Project Report on Earnings Management Techniques
Student Name:
Professor:
December 11, 2019
Table of Contents
    S.No.
    Table of Contents
    Page No.
    1
    Introduction
    3
    2
    Brief of the Company
    3-4
    3
    Company’s Financial Performance
    4
    4
    Earnings Management Techniques
    5-11
    5
    Conclusion
    11
    6
    References
    12
Introduction
Every business has its own working and a company’s earnings are the best way to understand the running and success of its business activity. It is the most powerful indicator as earnings mean profitability of a business. All the stakeholders, investors, creditors, vendors look at the profitability figures to see how attractive a particular company looks to work with. For this earnings management plays a key role. It helps in determining the share price of the company, raising capital from financial markets and, satisfying vendors and customers’ interest. The company chosen for project study and evaluation is Bellamy’s Organic. It deals in several types of baby food products with global distribution network. We will study the company’s earnings structure and analyze it with different earnings management techniques. Finally, the project concludes that corporate governance, following rigorous accounting standards, role of internal and external audit committee, all significantly contribute to proper earnings management in an organization.
Brief of the Company
Company Name: Bellamy’s Organic
Bellamy’s Organics makes certified, organic, nutritious baby food and formula based in Australia. There is a special team of experts who research and create superior quality baby food and formula milk organic and delicious. The major sourcing of ingredients is from Australia, but the raw material unavailable is sourced from other places as well.
Product Range:
· Baby Formula
· Baby Food
· Cereal
· Pouch
· Pasta
· Rusks
· Snacks
Organic Farms
· Esperance Bay Apple Orchard in Dover Tasmania
· De Bondt Organic Dairy Farm
· More Organics farm Products
Company’s Background
Bellamy Organic group was founded by Tasmanian women in the year 2004. From the beginning the company had following objective: Certified Organic, No Artificial Preservatives, No Artificial Colors, Made in Australia, No Artificial Flavors.
Mission Statement
The founder rightly said the mission of the company is, “A pure start to life”. They aim to make nutritious, healthy, organic food.
Company’s Financial Performance:
Bellamy’s Organics has continued to post impressive revenue figures in last two years 2017 and 2018. The company’s data as per above figure showed a 37% increase in yearly sales, a 65% increase in EBITDA on a normalized basis and a 67 % increased in NPAT from 2017 to 2018. The main contribution for revenue growth was high volume sales. It was driven by Camperdown manufacturing business which gave revenue of $8.7m contribution.
Techniques of Earnings Management:
1. Cookie Jar Reserve Technique: In this technique earnings are managed by estimating future events. In other words it means management estimates and enters obligations that will take place in future resulting from performance in current fiscal year.
· The company prepares for changes and transitions for which a $6m one-off inventory provision has been set aside which has impacted the FY18 statutory profit.
· The company targets to get approval for application of SAMR registration (previously CFDA) to sell their products in China. This approval was related to...