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Accounting standards and Practice PDF

   

Added on  2021-05-31

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Accounting Standards and PracticeName of the StudentName of the UniversityAuthor’s Note
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Executive SummaryThis report aims on the analysis of the impairment write downs for the Australian companies andWesfarmers Limited is selected. The first party of the report shows all the details of impairmentwrite downs in the company. The second part of the report shows complexities and keychallenges in impairment accounting. The third part shows the compliance of Wesfarmers withthe standards of AASB 136 for impairment calculation. The last part of the report shows thecompliance of impairment accounting of Wesfarners with the objectives of general purposefinancial reporting. As per this report, three main areas where Wesfarmers face complexity areCash Generating Units and Segments, Difference between Fair Value and Value-in-use and Useof Appropriate Discount Rate. It can also be observed that the company has done necessarydisclosures as per AASB 136 along with aligning with the objectives of general purpose financialreporting
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Table of ContentsIntroduction......................................................................................................................................1a. Details of Impairment Write Downs............................................................................................1b. Complexities and Key Issues in Impairment...............................................................................2c. AASB 136 Disclosure Requirements...........................................................................................3d. Alignment with the Objectives of General Purpose Financial Reporting...................................5Conclusion.......................................................................................................................................6References........................................................................................................................................8
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1ACCOUNTING STANDARDS AND PRACTICEIntroductionIn the recent business era, utmost importance is provided on the quality of financialinformation provided by the business entities as this information provides great aid in thedecisions-making process (Kabir and Rahman 2016). This particular report aims on the analysisof the impairment write downs for the Australian companies and Wesfarmers Limited is selectedas it is one of the leading retailers of Australia (wesfarmers.com.au 2018). The first part criticallyidentifies and analyzes the impairment write downs in Wesfarmers. The aim of the second part isto highlight the complexities and issues in the impairment testing of Wesfarmers. The third andfourth part of the report analyzes the compliance of Wesfarmers with disclosure requirement andobjectives of general purpose financial reporting. a. Details of Impairment Write DownsAs per the 2017 Annual Report of Wesfarmers, property, plant and equipment, tradereceivables, freehold property, goodwill and other intangible assets along with non-financialassets are tested for impairment. For property, plant and equipment, Wesfarmers test them at costvalue less depreciation and impairment (wesfarmers.com.au 2018). Impairment is recognized inthe income statement for trade receivable when the evidence is obtained that the company willnot be able to recover the debt. Goodwill is initially recognized at cost and after that, it is carriedout at cost less impairment losses. In case of other intangible assets, they are recognized at fairvalue and after that, they are carried out at cost less impairment losses and amortization(wesfarmers.com.au 2018).It is required for the Australian organizations to review their assets in order to ensure thatwhether there is any sign of impairment of the assets on not and Wesfarmers has also adopted thesame strategy. In Wesfarmers, the main reason behind the impairment testing of their assets isthe change in technology or liquidation plan of any business operation (wesfarmers.com.au2018). Apart from this, another major reason in Wesfarmers for impairment testing is thedecrease in the usefulness of the assets and the value of estimated economic benefits associatedwith these assets (wesfarmers.com.au 2018). The following table shows the value of assetimpairment in Wesfarmers for the year 2017 and 2016:
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