IMPACT OF CONVERGANCE ON WESFARMERS (ASX: WES) AND AGAAP - STUDY ON WESFARMERS INTRODUCTION Lawmakers

The Australian Accounting Standards Board (AASB) has issued 'Australian reciprocals to IFRS ’ which were in line with the international IFRS The AASB has made certain corrections to the IASB professions in making An IFRS IFRS AND AGAAP – IMPACT OF CONVERGANCE IMPACT OF IFRS IMPLEMENTATION ON WESFARMERS (ASX: WES) CONCLUSION IMPACT OF INTODUCTION OF irfs ON AUSTRALIAN COMPANIES - STUDY ON WESFARMERS INTRODUCTION

CONTENTS
 INTRODUCTION TO THE TOPIC
 ADVANTAGES POST IFRS
 DISADVANTAGES POST IFRS
 IFRS AND AGAAP – IMPACT OF CONVERGANCE
 IMPACT OF IFRS IMPLEMENTATION ON WESFARMERS (ASX: WES)
 CONCLUSION

IMPACT OF INTODUCTION OF
IRFS ON AUSTRALIAN
COMPANIES - STUDY ON
WESFARMERS

INTRODUCTION
 Lawmakers were highly impacted to move towards International
Accounting Standards and announcing the same in Australia.
 Their arrangement was to receive these Guidelines starting on or after
1 January 2005. The Standards are obligatory on all substances.
 The Australian Accounting Standards Board (AASB) has issued
'Australian reciprocals to IFRS’ which were in line with the international
IFRS
 The AASB has made certain corrections to the IASB professions in
making An IFRS

ADVANTAGES
 Help bringing down the cost of capital
 Attract foreign investments in Australia on account of uniformity
 Bring down the audit expenses which were earlier incurred on
account of different types of international audit requirements.
 Introduction of new concepts and aspects like financial
instruments
 Synergies in the arrangement, review and examination of financial
reports.

DISADVANTAGES
 AGAAP lost its individuality in auditing and accounting
 Loss of opportunity to build up, claim revenue driven
element norms
 A lot of training required for the accounting professionals
 Comparability aspect of the accounting standards
compromised

CHALLENGES
Shift from meeting the local benchmarks to meeting the global guidelines.
The AASB has brought about major changes to re-evaluate itself:
 comprehensive statute w.r.t. extractive Industries and elusive
resources
 focus on insurance company accounting and intangible assets
accounting
 Change in the perspective of accounting in many aspects like loss
recognition and earnings management
 takes an interest in International Meetings, for example, the NSS Group
and the AOSSG

Continued..
 illuminate IASB/IFRIC of translation issues, instead of building up
possess elucidations
 tie up with the New Zealand FRSB
 effectively partake in IPSASB exercises
 recognition of accounting for not-for-benefit and open area
ventures
 re-evaluation of differential detailing structure

IFRS AND AGAAP
 IFRSs were more thorough, in areas including: money related
instruments acknowledgment and estimation and post-business
benefits; and
 AGAAP was more thorough, in areas including: protection,
extractive exercises, impalpable resources, and applied structure
 In this manner, key highlights of Australian protection and
extractive exercises measures were held, since IFRS 4 Insurance
Contracts and IFRS 6 Exploration for and Evaluation of Mineral
Resources grandfathered existing applicable Australian GAAP
meeting specific criteria

IMPLICATION OF
IAS/IFRS ON
WESFARMERS
LIMITED

ABOUT THE COMPANY
 Wesfarmers Limited is one of Australia's greatest recorded
associations, retailers and organizations.
 Ranked 1st in terms of employers and in terms of revenue
 Its mainly deals in: supermarkets, retail chains, home change and
office supplies; coal mining; assurance; chemicals, essentialness
and fertilizers; and mechanical and security things.
 Working in excess of 4,000 discrete territories across finished
Australia and New Zealand and other regions like Ireland and
Bangladesh.

IMPACT ON LEASE RECOGNITION
AND ACCOUNTING:
 Wesfarmers' liabilities is expected to double, due to introduction of
new Accounting rules.
 The new standard will likewise influence benefit and cost
implications – changing income before Interest, tax, depreciation
and amortization (EBITDA), Earning before Interest and tax (EBIT)
and detailed net profit – as organizations book deterioration and
intrigue cost on rent liabilities as opposed to rental costs.
 The new standard was activated in 2011 as book retailer Borders
 Increase in liability of $2.8 Billions in leases which is even more
than seven times of the announced obligation.

Continued….
 New IAS will affect key budgetary measurements
 The new standard will likewise influence benefit and cost
implications – changing EBITDA, EBIT and net profit.
 Wesfarmers has one of the biggest rent liabilities in Australia
(about $15 billion) because of its 3500 Coles general stores,
Bunnings, Office works, Target and Kmart stores.

CGU impairment assessments:
 The right-of-utilization resource recorded under the proposition should
be dispensed to the applicable money generating units ('CGU'),
 Increase in the contemplation as compared to the old GAAP.
 No drastic change in the monetary streams.
 The CGUs would be influenced by the incorporation of the right-of-
utilization resource and the consideration or rejection of the risk to
make rent instalments.
 Increase in the NPV of the anticipatory monetary streams of the CGUs
as it resulted in rejection of amortization cost and premium cost.

Asset impairment assessments
 Steady with the prerequisites of IAS 36 the right-of-utilization
resource must be tested for Impairment.
 Where a right-of-utilization resource identifies with property and
delegated a Type B rent the underlying amortization is lower.
 This would risk the straight-line cost profile foreseen for
property under the proposition.

CONCLUSION
 Alongwith the positive influences, IFRS also has had disadvantages as
well. Positives are like capital raising, alignment with global practices
 Few divulgence which were compulsory proved to be troublesome for
organizations like for Wesfarmers w.r.t. extensive changed rent
portfolios.
 Tremendous amount of data and the disclosure requirements in IFRS
may confuse stakeholders and complicate issues.
 It might be also lead to conflicts of the Boards with regards to the
accounting report and other requirements when IFRS and AGAAP,
both needs to be adhered to.

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