Discuss about the Effective Corporate Financial Management.
The companies act is anticipated to create an impact on the wide range of areas such as financial reporting, corporate governance, maintaining the structure of the company, recruitment and rotation of auditors, chief financial officers and directors to look after for the mergers and acquisition etc. The financial proposal of this act inflicts an additional responsibility on the chief financial officers. The chief financial officers are statically concerned with the bulk of provision relating to the delegator powers. The principle objective of the chief financial officers of Telstra Corporation is to enhance the corporate governance framework in the country.
Preparation of consolidated financial statement: The chief financial officer of Telstra Corporation is responsible for mandatory preparation of the consolidated financial statement for the organisation along with its subsidiaries. The chief financial officer of Telstra Corporation ensures that the subsidiaries are prepared in distinct financial statements and are required to be prepared in the same prescribed format as the separate financial statements (www.telstra.com.au 2016). It is worth mentioning that the chief financial officers does not go as far as to dislocate the primacy of the distinct financial statement, however, the acknowledges the relevance of the consolidated financial statement by analysing the performance of Telstra Corporation.
Use of securities premium: The companies act has put up the restrictions on the use of securities premium because the financial statements must comply with the accounting standard prescribed under the Companies Act. The chief financial officers of Telstra Corporation restricts the use of securities premium only on the grounds that the equity bonus are entirely paid up and the expenses incurred pertaining to the issue of equity shares are written off (Brealey et al. 2012). The chief financial officer of Telstra Corporation ensures that the securities premium account are adjusted with the redemption premium including “debentures, preference shares, foreign currency convertible bonds”.
Depreciation requirements: The companies act has defined the useful life of non-assets under schedule II of the act. The chief financial officers have the obligations of ascertaining the cost of asset along with the useful life. The chief officers ensures that the useful part of an non-current assets is determined separately for depreciation by using the theory of components accounting which forms an indispensible part of the Telstra Corporation capital intensive requirement (www.telstra.com.au 2016). The Chief financial officer also ensures that amortisation of non-current assets should be governed by notifying under the schedule XIV of the companies act. The chief financial officer carefully evaluates the depreciation rates in order to determine the future profitability of Telstra Corporation.
Independent directors: The chief financial officers also ensures that requirement of the independent directors for both its main and subsidiaries company are listed under the public companies with exact prescribed numbers (Chiu 2016). It is noteworthy to denote that Telstra Corporation compositions of board of directors are more complex with additional restrictions is being imposed on the appointment of independent directors as nominee directors of Telstra Corporation is no more considered as the independent directors.
Providing non-auditing services: The duty of the chief financial officers of Telstra Corporation is providing non-auditing services like internal audit investment, strategies for investment services, advisory services etc. Hence, it is worth mentioning that such services cannot be rendered by the auditing firm either directly or indirectly to its parent body or in subsidiaries for ensuring that the compliance requirement of accounting policies are met in the organisation. Thus, the companies act has laid down in its policies that all non-auditing services should be completed prior to the first year of enactment (McKinney 2015).
Meeting improved reporting requirements: The responsibility of the chief financial officer of Telstra Corporation is under the obligation of providing enhanced reporting concerning the matters related to the surveillance of the monetary transactions. The financial officer ensures that any transactions should not have any unfavourable impact on the operational functionality of the organisations (www.telstra.com.au 2016). The chief financial officers of Telstra Corporation ensures that it any auditor is not appointed for a term not exceeding five years for more than two consecutive period. Since Telstra Corporation, being a listed company is in accordance with this requirement.
Creation of board of committees: The chief financial officers should ensure that an audit committee should be set up with majority of the independent directors. The role of chief financial officers should ensure that the audit committee is assigned with the roles that are well enhanced with the specific responsibilities (Hiebl 2015). The chief financial officer ensures that the audit committee should be able to read and comprehend the monetary statement.
