Group Assignment _ ACC 303 Lecturer: Rex Walsh

Analysis of Treasury Wine Estate

for Conceptual framework

Students: Liu Yanping 11502077

Dai Bin 11700927

Riyanti Teresa 11601260

Gini Sanju 11600117

Khan Siraj 11401628

Tamang Ashok 11501674

Marco Donato 11501345

Introduction

Treasury Wine Estate Limited, listed on the Australia Securities Exchange

(ASX), is one of the world’s largest wine company with a diverse portfolio
of some of the biggest wine brands including Penfolds. It is also a major wine
exporter in global markets across Asia, America and Europe.

This report will examine the case of Treasury Wine Estate in terms of its
quality of financial reports, the effectiveness of meeting obligations under
mandate of Conceptual Framework in providing useful information in respect
of the recognition criteria, fundamental and enhancing characteristics and
guideline.

Shareholder’ s legal issue

Treasury Wine Estate put a cork in disastrous American misstep that saw 18
million bottles of wine poured down the drain (Darren, 2017). On August 28th
2017, Treasury agreed to pay $49 million to settle an investor class action,
which accused the company of failing to meet disclosure obligations
continuously and of misleading the market owing to a $160 million write-down
of its US operation four years ago including the destruction of excess wine
worth $30 million.

In July 2014, represented by law firm Maurice Blackburn and litigation funder
IMF Bentham was running this action, Brian Jones and other TWE
shareholders who accused the company of breaching disclosure obligation.
The company which recently reported a 55 per cent jump in the net profit after
tax to $269.1 million for fiscal 2017, told the market that the settlement came
“without any admission of liability and is also subject to court approval”
(Darren, 2017).

TWE announced that $49 million settlement inclusive of interest, and cost,
and is fully insured so it will not bring the influence to the company’s financial
results. In the meanwhile, the agreement said they made the commercial
decision to TWE shareholder in the best interest.

IMF Bentham (Darren, 2017) stated that if they were satisfied with all the
settlement condition, the TWE would settle class action for $49 million. The
Federal Court of Australia is approval the other term confidential agreement.
In this case, IMF will provide further more information about information
return, once the settlement become without any condition or if it is no longer
have impact.

Analysis

Analysing the TWE case we can definitely individuate few heavy weighted
mistakes done by the direction of the company. Identifying the purposes and
the usefulness of the accounting standards and the conceptual framework we
could easily identify when and how the company misled its shareholders.

The conceptual framework and accounting standards are considered the

guidelines for the production of useful financial statements. The usefulness of
the financial statements is identified by being free from error, being complete
and faithfully represented; to be accepted need to be verifiable,
understandable and comparable. The capability of making difference in
shareholders, lenders, investors decision making process.

From the financial statements the company which has been taken to high
court of Australia to have misled the market declared no existence of any
change in liabilities in the annual report balance sheet, inventory levels but
instead declare a much more sustainable approach by presenting an increase
in process optimisation, increased annual net profit. Also in the profit and loss
summary there is no sign of anything related to the massive number of
products out of date destroyed or the ones declared as an asset in the
balance sheet that were then sold discounted because over produced. In fact,
as reported by the accounting standards, a financial item to be recognised as
a liability would need to lead to a probable outflow of economic benefit in the
future and that can reliably measure which TWE would have known much
prior but did not declare.

CSR and Sustainability

Corporate social responsibility is the responsibility of an organisation for the

consequences of its decision and activities on society and environment
through clear and ethical rules and regulations. Furthermore, it includes
sustainable development in regards to health and the welfare of society. CSR
is about running the business in a responsible, professional and sustainable
way. CSR is about embedding key principles and practices into the business.

Below are the sustainable sourcing Treasury wine estates has mentioned in
2017 Financial reports-

1.Climate change

Treasury wine estate recognizes the climate change as a risk to their

business. They have adopted the proper management strategies, activities
and initiatives within the business which reduce the potential factors to
decrease which is the main cause for climate change.

2. Vineyard and Winery Sustainability

Treasury wine estates states that they are the number one in the wine
industry in monitoring and analysing climate related viticulture data. Harvest
conditions and timing, and regional and variety variations are collected and
analysed to inform viticulture data. In their vineyards packing is done in a way
that it focuses and maintains environmental management plans which is
different to their vineyard areas. It helps in managing the risk and
opportunities of water supply and quality, bio diversity, agrochemical use,
carbon emission, waste.

Competitor benchmark:
Australia's second-largest wine company, Accolade Wines Holdings Australia
Pty Limited is a major competitor of TWE in Australia with 9.4% market share.
Generating total revenue of $590,670,000 including sales and other revenue
in 2017, Accolade Wines has more than 1000 employees and has operations
in Asia, the United States of America, New Zealand and Australia where it is
headquartered in Reynella, South Australia. Accolade Wines Holdings
Australia Pty Ltd is a wholly-owned subsidiary of the private equity firm,
CHAMP Buyout III Pte Limited which is incorporated in Singapore.

The released financial report reveals that Accolade Wines Holdings Europe
Ltd has posted £104 million drop in revenue. Revenue fell from £617.7 million
in 2015 to £513.1 in 2016, with operating profit also falling from £32 million in
2015 to £21.8 million in 2016. Stated in the report, despite the reduction in
revenue and operating profit, the company “continued to operate in a highly
competitive trading environment, and that the directors were satisfied the
results were in line with expectations.”  

In the first half of 2017, The company and its vendors had been targeting  a $1
billion-plus initial public offering. Earlier this year, the company decided to
withdraw from the IPO process as it looked to nail down an acquisition and re-
negotiate prices with retailers in the UK. The significant fluctuation of the
pound also worked against the Accolade float.

Conclusion

In general, by comparing the standards and requirements of the conceptual

framework, it is concluded that the company provides insufficient financial
information about its action taken towards its American operation in regards of
recognizing financial criteria and meeting qualitative characteristics, despite
the fact that its financial performance and CSR practices have outperformed
the industry average.

Reference:

Gray, D., 2017. Treasury Wine Estate settles shareholder class action for $49
million. Available at < http://www.smh.com.au/business/treasury-wine-estates-
settles-shareholder-class-action-for-49-million-20170828-gy5f2k.html>

SBS NEWS, 2017.TWE settles class action for $49m. Available at

<https://www.sbs.com.au/news/twe-settles-class-action-for-49m >

The weekly time, 2017.Treasury Wine Estates settles class action for $49m.
Available at <http://www.weeklytimesnow.com.au/agribusiness/wine/treasury-
wine-estates-settles-class-action-for-49m/news-
story/c6cccf614ec15b876d9fe99c3ffb0334>

Treasury Wine Estate annual report 2013, 2014, 2017

http://www.afr.com/street-talk/champ-private-equity-uncorks-accolade-wines-
refinancing-plans-20170813-gxvfe4#ixzz54KTiSrBv

http://www.drinkscentral.com.au/4751?Article=accolade-wines-reveals-
revenue-drop-of-1-million

http://www.afr.com/street-talk/champ-delays-accolade-float-20170225-gulbhe