Financial Reporting: Measurement of Assets and Liabilities at JB Hi-Fi

This report provides a comprehensive analysis of the financial reporting practices of JB Hi-Fi Limited, focusing on the measurement of its assets and liabilities. The study examines the significance of asset and liability measurement within the conceptual framework for financial reporting, emphasizing its role in providing a clear depiction of the company's financial position and performance. The report delves into the specific measurement criteria applied to two key assets—plant and equipment and inventories—and two liabilities—provisions and trade payables—as outlined in JB Hi-Fi's 2018 Annual Report. It assesses the relevance of these measurement practices concerning fundamental and enhancing qualitative characteristics, as defined by the AASB Framework, and evaluates the company's compliance with relevant AASB standards, including AASB 116, AASB 102, AASB 137, and AASB 101. The analysis concludes by highlighting the importance of accurate asset and liability measurement for JB Hi-Fi's financial reporting, ensuring the faithful representation and usefulness of financial information for decision-making.

Running head: FINANCIAL REPORTING
Financial Reporting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction................................................................................................................................2
1. Reasons for the Significance of Measurement of Assets and Liabilities...............................2
2. Essential Measurement of Two Assets and Two Liabilities in JB Hi-Fi...............................3
2.1 Assets...............................................................................................................................3
2.2 Liabilities..........................................................................................................................3
3. Assessment of the Relevancy of Measurement of Assets and Liabilities..............................4
4. Conclusion..............................................................................................................................6
References..................................................................................................................................7

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Introduction
Conceptual framework for financial reporting is a crucial aspects that provide
assistance to develop and revise the required accounting standards and principles for the
purpose of accurate financial reporting. Measurement of financial assets and liabilities is
regarded as a crucial portion of the conceptual framework for financial reporting. The key
aim of this study is to discuss about different aspects related to the measurement of assets and
liabilities in an ASX listed corporation. JB Hi-Fi Limited (JB Hi-Fi) is considered for this
purpose.
1. Reasons for the Significance of Measurement of Assets and Liabilities
According to Framework for the Preparation and Presentation of Financial
Statements, Paragraph 99, measurement is the procedure to ascertain the financial amount at
which the companies are required to recognize the financial statements’ elements in both
income statement and balance sheet. This puts the obligation on JB Hi-Fi to involve in the
measurement of the assets and liabilities of the business. In JB Hi-Fi, application of the
measurement idea provides guidance to the decision of JB Hi-Fi on the procedures for
determining the monetary amount that it will report for the assets and liabilities. The main
focus of the measurement model in JB Hi-Fi is to ascertain the assets’ and liabilities’ amounts
because the amounts that JB Hi-Fi will report for other elements of financial statements are
based on the determined values of the assets and liabilities (ifac.org 2019).
In JB Hi-Fi, the measurement concepts used by the company for the determination of
the suitable amounts for assets and liabilities give the company a basis for depicting the
financial standing and health of the company at a particular time along with financial activity
at a particular period. Apart from that, application of correct measurement concept in JB Hi-
Fi will assists in establishing standards that need the similar transactions and treatments. This

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leads to the increase in the ability in comparing the financial information of JB Hi-Fi with
other businesses in the identical or different business sector (dart.deloitte.com 2019).
2. Essential Measurement of Two Assets and Two Liabilities in JB Hi-Fi
The following discussion shows the adopted measurement criteria of two assets and
two liabilities in JB Hi-Fi.
2.1 Assets
Plant and Equipment – As per 2018 Annual Report of JB Hi-Fi, the business has measure its
plant and equipment and leasehold improvements at cost after deducting accrued depreciation
and impairment, if any. In addition, the company has charged depreciation on these assets
(investors.jbhifi.com.au 2019). The adopted measurement procedures by JB Hi-Fi is in
accordance with the requirements of AASB 116, Property, Plant and Equipment, Paragraph
29 and 43 which states the businesses are required to measure its assets at cost less
impairment losses and accrued depreciation; and the company needs to charge depreciation
on it (aasb.gov.au 2019).
Inventories – JB Hi-Fi has measured their inventory at the lower of cost and net realisable
value and weighted average costs has been used for assigning costs to separate substances
related to inventory (investors.jbhifi.com.au 2019). This adopted measurement is in
accordance with the Paragraph 9 of AASB 102 Inventories which puts the obligation on the
corporations for measuring the inventories at the lower of cost and net realisable value. This
also complies with Paragraph 25 of AASB 102 that states weighted average cost formula
needs to be used for assigning cost of inventories (aasb.gov.au 2019).
2.2 Liabilities
Provisions – JB Hi-Fi has measured the provisions in the presence of its present
responsibility due to a historical event and there is probability that it will be required for the

