Research Topics: Annual Report Samples

Annual Report Assignment

Students are required to select an organisation (you wish to research, preferably one that produces an Annual Report. Also an organisation, which is large enough to facilitate analyse its internal structure and design choices. Please note â€” there are some organisations that are not allowed. Please discuss with the lecturer before starting your research. Students are then required to research secondary sources for example, from any of the following journals (The Economist, Far Eastern Economic Review, Business Review Weekly, Asia Pacific Journal of Human Resources, HR Monthly, or journals of similar nature) to critically analyse their selected organization. These sources generally provide externally debated issues facing the organisation, from there you can proceed to conduct a wider literature review on the company. Students are also required to gather an annual report or similar document on the company and read the major business sections of newspapers such as the Financial Review. However, we do not want a financial or market analysis of the organization. Please note: due to the scope of the report, we definitely do not permit students undertaking any primary research investigation, such as interviews, questionnaires and so on. All materials sourced are to be of a secondary nature, such as annual reports, journal articles, press releases and so on. Any articles sourced should be recent and preferably not more than five years old. The articles should be on an organisation rather than on an individual of the organisation. Please note that the articles will not directly reflect the principles of organisation design, therefore, you need to look into the implicit theories, models and themes that are in the articles for you to analyse. You can make realistic assumptions to some extent about the organisation. Students are to chose one key determinant ONLY and analyse its impact on the organisation. For example chose one of the following: Culture, Change, Environment, Strategy, Technology, Size. Students are also required to apply one of the Organisation Effectiveness models as part of their critical analysis, this allows recommendations and solutions to be posed for the organisation. Ask the question: What current issues are facing the organisation from an internal and external perspective, how can the organisation re-align any identified gaps? The presentation of the findings of the study in the research paper will include a description of the process and research method used to gather the information, and its limitations; identification and explanation of the activities undertaken by the organisation and some comment on the activities as they relate to the theories and practices presented in the course- that is, drawing links or identifying differences between theory and practice. The authorâ€™s viewpoints in this paper should be related to the appropriate literature. The paper should be up to 3000 words in length and include a reference list. Credit:ivythesis.typepad.com

Annual Report Assignment

Students are required to select an organisation (you wish to research, preferably one that produces an Annual Report. Also an organisa...

