Advanced Accounting Issues (ACC5AAI)
SEMESTER 2, 2016
Due date: 7 October 2016, 5pm in SS114 (Kamran Ahmed)
Word Length: 1,500 words maximum
Group Size: Each Group should be between 4 and maximum of five students
Group Formation: Use the LMS “group assignment allocation” to form groups

Mark Allocation: 15%
All assignments must have a Signed Statement of Authorship form to be downloaded from
the LMS. Assignments without this form will be awarded “0” mark. Each STUDENT is
required to submit one form.
There will be NO Assignment Box for ACC5AAI. You should submit the printed copy of
your assignment to Professor Kamran Ahmed in SS114. If I am not around you can slide it
under the door.
Early assignments can be handed over to me in my room SS114.
Electronic submission will NOT be accepted for this assignment. However, you can submit
a printed copy to me through your fellow students along with Statement of Authorship if there
is a genuine reason for not coming to the campus on the due date.
You are required to submit the assignment with a maximum of 1500 words. Assignments
above this word limit will be returned for resubmission.
Assignment tasks must be presented in a professional manner (word processed).
Submissions must be properly referenced (refer to the University Style Guide). Use of

improper or inappropriate grammar, punctuation and excessive spelling mistakes will result in
the assignment being returned and the student being required to resubmit the work before a
mark is awarded. The resubmitted assignment will accumulate the same penalty as late
submissions until it has been presented in an acceptable format.
Late submissions will incur a penalty of as per the policy stated in Subject Learning Guide.
Applications for extensions must be lodged with the Subject Coordinator before the due
date in writing for granting an extension (medical problems etc).
Plagiarism is a serious matter; all students involved will be referred to the University’s
appropriate authority.
This assignment requires you to summarize and critically review the challenging questions
relating to accounting theories and accounting policies. It gives an opportunity to
demonstrate your level of understanding of the relevant accounting theories and applying
them to company financial reporting.

Question 1

(9 Marks)

Read the extract from Stewart Oldfield’s article ‘A step too far crucifies small
business’ reproduced in Financial Accounting in the News 3.6 and answer the
following questions:

Financial Accounting in the News: A step too far
crucifies small business
Stewart Oldfield
The Australian Financial Review, 4 June 2004, p. 81
Alan and Wilma McMinn thought they had it made when they bought a Gold
Coast child-care centre from ABC Learning’s Eddie Groves in 1995.
They had a supportive commercial manager from National Australia Bank
who endorsed a jointly penned business plan with a $800 000 loan to exploit
one of the fastest growing population corridors in the country. They had
switched from ANZ Banking Group because of their faith in the manager,
who, they say, showed a keen understanding of the child-care business.
The 1996 financial year produced a net profit of $250 000, prompting plans
to expand, they say. They planned to build an adjoining child-care facility
and have it ready for the start of the 1997 school year.

But changes were afoot at their bank under the then general manager of
Australian financial services, Frank Cicutto. Job cuts and branch closures
were in full swing as each of the major banks sought to cut costs.
The McMinns say their trusted bank manager was replaced and a string of
less-capable bank staff were appointed to manage their account.
Nevertheless, the McMinns say that in September 1996 they were told by a
new manager that the bank remained committed to their expansion.
They say the new manager told them that head office was in a mess due to
ongoing restructuring and staff changes, but the loan would be approved so
they should proceed while the necessary paperwork was completed. The
McMinns started building, but then in December they say they were ordered
to stop work without explanation.
Four agonising months passed before approval to resume building was
finally granted. The McMinns believe the delay caused by the internal
restructuring crucified their plans because they missed the start of the new
school year. This started them on a debt cycle that eventually led to the
appointment of receivers.
They say they had 16 different commercial managers at the bank between
October 1995 and July 2000 and have been left bitter about their treatment
by the bank.
Their dispute with the bank is now before the courts and the bank is saying
little on the matter. ‘We have a general policy of not commenting on
matters of this kind,’ a NAB spokesman said.
But it seems the internal restructuring in the country’s most profitable
small-business lending franchises continues to rub customers up the wrong
In its latest financial results, NAB reveals that it is losing market share at the
sole-proprietor end of the business lending. ‘Every bank has got a different
version of what SME relates to, but what we are clearly doing is losing
market share at the sole proprietor end,’ the head of NAB’s Financial
Services Australia unit, Ian MacDonald, says.
But it is not the $360 000 million foreign currency option scandal that is
being blamed for the departure of the lucrative sole proprietors.
Instead, it is a new round of restructuring triggered by a centralisation
program kicked off two years ago under Cicutto’s Positioning for Growth

