Identification of Questioned Accounting Treatment

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student
Name of the University
Author’s Note

1COMPANY ACCOUNTING
Table of Contents
Requirement 1..................................................................................................................................2
Identification of Questioned Accounting Treatment...................................................................2
Requirement 2..................................................................................................................................3
Examination of Basis of Accounting Treatment.........................................................................3
Basis of Concern Raised by ASIC...............................................................................................3
References........................................................................................................................................5

2COMPANY ACCOUNTING
Requirement 1
Identification of Questioned Accounting Treatment
It can be seen from the 2018 Annual Report of Premier Investments Limited (Premier)
that the company has written down its casual wear brand names assets by $30 million. The
company has undertaken certain accounting treatments for the above impairment of brands.
Acceding to the 2018 Annual Report of Premier, the value of their brands on 30 July 2017 was
$376,179 and the company has charged impairment of $30,000 on these brand names. After
deducting the impairment from the initial amount, the net carrying amount of brand names is
$346,179 (premierinvestments.com.au 2019). It needs to be mentioned that the company has
applied certain accounting policies for the determination of the impairment amount on brand
names.
The brand names of Premier have indefinite useful lives and these brand names are not
subject of amortization or revaluation. These brand names are acquired and they are tested for
impairment on annual basis for the indicators of impairment (Huian 2013). It is crucial to
mention the fact that Premier has three brand names; they are casual wear, women’s wear and
non apparel. The 2018 Annual Report has stated that Premier has applied certain average growth
rates applied to projected cash flows; they are 2% to 2.5% for casual wear, 1.5% to 3.5% for
women’s wear and 3% for non apparel. The used terminal value growth rate is same for three
brands which is 3%. In addition, Premier has used the value-in-use model for the determination
of recoverable value of these assets (premierinvestments.com.au 2019). It needs to be mentioned
that the above-discussed whole accounting treatment raises a big question in the determination of
impairment of $30 million for brand names.