Annual Budget

Introduction                         Budget is a monetary value allocated for different purposes. The budget is an inevitable portion of business operations because of several reasons. One reason is limited financial resources. This means that the company has to spend within its means so that it has to identify the areas requiring monetary resources and apportion the available resources according to priority and necessity. Another reason is accountability. Accountability pertains to the responsibility that the owners, managers and employees have in ensuring that the money apportioned is spent for the determined purpose. The foundation of accountability is the budget. (Weygandt, Kieso & Kimmel 2005, p. 971)   Benefits of Budget to a Business   A budget is a plan, a record and a forecast. It is a plan because it maps out the expected areas of spending together with the apportioned monetary resource. This serves as a guide to the limit of spending of the different operations of the company. It is a record or a printed document that businesses show to the government and to investors as proof of their monetary activities. The budget serves as a standard of performance. It is a forecast because it shows the pattern of future spending of the company. (Warren, Fess & Reeve 2005, p. 870)   The relevance of budget to the company enhances the importance of budgeting and budget management. Budgeting refers to the activity of matching the various planned actions and objectives with their respective estimated financial resource requirements. Budget management refers to the continuous process of drafting for approval a list of areas of spending and their corresponding monetary allocations based on a limited budget. This is followed by the activity of predicting price and cost as part of the spending plan. Then the next step is submitting the proposal and plan for approval. After approval, the implementation state involves supervision over performance through the identification and control of any occurring budget variances. (Weygandt, Kieso & Kimmel 2005, p. 972)   Parties Involved in the Determination of the Budget               The two elements of budget are income or money to spend and expenses or items subject of spending. The proper parties to determine the budget are the people with information about the income and spending of the company. (Weygandt, Kieso & Kimmel 2005, p. 1005) In small businesses, the owner or manager usually handles the budget but in larger businesses, there is a team of employees, in charge of finance management.               In the case of a family-owned cuisine restaurant, the finances and the budget of the business is handled by the owners themselves with tasks delegated to each family member. The spouses have two children and the delegation of tasks is cooking is done by the father with the assistance of the younger son, the cash register is manned by the wife, and waiting or food delivery is done by the older son together with two hired help. Thus, in the determination of the monthly budget, the father provides information on expenses on food ingredients, the mother knows the amount of money the business takes in everyday and the children provide information on other expenses in the maintenance of the restaurant’s physical structure. As the business grew and the restaurant is nearing its full capacity, the family hired two more people to help in the kitchen and in delivery and hired three more as the children moved out of state to earn a college degree. The business was a success that the owners searched for another location to establish a branch. The branch had a manager and six employees. In doing the budget, the parties involved included the spouses and the manager. Although the budget was done separately for the two restaurants, the spouses had to know the financial performance of both to determine their ability to pay for the amount loaned to start the restaurant branch. The goal is to make the restaurants independent with the revenue received by each restaurant covering its respective expenses.        Methods/Steps in Arriving at a Budget               There are two basic types of budget. One is cash budget that provides an estimate of the cash position of the business in a given period. Cash budget involves the consideration of the liabilities of the business and schedules the payment of these liabilities according to the schedule of the receipt of revenue from by the business. Cash budget starts with a list of the starting cash balance followed by expected revenue for the period covered by the budget added to the starting cash and then followed by the expenses such as liabilities deducted from the total cash balance. The positive remaining amount determines the cash earned by the business. (Weygandt, Kieso & Kimmel 2005, p. 978; Minbiole 2000, p. 225)   Another is operating budget that serves to forecast the revenues and expenditures for a year or less. This involves the listing of income and expenses into two columns, with every source of income and areas of spending itemized to compare the difference in total income and total expenditures. This method is helpful in mapping the revenue generation and spending of every area and stage of the business. Using this method enables the owners/managers to determine and evaluate the financial soundness of the business. (Young 2003, p. 191; Minbiole 2000, p. 212)   In the case of the cuisine restaurant, the initial budget method used was a simple cash budget where the family totals the sales revenue and expenses for food ingredients, salaries and other restaurant expenses and determines the difference in amount between the two items. The remaining positive amount becomes the earnings of the family. The starting capital was family earnings so they also considered earning back the amount they spent in starting the business. However, as the business grew and another branch was set-up, the items considered in the budget increased because of the loan, monthly rent, added salaries of workers, and other expenses. The family shifted to the more elaborate operating budget that covers an entire year of business operations. Change was needed so that the owners can foresee incoming and outgoing cash flow in the next twelve months and assess the ability of the company to meet its scheduled debt payments and obligations to employees.         