Trimester 2, Group Assignment Report 2022

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7111AFE Accounting
Trimester 2, 2019 Group Assignment

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Contents
Introduction......................................................................................................................................3
Part A: Motivation...........................................................................................................................3
Part B: Analysis Report...................................................................................................................3
B1: Consolidated Financial Position 2018 for Wesfarmers.........................................................3
B2: Income Statement for Wesfarmers for 2018.........................................................................5
B3: Financial Statement Analysis................................................................................................6
B4: Financial analysis for Wesfarmers and its competitor Woolworth.....................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Appendix........................................................................................................................................14

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Introduction
The report is prepared for conducting a competitor analysis of Wesfarmers Group by
examining its financial position and performance in relation to one of its key competitor. The
competitor firm selected for the purpose is Woolworths Group. The competitor analysis is
carried out by presenting a comparison of their line of business and ratio analysis that is carried
out by examination of their liquidity, efficiency, profitability, stability and investment. In
addition to this, the analysis of the consolidated financial position of Wesfarmers for the
financial year 2018 is also carried out within the report.
Part A: Motivation
The competitor identified for the Wesfarmers Group is Woolworths Group. The entity is
selected for carrying out a comparison as both the firms are recognized to be a leading
supermarket giant within Australia (Woolworth: Annual Report, 2018). They have same line of
business as they are involved in diverse businesses within Australian market in addition to retail
such as chemicals, fertilizers, coal mining and industrial and safety products. The major
limitation of conducting comparison between the two companies is that it has been done only
with the use of ratio analysis technique. The technique of ratio analysis is associated with the
limitation of not taking into consideration the changes within the price levels. Also, the ratio
analysis adopts the use of historical costs and thus sometimes fails to depict the actual financial
position of a company and therefore comparison of two entities carried out with the use of this
technique sometimes fails to depict the accurate results (Wesfarmers: Annual Report, 2018).
Part B: Analysis Report
B1: Consolidated Financial Position 2018 for Wesfarmers
1. The deprecation method used by the company for depreciating the items of property, plant and
equipment are straight-line basis. For the purpose, the company also discloses the assumed
useful lives of the assets. The estimated useful life for buildings is taken to be between 20 to 40
years and the plant and equipment is between 3 to 40 years. The estimation is mainly based on
the judgment of the management and is reviewed on an annual basis (Wesfarmers: Annual
Report, 2018).
2: The recoverable amount of an asset is calculated on the basis of greater the future value of an
asset by deduction of the disposal costs or value in use. The impairment to the carrying value of
$306 million is recognized for Target while impairment to carrying value of BUKI is recognized
to be $861 million. The decline in the recoverable amount is due to difficult trading conditions
and decline in the financial performance of Wesfarmers subsidiaries. The recoverable value for
its different subsidiaries is estimated to be close to the carrying value (Wesfarmers: Annual
Report, 2018).

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3: The total PPE additions are 1,638 and disposal and write-offs are (1,542) while depreciation
and amortization expenses are (1,130) at the end of the financial year 2018 as depicted below:
(Source: Wesfarmers Annual report 2018)
4: Gross amount, depreciation and carrying amount of each PPE
Items Land
($m)
Building
s ($m)
Leasehold
Improvement
s ($m)
Plant,
vehicles
and
equipment
($m)
Mineral
lease and
developmen
t ($m)
Total
Gross
Balance
$
1,142.0
0 $ 938.00 $ 1,734.00
$
12,620.00
$
158.00
$
16,592.00
Accumulate
d
Depreciation $(160.00) $ (828.00)
$
(7,136.00)
$
(60.00)
$
(8,184.00
)
Net Carrying
Amount
$
1,142.0
0 $ 778.00 $ 906.00
$
5,484.00
$
98.00
$
8,408.00
Proportion
of
depreciation
in gross
balance
0.00% 17.06% 47.75% 56.55% 37.97% 49.32%
(Wesfarmers: Annual Report, 2018)
5: The individual intangible assets reported include brand, contractual and non-contractual
relationships, software, gaming and liquor licenses. Their net carrying amount is depicted as
follows: