Financial Accounting and Reporting

The report includes about financial accounting system as this help the company to prepare and record all its transaction. It is governed by both local and international accounting standard and each company should follow this while preparing their financial accounting. Financial reporting is reporting of its annual report to the financial user. It includes balance sheet of the company, income statement of the company and cash flow of the company. The report includes detail about professional judgement and how it affect the public and individual interest. It also have impairment of asset and how the company deals with the same and include the different assumption and why the company have taken such assumptions.

Running head: Financial Accounting and Reporting
Financial Accounting and Reporting
Name of the Student
Name of the University
Author Note

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Financial Accounting and Reporting
Executive Summary
The report includes about financial accounting system as this help the company to prepare
and record all its transaction. It is governed by both local and international accounting
standard and each company should follow this while preparing their financial accounting.
Financial reporting is reporting of its annual report to the financial user. It includes balance
sheet of the company, income statement of the company and cash flow of the company. The
report includes detail about professional judgement and how it affect the public and
individual interest. It also have impairment of asset and how the company deals with the
same and include the different assumption and why the company have taken such
assumptions.

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Financial Accounting and Reporting
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Overview of the Company.....................................................................................................3
Role of Professional Judgement in Accounting.....................................................................3
Implication of professional judgement upon the users..........................................................4
Impairment written down of the company.............................................................................4
Analysis of the professional judgement in regards with Impairment of asset.......................5
Recommendation regarding impairment of asset...................................................................5
Fundamental Characteristic of Financial Information...........................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7
Appendix....................................................................................................................................8

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Financial Accounting and Reporting
Introduction
Financial accounting is concerned with the analysis, summary and reporting of
financial transaction related to its business. It include the preparation of the financial
statements which is used by the financial user of the company. This is govern by both local
and international accounting standard. GAAP stands for “General Accounting Acceptable
Principles which help the company to form a framework related to the process of financial
accounting system” (Henderson et al,.2015). Financial reporting is the reporting of financial
results and management information in to its annual report. This help the user to know how
the company is performing in the industry, its financial position and its stability in the market
(Freeman et al,. 2014). Financial reporting includes Balance sheet, income statement,
changes in equity statement, information related to retained earnings and cash flow statement
of the company.
Discussion
Overview of the Company
The company which is selected for the assignment is Wesfarmers. Wesfarmers is a
conglomerate based company which had it headquarter in Perth, Western Australia, it was
founded in 1914 as co-operative and in 1984 it got listed in Australian Securities Exchange.
The products in which it deals are chemicals, fertilizers and coal mining industry products.
Role of Professional Judgement in Accounting
Professional Judgement “is a process of taking assumption which are there and are
accurate as per the industry norms and all the judgement are taken by considering all the
business activities of the company” (Mullinova, 2016). In accounting professional
judgements play an important role as it should take all the risk in to consideration while

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Financial Accounting and Reporting
making the judgement and also they should judge as per the ethics and norms of the
organization.
Implication of professional judgement upon the users
1. Lack of Judgement of Risk – If the “professional judgement is not appropriate than
the user will not be able to judge the risk of the company and it will not able to take
the right decision regarding the company position so as a result of it user will not be
able judge its properly and may invest money which is not able to recover and can
turn into the loss” (Hoyle, Schaefer and Doupnik 2015).
2. No Proper Decision Making – “If the “professional judgement is not accurate and
the financial statement is not made with accurate judgements than it may happen that
the user will not able to take proper decision and it can make user wrong idea about
the financial statements of the company” (Schaltegger and Burritt 2017).
Impairment written down of the company
Asset treated as impairment by the company are property, plant and equipment,
goodwill and intangibles asset.
Estimations done by the company is it has estimated the future cash flow as
discounted to present value by using the discount rate which reflect current time value and
risk related to the asset of the company.
The amount of the impairment written down by the company is for Targets –
Goodwill = $47 million, Brand name = $238 million and other fixed asset = $21 million and
for Buki it is brand value = $18 million and goodwill = $777 million and it also had write off
deferred tax = $92 million and $66 million as written down of stock.