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company to settle the obligation when it is possible to make a dependable estimate of the
obligation amount (investors.jbhifi.com.au 2019). This measurement criteria of JB Hi-Fi is in
compliance with Paragraph 36 and 42 of AASB 137 Provisions, Contingent Liabilities and
Contingent Assets which state the sum recognized as a provision needs to be settled at the end
of the reporting period and the risks and uncertainties are due to numerous actions and
conditions (aasb.gov.au 2019).
Trade and Other Payable – JB Hi-Fi has measured trade and other payable at amortized
costs; and these are the liabilities for provided goods and services previous to the end of the
year. The company considers them unsecured that are settled within 45 days of recognition
(investors.jbhifi.com.au 2019). This measurement criteria is in line with AASB 101
Presentation of Financial Statements, Paragraphs 70 and 71 that state trade payable needs to
be categorised as current liabilities and they need to be paid off within one year after the
reporting period (aasb.gov.au 2019).
3. Assessment of the Relevancy of Measurement of Assets and Liabilities
The presence of qualitative characteristics increases the usefulness of financial
information. As per AASB Framework for the Preparation and Presentation of Financial
Statements, there are two types of qualitative characteristics which are Fundamental
qualitative characteristics and Enhancing qualitative characteristics (aasb.gov.au 2019). The
following discussion shows whether the adopted measurement based by JB Hi-Fi are relevant
to these characteristics and other AASBs.
Fundamental Qualitative Characteristics
Relevance – Information related to measurement is useful in the decision-making process of
the users and JB Hi-Fi has provided the necessary information to measure of its assets and

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liabilities that is most relevant to the users’ decision-making process. This indicates its
relevance to the business practice of JB Hi-Fi (aasb.gov.au 2019).
Faithful Representation – In order to ensure faithful representation, JB Hi-Fi has disclosed
all necessary information related to asset and liability measurement for providing greater
understanding; like measurement basis, depreciation and others. Disclosure of this
information is necessary for the business practice of JB Hi-Fi (Herath and Albarqi 2017).
Enhancing Qualitative Characteristics
Comparability – Disclosed information must be comparable with the same information of the
other companies and other timeline of the same company. JB Hi-Fi has disclosed the
information regarding asset and liability measurement under specific sections in the financial
statements related notes; and this information can easily be compared with the same
measurement based on other companies or the other annual reports of JB Hi-Fi (aasb.gov.au
2019).
Verifiability – For ensuring the presence of verifiability, JB Hi-Fi has disclosed the
underlying assumptions related to assets and liabilities measurement and other factors. In the
presence of these aspects, it becomes possible for the users to verify the measurement bases
adopted by the company (Henderson et al. 2015).
Timeliness – Information must be provided in time so that they can create an impact on the
process to make decisions of the users. JB Hi-Fi has ensured the disclosure of all information
regarding measuring the assets and liabilities in particular section of the annual reports. This
ensures the presence of timeliness characteristic (aasb.gov.au 2019).
Understandability – JB Hi-Fi has classified, characterized and presented the measurement
related information in clear and concise manner in order to make it comprehensible to the
users of the financial reports (Henderson et al. 2015).

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Apart from the qualitative characteristics of AASB, the measurement bases of assets
and liabilities in JB Hi-Fi are in line with the relevant AASB standards. AASB 116 Property,
Plant and Equipment has been followed for the measurement of plant and equipment while
AASB 102 Inventories has been followed for the measurement of JB Hi-Fi’s inventories. In
case of liabilities, JB Hi-Fi has followed AASB 137 Provisions, Contingent Liabilities and
Contingent Assets for the measurement of provisions and has followed AASB 101
Presentation of Financial Statements for the measurement of trade and other payable
(aasb.gov.au 2019).
4. Conclusion
The above analysis demonstrates that the correctly measuring the assets and liabilities
is important for JB Hi-Fi because this helps the firm in recording and disclosing the exact
value of the financial statements’ elements. It is observable from the analysis that the
company has adopted the measurement based of its assets and liabilities as per the principles
and rules of AASB. Moreover, this compliance with AASB principles has ensured the
presence of both fundamental and qualitative characteristics in the asset and liability
measurement related information of JB Hi-Fi.

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References
Aasb.gov.au. 2019. Framework for the Preparation and Presentation of Financial
Statements. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-
14.pdf [Accessed 25 Sep. 2019].
Aasb.gov.au. 2019. Inventories. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 25 Sep.
2019].
Aasb.gov.au. 2019. Presentation of Financial Statements. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf [Accessed 25 Sep.
2019].
Aasb.gov.au. 2019. Property, Plant and Equipment. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun16_01-17.pdf
[Accessed 25 Sep. 2019].
Aasb.gov.au. 2019. Provisions, Contingent Liabilities and Contingent Assets. [online]
Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-
04_COMPjun14_04-14.pdf [Accessed 25 Sep. 2019].
Dart.deloitte.com. 2019. Measurement Concepts for Assets and Liabilities and Fair Value
Measurement and Application. [online] Available at:
https://dart.deloitte.com/USDART/resource/065e6460-3f33-11e6-95db-957359951efc
[Accessed 25 Sep. 2019].
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.

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Herath, S.K. and Albarqi, N., 2017. Financial reporting quality: A literature
review. International Journal of Business Management and Commerce, 2(2), pp.1-14.
Ifac.org. 2019. Conceptual Framework for General Purpose Financial Reporting by Public
Sector Entities: Measurement of Assets and Liabilities in Financial Statements. [online]
Available at: https://www.ifac.org/system/files/publications/files/Conceptual%20Framework
%20Exposure%20Draft%203%20FINAL%20November%208,%202012_0.pdf [Accessed 25
Sep. 2019].
Investors.jbhifi.com.au. 2019. ANNUAL REPORT 2018. [online] Available at:
https://investors.jbhifi.com.au/wp-content/uploads/2018/10/Annual-Report-2018-with-
Chairmans-CEOs-Report.pdf [Accessed 25 Sep. 2019].