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
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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
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
(Hoque, 2014). Balance scorecard consist of four quadrants i.e. learning and growth perspective,
business process perspective, customer perspective and financial perspective.
Customer perspective Financial perspective
Attaining utmost level of customer’s Enhance business volume by offering

satisfaction. diversified products and services
Providing quality of products and services To provide satisfactory returns to th

shareholders (Cheng and Humphreys, 2012).
Internal business process perspective Learning and growth perspective
Dealing with internal and 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.
Wesfarmers Strategy Map
• Provide Satisfactory Returns

• Increase business volume
Financial
• Offering Quality of Products

• Attaining utmost level of customer's satisfaction
Customers
• Resproning to stakholders expectations

Internal • Promoting honesty and intergrity at each level of business fro dealing
Business with internal and external stakeholders
Process
• 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
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).
 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:
 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,
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
Expenses
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
Impairment expenses 41 44
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.
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
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.
 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.1042-
1067.
 Developing Strategy Map, 2016. [PDF]. Available through:

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ACCOUNTING

Balance score care and Strategy Map.............................................1

Wesfarmers competitive strategies..............................................1

Objectives of the Wesfarmers.......................................................2

Balance score card.......................................................................2

Wesfarmers Strategy Map............................................................4

Embracing full integrated reporting..............................................7

Budgeted Income Statement of Wesfarmers of 2016.....................8

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BALANCE SCORE CARE AND STRATEGY MAP

Wesfarmers competitive strategies

Considering the diverse business operations of Wesfarmers that consist of supermarkets,

Objectives of the Wesfarmers

Balance score card

In general it is a strategic planning and management system that is used in extensively in

Customer perspective Financial perspective

Attaining utmost level of customer’s Enhance business volume by offering

Providing quality of products and services To provide satisfactory returns to th

Internal business process perspective Learning and growth perspective

Responding to the customers and communities Contributing the growth of community by

Balance scorecard is a comprehensive performance monitoring tool that assist in measuring

• Provide Satisfactory Returns

• Offering Quality of Products

• Resproning to stakholders expectations

• Positively contributing towards Community

(Developing Strategy Map, 2016)

Embracing full integrated reporting

 Materiality analysis: Wesfarmers ensures in review of the issues affecting to the

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

Total expenses 59106 63834

Other income 330 330

Share of profit/(losses) of associates and joint ventures 82 82

EBIT 3759 5269

Finance costs 315 330.75

Profit before tax 3444 4938

Income tax expense 1004 1124

Profit from continuing operations 2440 3814

A Sample Report On Accounting Essay Writing

To Buy Complete Essay Writing Service from Us:

 Developing Strategy Map, 2016. [PDF]. Available through:

A Sample Report On Accounting Essay Writing

To Buy Complete Essay Writing Service from Us:

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