Fortex Construction Services Ltd.

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ACCG 399 Case Assignment
Semester Two, 2012
Fortex Construction Services Ltd.
Background to the Case
Fortex Construction Services Ltd is a newly listed Company on the Australian Stock
Exchange. The company was created in 1991 and currently owns 14 sites throughout the
Eastern states of Australia. You have just been recruited in a graduate accountant
position with the Company in their head office based in Chatswood, Sydney. Fortex has
two main divisions – one leases and rents-out corporate vehicles’ and the other division
leases and rents out equipment for construction sites. The major cost to Fortex is the
purchasing of equipment for rental, with equipment being shipped predominantly from
China and the UK.
Fortex CEO, Richard Davies, is concerned about the impact of the new carbon pricing
mechanism on Fortex’s business model and its reported profits. He is especially
concerned about the possible impact on the Fortex share price, which has been gradually
falling since the company was listed a year ago.
Richard has asked you to consult with him on the business implications of the new
carbon price on the business, and the actions Fortex can take to mitigate this impact,
illustrating how Fortex’s position might be communicated to investment analysts.
After discussions with Richard, you agree that you will undertake to advise him on the
following activities:
• Complete a greenhouse gas (GHG) inventory of the business to establish the
company’s current carbon footprint
• Identify the information which will need to be captured from now on in order to
monitor the GHG footprint of Fortex
• Identify what information should be reported to investment analysts to enable
them to accurately reflect the financial impact of the carbon tax in their
valuation of Fortex
• Identify opportunities and make recommendations to cost effectively reduce
elements of the company’s GHG footprint over time and capitalise on business
opportunities arising from the introduction of a carbon tax.
An old university friend, now a graduate at PwC and working in their sustainable
energy department, has sent through to you the following reference documents:
• The National Greenhouse and Energy Reporting (Measurement) Technical
Guidelines 2011, available at:
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http://www.climatechange.gov.au/publications/greenhouse-report/ngertechnical-
guidelines/2011.aspx
• National Greenhouse Accounts Factors (July 2011), available at:
http://www.climatechange.gov.au/~/media/publications/greenhouseacctg/
national-greenhouse-accounts-factors-july-2011.pdf
Fortex GHG Inventory calculation
After determining Fortex’s organisational and operational boundaries, you complete a
comprehensive stock-take of Fortex’s current business operations to discover the
following main sources of greenhouse gas and underlying raw data on quantities used in
the financial year ended 30 June 2011:
GHG Source Quantities used
Scope 1 – Direct Emissions
Own transport fleet fuel usage 400,000 litres
Scope 2 – Indirect Energy
Purchased electricity NSW – 2,000,000 kWh
Victoria – 1,000,000 kWh
Queensland – 250,000 kWh
Scope 3 – Indirect Other
Own transport fleet indirect fuel extraction 400,000 litres
Purchased electricity (indirect fuel
extraction and line loss)
NSW – 2m kWh
Victoria – 1m kWh
Queensland – 250,000 kWh
Customer use of vehicles (unleaded fuel) 800m litres
Customer use of equipment (Diesel fuel) 300m litres
Your assistant has begun the GHG inventory by determining the Scope 1 emissions for
Fortex and using the following calculation:
GHG Source Quantities
used
Calculation Emissions
tonnes CO2-e
Scope 1 – Direct
Emissions
Own transport fleet
fuel usage
400,000 litres =(400,000/1000)*34.
4*(69.22/1,000)
952
Required:
1. Discuss the four different methods of determining Scope 1 emissions. In your
advise you should detail why the first method is most appropriate for Fortex. (2
Marks). (hint: refer to the NGER Technical Guidelines).
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2. a) Briefly explain Scope 2 emissions and how Scope 2 emissions from
electricity purchased from the main electricity grid in NSW, Victoria and
Queensland are calculated. (hint: refer to the NGERS Technical Guidelines).
b) Using this information, complete the table below to calculate Fortex Scope 2
emissions. (2 Marks).
GHG Source Quantities used Calculation Emissions
tonnes CO2-e
Scope 2 – Indirect
Energy
Purchased electricity -
NSW
Purchased electricity -
Victoria
Purchased electricity -
Queensland
3. Briefly explain Scope 3 emissions and identify the emission factors for fuel and
electricity purchased. Using this information, complete the following table to
calculate Fortex Scope 3 emissions. (2 Marks).
(hint: refer to the National Greenhouse Accounts Factors – July 2011).
GHG Source Quantities used Calculation Emissions
tonnes CO2-e
Scope 3 – Indirect Other
Own transport fleet indirect
fuel extraction
Purchased electricity (indirect
fuel extraction and line loss) -
NSW
Purchased electricity (indirect
fuel extraction and line loss) -
Victoria
Purchased electricity (indirect
fuel extraction and line loss) -
Queensland
Customer use of vehicles
Customer use of equipment
4. a) Given the components of Fortex GHG footprint in relation to Scopes 1-3, list the
information that will need to be captured from now on in order to monitor Fortex’s
GHG performance. What impact will this have on the accounting system? Discuss
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whether you think this information should belong as part of the accounting
information system and identify three reasons why this may not be possible? (3
Marks).
b) In future, what other information may be useful to calculate the Fortex’s GHG
footprint? (2 Marks).
5. Identify what information should be reported to investment analysts to enable them
to accurately reflect the financial impact of the carbon pricing mechanism in their
valuation of Fortex? (2 Marks). (hint: you may wish to refer to the website detailing
the carbon pricing mechanism http://www.cleanenergyfuture.gov.au/ and discussion
papers such as fact sheets 19 and 20 at http://www.cleanenergyfuture.gov.au/cleanenergy-
future/our-plan/ )
6. Identify opportunities and make recommendations to cost effectively reduce
elements of the company’s GHG footprint over time and capitalise on business
opportunities arising from the introduction of a carbon price. (2 Marks).
1. Due Date: Friday 14th September 4pm in BESS (E4B 106). Late penalty at
25% per day.
2. The assignment must not exceed 5 pages in length (excluding referencing). The
assignment must be word-processed, single-spaced, and printed on one side
only of A4 paper. The word size should be 12 with ‘Times new roman’ font
type. Your student number must appear on the top right hand side of each
page of the assignment
3. Bullet points are not acceptable.
4. Each answer must be clearly marked by the designated activity to which it
corresponds.
5. Must include individual cover sheet which can be located on ilearn with your
tutor’s full name.
6. The assignment should be within the range of 2000 words.
7. Please list any references (books, articles, web-based material) you use at the
end of your assignment in alphabetical order, using the referencing style seen
in academic articles (i.e. with in text references and bibliography, as in the
Harvard referencing style).
8. If you choose to make any assumptions in completing your case then you
should ensure you provide sufficient detail of these within your written report.
A failure to comply with these guideline will result in your assignment not being
graded.

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