Evaluating the Budget Method               There are four elements to be considered in evaluating the budget. First is the purpose of the budget (Warren, Fess & Reeve 2005, p. 870; Oliver 2000, p. 13). The budget may be for the purpose of planning or scheduling the payment of debt or forecast the future financial performance of the business. Depending upon the purpose, the focus of the budget would also differ. If the purpose were to map-out debt payment, the focus would be on the itemization and spread of the amount to be paid every month based on the expected revenue of the business. If the purpose of the budget is to forecast financial performance, then the focus is on the remaining amount after expenses are deducted from the income.               Second is the complete listing of all sources of income and areas of expenditure (Warren, Fess & Reeve 2005, p. 870). This is important because the reliability of the budget depends upon the inclusion of all expected income and expenses. In the operating budget, the items to be included may be the sales revenue, production revenue, total labour cost, operating expenses, and capital expenses. If even a single item regardless of how small is omitted from the budget, the mapping of liability payments and forecasting will be affected.               Third is accurate estimation of amounts based on previous financial performance by using income statements, balance sheets and other relevant finance documents (Jiambalvo 2000, p. 355; Minbiole 2000; p. 239). Accuracy is important because this adds reliability to the budget especially if the budget serves as a guide to the limit of spending of the company. Ideally, a business should not spend beyond its means and the means of a company is stated in the budget. An inaccurate budget would cause negative effects to the business.               Fourth is flexibility to variances (Jiambalvo 1994, p. 357; Minbiole 2000; p. 239). Although, the budget is a mere estimate, it should be accurate enough to be reliable but flexible enough to cover any changes in the financial performance of the company due to both internal and external forces. The budget should consider every possible expense that the company may incur in the period covered by the budget because it is better to incur expenses less than the amount stated in the budget than to overspend.                 In the case of the budget of the cuisine restaurant, the cash budget method initially used by the owners was not completely effective because there were always one or two expense items incurred during the budget period not included in the original budget. There was a tendency to spend beyond the budget due to the failure to anticipate all expected business expenses. At the start of the business, there were no previous financial records from which to base the budget so the owners had problems with the income and expense itemization. Since the business is family owned there is also the tendency to mix business and personal expenses so that the budget was not as accurate as it should be. The purpose of the cash budget was to see whether the business is earning so the owners are content as long as there is a consistent positive amount remaining after expenses are deducted.               However, after the owners gained experience on the operations of a restaurant business, they were able to lessen incurring unplanned expenses. The expansion of the business through a branch meant that the owners had to develop a more itemized and accurate budget. The increasing income and expense items required the more elaborate operating budget method especially since the purpose of the owners now is to determine the schedule of liability payments and other expenses relative to the in flow of cash. Since the owners have gained experience in the restaurant business, the number of unplanned expenses was minimized resulting to a more accurate budget. Estimations in the budget were also based on the previous financial records of the business.               Apart from the contents of the business, budget evaluation may also be made by considering how effective the budget is based on the appropriate budget approach. Top down, bottom up and zero-based budgeting constitute the three budget approaches. A top down budget approach means that the budget is prepared by the owners or top managers of the business and imposed downwards to the rest of the organization. Top down budget reflects the goals of the owner/managers. This works for small businesses but subject to limitations in large firms. Bottom up budget are prepared by supervisors or middle managers and then submit them upwards to the owners or top managers for approval. This is ideal for large businesses because middle managers are most qualified to provide information on the income and expenses of the different areas of operation. (Oliver 2000, p. 49) Zero-based budgeting works through every manager providing an estimate of the proposed expenses in her area of responsibility as if doing so for the first time. Since managers are required to start from scratch, they should be able to justify their proposed budget. (Jiambalvo 2004, p. 343)               In the cuisine business, the budget approach is top down. The approach is relevant to the business because its operation is small and the owners and the manager of the branch has a clear view of all aspects of operations covering income generation and expenditures so they are able to make an accurate and reliable budget.   Reflection on Budget               The budget is inevitable to any business because it reflects the operations and financial performance of the business in the past, at present and in the future. The budget is important to assess the continuity of the business and to ensure that the business is able to meet its liabilities to creditors and obligations to the people who work to earn income bigger than the expenses of the company.                                           References   Jiambalvo, J 2004, Managerial Accounting, John Wiley & Sons, New Jersey.   Minbiole, EA 2000, Accounting Principles II (Cliffs Quick Review), IDG Books Worldwide, Inc. California.   Oliver, L 2000, The Cost Management Toolbox: A Manager’s Guide to Controlling Costs and Boosting Profits, AMA Publications, New York.   Warren, CS, Fess, PE & Reeve, JM 2005, Accounting, Thompson Corporation, Ohio.   Weygandt, JJ, Kieso, DE & Kimmel, PD 2005, Accounting Principles, 7th edn,  John Wiley & Sons, New Jersey.   Young, D 2003, Techniques of Management Accounting, McGraw-Hill, New York.   Credit:ivythesis.typepad.com

