ACC702 Managerial Accounting - Free Samples to Students

a) Analyse the roles of cost and management in organisations through the analysis of accounting concepts and tools
b) Evaluate and apply financial and non-financial performance measures and tools used in assessing and rewarding individual and corporate performance
c) Describe how management control theory and concepts apply to organisational settings through the generation of accounting and organisational reportsEach group member is to research and write an individual summary report that includes the following:
1. Research the Academic Literature using EBSCOHOST and/or other Academic Search Engines and discover academic articles discussing methods of measuring Executive Performance. (Note in the USA, remuneration is referred to as Executive Compensation so you may wish to substitute this term in your searches.)
2. Research and discover the corporate goals of each of the two companies reviewed. (Review the Chairman and CEO’s Statements in the Annual Report and the Corporate Website for this information.)
3. Research and discover how the senior executive are having their performance assessed. This may be limited to only the TWO top earning Executives, usually the CEO and CFO.
4. Discover the performance of the company from a shareholder’s perspective by reviewing growth (or decline) in the company’s share price and dividends paid. (Use a copy of the share price chart for the past 3 years)
5. Research commentary on the company’s performance and you may include some of these materials provided they are fully referenced. E.g. Use screen grabs using the Windows ‘Snipper’ Tool may be used to capture these images. Only a FEW (no more than THREE!) should be entered into your report and these MUST be fully referenced.
6. Reflect and COMPARE the information given between the two companies. Thoroughly report your findings and present your comparisons.
7. Your group should write up your findings AND conclude if your company is being truly transparent and if it is producing a ‘good’ result for the shareholders. In essence, you are concluding whether you believe their management control systems are working
8. Present your final analyse of both company’s methods.
9. Conclude with your overall findings in relation to the three research goals.

Answer:

Introduction

The paper is mainly purposed for analyzing and comparing methods of remuneration used by Saracen Mineral Holdings Limited and Newcrest Mining Ltd. In this report, an analysis of how well the approaches of each company worked in encouraging higher performance by the executive teams is given. In addition, this report considers whether or not this performance translated to higher performance of the companies. The paper focusses on performance and remuneration measures for the two companies.

Company Review

1. Remuneration Committee and Its Membership

1. Geoffrey Clifford (Non-Executive Chairman)
2. Raleigh Finlayson (Managing Director-Executive)

• Mark Connelly (Non-Executive Director)

1. Martin Reed (Non-Executive Director)
2. Samantha Tough
3. Roric Smith

1. Craig Bradshaw
2. Gerard (Gerry) Kaczmarek

• Morgan Ball

1. Daniel Howe
2. William (Troy) Irvin

1. Sandeep Biswas, CEO.
2. Gerard Bond, CFO.

• Melanie Allibon, EGM.

1. Craig Jetson, EGM.
2. Craig Jones, EGM.
3. Ian Kemish, EGM.

• Francesca Lee, EGM.
• Michael Nossal, CDO.

1. Philip Stephenson, EGM.
2. Bonikro, EGM.

1. Allocation of Executive Remuneration (Fixed pay/STIs/LTIs)

For Newcrest Mining Ltd, the outcomes of STI of executives during the fiscal year ending 2018 were kept in the range of fifty-seven percent (57%) to sixty-nine percent (69%) of their potential maximum allowed (Kuppapally 2008, pp. 74).

1. Mix of Performance Measures Used

Saracen Mineral Holdings Limited uses operating as well as non-operating Key Performance Indicators (KPI) as a performance measure of determining or forming a basis as to which the company assesses the levels of future remuneration for its executive teams and Key Management Personnel (KMP). The company mostly aligns its set KPIs of KMP to the intrinsic business performance of the group. For instance, the company evaluates performance against the annual budget and safety as well as health measures. The remuneration committee has the right to assess remuneration of the executive team depending upon the outcomes of their reviews on annual performance of each executive and KMP, in addition to other relevant factors (Gopal 2009, pp. 35).