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Financial Accounting and Reporting
AASB 136 “is the accounting standard in respect of impairment of asset and it states
all the rules and norms related to the same” (Wahlen, Baginski and Bradshaw 2014). “The
standard states an entity should not record its asset over the recoverable amount of the asset.
If the recoverable asset amount is more than the recovery amount so the company have to
treat it as impaired asset and should record its loss as impairment loss”. Each company should
disclose as the amount which is recorded in the income statement of the company, the
reversal amount of impairment which is recorded in the income statement of the company,
the amount of revalued asset which is directly recognised in the equity of the company and
amount of reversal revalued asset which is directly recognised in the equity of the company.
Analysis of the professional judgement in regards with Impairment of asset
As it is known that professional judgement plays an important role in the financial
accounting system. So the analysis done whether appropriate judgement where taken by the
management in regards with the impairment of asset as the cash flow looks reasonable with
the company and company have maintain a proper method for it . Discount rates were
reasonable as if its compare with other year so it can be see that the company is following
similar trend of return and no changes is made by the company in any tax rate as in 2017 the
company had taken 8.9% and 11% and in 2018 it had taken as 8.6% and 11.8% as it include
time value gap of 2017-2018 so that’s why it has increase a bit and so it can be said that the
company had used proper and reasonable discounts rates.
Recommendation regarding impairment of asset
The only recommendation which can be given is that the judgement which is taken by
the professional should be accurate and reasonable. It should check all the necessary
documents to ensure the real written-down value and also it will have to see the discounted
return as per the industry norms of the company.

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Financial Accounting and Reporting
Fundamental Characteristic of Financial Information
1. Relevance – The first important characteristic of financial information is the
information should be relevant to the financial user. “The information should be
helpful to the financial user” (Rutter and Brown 2015) and the above mention analysis
is satisfy this point as it give all the relevant and true information related to the
impairment asset of the company.
2. Comparability – “Financial information should be compare with other entities so as
to know how the company is working in the industry and how they are doing in the
market” (Shalem 2014). In the above it have both rates of 2017 n 2018 so the user can
easily compare and can know why the rates are taken by the company.
3. Understandability – Financial information should be made so that it can be
understand by the financial user. It should be “properly presented and classified so
that the user can know all the detail explanation of the accounting transaction of the
company” (Flower 2018).
4. Timeliness – “Financial information should be ready available for decision making as
the individual need to make decision in regard of the financial statement so the
information should be available any time whenever the individual needed the
information” (Nobes 2014).
Conclusion
It can be concluded from the above assignment that financial accounting is a part of
business and it help the company to develop its financial books. It is process in which the
company records its transaction and summaries it. Financial reporting help the company to
report all its report to the financial user of the company and it includes balance sheet of the
company, income statement of the company and cash flow of the company.

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Financial Accounting and Reporting
Lastly the report concludes as the details of impairment of asset and to explain it more
properly it is based upon the company name Wesfarmers which is an Australian based
company. The report shows different aspects of impairment and how the company deals with
the same.

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Financial Accounting and Reporting
References
1. Flower, J., 2018. Global financial reporting. Macmillan International Higher
Education.
2. Freeman, R.J., Shoulders, C.D., Allison, G.S., Smith Jr, G.R. and Becker, C.J., 2014.
Governmental and nonprofit accounting: Theory and practice. JPAEJOURNAL OF
PUBLIC AFFAIRS EDUCATION VOLUME 20 NUMBER 3, p.441.
3. Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
4. Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
5. Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments:
recognition and assessment" for bank financial accounting. Modern European
Researches, (1), pp.60-64.
6. Nobes, C., 2014. International classification of financial reporting. Routledge.
7. Rutter, L. and Brown, K., 2015. Critical thinking and professional judgement for
social work. Learning Matters.
8. Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting:
issues, concepts and practice. Routledge.
9. Shalem, Y., 2014. What binds professional judgment?: The case of teaching.
In Knowledge, expertise and the professions(pp. 103-116). Routledge.
10. Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial
statement analysis and valuation. Nelson Education.

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Financial Accounting and Reporting
Appendix
The impairment details of the company is given below from where all the necessary and
required details of the Impairment.