MGMT5513 Data Driven Decision Making

Memorandum

To: Board of Directors

From: Management

Subject: Technical aspects of Consolidation

The consolidation is seen to be the necessary one which includes corporation and it can be own with the majority of stocks for the purpose of another corporation along with outstanding common stocks. There are some of the main forms of accounting principle which has also been applied for preparing separate financial statements as well. In accounting it is seen that the consolidation refers to the financial statements as well for the purpose of subsidiary of the companies which will be into the financial statements of parent company. there are some of the consolidations which might have led one company acquiring another kind of two companies which are merging into one. Both of them have processed are done in order to receive single entity for every purpose.

For the purpose of consolidations, there are different companies which should have provided with a common base and this means that either the product or event service are connected with the products. For example: when a mobile phone company consolidating with any of the other manufacturing company of phone batteries, then the consolidation accounting is also done when there are two companies which are a part of the joint venture.

Two companies as per the ASX companies are Commonwealth Bank and Westpac group. Both of them are bank and it is believed that if they consolidate then they can be able to understand the requirement of their customers better and also to provide a better financial package to them in a most reasonable manner as well as with less risk. In Australia, both the banks consist of goodwill and trust of their customers in the market which defines that their new project will also attract customers towards them and this will help them to serve their customers well.

Th consolidates balance sheet review of Westpac Group contains the amount of previous 5 years as well so that the trend of improvement can also be seen and analysed accordingly. The balance sheet of Commonwealth bank consists of the trend only for previous year for the purpose of better analysis.

The current market value of Westpac Group is worth 25.65 Australian Dollars and the market value of Commonwealth Bank is worth 98.05 Australian Dollars. In the current situation the market value of Commonwealth Bank is more compared to the market value of Westpac Group. However, the strategies of both the companies must be noted for the purpose of consideration decision. The strategies of Westpac Group are related with their vision towards helping the Australians to get success. This is also why they are trying to come towards along with the work every day. There is most important fact of understanding the customers properly. This strategy seeks for the delivery on purpose and also to build the deep and enduring customer for themselves with the customer relationships with the help of being leader in community. Some of the key elements which is used for the approach is the portfolio of their financial services brands which also enabled for the purpose of appealing to broader range of customers and also to provide with strategic flexibility for offering the solution which is better for meeting the individual customer needs.

The strategy of Commonwealth towards their business approach in the market is explained with different segments. This includes the customer service, technology & operational excellence, trust & team spirit, progress and momentum, and business banking. This includes the improvement of their people and customers service and metrics, this also returns for shareholders and also the strength of reputation. There are some of the strategies which is used for the people to help them receive the best service from this company. the strategy of this company mainly focuses over the four key strategies of the business performance as well as the growth. The customer service considers the bank’s top strategic priority and also to have a positive relationship with the customers. The progress and momentum include the relationship with the 45% of Australian and many Australia’s leading companies in the market for distributing the network of any other Australian bank. These are together the marker-leading portfolios which is across the most product lines.

After the analysis the consolidation decision can be taken because due to this consolidation it is possible to come up with a solution which will have a better approach towards their customers. The main focus is to sustain in the market and considering the current situation, it can be a huge competition among the similar objective companies to sustain in a market where the customers does not have enough idea regarding how they can be able to manage their finance in future. It is always a best solution to come together to support the customers so that they can support the consolidation in future.

There are some of the rules of consolidation which is required to be kept in mind and they are related with the company utilisation of cost method when they own up to 20% of other company’s stock. In this case Westpac must use the cost method. When the company has anything between the 20% and 50% for the purpose of using the equity method, Westpac Group must try to understand each of the factors for this purpose. When the consolidation 50% of other company’s stock with them. The company will become the parent and will also receive the ownership over subsidiary with the help of combining financial statements.

References:

Alesina, A., Favero, C., & Giavazzi, F. (2015). The output effect of fiscal consolidation plans. Journal of International Economics, 96, S19-S42.

Alexander, G. (2018). The sources of democratic consolidation. Cornell University Press.

Commbank.com.au. (2021). Retrieved 23 May 2021, from https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/results/fy20/cba-2020-annual-report.pdf

Dudai, Y., Karni, A., & Born, J. (2015). The consolidation and transformation of memory. Neuron, 88(1), 20-32.

Molnar, M. (2013). Fiscal consolidation: What factors determine the success of consolidation efforts?. OECD Journal: Economic Studies, 2012(1), 123-149.

Westpac.com.au. (2021). Retrieved 23 May 2021, from https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/2019_Westpac_Group_Annual_Report.pdf

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