Annual Budget

Introduction Budget is a monetary value allocated for different purposes. The budget is an inevitable portion of...

Footsie 100 index

OBJECTIVES As a person with experience knowledge of companies within Footsie 100 index, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of annual reports and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it. By delving into this project paper, the author intends to have better insights into how the annual reports of Footsie 100 companies are thought up, formulated and then imparted down. The author hopes to have an in-depth understanding as to how the information on the annual reports of these Footsie 100 companies enables them to compete effectively and profitably in this era of internationalization where competition is extremely intense. In order to reinforce the learning objectives, two key focal issues were focussed upon, i.e. innovation and diversity. Innovation was discussed with regard to the analysis of the annual report where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the information found in the annual report.     INTRODUCTION Annual reports reflect the degree of efficiency and effectiveness of a company or organization’s implementation of the policies and tasks necessary to satisfy their customers, employees, and management. These are usually in the form of figures and other accounting policies. Annual reports normally focus on the information regarding the company’s careful management of the processes involved in the production and distribution of its products and services. More often than not, small companies don’t really have the capabilities to issue annual reports. Instead, these companies engage in activities that various schools of management typically associate with making annual reports of their status. These activities include press release involving the manufacturing rate of their products, product development, production and distribution. However, a comprehensive annual report must deal with all operations done within companies and organizations. Activities such as the management of purchases, the control of inventories, logistics and evaluations must still be covered by annual reports. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, annual reports must include the analysis and management of internal processes. Morrison Supermarkets will be the model Footsie 100 business entity that will be used in this research based on their history in making comprehensive annual reports. ANALYSIS   The following information was found in the 2005 Annual Report of Morrissons Supermarkets, specifically on the Accounting Principles section.   <li class="MsoNormal"> Fixed Assets and Depreciation </li>   Depreciation “The policy of the group is to provide depreciation at rates which are calculated to write off the cost less residual value of tangible fixed assets by equal annual installments. Following the acquisition of Safeway Limited (formerly Safeway plc), the group has harmonized its depreciation rates resulting in the following changes:                                             NEW RATE                   PREVIOUS RATE              GROUP                         MORRISONS SAFEWAY Freehold land 0% 0% 0% Freehold and long lease buildings 2·5% 2%  10% 2·5% 2·5% 2% Short lease land and buildings Over lease period Over lease period Over lease period Plant, equipment and vehicles 15%  33% 15%  33% 12·5%     Had the group’s previous rates been applied the depreciation charge in the current period would have been £35m higher, and the net book value of fixed assets an equivalent amount lower. In addition to the systematic depreciation, fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable” ().   Fixed assets             In terms of intangible assets (negative goodwill), it was equivalent to 262·9 £m in 2005, while the tangible assets registered to about 6,824·0 1 £m. B. Debtors and Provision for Doubtful Debts “Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand. Overdrafts are stated net of uncleared banking items (mainly cheques in the course of clearing). Liquid resources are current asset investments which are disposable without curtailing or disrupting the business and are either readily convertible into known amounts of cash at or close to their carrying values or traded in an active market. Liquid resources comprise term deposits of less than one year (other than cash) and investments in money market managed funds”(). C. Stock and Cost of Sales “Stocks are valued at the lower of cost and net realizable value and comprise goods for resale. The cost of financing property developments prior to their opening date is included in the cost of the project “().   2) The major issues/changes that Morrissons Supermarkets have faced in the last 12 months were indicated in the Chairman’s Statement section of the 2005 Annual Report. Its highlight was Morrisons Supermarkets’ recent acquisition of rival Safeway Supermarkets. Morrisons Supermarkets won the bid to acquire Safeway Supermarkets, and the integration of the two business entities started on March 8, 2004 (). Under the agreement, Morrisons had to let go of more than fifty stores and sell them to other buyers. It was fortunate that there were many buyers interested on those stores, but of course the fact of letting go of those stores was discouraging. The main objective of merging the Safeway supermarkets with Morrisons Supermarkets did not materialize easily, since there became a necessity of certain cultural adjustments all throughout the newly merged company in order to improve the overall business operations. The process of benchmarking of all the products of both companies was the main goal which the company believed would optimize their operations. Ever since the start of its business, Morrisons Supermarkets has always been a sales-oriented business entity. They give premium value to their clients because they believe that this is the key towards increased sales and maximization of operations. Morrisons plans to convert the former Safeway stores into a rolling store format throughout the next months, believing that this move will guarantee further growth through the recognition of the needs of their clients. Morrisons Supermarkets is governed by an effective management group which helps in maintaining the delivery of quality services for all its customers to enjoy. 3) Pieces of Information A. Suppliers (Director’s Statement) Payment to creditors “Supplier credit is an important factor in the success of the business. Following the acquisition of Safeway Limited the company will, as previously acknowledged, work within the spirit and letter of the supermarkets’ code of practice. The company will continue with its policy to ensure all payments are made within mutually agreed credit terms. Where disputes arise the company attempts to sort these out promptly and amicably to ensure delays in payment are kept to a minimum. Creditor days outstanding for the company at 30 January 2005 were 39 (2004 ) ()”.   B. Local Community (Director’s Statement) Political and charitable donations “During the period the group made charitable donations amounting to £153,000. In addition the group sponsored various charities and in the year over £4·1m was raised by customers and staff. No political donations were made ().” Future developments “The group continues to expand into new areas of merchandise where considered appropriate and plans to continue physical expansion of retail stores as and when opportunities arise. Further details of current and future developments are set out in the chairman’s statement ().” C. Customers (Director’s Statement) Health and Safety Policy “It is the group’s intention as far as is reasonably practical to ensure the health, safety and welfare of all its employees, customers and visitors to its premises. In order to achieve this, the group has drawn up a comprehensive health and safety manual that contains policies and procedures detailing safe working systems and practices for all work-based activities ()”. D. Shareholders (Director’s Statement) “The company maintains regular contact with institutional shareholders throughout the year. In addition the annual general meeting provides a forum for communicating with private investors. The non-executive directors have developed an understanding of the views of the major shareholders from briefings provided by the chairman and executive directors at the board meetings ()”.                                 Credit:ivythesis.typepad.com

