The assessment: Background: You have recently graduated as an accountant/ financial adviser and your first position is w
Posted: Sun May 08, 2022 3:56 pm
The assessment:
Background:
You have recently graduated as an accountant/ financial adviser
and your first position is with an integrated accounting and
financial services organisation in Melbourne.
One of the clients in the company BW Enterprises Ltd a small
publicly listed company. You have been asked by your senior manager
to sit in on a meeting of the client and the directors and to take
notes on the issues raised and then to prepare a report on the
matters for review by your senior manager and the managing
partner.
Expectations in preparation of the report:
The organisation that you work for has a high profile in the
profession and therefore expects all staff to demonstrate a high
degree of professionalism.
In the advice that you are to prepare you are expected to
demonstrate that you understand the relevant law and how the law
applies to the issues raised by the client and come to a logical
conclusion.
You are also expected to be able to justify your conclusion by
reference to the relevant legislation in the Corporations Act, ASIC
Act, or any other legislation you think appropriate and case
law.
Your senior manager has high expectations of you and will
not accept any grammatical errors or unsubstantiated statements or
conclusions made in your report. He will not tolerate any material
copied from textbooks, google or any other source which you attempt
to pass off as your own material.
You are currently under a three-month probation period with the
organisation and so far, your performance has been deemed
adequate.
Your performance on this task could determine whether you
continue being employed or not.
The client and issues:
BW Enterprises Ltd is a small capital sized company incorporated
in Melbourne on 3 February 2000. The directors of the company
are:
Brian the CEO,
Gurinder the IT director
Voon-Ling the marketing director
Jose is the CFO and finance director
Swee-Lim is the purchasing director
All are executive directors of the company
All the executive directors own their respective shares in the
company via their family trusts. Together they own 65% of the
shares equally.
Chiew is a non-executive director who was nominated by the
Halliwell Ltd which owns 15% of the shares in BW Enterprises Ltd.
Halliwell Ltd owns 15% and the public owns the remaining 20%.
The company has been involved in the manufacture, distribution
and installation of solar panels and batteries throughout Australia
and New Zealand.
It has developed new technology in relation to the production of
solar panels but needs more funding to get it into a commercial
stage.
The financial results for the year ended 30 June 2021 show that
the company has been profitable since 2015. However it has no
income tax liability because of the prior year losses. The CFO Jose
anticipates that the losses will be used up by 2022 and that the
company will have an income tax liability. The interim financial
statements as at 30 April 2022 show the following:
Total assets:
$37m
Liabilities:
$28m
Net shareholder funds:
$9m
The net shareholder funds is made up of:
the issued share capital
$12m
accumulated
losses:
($3m)
Operating revenue
$15m
Operating expenses
$12.5m
Due to the issues of COVID during the last 2 years and the
current conflict in Ukraine, it has placed stress on the company’s
financial position and the ability to develop the new technology.
Many of the software developers and engineers involved were based
in the Ukraine and this has slowed down the development of the new
technology.
Brian and Voon-Ling have requested a meeting to discuss several
issues that have arisen and would like your advice on the matters
plus any other recommendations you as experts may have
considered.
Issues:
However Gurinder has also used the
software and the data within the software to mail out to people
political information to assist him in the upcoming state
election.
Brian is not that concerned as he
believes that if Gurinder gets elected he can help the company get
State Government contracts.
Voon -Ling is not so happy but has not told the other directors
about this.
The other directors are not happy
about Chiew’s attitude and would like to remove him as a director
but are mindful he represents Halliwell Ltd which owns 15% of the
company.
Swee Lim as the purchasing director
has been asked to look at other countries as well as Australia to
develop alternative suppliers of parts so the supply chain issues
caused by COVID do not arise in the future.
Her god father has contacts in several
countries in Asia and South America that could supply the parts
cheaper than any other suppliers. She was authorised under her
employment contract to order parts up to $2m (AUD). Any contract
above that amount needed the approval of the Board of
directors.
She called a meeting of the Board of
directors but only she Voon-Ling and Brian turned up at the
meeting.
Under the constitution of the company
the quorum for Board meetings is three but one must include the
non-executive director Chiew.
Swee Lim on behalf of the company signed the contract for
$5m.
Swee Lim’s god father also bought her
a diamond necklace and gave her a “red packet” containing
$50,000.
Swee Lim did not consider or undertake
a review of the advantages of manufacturing in Australia on the
basis that “Australia is not a manufacturing country”. She advised
the board of the directors that it was better to have
suppliers throughout Asia and South America and not in
Australia.
To combat the current financial issues
happening again the directors agreed that the company needed to
raise funds to:
They are unsure whether to seek money
from the public or ask Halliwell Ltd to invest more or do a rights
issue or some other alternative.
They are mindful that by issuing more
shares to Halliwell Ltd they could lose control of the company.
