements and explain (in one sentence) how the amount recorded as ‘Goodwill’ arose.     (1 mark)

(b)   In general terms (that is, not with reference to DJS) explain what ‘goodwill’ represents and how it is calculated.     (2 marks)

Question 10   (4 marks)

(a)    In general terms, what are ‘provisions’?     (2 marks)

(b)   What types of provisions has David Jones recorded (see Note 18)?     (2 marks)

Question 11   (4 marks)

(a)    In general terms, what is a ‘contingent liability’?     (2 marks)

(b)   Why are DJS’s contingent liabilities (see Note 25) not shown on its statement of financial position?     (2 marks)

Question 12   (4 marks)

Refer to Note 21:

(a)    What is the total number of shares that have been issued by DJS?     (1 mark)

(b)   What is the total dollar amount that has been contributed by DJS’s shareholders?     (1 mark)

(c)    How much profit was earned by DJS’s shareholders, on a per share basis, in 2012?     (1 mark)

(d)   How much of this profit did the shareholders actually receive, on a per share basis, in 2012?      (1 mark)

Question 13   (2 marks)

Refer to DJS’s cash flow statement:

(a)    What was the dollar amount of DJS’s ‘Cash and cash equivalents’ at the end of the financial year?     (1 mark)

(b)   Why does this figure differ from the amount of cash and cash equivalents shown on DJS’s statement of financial position?     (1 mark)

Question 14   (4 marks)

(a)    What is the reported dollar amount for DJS’s ‘Net cash flows from operating activities’?            (1 mark)

(b)   Suggest 3 possible reasons why this figure is so much higher than DJS’s net profit after tax.       (3 marks)

Question 15   (3 marks)

Observe that DJS has reported negative net cash flows for 2 of the 3 types of activities reported in its cash flow statement. Explain whether, in your opinion, these negative net cash flows represent a potential problem for DJS.

Question 16   (28 marks)

(a)    Use the formulae presented on pp. 376-377 of your textbook to calculate the following ratios for DJS for 2011 and 2012: (i) ROE; (ii) ROA; (iii) gross profit margin; (iv) net profit margin; (v) inventory turnover (days); (vi) debtors’ turnover (days); (vii) current ratio; (viii) quick asset ratio; (ix) debt-to-equity ratio; (x) interest coverage ratio.     (20 marks)

(Note: you must show all calculations in full.)

(b)   Refer to the changes in these ratios between 2011 and 2012 to explain whether you believe there has been an improvement or deterioration in the following aspects of DJS’s performance or situation: (i) profitability; (ii) asset efficiency; (iii) liquidity; (iv) long-term debt-paying ability.     (8 marks)

Question 17   (8 marks)

(a)    What is meant by the term ‘corporate sustainability’?     (2 marks)

(b)   Refer to DJS’s Corporate Sustainability Report (pp. 26-37 of the annual report) and identify the 4 categories of key performance indicators listed.     (2 marks)

(c)    Select 2 indicators from each category and comment on whether you believe DJS has improved its performance with respect to those indicators between 2011 and 2012.     (4 marks)

Question 18   (2 marks)

With respect to its commitment to the environment, what are the 4 strategic objectives outlined by DJS in its Corporate Sustainability Report?

Question 19   (2 marks)

Refer to the section of DJS’s Corporate Sustainability Report titled ‘Environmental Management’ (p. 35 of the annual report) and identify the specific initiatives that have led to the reported 29.4% improvement in energy efficiency over the past 6 years.

Question 20 (4 marks)

In the section of DJS’s Corporate Sustainability Report titled ‘Environment Strategy’, para. 2.1 states: “To meet its aim of reducing greenhouse gas emissions, David Jones … invested $4.9 million in 34 capital projects …”:

(a)    Can you identify whether this amount has been recognised by DJS as an asset or an expense?     (2 marks)

(b)   How do you believe it should have been recognised? (You must refer to the definition and recognition criteria for assets and expenses as contained in the IASB’s Framework when answering this question.)     (2 marks)