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ASIC Concerns and Premier Investments Limited's Response

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Added on  2020-09-18

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This article discusses the concerns raised by ASIC regarding the accounting treatment of Premier Investments Limited and their response. It also provides an overview of the company's financial performance, market reaction, and recommendations for investors.

ASIC Concerns and Premier Investments Limited's Response

   Added on 2020-09-18

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Overview Premium Investments Limited(Premier), a public company which is limited by shares, runs in Australia and is a reputed company listed on the ASX i.e. Australian Securities Exchange. It has been listed since December 15, 1987. It can be ascertained from the website of Premium Investments Ltd., the establishment of the Company was done as a tool of investment vehicle with the aim of maximising of growth in return from capital to the shareholders and the same could be achieved by way of acquisition of control or shareholding in a strategic manner. Acquisitions were aimed to be made by Premier in various Australian companies and retail, import and distribution were the main areas of focus. The company owns and operates consumer products, wholesale businesses, retail business, etc. The Company has carried out retail investments in various Australian brands primarily ‘The Just Group’ and ‘Breville Group Ltd.’ Premier operates in various countries including Singapore, the United Kingdom, Australia, Malaysia, New Zealand and Hong Kong. Retail fashion chain is spread all over these markets. Premier runs it operations in two categories: •Investment and •Retail Premier has made investments in stock exchange and money markets which are listed. Investments are carried out for gains of the company which are both in the nature of short term and long term. The retail segment includes fashion chain stores of different brands including Just Jeans, Smiggle, Jay Jays, Dotti, Peter Alexander, Jacqui E, etc. The brands offered by Company include Sage, Kambrook and Breville Concerns raised by ASIC As per the Annual Report of Premium Investments Ltd., 2018,for the year ended July 28, 2018, Premier had written down the value of its casual wear brand name assets by $30million i.e. 26% which lowered down the net profit 20.5% to $83.6million. It has been reported by Mitchell Sue in the Financial Reviewthat the Australian Securities and Investment Commission (ASIC) took the same into notice since concerns were raised by ASIC with regard to the value of the written down assets. The support and reasoning was sought with regard to two primary aspects in testing assets for impairment: (i)Assumptions of royalty rate (ii)Increase in sales forecast. According to Premier, apparel industry has been impacted majorly in countries like Australia and New Zealand due to the increased competition in retail business and changes in the structure. As per the ASIC’s Financial Reporting Surveillance Program Dated 31 May 2018, the impairment of non-financial assets is an area of focus. ASIC holds that it is crucial for the auditors and directors to ensure that all the assumptions and the cash flows are reasonable. Also, in the case there is lack of cash flow projections in the past, it is important to make current assumptions reasonably. The companies are also required to carry out testing of the brand names and goodwill of all the brands. It is in reference to these standards of accounting estimates, ASIC raised questions against the Premier in the interest of the shareholders. ASIC’s announcement dated 25 January 2019announced the results from the financial reports of 30 June 2018 wherein ASIC made enquiries and sought reasoning for the accounting treatment done by various entities. ASIC made issuance of media release with respect to the Premier Investments Limited. This was done so because the sales had grown largely and it was not at all reflected in the annual accounts of the company. The sales reflected in various investments made by Premium had been huge including Smiggle and Peter Alexander sales which had made a growth of eight fold to nearly $512 million. The same was acquired in 2008 but the annual accounts have no data of the increase in the value and uplift by way of sales with regard to the same.
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