Financial Accounting and Reporting

The report includes about the financial account and reporting. Financial accounting is the process of identifying and recording the accounting transaction of the company. It is done so that the management can take necessary decision in regards with the financial statement of the company. Financial reporting help the company to report all the necessary report such as income statement, balance sheet and cash flow statement to the financial users of the company. Lastly the report includes about professional judgement and how it affect the business and financial user’s decision. It also include a detail explanation of impairment of asset and how the company manages its impairment asset.

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 the financial account and reporting. Financial accounting is the
process of identifying and recording the accounting transaction of the company. It is done so
that the management can take necessary decision in regards with the financial statement of
the company. Financial reporting help the company to report all the necessary report such as
income statement, balance sheet and cash flow statement to the financial users of the
company. Lastly the report includes about professional judgement and how it affect the
business and financial user’s decision. It also include a detail explanation of impairment of
asset and how the company manages its impairment asset.

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Financial Accounting and Reporting
Table of Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................4
Overview of the Company.....................................................................................................4
Role of Professional Judgement in Accounting.....................................................................4
Implication of professional judgement upon the financial users...........................................5
Impairment written down of the company.............................................................................5
Analysis of the professional judgement related to impairment of asset.................................6
Recommendation regarding impairment of asset...................................................................6
Fundamental Characteristic of Financial Information...........................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8
Appendix..................................................................................................................................10

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Financial Accounting and Reporting
Introduction
Financial accounting is the analysis, summary and reporting of transaction which are
done in the normal course of business. It includes the preparation of the financial statement
which served as a medium of decision for the financial user of the company (André,
Dionysiou and Tsalavoutas 2018). The financial accounts is been governed by local as well
as international accounting standard. It is done by considering the concept of GAAP. GAAP
stands General Accounting Acceptable Principles which allow the company to develop
framework related to the financial accounting system (Banker, Basu and Byzalov 2016).
Financial reporting is the process from which financial and management information are
carried in the annual report of the company. This details help the financial user to get a details
of the company, this help them to know the financial position, performance and the stability
of the company position. It includes the balance sheet, income statement, information related
to earning, cash flow statement and changes in equity statement (Caldecott and McDaniels
2014).
Discussion
Overview of the Company
The company which is taken in the assignment is Wesfarmers. Wesfarmers is a
conglomerate based company, it headquarter is in Perth, Western Australia, the company was
founded in 1914 as co-operative and it got listed at Australian Securities Exchange in 1914.
The products of the company are fertilizers, chemicals and coal mining industry products.
Role of Professional Judgement in Accounting
Professional Judgement is the process in which the management take assumption
which are there and it is related to the industry norms and the judgement are taken to make
decision regarding the business activities of the company(Henderson et al,. 2015). The

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Financial Accounting and Reporting
judgements play important role as while taking judgement person should take consideration
the risk into consideration and also should check the judgements as per the ethics and norms
of the organization.
Implication of professional judgement upon the financial users
1. Lack of proper decision – The judgements directly affect the business and the
financial statement of the company, so if the judgement is not accurate it will be give
wrong information in the financial statement which will directly affect the decision of
the financial user and can lead them a false impression of the company
(Hoyle,Schaefer and Doupnik 2015).
2. No proper Judgement of risk - If professional judgement is not accurate than the
risk related to the business cannot be judge properly and as a result of it the decision
regarding position of the company cannot be accurate and as result the investors may
lose the money which they have invested in the company business (Libby 2017).
Impairment written down of the company
Property, plant and equipment, goodwill and intangibles asset are considered as the
impairment asset of the company.
The estimation which is done by the company in regards of impairment of asset that
they have taken the future cash flow which is discounted as to present value by using of
different discount rates which shows the current time value and risk which are related to
the asset of the company (Wesfarmers.com.au 2019).
The classification of the impairment written down of the company is taken as 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 and for Targets – Goodwill = $47