Footsie 100 index

OBJECTIVES As a person with experience knowledge of companies within Footsie 100 index, the author has always brought up to his superio...

Annual Reports

ANNUAL REPORT Introduction Annual reports involve notes regarding the inspection and verification of the accuracy of financial records and statements. Private businesses and all levels of government release annual reports containing internal audits of accounting records and procedures. Internal audits are conducted by a company’s own personnel to uncover bookkeeping errors and also to check the honesty of employees. In large companies, annual reporting is an ongoing procedure. A company that trades stock on a registered stock exchange or is preparing to issue new shares of stock must indicate it on the annual report. These companies are known as publicly traded companies. An external audit is used to give the public a true statement of a company’s financial position. It is made at least once a year by public accountants who are not regular employees of the company. The auditors make sure that the company has followed proper ethical reporting procedures in its financial records and annual reports. They compare the current annual report with those of the previous year to determine whether the statements are calculated consistently. If they are not, they present a distorted picture of the company’s position. Annual reports also contain statements regarding assets to see if their value is overstated. Debts and other liabilities are also indicated to see if they have been understated (1995). The practice of annual reporting has a much longer history than many of the other developments that can be considered and the large firms of accountants, in which many financial auditors work have become influential advisory institutions throughout the world.  Thus annual reporting has provided the model which has influenced the design of auditing practice in many other fields. Although environmental, medical, or value for financial reporting are conceived as distinct from annual reports, the latter continues to exert its normative influence as a centre of gravity for debate and discussion. And it is in the context of annual reports that the dependency of acts of verification on judgment and negotiation is most apparent. The power of the annual reports lies in its benchmarking potential for other reporting practices. In part this potential is realized indirectly through the work of the board of directors, for whom the annual report is a fundamental component of their expertise and whose advice in areas of control is shaped by it. But the influence can also be direct as entities such as hospital trusts, privatized industries, charities, and many other organizations become subject to an intensification of financial control and annual reporting requirements. This is an expanding domain, not just of neutral checking but also of judgment and of an evaluation of the fundamental purposes of organizations. Paradoxically, given the influential role of the annual reports suggested above, its status as a practice is unclear. What do annual reports produce and how are they effective? (1992) Annual reports are subject to expectations and demands which are, justifiably or otherwise, often disappointed. Nevertheless, the official procedural knowledge base of annual reports has evolved in response to scandals and corporate failures in such a way that the essential puzzle of what annual reports produces their effectiveness remains hidden from view as an article of faith. Finally despite, and probably because of, this puzzle it is argued that annual reports maintain itself as an institutionally credible system of knowledge. Notwithstanding crisis and scandal it satisfies the aspirations and demands of a variety of regulatory programs. Particular annual reports may fail but the system as such cannot. The possibility of effective and ethical annual reporting is necessarily presupposed by regulatory intentions. Traditionally, annual reports have applied itself to the domain of finance, but organizations are increasingly finding value from annual reports that monitor other aspects of their activity. Annual reports, for example, have been championed by firms in response to the ethical concerns of both shareholders and the public in relation to the company’s impact upon the locality. Annual reports are growing in importance too, partly in response to recent major scandals such as the collapse of companies and organizations, and also in order to monitor the increasingly complex demands being made upon by the management ( 2002). However, annual reports remain something of a mystery to those outside of the profession, and have become more specialized as accounting has become more sophisticated. For example, while best practice has evolved certain tools for analytical review or establishing ethics for annual reports, an element of subjective judgment remains as the management decides what evidence to include. Further, rules of thumb can never be ruled out. Annual report risks have developed as an issue too, as the models for reducing the probability of mistakes being made on sampling, for example, become more subtle. Annual reports provide a degree of assurance, but not insurance, as to the financial position of the firm. The principles of annual reports has steered the way companies have taken into consideration with regards to their operations and the legal aspects in achieving their individual goals. In the said settings, the directors (or executives) of the corporations steer the entire organization towards these individual goals (Zingales, 1998). Though the director’s job seems to be based on decision making, the performance of the entire organization is highly dependent on their method of corporate governance as reflected in their annual report. Moreover, despite the apparent power and authority held by these directors, they are still accountable to a much higher entity in the organization: the shareholders (2005). This means that the directors are has the responsibility to their shareholders to keep them in the loop with regards to which path the organization seeks to take in the corporate world. In this context, directors have to contend with several important elements to effectively carry out their jobs. Among the primary elements that are deemed important which should be indicated in the annual report includes the primacy of the shareholders of the corporation as well as corporate disclosure within the company. Being of utmost importance in the performance of an organization’s corporate governance, these two elements have been subjected to controversy in many regimes in an international scale. This is similarly the case in the setting of Huaneng Power Inc and CPL Holdings Ltd, two highly regarded companies in Hong Kong. Specifically, there are still issues regarding the extent to which the directors of these companies could exercise their power, and in the same time, not infringe their duty to the shareholders. To what extent does the information on the annual report be included? How much should be disclosed to the shareholders? This study will be attempting to explain this issue in the Hong Kong setting with special consideration to the remuneration of the directors in the company. In the same way, the study will also take into consideration the specific courses of action that the Hong Kong government took in attempting to deal with the said issues.    