Accounting Report: ASIC Role and Wesfarmers Impairment Analysis (2017)

This report analyzes the role of the Australian Securities and Investments Commission (ASIC) as a corporate regulator and its impact on financial reporting, focusing on impairment write-downs. The report uses Wesfarmers Limited as a case study, examining its compliance with Australian Accounting Standards Board (AASB) 136 regarding asset impairment. The analysis includes details of impairment write-downs, the company's compliance with qualitative characteristics of financial statements, and its adherence to the objectives of General Purpose Financial Reporting (GPFR). The report highlights key aspects such as the role of ASIC in ensuring fair market operation, the types of assets tested for impairment by Wesfarmers, and the company's adherence to the standards for recognition of the impairment losses and the disclosure requirements. The report concludes with recommendations for enhanced financial reporting practices, including emphasis on foreign currency cash flow, consideration of market capitalization, and the use of external data for impairment assessments.

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Author’s Note

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Executive Summary
The report aims to analyze the role of the ASIC and the evaluate the resuts. The next section
includes the analysie which are seento be based on the various types of the “analysis of
impairment write-downs in Wesfarmers”. The study has also identified the qualitative
characteristics of the financial statement. The final section includes the compliance of the
company with the GPFR for the impairment.

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Table of Contents
Introduction......................................................................................................................................3
Role of ASIC...................................................................................................................................3
Details of Impairment Write-downs in Wesfarmers........................................................................4
Compliance with Qualitative Characteristics..................................................................................5
Compliance with Objectives of General Purpose Financial Reporting...........................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
The primary objective of the learnings in the discussion has been seen with the evaluation
of the necessary aspects related to the impairment written down for the companies which are
related as per the “Australian Security Exchange (ASX)”. In order to maintain the simplicity
“Wesfarmers Limited” is taken into consideration which is identified as the major retailer in the
Australian retail industry. The discourse in the report has focused on the role of “Australian
Securities and Investment Commission (ASIC)” as the main corporate regulator.
Role of ASIC
ASIC is considered to be operating with the independence in the commonwealth body of
Australia thereby ensuring the growth in the Australian economy. Among the three major roles
of ASIC, the first involves promotion of the trust and confidence of the customers and investors.
The second role has been identified with assuring efficiency and fair market operation. The third
important role is seen with providing efficient registration services. ASIX involves efficient
registration of thee services. In addition to this, ASIC is responsible for the different types of the
improving initiatives in the quality aspects of the financial report and surveillance is also
considered as one of their main functions” (Asic.gov.au. 2018).
Post review of the financial statements, ASIC has found that the main problems are
associated to the “impairment testing, asset valuation, revenue recognition, tax accounting and
accounting policy judgment and estimation”. Based on the findings of ASIC the companies are
seen to be identify the “cash generating units (CGU)” with utmost priority despite of presence of
“large independent cash flow, asset valuation and impairment”. In addition to this, ASIC has
evaluated the inefficiencies of the business activities based on the non-disclosure of the
information based on “sensitivity analysis, accounting assumptions and fair value method
techniques”. As per the ASIC the two-significant problems of revenue recognition is considered
with recognition of the contracts of the properties and the various types of the developmental
activities which are seen to be related to the contracts of the property brought at the time of
showing the revenue. As per the ASIC, the techniques of the tax accounting and sufficiency for
the future taxable income for recovering the deferred tax assets is considered as the main

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problem. The board has found several issues related to the “improvement completeness and
quality of all financial disclosures” (Asic.gov.au. 2018).
Details of Impairment Write-downs in Wesfarmers
In the annual report of 2017, Wesfarmers has shown the different types of the assets
which are tested for the impairment by the company. Some of these include “property, plant and
equipment (PPE), trade receivables, freehold property, goodwill and other intangible assets and
non-financial assets”. The PPE evaluation measurement by the Wesfarmers is done with the cost
after the deduction of the impartment and the depreciation. The impairment treatment for the
trade receivables is done at time when the company is not able to recover the debts. In case of the
goodwill the company measures the “cost and then carried out at cost value after the deduction of
any accumulated impairment losses”. Moreover, it has been further identified that the intangible
assets are obtained as per the initial assessment of cost value. The cos of the intangible is based
on the intangible assets which are obtained from the combination of the several types of the
business measured at fair value. The measurement after this is considered with deducting the loss
the impairment and amortization. The “table shows the total amount of impairment write downs
in Wesfarmers for the financial year 2016 and 2017”.
The indication of any sort of the impairment has been considered at the end of financial
period. It is required for “ASX listed companies” for the evaluation of the” assets on a regular
basis and he same rule can be observed for Wesfarmers”. Wesfarmers has been seen to be
involved in the various types of the activities which are seen to be related to the PPE and
intangible assets, planned for liquidation of any business unit or changes brought by the
technology. Additionally, it has been discerned that there are two another reasons which includes
“association of estimated economic benefits with the PPE and the intangible assets” and the
significance of the assets.

