Detailed Analysis of SCP Groups' Business and Financial Performance

This report provides a comprehensive analysis of SCP Groups' business operations, focusing on its accounting policies, particularly concerning investment properties and the application of AASB standards. It delves into the methods used by SCP in determining investment property values, including the fair value and cost models. The report further examines the probable influence of changes in the retail sector on the company's financial statements, highlighting the company's financial condition, declining profit margins, and cash flow issues. It also discusses the economic implications of changes in the retail sector. The analysis uses the IFRS system and includes an unqualified audit report. The conclusion summarizes the key findings, emphasizing the importance of accounting guidelines and the company's performance within the retail sector.

Running head: ANALYSIS OF THE BUSINESS OF SCP GROUPS
Analysis of The Business of SCP Groups
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Author’s Note

1ANALYSIS OF THE BUSINESS OF SCP GROUPS
Executive Summary
The aim of the report is to examine the assessment process of the investment properties and the
consequence of the retail sector on the economy. The report explains the details of the various
AASB sections that are applicable for the SCP group. The methods of valuation of the
investments property used by the company has also been mentioned in the report. The report
concluded witgh the analysis of the effect of the retail industry on the economic condition of the
country.

2ANALYSIS OF THE BUSINESS OF SCP GROUPS
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................8

3ANALYSIS OF THE BUSINESS OF SCP GROUPS
Introduction
The efficiency of the retail sector is influenced by the rules that are to be followed by the
company, and the valuation process followed by the company determine how well the company
will perform. The financial report of the company also reflects the situation of the company and
effect of the retail sector on the economy. The various accounting standards set by the AASB
brings transparency in the retail industry and that influences the performance of the SCP group.
Discussion
(A) The accounting policies of SCP and the regulations that dictate the accounting policy of
SCP
The accounting policies regarding to investment properties are acknowledged in the
AASB .the aim of this standard is to establish the rule for the accounting entries essential for the
investment property and the other disclosure necessities (AASB 2015).
The accounting policies that are adopted by SCP is in accordance with the guidelines set
by the AASB. The major accounting standards that are used by the company are stated below:
AASB 9
The AASB 9 is related with the accounting treatments for the recording of the finacila
instruments. The usage of the fincial instruments and how the company will record the
transactions that are related with the financial instruments are stated in the accounting standard 9.
as per the AASB 9 the profit or loss that is generated from the financial instruments should not

4ANALYSIS OF THE BUSINESS OF SCP GROUPS
be recorded in the income statement of the company but it should be recorded separately as other
comprehensive profit or loss.
Under the AASB 9 the group continued to measure the financial assets at the fair value.
the receivables are measured on the amortised cost. The impact of the classification of financial
instruments under the AASB 9 is immaterial (Yao Percy & Hu 2015).
The AASB 9 provides that accounting for the modification of a financial liability that has
not resulted in derecognition requires an adjustment to the amortised cost of the liability,with any
profit or loss being recognised immediately in the income statement.
The groups accounting for impairment lossess for financial assets has fundamentaly
changed by replacing AASB 139 incurred loss approach with aforward looking expected credit
loss.the company has applied simple method of recording the lifetime expected losses on trade
and other receivables (Bond Govendir & Wells 2016).
Hedge accounting
There is no impact from the application of hedging requirement on the financial statements.
AASB 15
There are 5 steps model that set the guidelines of the AASB 15,which frame the method
of determining the fact that when and how much revenue to be recognised by the company. The
scp group property development and construction revenue includes the construction design and
development fees earned from design and construction agreements with the third parties.the
company continues to recognise revenue on a percentage of completion basis determined on the

5ANALYSIS OF THE BUSINESS OF SCP GROUPS
proportion of contract cost incurred to date and the essential cost to complete (Hu Percy &
Yao2015).
The group also recognised property management revenue from agreement with third
parties as service provider. This is in relation to the guidelines provided by the AASB 15
(Towart 2018).
AASB 16
The AASB 16 deals with the accounting treatment of lease agreement. The standard
contains requirement about lease classification and recognition measurement and presentation
and disclosure of leases for lessees and lessors.the standard does not expected to have significant
financial impact on the financial statements on application.
Beside these standards the company also follows the following AASB sections like
 AASB 3 for business combination
 AASB 11 for joint arrangements
 AASB 123 for borrowing cost eligible for capitalisation
 AASB 10 for preparation of consolidated financial statements.
(B) The methods used by SCP in the determination of the investment property value
Fair value model
In the first phase, it is essential to limit the fair value of the investment value of the
property. The fair market value is the quantity that is a purchaser wants to expend on the
property and the purchaser wants to pay and the seller will accept. For this, the SCP has to