The Comparison of Ethical Reporting 1. The Audit Report A. CPL Holdings Ltd. CPL Holdings Ltd. values the ISA 240, a description and discussion of the auditor’s responsibility to consider fraud in the audit of financial statements. It is divided into different titles that includes an introduction; the description of the characteristics of fraud; description of the responsibilities of those charged with governance and of management; the inherent limitations of an audit in the context of fraud; the responsibilities of the auditor for detecting material misstatement due to fraud; professional skepticism; discussion among the engagement team; risk assessment procedures; identification and assessment of the risks of material misstatement due to fraud; responses to the risks of material misstatement due to fraud; evaluation of audit evidence; management representations; communications with management and those charged with governance; communications to regulatory and enforcement authorities; auditor unable to continue the engagement; documentation; effective date (2000). B. Huaneng Power Inc. On the other hand, Huaneng Power, Inc. is guided by SAS 99 in terms of its audit report, which is a description and discussion of consideration of fraud in a financial statement audit. According to SAS 99 Fraud is a broad legal concept and auditors do not make legal determinations of whether fraud has occurred. Rather, the auditor’s interest specifically relates to acts that result in a material misstatement of the financial statements. The primary factor that distinguishes fraud from error is whether the underlying action that results in the misstatement of the financial statements is intentional or unintentional. Fraud is an intentional act that results in a material misstatement in financial statements that are the subject of an audit. Three conditions generally are present when fraud occurs. First, management or other employees have an incentive or are under pressure, which provides a reason to commit fraud. Second, circumstances exist for example, the absence of controls, ineffective controls, or the ability of management to override controls that provide an opportunity for a fraud to be perpetrated. Third, those involved are able to rationalize committing a fraudulent act. Some individuals possess an attitude, character, or set of ethical values that allow them to knowingly and intentionally commit a dishonest act. However, even otherwise honest individuals can commit fraud in an environment that imposes sufficient pressure on them. The greater the incentive or pressure, the more likely an individual will be able to rationalize the acceptability of committing fraud.   Fraudulent financial reporting need not be the result of a grand plan or conspiracy. It may be that management representatives rationalize the appropriateness of a material misstatement, for example, as an aggressive rather than indefensible interpretation of complex accounting rules, or as a temporary misstatement of financial statements, including interim statements, expected to be corrected later when operational results improve. According to SAS 99 Fraud also may be concealed through collusion among management, employees, or third parties. Collusion may cause the auditor who has properly performed the audit to conclude that evidence provided is persuasive when it is, in fact, false. For example, through collusion, false evidence that controls have been operating effectively may be presented to the auditor, or consistent misleading explanations may be given to the auditor by more than one individual within the entity to explain an unexpected result of an analytical procedure. As another example, the auditor may receive a false confirmation from a third party that is in collusion with management. Although fraud usually is concealed and management’s intent is difficult to determine, the presence of certain conditions may suggest to the auditor the possibility that fraud may exist. For example, an important contract may be missing, a subsidiary ledger may not be satisfactorily reconciled to its control account, or the results of an analytical procedure performed during the audit may not be consistent with expectations. However, these conditions may be the result of circumstances other than fraud. Documents may legitimately have been lost or misfiled; the subsidiary ledger may be out of balance with its control account because of an unintentional accounting error; and unexpected analytical relationships may be the result of unanticipated changes in underlying economic factors. Even reports of alleged fraud may not always be reliable because an employee or outsider may be mistaken or may be motivated for unknown reasons to make a false allegation 2. The Chairman’s Statement A. CPL Holdings Ltd. The Chairman’s Statement of CPL Holdings Ltd. includes several elements that are evidently present in the setting of the company. The Chairman’s Statement of CPL Holdings Ltd. typically indicates a strong public policy regarding governance which should be established in a specific department of the company. This means that laws and legislations with respect to reporting, auditing and other financial activities should be specified in the legal system. Another element that is always present in the Chairman’s Statement of CPL Holdings Ltd. is the proclamation of the existence of a sturdy and well-built regime for practicing internal governance within the company itself. This means that in order for corporate governance be effective, the top level management personnel of the company should be knowledgeable and well-trained in such a way that their actions are still in the bounds of the established legislation of the land. And lastly, the Chairman’s Statement of CPL Holdings Ltd. almost always indicates the need of a network of independent auditors that would serve as the needed link and check of corporate governance of the company in general. This means that an independent body is required in order to monitor whether the actions of the top level management of the company does complement what the legislators have created, particularly the regime governing corporate governance as a whole.    B. Huaneng Power Inc. Traditionally, the Chairman’s Statement of Huaneng Power, Inc. includes the concept of shareholder primacy, and this has been considered as the primary mandate of the directors and senior officers of the company in the context of Hong Kong corporate law. Specifically, the Chairman’s Statement of Huaneng Power, Inc. specifies that all the “energies” of the board should be geared towards the advancement of the shareholders in general. This claim similarly talks about the fiduciary obligation of the board of directors of the company to make the decision making within the organization known to the corporation and its shareholder. The Chairman’s Statement of Huaneng Power, Inc. never fails to indicate that shareholder primacy rests on a couple of general assumptions: (a) the shareholders are the principals “on whose behalf corporate governance is organized;” and (b) it is the shareholders that should be controlling the entire enterprise. These generalizations being included in the Chairman’s Statement of Huaneng Power, Inc. basically places the claim of the said principle on the shareholders, being the primary recipients of and even protected by corporate governance, should be the ones making the decisions in the company, not a privileged few. The problem in the Chairman’s Statement of Huaneng Power, Inc. is that the principle of shareholder primacy reveals what is ideal to the organization. However, the management of Huaneng Power, Inc. claims that in the actual setting, their shareholders entirely do not have any “direct or indirect mechanism of control.” This leads the Chairman to the hypothesis of the existence of “director primacy” in the company contrary to what is traditionally claimed as ideal. Based on the said arguments of the Chairman’s Statement of Huaneng Power, Inc., the principles presented by traditional corporate laws in Hong Kong may possibly be progressively becoming obsolete and impractical in the current setting. The value of the shareholders has considerably seen as diminishing by the more contemporary scholars of corporate law (Kay, 1995). Possibly, the delegation of the decision making power of these shareholders are given to the board of directors such that learned decisions are carried out. However, the Chairman’s Statement of Huaneng Power, Inc. contends that the decision making authority should not be entirely left on the hands of the board of directors. Though it appears that what most claims is rather in effect already, the actions of the directors of Huaneng Power, Inc. should constantly be subjected to the knowledge of the shareholders. 3. Management’s discussion and analysis A. CPL Holdings Ltd. Most of the typical discussions in the management of CPL Holdings Ltd. involve corporate disclosure. CPL Holdings Ltd. believes that corporate disclosure is an important instrument of accountability for their directors and to the shareholders of their company. The management of CPL Holdings Ltd. believes that the use of corporate disclosure takes on a facilitating function for particular members of their company: investors, creditors, regulatory agencies, and the general public. It serves as a function facilitating the decision-making of the said individuals particularly whether or not they are make decisions that would one way or another affect the capital creation of the company. Theoretically, the board of directors of CPL Holdings Ltd. is employed by the shareholders to take into consideration specific elements of the operations of the company. This means that the shareholders of CPL Holdings Ltd. have instilled their trust to these individuals to steer their company towards a better position in the industry. However, in the context of the remuneration of these directors may perhaps be compromised by the possibility of their view on whether their welfare is closely tied to the top management of CPL Holdings Ltd., not the shareholders. For this reason, the disclosure of such remuneration is imperative on the part of the shareholders.  