Managing business operations: It is noteworthy to denote that the chief financial officers of Telstra Corporation play an important role in the expansion and development of operational strategies. The chief financial officer undertakes an active part in the operational strategies relating to the business enterprise. On the other hand, the chief financial officer is solely responsible for Telstra Corporation business management and plays multiple role in the building the global reputation of the organisation. One of the common phenomenon’s of the current business world is outsourcing the activities to prevent the financial resources from being wasted and simultaneously maintaining the reputation and goodwill of the organisation in the international market. The transactional processing systems play a huge role in the maintenance of the authenticity and transparency at the time of recording the monetary transactions of Telstra Corporation (www.telstra.com.au 2016).
Duties defined under the articles of company: The chief financial officer must act in accordance with the duties defined under the articles of the company. It is responsibility of the chief financial officer to promote the objectives of Telstra Corporation in order to attain the objectives of the organisation for general benefits of its overall members (Ebert and Griffin 2015). The chief financial officer is under the obligations of protecting the interest of the shareholders, the community and its customers. The chief financial officer should exercise his duties with due diligence and care by exercising reasonable judgements. The chief financial officer of Tesla hardly gets indulged in those situations which may create either direct or indirect conflict of interest which might potentially conflict the interest of Telstra Corporation.
Managing business risks: Chief financial officer of Telstra Corporation is entirely responsible for the execution of the risk administration process of the organisation as a whole comprising of its parents body or its subsidiaries. The chief financial officer of Telstra Corporation identifies risk as the external and internal market threats concerning the operational functions of the organisations (Cole et al. 2016). The chief financial officer also covers the large areas of risk associated with the financial, economical and management policies in regard to the business entity. Therefore the chief financial officer of Telstra Corporation must have the authority to understand and analyse the market the threat by undertaking suitable steps to look beyond internal and external environment.
Transactions with directors: The chief financial officer ensures that the loans, which are made to the managing directors or a whole time directors, is given out as the part of services for the company. Such services should be approved by passing of the special resolution after attaining the approval in the general meeting of the company. It should be noted that Telstra Corporation provides loan to loans and guarantees in the form of securities connected with the loans in the ordinary course of business (Hoitash et al. 2016). The companies act states that the chief financial officer should impose restrictions on the on the managing directors by issuing instructions for lending money. It is the duty of the chief financial officer to maintain the non-cash transactions concerning the board of directors by attaining the prior approval of the company as whole in a general meeting.
Simplified method of Mergers and acquisition: The chief financial officer ensures that all the investment which are permitted for acquisitions of a company is originally used in the business. This includes acquisition of shares, redemption of debentures and other important securities. On complying with the standard procedure issued under the act has a significant amount of impact on the ability of Telstra Corporation to raise funds (Chiu 2016). The chief financial officer ensures that the current structure of company legal framework comply with the above stated requirements. The chief financial officer of Telstra Corporation also ensures that group restructuring activities are undertaken to meet the immediate future needs of the organisation as a whole.
Mergers with unlisted companies: Telstra Corporation is currently looking forward to permits the chief financial officer with the merger depending upon the factors where the shareholding company decides to opt out. The chief financial officer makes certain the prices of the mergers are always listed with the unlisted company of the who are deciding to opt out of the agreements. Therefore, the chief financial officer ensures that all the statutory requirements concerning the use of financial statement shall be notified under the accounting standard board. The chief financial officer also ensures that the buyback is shares are authorised by the board of directors to look in to the special resolution for Telstra Corporation (www.telstra.com.au 2016).
Efficient market hypothesis: The efficient market hypothesis can be defined as the market theory, which states that it is impossible to make profit under a vulnerable market environment reflecting an inconsistency in the stock market. Hence, investors selling stock at a lower value than the fair market price will not be able to generate the desired amount of profit. The only method that is left behind to generate the desired amount of profit is by investing in those stocks, which possess high market risks. Thus, the objective of the efficient hypothesis is to enable the investors to make delicate investment decision relating to the investment policies. It is worth mentioning the pension investment managers in framing a profitable investment schemes for retired pensioners shall put that efficient hypothesis into the use.
Curry and Schorer (2016) mentioned that pension fund administrator is one who has the ultimate power and authority to manage pension in their control. Therefore, pension fund managers play a vital role in increasing the pension fund, which has the possibility to create an impact on the operational functions of business. According to Cole et al. (2016) the pension fund manager of the business assist the business in the process of mobilization of funds in regard to the business organisations. Below listed are the important responsibilities relating to the pension fund manager.
