HI6025 Group Assignment T1 2026

Group Assignment

Group Assignment Guidelines and Specifications

Choose a company listed on the Australian Stock Exchange (ASX) here:

https://www.marketindex.com.au/asx-listed-companies and register your chosen company with your Lecturer (in your campus) in the class or via email by Week 9. No student can use the same company as another student, so register your company early.

10% will be deducted if your group did not register your chosen company with your Lecturer in your campus.

Provide the following details if emailing your Tutor to register your company:

• Group Number
• Campus you are registered (Sydney/Melbourne/Brisbane/Gold Coast)
• The name of the company as your 1st choice, 2nd choice & 3rd choice.

[If your 1st choice is taken, you will get your 2nd choice etc.]

Part A: (25 marks)

Executive Remuneration and Positive Accounting Theory

Obtain the latest annual report of your group's chosen company (2025 or 2024 only if 2025 isn't available), and critically evaluate its executive remuneration structure using Positive Accounting Theory (PAT).

Required:

1. Identification of Remuneration Structure (6 marks)

Identify and clearly explain the key components of the executive remuneration package, including:

• Fixed remuneration (salary)
• Short-Term Incentives (STI)
• Long-Term Incentives (LTI)

For each component, include any relevant performance measures (if applicable) (e.g., profit, EPS) used to determine payouts.

Present your answer in a table format, with clear explanations for each component.

All information must be supported with appropriate references to the company's Remuneration Report.

HI6025 Group Assignment T1 2026

2. Evaluation Using Positive Accounting Theory (14 marks)

Using the identified remuneration structure in (1), critically evaluate how it may influence managerial behaviour by applying:

• Bonus Plan Hypothesis
• Debt Covenant Hypothesis
• Political Cost Hypothesis

Students must:

• Support your answer using at least three (3) relevant academic journal articles.
• Link specific remuneration components (e.g., STI, LTI, performance targets) to each PAT hypothesis
• Explain how these incentives may lead to specific accounting choices or earnings management behaviour
• Support arguments with examples from the company's Remuneration Report

This is the core of the assignment — marks are awarded for critical analysis rather than description, and arguments must be supported with relevant academic literature.

3. Overall Evaluation, Conclusion and Recommendations (5 marks)

Assess whether the remuneration structure:

• Aligns managers' interests with shareholders
• Encourages or discourages opportunistic behaviour

Based on your evaluation, propose two (2) recommendations to improve the remuneration structure.

Recommendations should be realistic and supported by relevant academic literature. Answers that demonstrate such support will achieve higher marks.

Additional Instructions for Part A:

• Students must explicitly link remuneration components to managerial incentives and accounting behaviour using Positive Accounting Theory.
• Use at least three academic journal articles in Q2.
• Students must use the most recent Annual Report.
• Your chosen journal articles must be published from year 2010 onwards.

For academic journal articles, you can search online using Google Scholar (not Google) or access relevant Accounting and Auditing Journals via the ProQuest Database.

Some journals can be accessed in ProQuest by clicking on the links below:

• Accounting, Auditing and Accountability Journal
• Journal of Applied Accounting Research
• The Accounting Review
• Journal of International Accounting Research

HI6025 Group Assignment T1 2026

Log-in details in ProQuest Username: HOLMES2004; Password: PQLogin2025@

Accounting journals can also be accessed via the ProQuest Database link available via the Student Login page in the Holmes website.

Search and read several articles before you select the article you will use here.

The chosen articles must be referenced using the Holmes Adapted Harvard Referencing style, with the article's hyperlink added to the reference list.

Avoid using ChatGPT generated material and submit them as your assessment. Ensure your assessment submitted for marking are from reliable sources, properly referenced, and is your own work, not the output, or a copy from generative AI, such as ChatGPT.

Part B: (12 marks)

"Professional judgment plays a central role in the application of accounting standards in financial reporting."