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Compliance with Qualitative Characteristics
As stated in the “Paragraph 126 (a) of AASB 136”, it has been discerned that the
companies need to state the “loss of impairment” in their income statement. The annual report of
the Wesfarmers depicts that the company has revealed the impairment in the income statement,
listed below as follows:
(Sources: wesfarmers.com.au 2018)
The “Paragraph 126 (b) of AASB 136”, have further evaluated that the business
disclosure requirement of the reversal amount needs to be shown in the IS. The reversal
impartment treatment is determined by the changes used to determine the amounts recoverable
after the last impartment (Aasb.gov.au. 2018). The annual report of Wesfarmers has not shown
any “reversal of impairment in 2017” which can be duly observed below:

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(Sources: wesfarmers.com.au 2018)
As per the statement in the “Paragraph 130 (g) of AASB 136” the companies are
required to apply discount rate on the past and the current estimates in case the recoverable
amount of the CGU is found as “value-in-use”. In the 2017, annual report Wesfarmers the key
assumption used by the company is shown below as follows:

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(Sources: wesfarmers.com.au 2018)
Based on the AASB 136, the business entities are required to allocate the amount of
goodwill in the CGU for getting the assistance. In the annual report published in 2017, the
allocation of the goodwill made by Wesfarmers is shown below as follows:
(Sources: wesfarmers.com.au 2018)
The fundamental qualitative nature of the financial information is seen with the
“Relevance and Faithful Representation” as main characteristic for improving the qualitative
aspect, which is seen with timeliness. Based on the above discourse, Wesfarmers has showed
that the relevant information of the impairment is seen with the compliance of the standards as

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prescribed in the AASB 136. In addition to this, the relevant information is also disclosed timely
in the 2017 annual report (Aasb.gov.au. 2018).
Compliance with Objectives of General Purpose Financial Reporting
The GPFR “General purpose financial reporting”, assists in the delivery of financial
information which is conducive for the decision-making process. As stated in the “Paragraph
70 of the Conceptual Framework”, the business entities are required to recognize the loss for
the impartment when the carrying value is not recoverable. The impartment loss in case the
“carrying amount of greater than recoverable amount” is recognized by the company as follows:
(Sources: wesfarmers.com.au 2018)
As stated in the “Paragraph 130 of the Conceptual Framework”, the asset impartment
as per the AASB 136, is required for the estimation of the cash flows taken from the perspectives
of the market. The annual report has further shown that the generation of the of the cash flow
form the Wesfarmer is not able to present the “project value-in-use as per the fair value”. The
same can be discerned as follows

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(Sources: wesfarmers.com.au 2018)
Conclusion
It can be seen that the company follows “AASB 136 for the asset impairment”,
Furthermore, the company also complies to the objectives listed under GPFR. The
recommendation is stated as:
 Giving an augmented emphasis on “foreign currency cash flow”
 Impairment data with the external data
 Considering of the market capitalization with the net impairment

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References
Aasb.gov.au. (2018). Australian Accounting Standards Board (AASB) - Home . [online]
Available at: http://www.aasb.gov.au/#error [Accessed 29 Apr. 2018].
Aasb.gov.au. (2018). Conceptual Framework for Financial Reportin. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-15.pdf [Accessed 29 Apr.
2018].
Aasb.gov.au. (2018). Impairment of Assets. [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB136_07-04_COMPjun09_01-10.pdf
[Accessed 29 Apr. 2018].
Asic.gov.au. (2018). 16-205MR ASIC review of 31 December 2015 financial reports | ASIC -
Australian Securities and Investments Commission . [online] Available at:
http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-205mr-asic-
review-of-31-december-2015-financial-reports/ [Accessed 29 Apr. 2018].
Asic.gov.au. (2018). ASICs Financial Reporting Surveillance Program | ASIC - Australian
Securities and Investments Commission . [online] Available at: http://asic.gov.au/regulatory-
resources/financial-reporting-and-audit/directors-and-financial-reporting/asics-financial-
reporting-surveillance-program/ [Accessed 29 Apr. 2018].
Asic.gov.au. (2018). Our role | ASIC - Australian Securities and Investments Commission .
[online] Available at: http://asic.gov.au/about-asic/what-we-do/our-role/ [Accessed 22 Apr.
2018].
Group, D. (2018). Who we are . [online] Wesfarmers.com.au. Available at:
http://www.wesfarmers.com.au/who-we-are/who-we-are [Accessed 29 Apr. 2018].
Wesfarmers.com.au. (2018). Annual Report 2017. [online] Available at:
https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-
report.pdf?sfvrsn=0 [Accessed 29 Apr. 2018].