Analysis of Accounting and Financial Reporting for JB Hi-Fi Company

This report analyzes the financial reporting of JB Hi-Fi, a New Zealand and Australian retailer. The analysis focuses on the company's intangible assets, specifically goodwill, brand names, location premiums, and rights to profit share, referencing the annual report for the fiscal year ended June 30, 2017. The report details the amounts and changes in these assets, including the increase in goodwill and the allocation of goodwill arising from the acquisition of The Good Guys. It examines the company's approach to impairment testing for intangible assets with indefinite useful lives, including the annual review process and the factors considered in determining impairment losses. The report also addresses the treatment of goodwill for taxation purposes and the amendment of accounting policies regarding deferred tax liabilities. Finally, the report includes the impairment of goodwill during the fiscal year ended June 30, 2017.

Running head: ACCOUNTING AND FINANCIAL REPORTING
Accounting and Financial Reporting
Name of Student:
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Author’s Note:

1ACCOUNTING AND FINANCIAL REPORTING
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Conclusion.......................................................................................................................................3
Reference.........................................................................................................................................4

2ACCOUNTING AND FINANCIAL REPORTING
Introduction
JB Hi-Fi is recognised as a New Zealand and Australian retailer of specialised consumer
goods dealing in products such as “Ultra HD Blu-rays, video games, DVDs, CDs and electrical
home appliances”. Some of the main discourse of the report will consider the information on the
financial position taken from the latest annual report and provide the relevant details on amount
of intangible assets held by the company and the treatment of acquisition of goodwill
(Jbhifi.com.au 2018).
Discussion
As per the depiction of the “annual report” published for the FY ended “30 June 2017”,
the closing netbook amount for the intangible assets have shown categorization of this asset as
per goodwill, “brand names, location premiums and rights to profit share”. The total closing
netbook amount for goodwill is designed with $ 736.3 million which is an increase over $ 49.5
million obtained in 2016. The brand names closing netbook amount is seen with an amount of $
284.4 million, location premiums have amounted to 2.4 million and rights to profit share has
amounted to $ 3.5 million. The total amount of intangibles is discerned with an amount of 1026.6
million which is an increase over $ 98.5 million obtained in 2016. The aforementioned
assessment has been able to reveal that management of the company intends to continue utilize
the “intangible assets” into the predictable future. In “each period, the useful life of the assets” is
reviewed for determining the events and circumstances which continues to support “indefinite
useful life” for the assets. In addition to this, the intangible assets which have “indefinite useful
life” are carried at the “cost less accumulated impairment loss” goodwill (Jbhifi.com.au 2018).
The impairment testing for the “intangible assets” which have “indefinite useful life” are
not subjected for amortization and are seen to be tested once in a year or more frequently in case
the circumstances indicate they might be impaired. In addition to this, the “impairment loss” is
considered with the amount in which the carrying value of assets exceed its recoverable amount.
The recoverable amount is for the seem to be higher than the “assets fair value less costs” for
selling and value in use. The assessment of “impairment” is followed with the lowest levels for

3ACCOUNTING AND FINANCIAL REPORTING
which there is distinctly recognized “cash inflows” which is largely “independent of the cash
flows” from the other assets or groups of assets which has been seen with cash generating units.
In addition to this, the non-financial assets apart from goodwill which has suffered “impairment”
are reviewed for possible reversal for impairment at the end of every financial reporting period.
The “impairment testing” for “goodwill” arising as a result of acquisition of “The Good
Guys” of $ 701.5 million and the same is allocated to the “cash generating units” of JB Hi Fi
Australia amounting to $ 134.6 million and for “The Good Guys” amounting to “cash generating
unit” of $ 566.9 million. This is considered as for the expected earnings contribution pertaining
to the groups acquisition goodwill (Jbhifi.com.au 2018).
It is for the discerned that the “goodwill” which is allocated to the various factors
including the “high profitability” and the potential of acquiring other business and ability to
provide expansion with a range of products and services to the customers are also seen with the
intangible assets. Furthermore, the “goodwill arising on acquisition” will not be considered for
deduction for taxation. It has been further understood that as a result of the IFRS Interpretation
Committee (IFRIC), the group is discerned to amend the accounting policies for recognizing the
“deferred tax liabilities” on the “indefinite life of intangibles” as a result of the “business
combination”. The main result from the amendment has shown an increase of $ 12.9 million
goodwill and deferred tax liabilities at the beginning of comparative period goodwill
(Jbhifi.com.au 2018).
The company allocates the purchase consideration into identifiable intangible assets. The various
assessment and analysis of management associated to finalizing the identification is included
with the intangible assets. As per the Note 11 Intangibles, during FY ended “30 June 2017”, the
group was depicted to impair goodwill amounting to $ 14.7 million goodwill (Jbhifi.com.au
2018).
Conclusion
The main discourse of the report has revealed that management of the company intends to
continue utilize the “intangible assets” into the foreseeable future. In each period, the “useful life
of the assets” is reviewed for determining the events and circumstances which continues to

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support indefinite useful life for the assets. In addition to this, the “intangible assets” which have
“indefinite useful life” are carried at the “cost less accumulated impairment loss”.
Reference
Jbhifi.com.au. (2018). [online] Available at:
https://www.jbhifi.com.au/Documents/2017%20Annual%20Report.pdf [Accessed 14 May
2018].
Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/Appendix
%204E%20and%20Financial%20Report%20-%202017%20Full%20Year.pdf [Accessed 14 May
2018].
Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/Appendix
%204D%20and%20Financial%20Report%20-%202018%20Half%20Year.pdf [Accessed 14
May 2018].
Jbhifi.com.au. (2018). [online] Available at: https://www.jbhifi.com.au/Documents/Appendix
%204D%20and%20Financial%20Report%20-%202017%20Half%20Year.pdf [Accessed 14
May 2018].