Financial Reporting Disclosures in the Australian Corporate Sector

Running head: ACCOUNTING STANDARDS AND PRACTICE
Financial Reporting Disclosures in the Australian Corporate Sector
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1ACCOUNTING STANDARDS AND PRACTICE
Executive Summary:
In this report, emphasis would be placed on the impairment write-downs in the Australian
corporate sector. For simplification of the report, Wesfarmers Limited is selected as the
organisation, which is the leading retailer of Australia in terms of revenue, size and market share
(Wesfarmers.com.au 2018). The significant issues related to impairment testing include cash
generating units and segments, difference between value-in-use and fair value along with use of
the discount rates. It has been evaluated that Wesfarmers Limited has met all the necessary
disclosures laid out in the objective of general purpose financial reporting and AASB 136.
However, some recommendations have been provided so that the quality of disclosures could be
improved further in future.

2ACCOUNTING STANDARDS AND PRACTICE
Table of Contents
Introduction:....................................................................................................................................3
a. Detailed explanation of the impairment write-downs made by Wesfarmers in the year ended
30 June 2017:...................................................................................................................................3
b. Critical analysis of some of the complexities and key issues involved in impairment testing:...4
c. Extent to which the annual report of Wesfarmers meets the disclosure requirements for
impairment as per AASB 136:.........................................................................................................5
d. Alignment of the disclosures on impairment of Wesfarmers with the objective of general
purpose financial reporting and recommended actions for improvement:......................................9
Conclusion:....................................................................................................................................10
References:....................................................................................................................................12

3ACCOUNTING STANDARDS AND PRACTICE
Introduction:
In the current era, the quality of financial information that the business organisations
provide to their users of financial statements is of utmost importance for aiding in the decision-
making process of the users. In this report, emphasis would be placed on the impairment write-
downs in the Australian corporate sector. For simplification of the report, Wesfarmers Limited is
selected as the organisation, which is the leading retailer of Australia in terms of revenue, size
and market share (Wesfarmers.com.au 2018). The different assets that the company tests for
impairment are identified and analysed from the critical perspective. The second section would
elaborate on highlighting the significant problems encountered while conducting impairment
testing. The third segment would identify the extent to which the annual report of the
organisation fulfils the impairment disclosure requirements in accordance with AASB 136.
Finally, the report would shed light on aligning such impairment disclosures with the objectives
laid out in general purpose financial reporting.
a. Detailed explanation of the impairment write-downs made by Wesfarmers in the year
ended 30 June 2017:
According to the annual report of Wesfarmers in 2017, it has been identified that the
major assets tested for impairment include property, plant and equipment, trade receivables,
freehold property, goodwill and other intangible assets along with non-financial assets
(Wesfarmers.com.au 2018). For property, plant and equipment, the measurement is carried out at
cost less accumulated depreciation and impairment. In case of trade receivables, impairment is
recognised in the income statement, when evidence is obtained that the organisation would not
be able to recover the debts (Beekes, Brown and Zhang 2015).
Goodwill, which is obtained in a business combination, is gauged initially at cost. After
the initial recognition, the measurement of goodwill is carried out at cost less any losses related
to accumulated impairment. In case of intangible assets, they are obtained separately and their
measurement is made on initial realisation at cost (Bepari, Rahman and Mollik 2014). The cost
of intangible assets, which are obtained in a business combination, is their fair value when they