Accounting for the collapse of Dick Smith

In August 2019, Oliver Jones, senior manager at the New South Wales Institute of Qualified Accountants, was following the case of the insolvency of Dick Smith Group. The company began when the founder started servicing radios and expanded to carry a wide range of electronics products. Over the years...

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Main Authors: HUANG, Sterling, CHAN, Chi Wei
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2020
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Online Access:https://ink.library.smu.edu.sg/cases_coll_all/326
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spelling sg-smu-ink.cases_coll_all-13302022-08-19T02:37:03Z Accounting for the collapse of Dick Smith HUANG, Sterling CHAN, Chi Wei In August 2019, Oliver Jones, senior manager at the New South Wales Institute of Qualified Accountants, was following the case of the insolvency of Dick Smith Group. The company began when the founder started servicing radios and expanded to carry a wide range of electronics products. Over the years, the competitive consumer electronics industry saw Dick Smith undergo several strategic changes. The founder had sold the company to Woolworths before the supermarket retailer decided to exit the consumer electronics business. After private equity firm Anchorage turned the company around and sold it for a profit in 2014, Dick Smith again experienced financial troubles. Management had bought too much inventory, chose the wrong products to buy and ultimately assumed too much debt during its expansion phase. In 2016, Dick Smith went bankrupt. Subsequently, creditors began litigation against top Dick Smith executives for pursuing a “rebate maximising” strategy that prioritised rebates over customer demand. The auditor was also implicated. While Jones was unsure if the auditor was legally responsible for investor losses, he wondered how they had not found any risks worth flagging. The case study provides students with an opportunity to discuss the importance of proper accounting. Students who have successfully examined the case should be able to analyse financial statements to identify accounts at risk of material misstatement, explain how inventory and working capital management affect a firm’s financial performance and position and understand the accounting treatment for different type of rebates. 2020-01-01T08:00:00Z text https://ink.library.smu.edu.sg/cases_coll_all/326 https://smu.sharepoint.com/sites/admin/CMP/cases/SMU-20-BATCH%20%5BPDF-Pic%5D/SMU-20-0036%20%5BDick%20Smith%5D/SMU-20-0036%20%5BDick%20Smith%5D.pdf?CT=1610423341503&OR=ItemsView Case Collection eng Institutional Knowledge at Singapore Management University Rebates Financial accounting Accounting standards External audits Fraud Accounting Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Rebates
Financial accounting
Accounting standards
External audits
Fraud
Accounting
Finance and Financial Management
spellingShingle Rebates
Financial accounting
Accounting standards
External audits
Fraud
Accounting
Finance and Financial Management
HUANG, Sterling
CHAN, Chi Wei
Accounting for the collapse of Dick Smith
description In August 2019, Oliver Jones, senior manager at the New South Wales Institute of Qualified Accountants, was following the case of the insolvency of Dick Smith Group. The company began when the founder started servicing radios and expanded to carry a wide range of electronics products. Over the years, the competitive consumer electronics industry saw Dick Smith undergo several strategic changes. The founder had sold the company to Woolworths before the supermarket retailer decided to exit the consumer electronics business. After private equity firm Anchorage turned the company around and sold it for a profit in 2014, Dick Smith again experienced financial troubles. Management had bought too much inventory, chose the wrong products to buy and ultimately assumed too much debt during its expansion phase. In 2016, Dick Smith went bankrupt. Subsequently, creditors began litigation against top Dick Smith executives for pursuing a “rebate maximising” strategy that prioritised rebates over customer demand. The auditor was also implicated. While Jones was unsure if the auditor was legally responsible for investor losses, he wondered how they had not found any risks worth flagging. The case study provides students with an opportunity to discuss the importance of proper accounting. Students who have successfully examined the case should be able to analyse financial statements to identify accounts at risk of material misstatement, explain how inventory and working capital management affect a firm’s financial performance and position and understand the accounting treatment for different type of rebates.
format text
author HUANG, Sterling
CHAN, Chi Wei
author_facet HUANG, Sterling
CHAN, Chi Wei
author_sort HUANG, Sterling
title Accounting for the collapse of Dick Smith
title_short Accounting for the collapse of Dick Smith
title_full Accounting for the collapse of Dick Smith
title_fullStr Accounting for the collapse of Dick Smith
title_full_unstemmed Accounting for the collapse of Dick Smith
title_sort accounting for the collapse of dick smith
publisher Institutional Knowledge at Singapore Management University
publishDate 2020
url https://ink.library.smu.edu.sg/cases_coll_all/326
https://smu.sharepoint.com/sites/admin/CMP/cases/SMU-20-BATCH%20%5BPDF-Pic%5D/SMU-20-0036%20%5BDick%20Smith%5D/SMU-20-0036%20%5BDick%20Smith%5D.pdf?CT=1610423341503&OR=ItemsView
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