Analyzing Accounting Items Impact

This assignment delves into the significance of various accounting items within a company's financial reporting. It examines how Property, Plant, and Equipment (PP&E) and Intangible Assets are valued, their impact on a company's financial health, and the broader social implications of accurate reporting. The analysis is based on an example annual report from Telstra, highlighting key points like earnings per share and future growth prospects.

EXECUTIVE SUMMARY
The title of the report is the analysis of the accounting items of Telstra Corporation Limited. As
the title suggests the accounting items have been analysed with reference to the annual report of
the company. The main aim of this report is to analyze the importance and the impact of the
selected accounting items on the society. With this consideration, the report has been prepared
with sufficient headings and sub headings.
Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................3
ACCOUNTING ITEMS....................................................................................................................................3
PROPERTY PLANT AND EQUIPMENT........................................................................................................3
INTANGIBLES...........................................................................................................................................4
IMPORTANCE AND IMPACT.........................................................................................................................4
IMPORTANCE OF ITEMS...........................................................................................................................4
IMPACT ON FINANCIAL POSITION AND FINANCIAL PERFORMANCE........................................................4
SOCIAL IMPACT............................................................................................................................................5
REFLECTIONS...............................................................................................................................................5
CONCLUSION...............................................................................................................................................5
REFERENCES................................................................................................................................................6

INTRODUCTION
The accounting system of the company plays a very important role in the proper functioning of
the company. For the purpose of the report – Telstra Corporation Limited has been selected. To
start with the study two accounting items – Property plant and equipment and Intangibles has
been selected from the annual report of the company. The accounting policies relating to these
accounting items have been detailed along with the importance that both the items have on the
financial position and financial performance of the company. After that the social impacts of
these items have been discussed and the overall view of the company has been summarized from
emphatic view. At the end the study is then concluded with the recommendations
ACCOUNTING ITEMS
For the purpose of the study, two accounting items have been selected from the annual report of
the company for the year endingn30th of June 2016. These are as follows:
PROPERTY PLANT AND EQUIPMENT
The company in the annual report has recorded the amount of $ 20581 million as the book value
of the Property plant and equipment. As per Note number 3.1.2 of the annual report of the
company – Property plant and Equipment is recorded at the cost of purchase less the amount of
the depreciation that has been accumulated over the years including the current year depreciation
and the impairment loss if any (Company Official Website, 2016). Cost is identified as the cost
of acquisition including the costs which can be directly allocated to the asset. The additions in
the assets also include the borrowing costs which can be directly attributable to these assets
(Assets, 2008).

INTANGIBLES
The company has recorded the intangibles at the book value of $9229 million as on 30th of June
2016. As per Note number 3.2.2 of the annual report of the company – Goodwill is recognized at
cost on every business combination that the company made during the year. The cost is
equivalent to the excess amount paid for acquisition of the business on the fair value of the assets
of the company. The goodwill is not amortized but is tested for the loss of impairment at the end
of every annual year or other frequent intervals. Other intangible assets which are internally
generated like new Information technology software, etc are capitalized if the content of the
costs includes the development costs. For instance, direct expense of the material involved,
salary of the employees which can be directly associated with the asset so being developed and
the interest cost comprising of loan if any taken. Specific disclosure has been made that any of
the research expenditure if incurred shall be charged to the statement of Profit and Loss Account.
Other intangible assets like patents, etc. are valued at the cost which can be either will be the part
of the business arrangement or the part of the individual acquisition.
IMPORTANCE AND IMPACT
IMPORTANCE OF ITEMS
These items have very important place in the financial statements of the company. Both the items
represent the part of the net worth of the company. The higher the value of the property plant and
equipment, the more will be the net worth of the company and which in turn will help in
increasing the share price of the company. On the other hand the intangible shows the
technologies that the company have and how much goodwill the company has been able to
generate while engaging in the same line of the business. If these items are not present in the
financial statement majorly property plant and equipment then no investor will decide to invest
in the company (Steenkamp, and Kashyap, 2010).
IMPACT ON FINANCIAL POSITION AND FINANCIAL PERFORMANCE
Both the items can give the material effect in the financial position and the financial performance
of the company. Financial position is exhibited by the balance sheet of the company and
financial performance of the company is depicted by the statement of the profit and loss.
Following impact has been observed:

- Property Plant and Equipment – This item gives the material effect in determining the
financial position of the company in the sense that the if the value of the same is
underestimated then the value of the company and the shareholder wealth will be
decreased and in case it is overstated then not only the shareholders wealth will be
increased but also the eyes of law will be affixed on the working of the company. Many
collapses have been encountered due to wrong valuation of the assets (Abdul-Shukor,
2008).
- Intangible assets - If this item is undervalued then there will be wave in the market that
the reputation of the company has been eroded and which in turn will hamper the
financial position and the financial performance of the company (Barth, 2008).
SOCIAL IMPACT
The major social impact that has been observed in the positive sense is that the readers and the
users of the financial statements of the company will have more insights of the working of the
company and its adherence to social and environmental protection related laws and the
compliance with the accounting standards and the governing law (Goodwin, 2006).
REFLECTIONS
Being the shareholder of the company, the company is performing well and has disclosed all the
relevant information and the explanation that is required by the accounting standards and the
relevant provisions of the corporations act, 2001. As the company has reported the earnings per
share as 31.6 cents and the company has the growth in future therefore the company is the strong
performer.
CONCLUSION
The Accounting items have been flowed throughout the report detailing their accounting
treatment as per the policies listed in the annual, importance, impact on the position and
performance of the company in the financial terms and impact on the society. The observations
from the annual report have been given. In order to conclude, the report has specified that each
accounting item have its own importance and shall be treated and dealt accordingly.

REFERENCES
Abdul-Shukor, Z., 2008. The value relevance of intangibles non-current assets in different
economic conditions. International Review of Business Research Papers, 4(2), pp.316-337.
Assets, I., 2008. Non-Current Assets. Group, 30, p.2007.
Barth, M.E. 2008. Revalued financial, tangible, and intangible assets: Associations with share
prices and non-market-based value estimates. Journal of Accounting Research, 36, pp.199-233.
Company Official Website, (2016), “Annual Report 2016”, available at
https://www.telstra.com.au accessed on 14/09/2017.
Goodwin, J., 2006. Factors affecting the audit of revalued non‐current assets: Initial public
offerings and source reliability. Accounting & Finance, 36(2), pp.151-170.
Steenkamp, N. and Kashyap, V., 2010. Importance and contribution of intangible assets: SME
managers' perceptions. Journal of Intellectual Capital, 11(3), pp.368-390.