1. Company Performance (Total Shareholder Value) Versus Executive Pay

For Newcrest mining Ltd, the remuneration of its executive team and Key Management Personnel (KMP) was highly correlated. The key operational and financial outcomes for the company for the financial year 2018 are also discussed. For instance, the company realized a profit of $308 million and there was a key improvement in its margin of EBITDA. The company also recognized free cash flows amounting to $739 million, and experienced significant reduction in its net debt. Additionally, the ratio of its net debt to EBITDA increased to 1.1 times. Furthermore, there was a significant reduction in the company’s gearing to 16% (Newcrest Mining Ltd 2018, pp. 78).

1. Research Commentary on the Company’s Performance
   1. Saracen Mineral Holdings Limited

The earnings of Saracen Mineral Holdings Limited from December 31, 2017 amounting to AU$59.49 million has increased by approximately 81% in comparison to the previous financial year 2017. Additionally, this particular growth rate of one year exceeds the annual growth rate of the company for the last five years, which is approximately 21%. This is an indication that the Saracen Mineral Holdings Limited is growing at an accelerated rate (Macintosh & Quattrone 2010, pp. 34).

1. Newcrest Mining Ltd

1. Summary of Findings
   1. Saracen Mineral Holdings Limited

The gross revenue recognized by the group from its operations in mining during the fiscal year 2018 was approximately fifty-one million dollars, after making deductions amounting to approximately fourteen million dollars and seventy-four of depreciation expense as well as amortization expense amounting to approximately thirty-three million for the financial year then ended (Saracen Mineral Holdings 2018, pp. 29).

1. Newcrest Mining Ltd

Short term incentive (STI) outcomes for Executive team and KMP of Newcrest Mining Ltd during the fiscal year 2018 was between fifty-seven percent and sixty-nine percent of the potential maximum limit. Just like its previous fiscal years, there are significant adjustments made by the board of remuneration regarding the STI outcomes of the business due to impacts of prices of commodities, exchange rates of foreign currency as well as other important items that highly depended on the decision of the board as they were considered to have be out of their control. With regard to the 2018 fiscal year, the adjustments were for these items that were not controllable by the company’s management were made. There were adjustments that were also made to the measure of the company’s cash flows with regard to the LTI (Newcrest Mining Ltd 2018, pp. 75).

1. Remuneration Methods of Saracen Mineral Holdings Limited

The company mainly uses performance linked approaches of remuneration such as Long Term Incentives and Short Term Incentives. For instance, in its Long Term Incentive remuneration approach, Saracen Mineral Holdings rewards its executive employees and key management personnel using performance payments and equity payments, for exceedingly meeting their set targets and objectives. The company also uses other short term incentives such as cash payments for remunerating its staff (Hilton & Platt 2013, pp. 23). These incentives are meant for rewarding the key management personnel of the company in order to motivate them in achieving their individual as well as group targets, thus enhancing achievement of organizational success (Bussin 2014, pp. 14).

The performance linked remuneration approach used by Saracen Mineral Holdings in rewarding its executive teams motivated them to achieve higher performance, which led to improved performance of the group company in general (Gitman, Juchau & Flanagan 2015, pp. 10). The company achieved a Total Shareholder Return (TSR) of 832%, which gave it the first place in its peer group. This is primarily attributed to its attractive remuneration methods and incentives (Saracen Mineral Holdings Limited 2018, pp. 29).

1. Remuneration Approach of Newcrest Mining Ltd

During the financial year 2018, Newcrest Mining Ltd achieved various interesting and encouraging financial results such as key improvements in its performance of safety and generation of cash flows which are consistent as well as various achievements regarding its operations, especially in relation to Cadia and Lihir. From its financial statements, it can be noted that the company recognized significant amounts of free cash flows from all of its key operations (Abraham, Glynn and Murphy 2008, pp. 23).

Conclusion (Overall Findings)

References

Bussin, M., 2014. Remuneration and Talent Management: Strategic compensation approaches for attracting, retaining and engaging talent. Knowres Publishing, pp. 15-23.

Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons, pp. 33-35.

Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education, pp. 47-54.

Horngren, C.T., 2009. Cost accounting: A managerial emphasis, 13/e. Pearson Education India, pp. 32.

Saracen Mineral Holdings, 2018. Saracen Mineral Holdings Limited annual report 2018, pp. 30-100.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John Wiley & Sons, pp. 23-45.