Woolworths Limited Accounting Theory
Added on 2020-03-23
15 Pages4498 Words159 Views
Accounting Theory &Current issues
Woolworths LimitedExecutive summaryAn organization performs in an effective manner when the accounting policies are strong because it drives the organization in the correct path. Therefore, it is imperative to have consistent accounting policies because that aids in providing relevant information to the end users. With the aid of the correct accounting policies, there is a strong enhancement in the process of disclosures. In this report, the main emphasis will be on the theory of accounting and the policies followed by the organization. The study will be conducted in the light of Woolworths Ltd, a pioneer in the retail operations. The report sheds light on the accounting policies, the assessment of the policies, and quality of disclosure, red flag and ultimately the conceptual framework.2
Woolworths LimitedContentsIntroduction.................................................................................................................................................4Assessment of accounting policies and estimates.......................................................................................4Critical evaluation of accounting quality.....................................................................................................5Key Accounting Policies...............................................................................................................................6Liquidity Risk........................................................................................................................................7Market Risk..........................................................................................................................................7Credit Risk............................................................................................................................................7Assessment of accounting flexibility............................................................................................................8Evaluate Accounting Strategy......................................................................................................................8Evaluation of disclosure quality...................................................................................................................9Red Flags...................................................................................................................................................10Compliance with the conceptual framework.............................................................................................11Conclusion.................................................................................................................................................13References.................................................................................................................................................143
Woolworths LimitedIntroductionA business division performs in an effective manner when the management is able to have a strong hold on the matter related to accounting policies and the quality of disclosures. The preparation of the report is done keeping into consideration Woolworths Ltd, a pioneer in the retail operations and listed on the ASX. Moreover, the competitor that is considered in the question is Wesfarmers. In the report, the discussion is done ranging from the critical evaluation of the accounting policies together with identification of the key accounting policies and its flexibility. Further, the discussion stretches to the disclosure quality together with the highlight on red flags. The report then stretches to the main concept that is the conceptual framework.Assessment of accounting policies and estimatesIn relation to Woolworths Ltd, its significant accounting estimates and policies are prevalent in the notes to financial statement section of its annual report. In relation to PPE, the same is depreciated over its relevant life after considering residual values. Further, all PPE items are recognized at cost minus accumulated depreciation and accumulated losses of impairment. Besides, assets are depreciated on a straight-line system over their estimated useful lives (Bushman & Piotroski, 2006). Moreover, such lives are reevaluated regularly. In relation to borrowings, the same are identified at fair values minus attributable expenses (Woolworths Limited, 2015). After this, these are described at amortized costs with differences betwixt redemption and cost value. Lastly, in relation to intangibles, the same are identified at cost (if procured separately), or at fair value (if procured as a business combination). The company has complied with the AASB 101 standards that not only is related with the judgments of accounting policy but also offers valuable information regarding the steps that can be taken during estimation uncertainties. Based on this standard, Woolworths discloses how it has ascertained thecarrying values of every assets and liabilities. In addition, it has also described various significant accounting policies in its financial statements as a response to several uncertainties owing to the prevalence of foreign currencies (Woolworths Limited, 2015). Nevertheless, the company also provides necessary information relating to judgments about lease liabilities and assets in its notes to financial statements. The estimates of all such policies rely on past factors and other reasonable factors that form the basis of making proper judgments about carrying 4
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