B. Huaneng Power Inc. Huaneng Power, Inc. believes that there are several factors to consider for corporate disclosure to be effective. Their management values the importance of materiality of the information disclosed. Disclosure has a facilitating function for several components of Huaneng Power, Inc. Similarly, it has a facilitating function in the decision involving investments and other operational choices made by the management of the company. Thus, it is important that the information disclosed by the directors of Huaneng Power, Inc. is able to substantially make the stakeholders establish decisions with regards to the internal elements of the company. This brings about the second principle, clear disclosure. This means that the information disclosed to the shareholders of Huaneng Power, Inc. have to be understandable such that it would allow them to draw their respective conclusions to which their decisions will be based ( 1976). Another principle that has been the topic of Huaneng Power, Inc.’s management includes the equal treatment of investors. This indicates that the individual shareholders of Huaneng Power, Inc. should be able to get access on the information disseminated by the company through the same medium. A prejudiced provision of information may well lead to accusations of insider trading. In connection with this principle, the management of Huaneng Power, Inc. looks into the internet as the medium to which company information is disclosed. They found out that with the emergence of the internet becoming one of the major mediums to which their shareholders are able to access information brought about a lot of “gray areas” with regards to the application of specific securities and corporate laws. The creation of the company websites of Huaneng Power, Inc. are still a new conduit to which information is publicly offered, and to such extent there has yet to be considerable legislation, and studies even, that addressed this medium of corporate disclosure. 4. Report of the directors A. CPL Holdings Ltd. Based on the discussion of the directors of CPL Holdings Ltd. regarding the various roles available for its corporate governance, a general theme resonates. It is clear that the directors of CPL Holdings Ltd. believe that corporate governance is aligned with the attainment of the objectives of the corporation. This includes whose and how’s of interest protection within the organization. However, the translation of theory to practice when it comes to corporate governance is still unknown in the company since there is still much debate about who among the various stakeholders should be taken into consideration. However, it is undeniable that from the report of the directors of CPL Holdings Ltd. abovementioned, their corporate governance can be considered as a mere part of a bigger economic context. This means the corporate governance of CPL Holdings Ltd. can be seen in the context of product competition, market factors and macroeconomic policies. As such, corporate governance in the company is also dependent upon institutional, legal and regulatory environments. This being the case, factors such as the ethics, societal and environmental awareness can affect the long-term success of the company (1986). B. Huaneng Power Inc. The presentation of the report of the directors of Huaneng Power, Inc. also paved the way for formulating the criteria for evaluating the corporate governance being implemented in the company. Thus, good corporate governance in Huaneng Power, Inc. can be observed when the proper incentives are provided to the Board and the management in order to ensure the pursuant of the company’s objectives and upholding the interest of the company and its shareholders. In addition, good corporate governance in Huaneng Power, Inc. also sees to the efficient use of its resources. These criteria of good corporate governance in Huaneng Power, Inc. entail the prevention of damage to the interest of the parties involved. Logically, corporate governance is associated with the performance of the company. Even though, the definitions and criteria presented above by the directors of Huaneng Power, Inc. are concerned with businesses. It is evident that the most of the definition and conditions of corporate governance of Huaneng Power, Inc. is applicable to other forms of organizations. This is the case since the organizational structure used in most of the definitions is generic in a sense. The presence of the Board and other stakeholders in Huaneng Power, Inc. can also be observed in other organizations such as educational institutions for example. The premise of governance in Huaneng Power, Inc. is based on the manner of operation. From the Latin root of the word governance itself, which is steering, it can be stipulated that governance in Huaneng Power, Inc. is generic regardless of the nature of the organization since the main objective of governance is to serve as a guide. All organizations, profit or non-profit, need guidance in order to achieve their objectives. ]     5. Corporate governance report A. CPL Holdings Ltd. Corporate governance in CPL Holdings Ltd. possesses different features with reference to the different structures of the corporate sector of the company. This means that the general features of corporate governance in CPL Holdings Ltd. depends on the environment to which the company operates. The focus on corporate governance of CPL Holdings Ltd. has not always been the focus of the businesses. Long ago, the buying and selling of corporation stocks in the company were individualized. Investors were primarily composed of wealthy business people. However, as the market evolved so did the buyers and sellers of the company’s stock. A shift form individual trading soon faded and was replaced by large institutions such as banks, insurance companies and mutual funds to name a few. This is the case since the market became highly institutionalized. As the number of institutional investors increased so did the professional diligence, which was intentional in order to improve the parameter of the stock market. However, these improvements do not necessarily go in accordance to the interests of small investors who are still many in numbers during that time.             Even though, the rationale behind the vested powers of the corporate board of CPL Holdings Ltd. is theoretically for the good, simultaneous slips in the omission of large corporations caused some companies to face pitfalls that threaten the performance of their businesses in general. For example, principal shareholders of CPL Holdings Ltd. traditionally choose the Boards of Directors. In many cases, principal shareholders of CPL Holdings Ltd. have emotional and monetary investments in the company. As such, principal shareholders entrust the overseeing of the company as well as the principle executives to the Board of Executives. Being responsible for the principle executives, the Board is responsible for the hiring as well as firing of the company’s president or chief executive officer. However, this tradition slowly changed in CPL Holdings Ltd. Nowadays, the Board hesitates in firing the president or the CEO since they think that it will only cost time as well as financial losses and thus they would just let go of their interest. In addition, it is now common in CPL Holdings Ltd.  that the president is the one who chooses the Board members. Unfortunately, most of the appointments are based on the relationship of the president’s to the appointee. In addition, the shareholders hardly ever object with the appointments being made by the president and thus, it often becomes the case that the president also takes over the chairmanship of the Board. With two highly important and powerful positions being held, it becomes difficult for the institutional owners to fire the president. B. Huaneng Power Inc.             