Woolworths Limited Income & GAAP Application
Added on 2020-05-16
4 Pages1419 Words120 Views
|
|
|
ANSWER1.Identification of Income of Company and its Recognition and MeasurementThe company selected is the Woolworths Limited. The income of the company isidentified from the Statement of Profit and Loss account for the year end along with thenotes to the financial statements of the company. In the annual report of the company forthe year ending 25th of June 2017, the total income of the company as mentioned in thestatement of Profit and Loss account is $55475 million and the note number 2.1.1 of thefinancial statements have provided the breakup of the total income figure into sixdifferent segments as Australian Food, New Zealand Food, Endeavour Drinks, Big W,Hotels and Unallocated (Bradshaw and Sloan, 2012).Revenue in case of goods is recognized when the significant risks and rewards ofownership have been transferred to the customer and in case of services based oncompletion stages. It is measured at consideration received or receivable depending uponfulfillment of recognition requirements. 2.GAAP is Crucial for Financial Reporting and Business PracticesFinancial reporting is defined as the communication of the financial information of thecompany to the investors and the stakeholders of the company. Financial report generallyincludes two types of statements – balance sheet and statement of profit and loss account.The former provides the financial position of the company and the latter provides thefinancial performance of the company. Along with the above statement the nextstatement is the disclosures which every organization whether private or governmental isrequired to made (Bradshaw and Miller, 2016). GAAP is defined as the Generally Accepted Accounting Principles. These are defined asthe set of rules, methods, concepts, objectives and the standards that has been developedover time and are required for the preparation of the financial statements of the company.The GAAP includes the accounting standards as established by Financial AccountingStandards Board and Governmental accounting standards board.
The adoption of the GAAP ensures that the financial data so delivered by theorganization to their users shall be relevant and reliable and shall in no case represent themanipulative data or figures. Secondly, the adoption of GAAP facilitates the comparisonof the financial statements of the company in very easy manner. The financial results ofthe organization can be compared over the time and also with other organizationprevailing in the same industry or sometimes in different industries (Street, D.L andGray, 2014). Thirdly, it facilitates the clear financial rules and ensures the provisioning ofunbiased and true and correct information of the organization whether profit making ornot for profit making. 3.Illustrating the Implementation of GAAPEvery company implements the GAAP. The principle of the GAAP includes four areas –recognition, measurement, presentation and disclosure. All the standards on accountinghas been prepared and presented on these four major principles. In the given casethe .company – Woolworths Limited has implemented the GAAP. The example that has been chosen is the recognition and measurement of the propertyplant and equipment. As per the significant accounting policies of the company number3.3 of the annual report of the company, the carrying value of the property plant andequipment has been measured at cost less accumulated depreciation, accumulatedamortization and the accumulated impairment losses. The assets have been depreciated on the basis of the straight line method as envisaged bythe Corporations Act 2001. The amount has been depreciated over the estimated usefullives of the assets. In case where the items of property plant and equipment have beendepreciated different useful life then those items have been separately mentioned in theannual report. Thereafter, the accounting treatment of the profit or loss that has occurredon sale of asset has been explained as the net gain or loss will be transferred to thestatement of the profit and loss. As the GAAP principles includes the measurement and recognition of items of thefinancial statements and that too in accordance with the traditional method of accounting
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents