Executive Summary
This report looks at the disclosure of revenue under AASB 15. It provides a financial analysis of JB Hi-Fi
Ltd in terms of their Revenue, Cost of sales, other income and reason for their boost in sales. JB Hi-Fi Ltd
is one of the famous and large retail industries that has a range of technology with lower prices in Australia.
In this report, we consider JB Hi-Fi Ltd as a Group that is including JB Hi-Fi Australia, JB Hi-Fi New
Zealand and The Good Guys. Additionally, the report analyzes the factors that has contributed towards
the boom in financials of the company also because of the impact of Covid-19 pandemic so customers
tend to purchase online to upgrade their electronic goods including entertainment products, laptop and
other items. The report also analyzes the accounting requirements of revenue under AASB 15 and how
and when it came into effect and when AASB 15 adopted by JB Hi-Fi Ltd. Lastly, we discuss about that
how the revenue increases that benefits the business during the impact of Covid-19 pandemic and the
revenue recognition of JB Hi-Fi Ltd along with their financial evaluation.
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Table of Contents
1.1 Introduction…………………………………………………………………………………………………………………………………5
1.2 Company Profile ………………………………………………………………………………………………………………………….5
1.3 Literature Review…………………………………………………………………………………………………………………………6
1.4 Financial Growth …………………………………………………………………………………………………………………………7
1.41 Sales Growth of JB Hi-Fi Ltd (Group) …………………………………………………………………………….7
1.42 Sales Growth of JB Hi-Fi Australia……………………………………………………………………………….7-8
1.43 Revenue Growth of JB Hi-Fi Ltd …………………………………………………………………………………….8
1.44 Deferred Revenue…………………………………………………………………………………………………………9
1.45 Revenue from External Customers………………………………………………………………………………9-10
1.5 Accounting Standard for Revenue AASB 15………………………………………………………………………………….10
1.51 Accounting Requirements for Revenue Under AASB 15 ………………………………………………10-11
1.52 AASB15 Adopted by JB Hi-Fi Ltd (JB Hi-Fi Australia/New Zealand and The Good Guys)…….11
1.6 Revenue Recognition of JB Hi-Fi Ltd……………………………………………………………………………………………12
1.61 Sale of Goods …………………………………………………………………………………………………………….12
1.62 Commissions ……………………………………………………………………………………………………………..12
1.63 Rendering of Services………………………………………………………………………………………………….12
1.64 Timing of Revenue Recognition ……………………………………………………………………………………13
1.7 Evaluation of Financial Report…………………………………………………………………………………………………….13
1.8 Conclusion …………………………………………………………………………………………………………………………………14
1.9 References………………………………………………………………………………………………………………………………….15
1.10 Appendices…………………………………………………………………………………………………………………………..16-18
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1.1 Introduction
IFRS revenue recognition pricing significance, revenue recognition, services revenue recognition The
International Accounting Standards Board (IASB) and the Financial Accounting Standards Board
(FASB) have completed a collaborative operation to enliven economic news by establishing a common
revenue standard for IFRS that can be applied consistently across a wide range of transactions,
businesses, and financial industry.
With IFRS, the boards were able to reach consistent judgments on all standards for accounting for
revenue from client contracts. The question of whether profit and loss must be recorded is one of the
most important in accounting theory, and it can be a critical issue for vital financial performance. It’s
not surprising that it’s been a divisive issue for over a century. Many financial theories have been
proposed, and accounting rules have evolved over time to provide direction. The topic of revenue
recognition has recently gotten a lot of attention.
1.2 Company Profile
Mr. John Barbuto (JB) started JB Hi-Fi at a single business in East Keilor, Victoria, in 1974. He had a
clear mission: to provide a wide selection of Hi-Fi technology and recorded music to Australia at
reasonable pricing. JB Hi-Fi Ltd is a firm based in Australia that specializes in reselling native
consumer products. The company sells a wide range of consumer-oriented products, including
software, music, games, and movies, as well as white goods and instrumentality. JB Hi-Fi Australia
(JB Aust), JB Hi-Fi New Zealand (JBNZ), and The Good Guys are among the categories (TGG). It
retails a variety of items, including consumer electronics such as televisions, audio instruments,
computers, and cameras; communication products and services; change of state products, air –
conditioning products, small appliances, and room appliances; software, including compact discs
(CDs), digital discs (DVDs), Blu-ray discs, and games; and musical instruments. It also offers
consultancy and information technology services. It primarily sells through its in-store systems, such
as JB Hi-Fi and JB Hi-Fi Home stores in Australia and New Zealand, as well as The Good Guys stores
in Australia and online. Now, in order to stay true to Barbuto’s initial ideology, JB is one in every of
Australia’s fastest-growing retailers and residential diversion.
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.
1.3 Literature Review
“The largest revenue number on the summary is probably the main amount, and it can be a critical element
in evaluating a firm ’s financial performance” (International Accounting Standards Board, 2011, p. 5).
The International Accounting Standards Board (IASB) and the money Accounting Standards Board
(FASB) produced a converged revenue recognition standard (Bloom & Kamm, 2014). The advantages of
the converged standard, the provision of the Revenue from Contracts with Customers standard in 2014,
and the 5-revenue recognition methodology that applies to revenue transactions are all covered. The article
A Way to Recognize Revenue (2014) focuses on the money Accounting Standards Board’s revenue
recognition effort (FASB) Accounting Standards Board (FASB) and International Accounting Standards
Board (IASB). The specifics of the revenue recognition standard set by the Financial Accounting
Standards Board (FASB) and also the International Accounting Standards Board (IASB) that accountants
should be aware of (Devonish Mills,2014). The procedures for recognizing and calculating revenue are
defined. The goal of this report is to examine financial supervisors’ revenue decisions from a principlesbased perspective compared to a rules-based principle.
Managers utilize discretion in each raised and rescheduled revenue to minimize negative financial
uncertainties, according to Caylor (2012). He observed very little evidence that discretion is used to
minimize risk or earnings reductions when it comes to revenue recognition. His findings suggest that the
FASB and IASB’s joint revenue-recognition initiative should be scaled back in societal influence
assumption in revenue recognition. Linda Devonish (2014) discovered that once either party to a contract
has executed its commitment, the entity must gift a contract liability, a contract bonus, or an owed in its
money statements The facts and circumstances will determine if Associate in Nursing entity has a contract
liability, a contract plus, or an owing. If a customer pays before the business transmits the secured smart
or service to the clients, for example, the business should gift a contract liability on its records.
“Revenue is fundamentally different,” Murdock said of the SEC’s involvement in the TRG’s actions.
Revenue is unique. We have encouraged the corporations to return to our offices and share with the United
States, but they must agree to evaluate the revenue commonplace’s adoption in their follow-up. There is
evidence to believe that we will be quite proactive, and the window is open, so anyone who chooses may
come in and ask the United States.” Partner Peter Stallings of PricewaterhouseCoopers summed up the
new standard’s key principle: “You accept revenue at the amount that you are eligible to as long as you
meet the promises that you created in your agreement.”
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1.4 Financial Growth
JB Hi-Fi delivered its record financial growth in the year 2020 (The Australian Financial Review,
2021)
1.41 Sales Growth of JB Hi-Fi Ltd (Group)
JB Work-at-home rules adopted as a result of the coronavirus epidemic are driving up demands for
home entertainment items, which is driving up Hi-Fi sales (Craven et al., 2020).
Total sales grew as a bunch 11.6% to 7,918.9 million, with Australian sales fast from March as
customers spent longer operating and learning reception, still as upgrading their home appliances and
recreation merchandise. The Covid-19 pandemic gives retail industries a boost in their sales specially
in online shopping (Mitchell, 2020).
Source: JB Hi-Fi Annual Report, 2020
1.42 Sales Growth of JB Hi-Fi Australia
JB Hi-Fi Australia’s segmental performance is depicted in the image below. In the year 2020, total
sales will climb by 42.1%.
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Source: JB Hi-Fi Annual Report, 2020
1.43 Revenue Growth of JB Hi-Fi Ltd
JB Hi-Fi forecasted total revenue of 7.92 billion Australian dollars for the financial year 2020. This
shows an increase from the previous fiscal year, as well as a year-over-year growing trend since the
2015 fiscal year. Cost of sales is additionally will increase by 7.9% within the year 2020 and alternative
financial gain will increase ensuing from the sale of fixed assets.