The initiative resulted in about 110 business bankers [being] pulled out of
the field and into capital-city offices.
The idea was that NAB could centrally manage its small-business customers,
sacrificing face-to-face contact in the process.
The bank now admits it went too far with the efficiency drive.
The bank has moved to have a small-business banker in each of its 110
business-banking centres around the country, MacDonald says. Further it
will position a business banker in a retail branch if there is a need.
It is an embarrassing and costly turnaround that has gone largely unnoticed
by investors as they focus on the impact of the currency option scandal.
The drive for efficiency has seen the market leaders in small business
banking, NAB and CBA, become too willing to call receivers in on a client
when there is a whiff of trouble, Evan Jones, of the economics faculty at the
University of Sydney, says.
Staff turnover has contributed to the demise of an unknown number of NAB
borrowers, he says, sympathising with suggestions that NAB will transfer a
bank manager who gets too close to clients.
‘There is no moral or legal pressure on these banks to act in any normal
principles of ethical standards or corporate governance. The imbalance of
resources which they can bring and their long-standing relationship with the
receivers means they can count on getting away with whatever they want to
do. I would like to think that there is a link between NAB’s behaviour and
loss of market share,’ he says.
The banks have promoted studies that find small business is getting a better
deal from the banks, perhaps in fear that the federal government might
introduce legislation to improve service to the country’s 1.2 million smallbusiness operators, as has the government in the UK.
Answer 3 questions below (each sub-question carry 3 marks)
(a) Applying Stakeholder Theory, would the bank care about the concerns
of the small business sector and regional business communities?
(b) Applying the political cost hypothesis of Positive Accounting Theory,
explain the claim in the article that ‘The banks have promoted studies that
find small-business is getting a better deal from the banks, perhaps in fear
that the federal government might introduce legislation to improve service
to the country’s 1.2 million small-business operators, as has the government
in the UK’.

(c) If rising bank closures and management turnover are not what the
community expects, how would Legitimacy Theory predict how the bank
might react?

Lion Nathan rethinks bricks and porter strategy
Leon Gettler
The Age, 29 January 2004, p. 3
Lion Nathan has put its pubs operation under review, four years after embarking on an aggressive
plan in which it spent $65 million on hotel assets to ratchet up its low share of the Victorian beer
The brewer said yesterday that it was reviewing its ownership of 41 pubs in Melbourne and
Geelong after receiving expressions of interest. This is expected to involve various sale and
leaseback options.
Contracts for long-term supply arrangements are expected to be part of any deal.
Lion Nathan is revisiting the pubs business after its rival, Foster’s, spun off its own hotels and
gaming business, Australian Leisure and Hospitality.
Lion Nathan’s pub-buying spree was at odds with its strategy of not owning or operating hotels,
but the brewer wanted to make an exception in Victoria, the backyard of Foster’s.
In June 2000, it had a 13 per cent share of the Victorian beer market but by November 2003, Lion
Nathan’s share had crept up to only 13.2 per cent.
Lion Nathan had shrewdly targeted the 18-to 25-year-old segment in Victoria, but the strategy has
been criticised because of the difficulties of coming in as an outsider and using an exclusive retail
network to drive market share from such a low base.
In that time, Lion Nathan had also written down the value of its Victorian hotels.
Yesterday, the group said the change did not indicate a reduction in its plans for Victoria but
rather a switch in focus by increasing its investment across brands including Tooheys, Becks,
Hahn, James Squire and XXXX.
Analysts said yesterday that the news was in line with Lion Nathan overhauling its Victorian
strategy, something which had been under way for 12–18 months.
Lion Nathan is believed to have raised $20 million from the sale and leaseback of about a third of
its Victorian portfolio about 12 months ago.
In a statement to the market, Lion Nathan said it was not looking to sell individual venues and
was committed to retaining ownership and control of the portfolio ‘if that will deliver the best
outcome for Lion Nathan and maximise shareholder value’.
Hotels in the brewer’s portfolio include Pugg Mahone’s and The Imperial in the central business
district, the Albert Park Hotel, Limerick Arms and Golden Gate in South Melbourne and the

Builders Arms in Fitzroy. Lion Nathan Australia managing director, Andrew Reeves, said
yesterday: ‘Hotel ownership and management was only one part of our Victorian growth strategy,
the objectives of which have been largely achieved. We have never viewed hotel ownership as a
core business and, given the recent focus on investment in the sector, we considered that now was
an opportune time to review the future of these venues in our Victorian growth strategy’

Read the above newspaper article by Leon Gettler called ‘Lion Nathan rethinks bricks and
porter strategy’ in Financial Accounting in the News below and answer the following
questions: (each sub-question carries 1.5 marks)
(a) Identify some benefits that might accrue to Lion Nathan as a result of the sale and leaseback
(b) Would you expect the related leases to be finance leases or operating leases? Explain your
(c) How should Lion Nathan account for any profit or loss on the sale of the pubs??
(d) If it sells the pubs and then leases them back would you expect Lion Nathan to change how it
accounts for the depreciation of the buildings??