Essays on Analysis of Financial Statement and Reputation - Leighton Company Case Study

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The paper "Analysis of Financial Statement and Reputation - Leighton Company" is an outstanding example of a finance and accounting case study. The reputation  of any company is never reported in the financial statement reports. According to the CIMA, (2007), the reputation of an organization cannot be reported in the financial because it does not qualify as a fixed asset or liability by itself, hence valuation in isolation impossible. According to Walker (2010), the most ideal and precise definition of corporate reputation is the one originally put forward by Fombrun, (1996) which states that reputation is the collective representation of an organization’ s previous actions and a result which labels its capacity to deliver valued results to stakeholders.

Reputation is therefore based on perception, the collective judgment, positivity or negativity and relative (Walker, 2010) Reputation cannot be accounted for in the balance sheet as an asset because the balance sheet does not report perceptions, ideas or people who cannot be owned or rented. However, the company’ s reputation is an asset or liability to the extent it influences the cash flow of a company (CIMA, 2007, P. 11).

Likewise, the reputation of a company can only be valued by analyzing its relative effect on the return of investment. Though the value of reputation is not as concrete as property or money, it is possible to value it through forecasting on the degree to which it can affect the share price. Reputation is vital in any business organization because of its superior and exceptional capability to influence the buying decisions made by customers. The limitations affiliated with valuation and reporting of reputation in the financial statements emanate from the fact that reputation is purely founded on personalities and perceptions which means it cannot be sold or bought but has to be earned with time.

Nevertheless, reputation has to be reported, and the best way to go about it is through a narrative on the non-financial sector of a company’ s Financial Report. 2. (1). Disclosures on Ethical and Ethical behavior by Leighton Ltd in their 2011 report: The disclosures of ethic and ethical behavior In the Leighton Ltd 2011 report can be found in the Corporate Governance Report from page 30-43.

The report indicates that Leighton Group has fulfilled all the rules and commendations of the ASX Corporate Governance Council for the year ending June 2011 with the exception of one. The only principle not yet fulfilled is ASX council recommendation 2.1 that requires majority independent directors. The report also explains why this recommendation has not been followed. The principles of corporate governance that the LEIGHTON company implemented to ensure ethical behavior include the following; Provision of a strong base for effective management and oversight: The company has provided information regarding how they achieve oversight through the inclusion of independent and non-executive board meeting. The company has provided information on how they add value and ensure the right and smart decision.

According to the Leighton annual report, new Directors receive induction training and their performance continually reviewed. The disclosures on ethic and ethical behavior are found on the third principle on corporate governance recommendations. Implications from the report indicate that the company. The company has disclosed the ethics code of conduct for all the employees and the compliance supervised by the Ethics and Compliance Committee: The company has disclosed its compliance with the ASX Listing Rules by training employees continuously on the policies to prevent insider trading.

References

Barnett, M. L., & Pollock, T. G. (2012). The Oxford handbook of corporate reputation. Oxford: Oxford University Press.

Jarboe, K. (2007). Valuing reputation as an asset. Retrieved from http://www.athenaalliance.org/weblog/archives/2007/07/valuing_reputat.html

McKenzie, N., & Baker, R. (2013, October 4). Going rogue. Retrieved August 13, 2014, from http://www.theage.com.au/national/going-rogue-20131004-2uzy5.html

The Australian Financial Review. (2013, October 3). Wal King ‘approved Iraq bribe’. Financial Review. Retrieved from http://www.afr.com/p/national/wal_king_approved_iraq_bribe_7A7XodY9Jtfu9Hki4guAO

The Chartered Institute of Management Accountants. (2007). Corporate reputation. Perspectives of measuring and managing a principal risk, 11-12. Retrieved from http://www.cimaglobal.com/Documents/Thought_leadership_docs/cid_exrep corporate_reputation_june07.pdf

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