Financial analysis of Aeon Group and Westfield Group

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A Comparison of the Financial Statements of

Aeon Group (Japan) and Westfield Group (Australia)

Assignment Due: 19th May, 2014, 4pm

Handed in: 19th May, 2014

Word Count: ______

Table of Contents

1.Executive Summary.......................................................

2.Introduction..............................................................

3.Differences in Financial Statements.........................................

4.Five recognition and measurement items....................................

5.Similarities and Differences of the Notes to Financial Statements and Disclosure.

6.Overall provision and presentation.........................................

7.Conclusion...............................................................

8.References...............................................................

1. Executive Summary

2. Introduction

This report will analyze and critically evaluate the financial statements of two retail corporations, Aeon Group (Japan) and Westfield Group (Australia). The Aeon Group comprises of a variety of competitive companies and currently reports the highest operating revenue within Japan’s retail industry (Aeon, 2014). AEON consists of more than 250 companies, with sister companies located in Mainland China, Hong Kong, Indonesia and Malaysia. Strategically, the company strives to support its customers’ everyday life, while generating Group synergies (Nordqvist, 2014).

Meanwhile, the Westfield Group is an Australian based company with one of the world’s largest shopping centre portfolios, consisting of 90 centres across Australia, New Zealand, United States, and the United Kingdom (Westfield Group, 2014).Westfield Centres are highly productive and are an essential part of the community’s social and economic fabric.In 2013, more than 1 billion customer visits generated over $40 billion in retail sales (Westfield Group, 2014). The Group’s strategy is to develop and own superior retail destinations in major cities by integrating food, fashion, leisure and entertainment and by using technology to better connect retailers with consumers.

3. Differences in Financial Statements

There are several differences with the financial statements between Aeon and Westfield. This is to be assumed as the two companies are based on two significantly different accounting cultures – Aeon’s on Japan’s conservatism and secrecy and Westfield’s on Australia’s high transparency and optimistic outlooks (Doupnik & Perera, pp. 272-275). The most significant difference is in the types of statements released to the public. Aeon, since 2010, has only released a Financial ‘Review’ which includes a short, consolidated financial summary and results from the annual financial statements in less than 30 pages (Aeon, 2014). This compares to Westfield, who releases a comprehensive Annual Report for the company and ranges over 100 pages of extensive information for the public (Westfield Group, 2014).

The levels of details provided within the reports have considerable difference as well. Aeon provides limited information and wording on the current financial situations of the company. The report includes numerous graphs and tables that are easy to read and diagnose and a concise summary reflective of these results, whereas with Westfield, the information is in abundance. The Director’s report alone gives plenty of information for the public to make conclusions on investment opportunities and decisions and is supported by company goals, strategic plans and Corporate Governance Statements prepared by the Board of the company. The financial notes are plentiful and allow investors to have a great deal of detail of the company’s current financial situation. Westfield includes a number of graphs from the information gathered by the company’s research and development teams and from the Australian Securities Exchange (ASX).

Within Westfield’s Report includes an Independent Audit Report conducted by Ernst & Young, a multinational professional services firm (Westfield Group, 2013, p.34). This is reflective of the Anglo-American professionalism culture where auditing of companies is of high importance (Doupnik & Perera, p.37). This is compared to the conservative natured company, Aeon, where outside reports of a company’s financial standing are absent in the report as it is not common to have outsider’s audit companies in Japan.

In addition, further differences can be noted in the financial statements included in each report. In Aeon’s review, there are a lack of extensive statements. It is limited to; Consolidated Balance Sheets and Consolidation Cash Flow Statement (Aeon, 2013, pp 7-10). This is opposed in comparison to the detailed statements in the Westfield report, which includes a vast range of statements including; Income Statement, Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity and Cash Flow Statement (Westfield Group, 2013, pp 35-39). To support statement results, the Corporate Governance Statement is provided to show how the statements will impact on company plans and procedures. This is a vital document for potential investors and current stakeholders who want to know how the business is run and profits or losses are produced and implemented back into the company. Additionally, investors and shareholders have access to over 60 pages of notes to support and explain the circumstances presented in the financial statements, once again highlighting a substantial difference in the reporting and level of detail expectations of the two companies.

After reviewing the documents, although the format may differ significantly, the context and terminology of both reports remain consistent and concise to meet all requirements of Australia’s (AASB) Accounting Standards Board AASB 101-7 Presentation of Financial Statements (AASB101, 2007) and Accounting Standards Board of Japan’s (ASBJ) Technical Committee for the Accounting Standards for Financial Statement Presentation (ASBJ). This seems to be the only similarity in the details of the annual reports and reviews of the two companies.

These comparisons have shown the significant differences between Aeon’s financial statements and disclosure of information details with Westfield’s report, highlighting the impact of different accounting cultures within countries on local businesses.