6ANALYSIS OF THE BUSINESS OF SCP GROUPS
determine the fair value by referring with the real estate agent. It will be obligatory to compare
the price of the property and then secure the price of the property of SCP (Al-Hadi 2015).
In the second phase, it will be mandatory to evaluate the value of the property by using
the replacement cost method. Replacement cost are determined by the cost to rebuild this exact
property on this same piece of property. Replacement cost is the cost that are indomitable by the
cost of all resources and labour plus the value of the land from which it is required to subtract the
depreciation. This estimation technique is for comparable kind of properties (Sukmadilaga.,
Pratama & Mulyani 2015).
Beside these standards the group uses the following structure for determining and
disclosing the fair value of the assets
Level 1
The fair value is calculated using the prices in the active market for identical assets.
Level 2
The fair value is estimated using inputs other than quoted price that are determined either
directly or indirectly.
Level 3
The fair value is estimated using inputs that are not based on observable marker data.
Cost model
After the preliminary acknowledgement, an organisation that chooses the cost model
shall measure the investment property in agreement to the AASB 116 obligation for that model.

7ANALYSIS OF THE BUSINESS OF SCP GROUPS
Other than that meet, the principles to be categorized as held for sale of the investment property
in relation to the AASB 5 non-current assets held for sale should be measured in accordance with
AASB 5. The company also used the cost model for valuing the assets (Nobes & Stadler 2015).
(C)Probable influence on the financial statements due to the change in the retail sector
The financial condition of the company is not strong and that can be easily identified
from the financial report and the statements given by the directors of the company. The changes
in the accounting system though create some transparency in the activities in the retail industry
but it does not affect the revenue generating capacity of the company. Despite of the increase in
the figures of the turnover the company fail to improve its profit margin. The net profit declined
by $145.70, which has become a major, cause of concern for the company. The SCP group failed
to manage the operating cost for which the profit margin is decreasing rapidly. The cash and cash
equivalent balance is so poor that the company even failed to meet the short term obligations like
payment to creditors and other third parties. Besides that, the company also failed to collect the
dues from the debtors which further decreases the cash position of the SCP.
(D) Economic implications due to the changes in the retail sector
The economic condition of any country is reliant on the performance of the retail sector
as the major portion of the economy depends on the retail sector. The customers depends on the
retail sector and the economy will suffer if the retail sector fails to perform. The SCP is using the

8ANALYSIS OF THE BUSINESS OF SCP GROUPS
IFRS system to prepare the financial statements of the company. The accounts of the company
has been audited with an unqualified report.
Conclusion
From the above discussion it can be concluded that the SCP is not executing that well as
it should do. The accounting guidelines of the investment property is essential is to be followed
by the company which will bring more clearness in the retail sector. The company has to
preserve various stages to make an appropriate worth of the property. The company’s financial
statement is also imitated the ailment of the retail sector and the significances of the disaster of
the retail sector on the economy and the company’s condition.

9ANALYSIS OF THE BUSINESS OF SCP GROUPS
Reference
AASB, C. A. S. (2015). Investment property.
Al-Hadi, A. K. H. (2015). Three essays on market risk disclosures: corporate governance,
investment efficiency and implied cost of equity capital: evidence from gulf cooperation
council countries (GCC) (Doctoral dissertation, Curtin University).
Bond, D., Govendir, B., & Wells, P. (2016). An evaluation of asset impairment decisions by
Australian firms and whether this was impacted by AASB 136.
Hu, F., Percy, M., & Yao, D. (2015). Asset revaluations and earnings management: Evidence
from Australian companies. Corporate Ownership and Control, 13(1), 930-939.
Nobes, C. W., & Stadler, C. (2015). The qualitative characteristics of financial information, and
managers’ accounting decisions: evidence from IFRS policy changes. Accounting and
Business Research, 45(5), 572-601.

10ANALYSIS OF THE BUSINESS OF SCP GROUPS
Sukmadilaga, C., Pratama, A., & Mulyani, S. (2015). Good Governance Implementation in
Public Sector: Exploratory Analysis of Government Financial Statements Disclosures
Across ASEAN Countries. Procedia-Social and Behavioral Sciences, 211, 513-518.
Towart, L. C. (2018). The balance sheet and valuation treatment of retirement living and aged
care assets. Pacific Rim Property Research Journal, 24(2), 185-197.
Yao, D. F. T., Percy, M., & Hu, F. (2015). Journal of Contemporary Accounting &
Economics. Journal of Contemporary Accounting & Economics, 11, 31-45.