Using your group's allocated company listed on the ASX, critically discuss this statement with reference to any two (2) of the accounting standards discussed in class.

Choose from the following:

• AASB 116: Property, Plant and Equipment
• AASB 138: Intangible Assets
• AASB 119: Employee Benefits and
• AASB 16: Leases

Required:

1. Professional Judgement Disclosures (4 marks)

Using the latest financial report, select any two (2) relevant disclosures (one for each chosen accounting standard) where professional judgment is applied.

For each disclosure:

• Clearly identify and explain the disclosure.
• Provide clearly labelled screenshots (including any relevant notes to the financial statement) to support your answer.

2. Evaluation of Transparency (4 marks)

Evaluate whether the company's disclosures provide sufficient transparency for stakeholders to understand those professional judgments. Provide specific examples to support your answer.

3. Conclusion and Justification (4 marks)

Clearly state whether you agree or disagree with the statement and justify your position with reference to your analysis, relevant accounting standards, and two (2) relevant academic accounting literature.

Your chosen academic journal articles must be published from year 2010 onwards.

Assignment Structure:

The assignment should include the following components:

1. The assignment cover page which clearly states your group members' names and student numbers, and all other required details.
2. Executive summary
3. Table of contents
4. A brief introduction or overview of what the assignment is about
5. Body of the assignment with appropriate section headings
6. Conclusion
7. List of References (follow the Holmes Adapted Harvard Referencing guidelines)

Student Assessment Citation and Referencing Rules

Holmes has implemented a revised Harvard approach to referencing. The following rules apply:

1. Reference sources in assignments are limited to sources that provide full-text access to the source's content for lecturers and markers.
2. The reference list must be located on a separate page at the end of the essay and titled: "References".

3. The reference list must include the details of all the in-text citations, arranged A-Z alphabetically by author surname with each reference numbered (1 to 10, etc.) and each reference MUST include a hyperlink to the full text of the cited reference source. For example:

   1. Hawking, P., McCarthy, B. & Stein, A. 2004. Second Wave ERP Education, Journal of Information Systems Education, Fall, http://jise.org/Volume15/n3/JISEv15n3p327.pdf

4. All assignments must include in-text citations to the listed references. These must include the surname of the author/s or name of the authoring body, year of publication, page number of the content, and paragraph where the content can be found. For example, "The company decided to implement an enterprise-wide data warehouse business intelligence strategy (Hawking et al., 2004, p3(4))."

Academic Integrity

Holmes Institute is committed to ensuring and upholding academic integrity, as it is integral to maintaining academic quality and the reputation of Holmes' graduates. Accordingly, all assessment tasks need to comply with academic integrity guidelines. Table 1 identifies the six categories of Academic Integrity breaches. If you have questions about Academic Integrity issues related to your assessment tasks, please consult your lecturer or tutor for relevant referencing guidelines and support resources. Many of these resources can also be found through the Study Skills link on Blackboard.

Academic integrity breaches are serious offences punishable by penalties ranging from deduction of marks, failure of the assessment task or unit involved, suspension of course enrolment, or cancellation of course enrolment.

Table 1: Six categories of Academic Integrity breaches

Marking Rubric

Part A

Part B

Overall Presentation

Note: This report is provided as a sample for reference purposes only. For further guidance, detailed solutions, or personalized assignment support, please contact us directly.

SAMPLE SOLUTION – HI6025 GROUP ASSIGNMENT (T1 2026)

Sample Company Chosen: ASX Limited
(You should replace this with your own approved ASX company.)

EXECUTIVE SUMMARY

This report evaluates the executive remuneration structure and accounting disclosures of ASX Limited using Positive Accounting Theory (PAT) and professional judgement concepts in financial reporting. Part A analyses the remuneration structure including fixed remuneration, Short-Term Incentives (STI), and Long-Term Incentives (LTI), and evaluates how these incentives may influence managerial behaviour through the Bonus Plan Hypothesis, Debt Covenant Hypothesis, and Political Cost Hypothesis. The report concludes that although the remuneration structure aligns executives with shareholder interests, some opportunistic accounting behaviour may still arise.