4. Five recognition and measurement items

5. Similarities and Differences of the Notes to Financial Statements and Disclosure

There are a number of similarities and dissimilarities with regards to the level of disclosure contained in Aeon’s and Westfield’s notes to the financial statements. While a quick review reveals similarities in the coverage type and layout of the notes, a more detailed inspection unveils significant differences in the level of disclosure of information and the quantitative depth of this information. Parallels can be drawn between the two company’s scope of information, with each business covering accounting policies, revenues, derivatives, costs, current and non-current assets and subsequent events (Aeon, 2013) (Westfield, 2013). Nevertheless, comparisons can clearly be drawn in the level of detail of the information and numerical analysis provided. Some specific divergences between the levels of disclosure for each company, are outlined in the notes for the consolidation of the financial statements (Aeon, 2013, p. 10) (Westfield, 2013, p. 41) and Investments properties (Aeon, 2013, p. 20) (Westfield, 2013, pp. 48-49).

With regards to the consolidation and classification of their financial statements, both companies arguably conform to the stereotypical expectations of their respective cultures. In this case, Aeon provides a succinct summary outlining their methodology, stating that the company prepared its consolidated financial statements in accordance with the provisions set by the Japanese Financial Instruments and Exchange Act and the accounting principles generally accepted in Japan. Further, Aeon briefly acknowledges that certain reclassifications and rearrangements were made in order to present the reports in a more internationally readable manner (Aeon, 2013, p. 10). Arguably, this brief summary is consistent with Japan’s historical reporting standards, relating to low level disclosure and secrecy. Meanwhile, Westfield provides far more extensive details concerning the practices implemented for the consolidation of their statements, outlining specific laws and regulations that were conformed to, as well as confirming compliance with both the Australian (AASB) and International (IASB) Accounting Standards Boards (Westfield Group, 2013, p. 41). Further, while both companies recognize their respective accounting authorities, unlike Aeon, Westfield explicitly identifies compliance to key requirements of the AASB including AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income; and AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (Westfield Group, 2013, p. 41). Consequently, these details emphasize the high level of disclosure and openness of financial reporting in Anglo-American cultures.

In addition, further differences and similarities can be noted in the level of disclosure concerning information about each company’s respective investment properties. Similarly, both companies provide running figures outlining the performance of their respective investment properties. However, Aeon again provides only a brief summary, compared to the level of disclosure provided by Westfield. Here, Aeon simply details the carrying amounts, increases in balances, and fair values of the properties as a whole (Aeon, 2013, p. 20). And while Westfield also provides a similar summary (Westfield Group, 2013, p.48), it goes on to provide an extensive examination of its property investments types, including its shopping centre assets and the performance of each of these investments (Westfield Group, 2013, p. 49). Arguably, these comparisons again highlight the differences in the reporting and disclosure expectations of the two companies.

6. Overall provision and presentation

The overall provision and presentation of the two annual reports varies considerably. While Westfield’s annual report provides a typical illustration of a standard annual review, Aeon’s “Financial Review” provides a much more targeted summary of the company’s financial performance. Consequently, Aeon does not provide in its review, anything beyond the financial statements, notes to the financial statements and auditors report. Furthermore, this has been the case for the company since 2010, which was the last time Aeon produced a full, extensive annual report. Since this time AEON has opted to provide a much more ‘current’ synopsis of the company’s general performance available on the company’s website (Aeon, 2014).

7. Conclusion

After the analysis of Aeon’s and Westfield’s annual review and report, its fair to conclude there are significant differences between the two companies, arguably due to the two countries cultural influences on accounting standards.

8. References

Accounting Standards Board of Japan. The Technical Committee for Financial Statement Presentation. Retrieved 07 May, 2014. <https://www.asb.or.jp/asb/asb_e/technical_committees/financial_statements/index.jsp>

Aeon. 2014. About Aeon. Retrieved 11 May, 2014. < https://www.aeon.info/en/aboutaeon/>

Aeon. 2013. Aeon Review 2013. Retrieved 11 May, 2014. <http://v4.eir-parts.net/v4Contents/View.aspx?template=ir_material_for_fiscal_ym&sid=4409&code=8267>

Australian Accounting Standards Board. AASB 101. Retrieved 07 May, 2014. <http://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-04_COMPsep05_01-06.pdf>

Doupnik. T & Perera, H. (2011). International Accounting. McGraw-Hill College,

Nordqvist, J. 2014. AEON Co., Ltd. – Company Information. Retrieved 11 May, 2014. <http://www.marketbusinessnews.com/aeon-co-ltd-company-information/16275>

Westfield Group. 2014. Corporate Westfield – About. Retrieved 11 May, 2014. <http://corporate.westfield.com/about/>

Westfield Group. 2013. Annual Report 2013. Retrieved 11 May, 2014. <http://corporate.westfield.com/wp-content/uploads/2014/02/AR13-Group-Financials_D9.pdf>

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