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Financial Accounting and Reporting
million, Brand name = $238 million and other fixed asset = $21 million (Wesfarmers.com.au
2019).
AASB 136 it is the accounting standard which show how to manage and record the
details of impairment of asset. This standard shows the principle and the norms which are
related to impairment of asset. The standard states that a business organization should not
record asset over the recoverable amount (Linnenluecke et al., 2015). If the recoverable asset
is greater than the recovery amount than the company should consider it as impaired asset
and should record the loss s impairment loss. The disclosure related to the impairment is it
should show the amount recorded in the income statement as well as reversal amount of the
impairment asset which is recorded in the income statement. It should disclose the amount of
revalued asset which is been recognised in equity of the company and also it should show the
reversal revalued asset which is also recognised in the equity of the company.
Analysis of the professional judgement related to impairment of asset
Professional Judgement plays a very important role in the financial accounting. The
analysis is done whether the professional judgement which is taken by the company in
regards of impairment of the asset as the cash flow of the company looks accurate and the
company had also maintain proper records of it. Comparing the discount rates with other
years it can be said that the company had maintain a proper discounting rates while
calculating the present value of impairment asset (Wesfarmers.com.au 2019). The discount
rates in 2017 was 8.9% and 11% where as in 2018 it had taken 8.6% and 11.8%, the 2018
rate has increased as it include the inflation between 2017-2018 so the increasing in discount
rate has come and it can be said that company had used accurate and reasonable rate of
return.

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Financial Accounting and Reporting
Recommendation regarding impairment of asset
The recommendation which can be given from the above analysis is that the
professional judgement should be reasonable. The management should check all the features
and risk related to the assumption and it should also be made as per the discounted rates
which are used by the industry.
Fundamental Characteristic of Financial Information
1. Relevance - The primary characteristic of the financial information is the information
should be useful to the financial users (Narayanaswamy 2017). It should be relevant
that the users can take decision in regards with the financial information.
2. Timely Available – It should be readily available for the financial users, as the
information is the base from which the financial users takes decision in regards of the
company (Nobes 2014). The information should be available anytime when the
financial users needed them.
3. Comparability – The information should be made as such it can be compare with the
other business operating in the same industry (Pratt 2016). As in the above the
comparison of 2017 n 2018 is done which help to know how the company had
perform and the growth of the company.
4. Understandability – Financial information should be made in a way which can be
easily understood by the financial user (Warren and Jones 2018). The information
should be classified and presented properly so the financial users can know details of
each transaction and reason behind of it.
Conclusion
The report can concluded as from the given assignment which is based upon the
financial accounting. Financial accounting help the company to record its transaction of its
business and also help to maintain the financial books. It help the company to manage their

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Financial Accounting and Reporting
business and summaries their accounting treatment. Financial reporting is the process which
help the company to publish all its report like income statement, balance sheet and cash flow
of the company.
Lastly the report concludes details of impairment of asset and it includes the details of
the standard which help them to recognise and records the details of the impairment asset.
The report is based upon the company name Wesfarmers, it is an Australian based company
and the report shows all the details related to impairment process of the company in regards
of the impairment of the assets.
References
André, P., Dionysiou, D. and Tsalavoutas, I., 2018. Mandated disclosures under IAS 36
Impairment of Assets and IAS 38 Intangible Assets: value relevance and impact on analysts’
forecasts. Applied Economics, 50(7), pp.707-725.
Banker, R.D., Basu, S. and Byzalov, D., 2016. Implications of Impairment Decisions and
Assets' Cash-Flow Horizons for Conservatism Research. The Accounting Review, 92(2),
pp.41-67.
Caldecott, B.L. and McDaniels, J., 2014. Stranded generation assets: Implications for
European capacity mechanisms, energy markets and climate policy.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Libby, R., 2017. Accounting and human information processing. In The Routledge
Companion to Behavioural Accounting Research (pp. 42-54). Routledge.

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Financial Accounting and Reporting
Linnenluecke, M.K., Birt, J., Lyon, J. and Sidhu, B.K., 2015. Planetary boundaries:
implications for asset impairment. Accounting & Finance, 55(4), pp.911-929.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning
Pvt. Ltd.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.
Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Wesfarmers.com.au (2019). [online] Wesfarmers.com.au. Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0 [Accessed 23 Apr. 2019].

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Financial Accounting and Reporting
Appendix
The attachments related to impairment of the asset which is taken from the balance
sheet of the company.

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Financial Accounting and Reporting