Huaneng Power, Inc. believes that corporate governance is an institutional arrangement. In addition, it is being assumed that that corporation’s suppliers of finance guarantee themselves that proper return of their investments are viable. This means that Huaneng Power, Inc. views corporate management as a means of protecting the interests of the company’s shareholders. Aside from that, Huaneng Power, Inc. affirms that corporate governance is a process of directing and controlling the company (Cadbury, 1992). They believe that the direction and control of the company is specified by the distribution of responsibilities as well as rights among the parties involved. The connotation of parties involved includes managers, board members and other stakeholders. In addition, Huaneng Power, Inc. believes that good governance also pertains to the guidelines for making corporate decisions, suggesting that it sets the background on which the corporate objectives sit. As such, corporate governance entails responsibility in attaining and monitoring of the set objectives. The focus on the narrow application of corporate governance on the structure and functions of the board of Huaneng Power, Inc. as well as the prerogatives and rights of the shareholders in participating in the decision making process was proposed by its Board of Directors.  As such, this means that good governance in the company pertains to the determining who controls the corporation and how the control will be exercised. Moreover, the allocation of the risks and returns from business activities undertaken is also part of corporate governance of Huaneng Power, Inc. Huaneng Power, Inc. recognized that conflicts between its large shareholders, small shareholders and management can arise brought about by unforeseen factors before the creation of the contract. As such, the company’s corporate governance constitutes the rights entitled to certain parties for the resolution of the disputes.  Huaneng Power, Inc. knows the purpose of its corporate governance, which is to minimize the cost of the conflict between the managers’ and shareholder’s incentives. This can be better reflected upon by going back to the abovementioned scenario where the President of a company tends to horde the available power within the organization by grabbing two major and crucial positions including the chairmanship of the board. This entails that corporate governance in Huaneng Power, Inc. aims to hinder the formation of self-interested managerial behavior. 7. Corporate social responsibility A. CPL Holdings Ltd. The importance of corporate social responsibility in CPL Holdings Ltd. has been resonating. Since corporate social responsibility in CPL Holdings Ltd. covers the issues of interest especially the resolution of conflicting ones, corporate social responsibility is related to the over-all performance of the company. With the resolution or impediment of internal conflicts, smoother decision-making and decision implementation can be secure. This means that interests of the stakeholders of CPL Holdings Ltd. are the same, and they will be able to work as one body in order to achieve their objectives and thus uphold their respective interests within the company. B. Huaneng Power Inc. On the contrary, the absence of good social responsibility in Huaneng Power, Inc. can lead to the worsening of conflicting interests. Each of the stakeholders in the company has the tendency of agreeing with decisions they think will be beneficial to them, even though, it does not translate to the welfare of other stakeholders. This means that various corporate players can assert their own views and perspectives. As such, Huaneng Power, Inc. will no longer function as one and can be described as very man for himself. 8. Remuneration Report A. CPL Holdings Ltd. Employee remuneration in CPL Holdings Ltd. serves as a reward for past performance and as a stimulus to increase future performance.  In the company employee remuneration are called financial stimulants such as incentive wages, profit sharing, bonuses, merit wage increases, and measured day-work.  These items are increasing in importance as part of the compensation package because bigger and costlier benefits continue to be major goals of labor unions. These benefits are often emphasized by individual employees in choosing or remaining with an employer. Other factors leading to increased emphasis upon these items are: increased leisure time available to all workers; higher levels of affluence; and further social legislation by governments.             CPL Holdings Ltd. has long been concerned with welfare programs designed to protect their employees, or the employee and his dependents, against the basic hazards of life such as the problems of old age, disability, illness and accidents, unemployment, and health.  Some of the programs that have been established in CPL Holdings Ltd. to provide a measure of economic protection against these contingencies include private pension plans, private death and disability benefits plans, workmen’s compensation, unemployment compensation, and Old-Age, Survivors, and Disability Insurance.  B. Huaneng Power Inc. Many of the remuneration programs in Huaneng Power, Inc. such as private pension plans, were established directly by the management. In other instances the remuneration programs were initiated by the board of directors, at either the state or the federal level, even though they are largely financed by industry. Old-Age, Survivors, and Disability Insurance, for example, while established by the board of directors is financed equally by the company and its employees, and workmen’s compensation was created by the management at but is also financed entirely by the company. To the average worker in Huaneng Power, Inc., employee benefits are a concrete and visible evidence of the good life which is his goal. He tends to perceive them as a means of security and a means of tax saving–which is a pleasure to everyone. RECOMMENDATIONS Deriving from the analysis between the two companies, corporate governance capabilities and ethical reporting, many strategic options would become imperative. It is therefore essential to evaluate these strategic options as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders. A. Business Level Strategy There is definitely a need to reconcile both the inside-out and outside-in capabilities for Huaneng Power, Inc. While the company’s corporate governance capabilities and ethical reporting involves focusing on its core competencies following its resource base, the company will be put into a disadvantageous position should it choose to neglect both the macro as well as micro industry environment. Therefore, Huaneng Power, Inc. has to be aware of the latest corporate governance capabilities and ethical reporting changes, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as market sensing, customer linking, channel bonding and technology monitoring. The advantages enjoyed by Huaneng Power, Inc. may come in the form of increased revenues. Knowing what the market demands and the latest trends could help the company fully exploit its research and development capabilities to come out with corporate governance capabilities and ethical reporting initiatives which are not also cost-effective but also high in quality. The strategic option can even be used as marketing tool where the focus is on staying close to their customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the company. Nevertheless, the mentioned strategic option seems the most practical for Huaneng Power, Inc. in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long as the company’s core business is not threatened. By virtue of Huaneng Power, Inc.’s centralized control of its business, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of operations. Understanding the strategic importance of corporate governance capabilities and ethical reporting is something the company has to be familiar with. Huaneng Power, Inc. normally practices a centralized and globally scaled configuration of operations and capabilities. This allows information dissemination to be retained. CONCLUSION The results of the analysis carried out on the corporate governance capabilities and ethical reporting of Huaneng Power, Inc. and CPL Holdings Ltd. indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the corporate governance capabilities and ethical reporting of both companies could still be expected to improve faster than average. The review of both company’s corporate governance and ethical reporting capabilities and resources revealed very little inconsistencies regarding their strategies. This is coherent with their traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for Huaneng Power, Inc. The analysis among the environment as well as the corporate governance and ethical reporting capabilities of Huaneng Power, Inc. revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure the competitiveness of the company. Also, Huaneng Power, Inc. has to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.   Credit:ivythesis.typepad.com

Annual Reports

ANNUAL REPORT Introduction Annual reports involve notes regarding the inspection and verification of the accuracy of financial records ...