Establishing key pension policies and benefits: As stated by Ebert and Griffin (2015) the pension fund manager is under the obligations of developing the pension policies, which can yield desired benefits for the retired personnel in the company. The ultimate responsibility of the pension fund manager is to mobilise the investment and the savings relating to the business expansion.
Implementation of pension fund strategy: It should be noted that the pension fund strategy need to be carefully reviewed before being implemented. This involves discussions and evaluations as per the goals and objectives set by the organisations. As stated by Lasher 2013) pension fund strategy should be implemented after taking into the consideration the inherent financial strength of the personnel along with the ability to save for desired investment under a given period of time.
Pension schemes: It is the duty of the pension scheme manager to efficiently operate and manage the functioning of the organisations so that the performance standards and the anticipations of the organisations are well met. The pension scheme should be developed in considerations with factors like savings and cutting down the unnecessary expenses of the business monthly. Thus, managing the pension scheme is one of the main duties of the pension scheme manager.
Operating updated reports: The pension fund manager has the obligations to report the trustees regarding the intrinsic details of business concerning pension fund. As stated by Sheng (2015) the updated report shall be presented quarterly or in a half-yearly basis.
Thus, this can be said that both the pensioners as well as the chief financial officers play an important role in the development of investment and financial strategies relating to a business organisation. Such policies and measures help the business in achieving the financial strategies of the business entity.
Reference List:
Becker, B. and Strömberg, P., 2012. Fiduciary duties and equity-debtholder conflicts. Review of Financial Studies, 25(6), pp.1931-1969.
Bedard, J.C., Hoitash, R. and Hoitash, U., 2014. Chief financial officers as inside directors. Contemporary Accounting Research, 31(3), pp.787-817.
Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P., 2012. Principles of corporate finance. Tata McGraw-Hill Education.
Cheng, M.M., Tan, H.T., Trotman, K.T. and Tse, A., 2016. The Impact of the Timing of a Prior Year’s Auditor Concessions on Financial Officers’ Judgments. Auditing: A Journal of Practice and Theory.
Chiu, I.H., 2016. Comparing Directors’ Duties in the Financial Services Sector with Regulatory Duties under the Senior Persons Regime-Some Critical Observations. European Business Law Review, 27(2), pp.261-283.
Chiu, I.H., 2016. Regulatory Duties for Directors in the Financial Services Sector and Directors’ Duties in Company Law-Bifurcation and Interfaces.Journal of Business Law.
Cole, S., Kanz, M. and Klapper, L., 2016. Improving Financial Access for Entrepreneurs in Developing Countries. Policy, 2011.
Curry, D.S. and Schorer, J.U., 2016. The Effects of Business Insolvency on the Duties and Liabilities of Directors and Officers—A Comparative Analysis With Recommendations to Promote Good Decision—Making. In Global Insolvency and Bankruptcy Practice for Sustainable Economic Development(pp. 168-218). Palgrave Macmillan UK.
Ebert, R.J. and Griffin, R.W., 2015. Business essentials. Upper Saddle River, NJ: Pearson.
Hiebl, M.R., 2015. Agency and stewardship attitudes of chief financial officers in private companies. Qualitative Research in Financial Markets,7(1), pp.4-23.
Hoitash, R., Hoitash, U. and Kurt, A.C., 2016. Do accountants make better chief financial officers?. Journal of Accounting and Economics, 61(2), pp.414-432.
https://www.telstra.com.au/, h. (2016). [online] Available at: https://www.telstra.com.au/ [Accessed 16 Sep. 2016].
Lasher, W.R., 2013. Practical financial management. Nelson Education.
McKinney, J.B., 2015. Effective financial management in public and nonprofit agencies. ABC-CLIO.
Ojo, A.O., 2016. Corporate governance and risk management in the financial industry: changes after the global financial crisis.
Shaw, S.J., 2015. Financial and Administrative Organization and Development. Princeton University Press.
Sheng, L., 2015. Study on the Financial Integration after the Merger and Acquisition.
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