Source: JB Hi-Fi Annual Report, 2020
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1.44 Deferred Revenue
Unrealized services to be completed are referred to as deferred revenue (Caylor, M.L, 2010). It is estimated
that 76% of non-current delayed revenue will be recognized over the next three financial years, with the
remaining 24%recognized during the next three years.
Source: JB Hi-Fi Annual Report, 2020
1.45 Revenue from External Customers
JB Hi-Fi Ltd not simply get revenue from their internal client like staff, house owners and
representatives. External customers are those customers they are the people who are not directly
connected to your organization but just to buy your service and products (Donelson, 2011). Jn Hi-Fi
Ltd conjointly gain revenue from their external customers like customers, creditors, suppliers,
shareholders etc.
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Source: JB Hi-Fi Annual Report, 2020
1.5 Accounting Standard for Revenue AASB 15
1.51 Accounting Requirements for Revenue Under AASB 15
AASB15 is take into account as revenue from contracts with customer and came into effect from 1st
January, 2018. The standard’s main objective needs appropriate entities to recognize revenue to depict
the transfer of products or services to customers in amounts that replicate the thought (that is, payment)
to that the corporate expects to be entitled in exchange for those product or services (Commonwealth
Australia, 2014).
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Source: accru.com
1.52 AASB15 Adopted by JB Hi-Fi Ltd (JB Hi-Fi Australia/New Zealand and The Good Guys)
AASB 15 Revenue from Contracts with Customers and connected amending Standards. The JB HiFi Ltd. has adopted AASB 15 from 1st of July 2018, that replaces AASB 118 Revenue. (Annual
Report, 2019).
AASB 15 establishes a principles-based approach for revenue recognition whereby revenue is
recognised once performance obligations area unit glad and also the management of products and
services is transferred (Carmichael, D.R, 2019). The quality applies a five-step approach to the
temporal order of revenue recognition and is applicable to all or any contracts with customers, except
those within the scope of alternative standards, replacement the separate models for product, services
and construction contracts beneath the previous accounting standards.
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1.6 Revenue Recognition of JB Hi-F Ltd
The major sources of the JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys or we can
say a Group’s revenue are from the sale of goods, commissions and rendering of services. (Annual
Report, 2020)
1.61 Sale of Goods
Revenue connected to the sale of items is recognised in accordance with AASB 15 once the
performance obligation of the sale has been fulfilled and administration of the items has been passed
to the client, which occurs at the time of sale or once the products have been collected/delivered.
1.62 Commissions
JB Hi-Fi Ltd works as an intermediary for buyers in the sale of various goods and services, such as
communications contracts. Commissions connected to agency sales are recognised on a degree-intime basis under AASB 15 once all performance commitments are met, entitling JB Hi-Fi Ltd (The
Group) to the commission.
1.63 Rendering of Services
JB Hi-Fi Ltd (The Group) makes money by providing a variety of services such as installations,
customer deliveries, IT solutions, and prolonged care and user support.
When the Group retains responsibility for the performance commitments linked to the services, revenue
is recognized over the amount of canopy, and when a third party acquires responsibility for the
performance obligations related to the services, revenue is recognized at the point of sale.
The Covid-19 pandemic and subsequent government efforts had a significant impact on the Group’s
activities. Placement of protective screening at store shelves and distribution sites is one of the
additional steps that the Group has invested in, hand sanitizing stations have been installed.
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1.64 Timing of Revenue Recognition
As represented higher than, the Group’s revenue is chiefly generated on a “point in time” basis, the
number of revenues recognised by the Group on an “over time” basis is not material context of the
Group’s total revenue. During this case, the Group operates in one product and repair section, being
the sale of client physical science product and services as well as electronic equipment’s and
alternative accessories. The Group’s revenue is primarily generated on a degree in time basis. The
number of revenues recognised by the Group on an “over time” basis.
