Accounting information in Maori business
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Introduction
One of the unique factors about the Maori business is that they integrate their unique culture and values into operating their business, which has been thriving since the ancient era. These values and concepts have enabled the organization to efficiently utilize and conserve their assets through the concept of kaitiakitanga. Therefore, the report aims to explain and elaborate the latest TDB report (2018) to Hemi Orupe, a member of the Tuhoe iwi, the concept of Kaitiakitanga, the iwi’s return on assets as well as return on equity and how they reveal about the investment performance. In addition to this, the report will evaluate the asset base and net worth of the iwi and explain the difference between the two approaches.
The concept of kaitiakitanga
kaitiakitanga is a traditional concept that is part of the social, complex, spiritual, cultural, and economic system that was formed through a long association of hapu and iwi with waters and land. However, kaitiakitanga was termed as protection or guardianship that simply means to guard, but it depended on the context in which it was used. Having spiritual nature, the tribal guardian is left behind by ancestors to protect sacred places and watch over its descendants. The main philosophy with this concept is that the condition of the environment and people are complexly related. Kaitiaki ensured the mauri of taonga is strong and healthy as part of its responsibility in the community. In the current society, scientists are acknowledging the values of Maori knowledge, especially the kaitiakitanga’s concept. More so, the alliance with iwi and hapu is becoming a significant part of environmental science in ensuring the environment is sustainable. Utilizing the ideas about conservation, repair, utilization, and conservation of the environment is how kaitiakitanga informs the investment decision of iwi leadership. Integrating the concept of kaitiakitanga effectively assists organizations in making efficient asset management decisions within organizations such as the equal distribution of assets and efficient utilization of assets to increase their earnings. Additionally, the concept assists in assessing assets’ efficiency using analyses such as return on assets and asset base.
Return on assets and return on equity
Return on assets
The concept of return on assets is an indicator of how profitable a company is relative to its total assets. It reveals how organizational management efficiently utilizes the firm’s assets to generate earnings for the company. Simply the return on assets provides clear information on what incomes are generated from invested assets. According to Tuhoe’s investment performance, the organization had a historic increase in its return on assets until 2017 and 2018 when it decreased from 9% to 6% as well as 4% in 2018. 2018 was the year that was attributed with the least return on assets an indication that the Tuhoe organization had not fully utilized its assets to generate enough earnings, unlike the previous years. However, a decrease in carbon price is one of the factors that resulted in a reduction of the return on assets in 2018.
Return on equity
The absence of debt in its capital structure, Tuhoe’s return on equity was similar to that of return on assets. A reduction in return on equity results in weaker CNI returns of the organization. However, the concept of return on equity measures an organization’s ability to utilize its resources. A decline in return on equity in 2018 was a clear indication that the organization did not fully use its resources to generate more earnings back to the organization. Distributions to iwi beneficiaries are another factor that contributed to the decline of the return on equity. In addition to that, Te Tii and Te Wharehou o Waikaremoana building projects are other factors that withdrew resources from the organization, declining the return on equity.
Evaluation of the asset base and net worth of Tuhoe over the years 2014 to 2018
The asset base of Tuhoe increased from approximately $150m in 2014 to $365m in 2108. According to Tuhoe’s financial portfolio, it indicates that the organization’s assets had rapidly grown to a value of $365m in 2018. However, the term asset base refers to the primary assets that provide value to a firm, loan, or investment. The organization’s valuation is directly affected by an increase or decrease of assets in the organization. In the case of Tuhoe, the organization has increased more assets in its organizations such as the Te Tii in Ruatahuna that is currently in progress, among others, such as the Te Wharehou O Waikaremoana. These assets have added the value of Tuhoe’s asset valuation, facilitating its progressive increase. Secondly, Tuhoe’s net worth has increased over four years, from 2014 to 2018. Tuhoe’s net worth increased from approximately $150m in 2014 up to $360m in 2018. One of the main contributing factors to the increase of Tuhoe’s net worth is the growth of assets that give value to the organization. As a result of the rise in net worth, the organization’s cash dividends to its shareholders increase respectively, while the net assets per shareholders increased to $9,588.
The main difference between these two approaches is that the asset base is the classification of all the assets that add value to the company. In contrast, the net worth approach is the value derived at after deducting all the company’s liabilities from its total assets. That is why Tuhoe’s asset base is higher than its net worth since all the organization’s liabilities are deducted, meaning that its total liabilities were $5m since its asset base was $365m. In comparison, its net worth was $360m.
Conclusion
The use of the concept of Kaitiakitanga is one of the factors that has assisted the progressive Tuhoe’s growth of assets, which has greatly increased its net worth. From the TDB report (2018), the iwi has been developing more assets lately, which have reduced the value of return on assets. On the other hand, the decline of return on assets has hugely contributed to the deterioration of its return on equity. The main difference between the concepts of the asset base is that it only involves an organization’s assets, while net worth is the value derived from deducting its liabilities from its total assets.