Required:
From the information above you are required to provide advice to
the Board of directors of BW Enterprises Ltd:
(15 marks)
Background:
You have recently graduated as an accountant/ financial adviser
and your first position is with an integrated accounting and
financial services organisation in Melbourne.
One of the clients in the company BW Enterprises Ltd a small
publicly listed company. You have been asked by your senior manager
to sit in on a meeting of the client and the directors and to take
notes on the issues raised and then to prepare a report on the
matters for review by your senior manager and the managing
partner.
Expectations in preparation of the report:
The organisation that you work for has a high profile in the
profession and therefore expects all staff to demonstrate a high
degree of professionalism.
In the advice that you are to prepare you are expected to
demonstrate that you understand the relevant law and how the law
applies to the issues raised by the client and come to a logical
conclusion.
You are also expected to be able to justify your conclusion by
reference to the relevant legislation in the Corporations Act, ASIC
Act, or any other legislation you think appropriate and case
law.
Your senior manager has high expectations of you and will
not accept any grammatical errors or unsubstantiated statements or
conclusions made in your report. He will not tolerate any material
copied from textbooks, google or any other source which you attempt
to pass off as your own material.
You are currently under a three-month probation period with the
organisation and so far, your performance has been deemed
adequate.
Your performance on this task could determine whether you
continue being employed or not.
The client and issues:
BW Enterprises Ltd is a small capital sized company incorporated
in Melbourne on 3 February 2000. The directors of the company
are:
Brian the CEO,
Gurinder the IT director
Voon-Ling the marketing director
Jose is the CFO and finance director
Swee-Lim is the purchasing director
All are executive directors of the company
All the executive directors own their respective shares in the
company via their family trusts. Together they own 65% of the
shares equally.
Chiew is a non-executive director who was nominated by the
Halliwell Ltd which owns 15% of the shares in BW Enterprises Ltd.
Halliwell Ltd owns 15% and the public owns the remaining 20%.
The company has been involved in the manufacture, distribution
and installation of solar panels and batteries throughout Australia
and New Zealand.
It has developed new technology in relation to the production of
solar panels but needs more funding to get it into a commercial
stage.
The financial results for the year ended 30 June 2021 show that
the company has been profitable since 2015. However it has no
income tax liability because of the prior year losses. The CFO Jose
anticipates that the losses will be used up by 2022 and that the
company will have an income tax liability. The interim financial
statements as at 30 April 2022 show the following:
Total assets:
$37m
Liabilities:
$28m
Net shareholder funds:
$9m
The net shareholder funds is made up of:
the issued share capital
$12m
accumulated
losses:
($3m)
Operating revenue
$15m
Operating expenses
$12.5m
Due to the issues of COVID during the last 2 years and the
current conflict in Ukraine, it has placed stress on the company’s
financial position and the ability to develop the new technology.
Many of the software developers and engineers involved were based
in the Ukraine and this has slowed down the development of the new
technology.
Brian and Voon-Ling have requested a meeting to discuss several
issues that have arisen and would like your advice on the matters
plus any other recommendations you as experts may have
considered.
Issues:
However Gurinder has also used the
software and the data within the software to mail out to people
political information to assist him in the upcoming state
election.
Brian is not that concerned as he
believes that if Gurinder gets elected he can help the company get
State Government contracts.
Voon -Ling is not so happy but has not told the other directors
about this.
The other directors are not happy
about Chiew’s attitude and would like to remove him as a director
but are mindful he represents Halliwell Ltd which owns 15% of the
company.
Swee Lim as the purchasing director
has been asked to look at other countries as well as Australia to
develop alternative suppliers of parts so the supply chain issues
caused by COVID do not arise in the future.
Her god father has contacts in several
countries in Asia and South America that could supply the parts
cheaper than any other suppliers. She was authorised under her
employment contract to order parts up to $2m (AUD). Any contract
above that amount needed the approval of the Board of
directors.
She called a meeting of the Board of
directors but only she Voon-Ling and Brian turned up at the
meeting.
Under the constitution of the company
the quorum for Board meetings is three but one must include the
non-executive director Chiew.
Swee Lim on behalf of the company signed the contract for
$5m.
Swee Lim’s god father also bought her
a diamond necklace and gave her a “red packet” containing
$50,000.
Swee Lim did not consider or undertake
a review of the advantages of manufacturing in Australia on the
basis that “Australia is not a manufacturing country”. She advised
the board of the directors that it was better to have
suppliers throughout Asia and South America and not in
Australia.
To combat the current financial issues
happening again the directors agreed that the company needed to
raise funds to:
They are unsure whether to seek money
from the public or ask Halliwell Ltd to invest more or do a rights
issue or some other alternative.
They are mindful that by issuing more
shares to Halliwell Ltd they could lose control of the company.
Required:
From the information above you are required to provide advice to
the Board of directors of BW Enterprises Ltd:
(15 marks)