1.7 Evaluation of the Financial Report
Evaluation of the financial report for the year finished June 2020, JB Hi-Fi revenue raised by 13% to
$8.92 billion. earnings will increase 36% to $506.1 million. Revenue’s mirror operative segment- JB
Hi-Fi Australia increase of 12-tone system to $5.18 billion, on-line sales JB Hi-Fi Australia increase
of 93% to $780 million. Sales at JB Hi-Fi Australia comprised $ five.32 billion of the company’s
revenue, a 12.5% rise on the previous year. Cost of doing business will increase by half 6.5% in
absolute terms (The Market Herald, 2020).
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1.8 Conclusion
We can conclude from this report that the there is no doubt that JB Hi-Fi Ltd has a solid sale growing even
during Covid-19 pandemic. JB Hi-Fi has a consecutive growth in their revenue and sales including
deferred revenue and revenue from external customers. Factors like purchasing online electronic products
related to an increase in financials of the company. Moreover AASB 15 establishes a 5-stage model to
achieve the requirements of AASB 15. JB Hi-Fi Ltd disclose their revenue by timing of revenue
recognition. Overall, from the evaluation from the financial report the company there is an increase in
their financials and will tend to maintain their profit for upcoming years by their strong business strategies.
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1.9 References
Australian Financial Review. 2021. JB Hi-Fi sales soften after bumper year. [online] Available at:
<https://www.afr.com/companies/retail/jb-hi-fi-profit-soars-67-per-cent-to-506m-20210802-p58f16>
[Accessed 2 September 2021].
Accru. 2021. AASB 15 summary and five-step model explained – Accru. [online] Available at:
<https://www.accru.com/blog/aasb-15-summary-and-five-step-model-explained/> [Accessed 1
September 2021].
-AASB 15, (2014), “Revenue from Contracts with Customers”, Australian Accounting Standard Board,
Commonwealth of Australia, 2014.
Accounting Standards Board. (2011). Discussion paper London, UK: IASB.
Carmichael, D. R. (2019). New Revenue Recognition Guidance and the Potential for Fraud and Abuse.
CPA Journal, 89(3), 3 Bloom, R., & Kamm, J. (2014). REVENUE RECOGNITION. Financial
Executive, 30(3), 48-52.
Caylor, M. (2010). Strategic revenue recognition to achieve earnings benchmarks. Journal of
Accounting and Public Policy, 29(1), 82. http://dx.doi.org/10.1016/j.jaccpubpol.2009.10.008
Craven, M., Liu, L., Mysore, M. and Wilson, M. (2020). COVID-19: Implications for business.
[online]. Available at: https://covid19.bangkokhealth.com/wp-content/uploads/2021/01/Key-criteriafor-the-ethical-acceptability-of-COVID-19-human-challenge-studies-2.pdf.
Donelson, D. C., Jennings, R., & McInnis, J. (2011). Changes over time in the revenue-expense
relation: Accounting or economics? The Accounting Review, 86(3), 945-974.
https://doi.org/10.2308/accr.00000046
Devonish-Mills, L. (2014). The New Revenue Recognition Standard. Strategic Finance, 96(9), 17-
18.6–43.
Five Steps to Recognizing Revenue. (2014). Journal of Accountancy, 218(1), 44-46. International
JB Hi-Fi, 2019. [online] Available at: <https://investors.jbhifi.com.au/wpcontent/uploads/2019/10/Annual-Report-2019-with-Chairmans-CEOs-Report.pdf> [Accessed 29
August 2021].
JB Hi-Fi, 2020. [online] Available at: <https://investors.jbhifi.com.au/wpcontent/uploads/2020/10/Annual-Report-2020-with-Chairmans-CEOs-Report.pdf> [Accessed 29
August 2021].
Mitchell, S. (2020). JB Hi-Fi rides COVID-19’s retail revolution. [online] Australian Financial
Review. Available at: https://www.afr.com/companies/retail/jb-hi-fi-profit-soars-21pc-to-302m-
20200817-p55mbf [Accessed 1 September 2021].
The Market Herald. 2021. JB Hi-Fi (ASX:JBH) records 33 per cent profit increase in FY20 – The
Market Herald. [online] Available at: <https://themarketherald.com.au/jb-hi-fi-asxjbh-records-33-percent-profit-increase-in-fy20-2020-08-17/> [Accessed 3 September 2021].
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1.10 Appendices
Appendix A: Income Statement, 2020
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Appendix B: Balance Sheet, 2020
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