Part B discusses the importance of professional judgement in financial reporting using AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets. The report evaluates whether ASX Limited provides transparent disclosures regarding management judgements and estimates. Overall, the report agrees that professional judgement plays a significant role in applying accounting standards.

TABLE OF CONTENTS

1. Introduction
2. Part A – Executive Remuneration and Positive Accounting Theory
3. Identification of Remuneration Structure
4. Evaluation Using Positive Accounting Theory
5. Overall Evaluation and Recommendations
6. Part B – Professional Judgement in Financial Reporting
7. Professional Judgement Disclosures
8. Evaluation of Transparency
9. Conclusion and Justification
10. References

INTRODUCTION

Executive remuneration is a major corporate governance mechanism used to align managers’ interests with shareholders’ interests. Positive Accounting Theory (PAT) explains how managers may select accounting methods to maximise personal benefits arising from remuneration contracts and organisational pressures. This report analyses the remuneration structure of ASX Limited and evaluates its impact on managerial behaviour using PAT hypotheses.

The report also examines the role of professional judgement in financial reporting. Accounting standards often require managers to make assumptions and estimates that affect reported financial performance and position. Therefore, transparency in disclosures is important for stakeholders.

PART A – EXECUTIVE REMUNERATION AND POSITIVE ACCOUNTING THEORY

1. Identification of Remuneration Structure

Table 1 summarises the executive remuneration structure of ASX Limited.

Table 1: Executive Remuneration Structure of ASX Limited

ASX Limited states that executive remuneration includes fixed and variable rewards, with STI and LTI linked to organisational performance.

The LTI scheme uses relative TSR and EPS growth to encourage executives to focus on sustainable shareholder returns.

2. Evaluation Using Positive Accounting Theory

Positive Accounting Theory suggests that managers choose accounting methods that maximise their own utility (Watts & Zimmerman, 1986).

2.1 Bonus Plan Hypothesis

The Bonus Plan Hypothesis argues that managers whose remuneration depends on accounting profits are more likely to adopt accounting methods that increase current earnings.

At ASX Limited, STI rewards are partly based on profit-related performance indicators and individual performance measures. Therefore, executives may have incentives to accelerate revenue recognition or defer expenses to increase short-term profits.

For example, executives may estimate lower provisions or delay asset impairments to improve reported earnings and maximise STI payouts. Research by Healy and Wahlen (1999) found that managers commonly engage in earnings management when compensation is linked to accounting performance.

Similarly, LTI rewards linked to EPS growth may encourage executives to maintain stable earnings growth trends. According to Armstrong et al. (2013), performance-based compensation can motivate managers to manipulate accounting estimates to achieve performance targets.

Therefore, ASX’s remuneration structure may create incentives for earnings management behaviour under the Bonus Plan Hypothesis.

2.2 Debt Covenant Hypothesis

The Debt Covenant Hypothesis suggests that managers in firms approaching debt covenant restrictions are more likely to choose accounting methods that increase earnings and assets.

Although ASX Limited is financially strong, executives may still attempt to maintain favourable financial ratios to protect borrowing capacity and investor confidence. Performance measures such as EPS growth and profitability could motivate managers to avoid reporting accounting losses or declining earnings.

Managers may use optimistic assumptions relating to asset valuations or useful lives of assets to improve financial ratios. This behaviour reduces the likelihood of violating debt agreements.

Sweeney (1994) found that firms close to debt covenant violations often adopt income-increasing accounting policies. Therefore, ASX executives may prefer accounting choices that maintain stable profitability and financial strength.

2.3 Political Cost Hypothesis

The Political Cost Hypothesis argues that large profitable firms face political scrutiny from regulators, unions, governments, and the public. Managers may therefore reduce reported profits to minimise political attention.

ASX Limited is a major Australian financial institution and is subject to significant public scrutiny. High executive bonuses and strong profits may attract criticism from shareholders and regulators.

Consequently, executives may adopt conservative accounting policies during periods of high public attention. For example, management could recognise higher provisions or accelerate expense recognition to reduce political visibility.

Jones (1991) argued that politically sensitive firms may use accounting discretion to reduce reported profits during periods of regulatory pressure.

ASX’s remuneration structure may therefore create conflicting incentives: executives are rewarded for strong performance, but excessive profitability may increase political scrutiny.

3. Overall Evaluation, Conclusion and Recommendations

The remuneration structure of ASX Limited generally aligns managers’ interests with shareholders because a significant portion of executive remuneration depends on long-term shareholder value and financial performance.

The LTI scheme linked to TSR and EPS growth encourages executives to focus on sustainable organisational performance rather than only short-term gains. Deferred equity incentives also improve alignment between executives and shareholders.

However, the remuneration structure may still encourage opportunistic behaviour. STI rewards based on accounting performance measures can motivate earnings management and short-term decision-making.

Recommendation 1

ASX Limited should increase the weighting of non-financial performance measures such as sustainability, governance, and customer satisfaction within STI schemes.

Research by Kaplan and Norton (2001) suggests that balanced scorecard approaches reduce excessive focus on short-term accounting profits.

Recommendation 2

The company should strengthen clawback provisions for executive bonuses where financial results are later restated or linked to misconduct.

Clawback mechanisms improve accountability and reduce opportunistic reporting behaviour (Dehaan et al., 2013).

PART B – PROFESSIONAL JUDGEMENT IN FINANCIAL REPORTING

1. Professional Judgement Disclosures

AASB 116 – Property, Plant and Equipment

ASX Limited applies professional judgement when estimating the useful lives and residual values of property and equipment.

Management must determine depreciation methods and estimate the economic life of assets. Small changes in these assumptions can significantly affect depreciation expense and profit.

[Insert Screenshot from Annual Report – PPE Note]

AASB 138 – Intangible Assets

ASX Limited exercises judgement in assessing the useful lives and impairment of intangible assets such as software and acquired technology assets.

Management determines whether intangible assets have finite or indefinite useful lives and estimates future cash flows for impairment testing.

[Insert Screenshot from Annual Report – Intangible Assets Note]

2. Evaluation of Transparency

ASX Limited provides relatively transparent disclosures regarding professional judgements.

For PPE disclosures, the company explains depreciation methods and useful life assumptions. This allows stakeholders to understand how management estimates influence reported expenses.

For intangible assets, ASX explains impairment testing assumptions including discount rates and cash flow forecasts. Such disclosures improve transparency because stakeholders can evaluate whether assumptions are reasonable.

However, some assumptions remain highly subjective. For example, future cash flow estimates used in impairment testing rely heavily on management expectations and may be difficult for investors to independently verify.

Overall, ASX provides sufficient disclosure to satisfy AASB requirements, although additional sensitivity analysis would further improve transparency.

3. Conclusion and Justification

This report agrees that professional judgement plays a central role in applying accounting standards.

Accounting standards such as AASB 116 and AASB 138 require management to make significant estimates regarding asset valuation, depreciation, impairment, and useful lives. These judgements directly affect reported profits and asset values.

ASX Limited demonstrates the importance of professional judgement through its disclosures relating to depreciation assumptions and impairment testing.

Academic research supports the view that accounting standards rely heavily on managerial judgement. According to Nelson and Tan (2005), professional judgement is necessary because accounting standards cannot prescribe rules for every situation. Similarly, Clor-Proell et al. (2014) argue that transparent disclosure of assumptions improves financial reporting quality and stakeholder confidence.

Therefore, professional judgement is essential for preparing meaningful financial reports, but transparency and strong governance are necessary to reduce bias and opportunistic behaviour.