Analysis of Property, Plant, and Equipment Derecognition - Finance

This report analyzes the derecognition of property, plant, and equipment (PPE) based on the annual report of a company ending June 30, 2017, referencing Australian Accounting Standard 116. The analysis covers the circumstances under which PPE is derecognized, including disposal and lack of future economic benefits. The report examines the company's treatment of PPE, including plant and equipment, and leasehold improvements. It highlights the total derecognition of non-current assets and the recorded losses on disposal in the statement of profit and loss. The analysis also references the reconciliation statement for cash flows from operating activities, noting the inclusion of net losses on disposal. The report concludes that while the company follows relevant accounting standards, it could improve transparency by providing more detailed figures on losses, potentially benefiting investors. The references include the AASB guidelines and the company's official website for financial data.

ANSWER
For the purpose of the conducting the research, the annual report of the year ending 30th of June
2017 has been considered.
As per paragraph number sixty seven of the Australian Accounting Standard number 116, the
carrying amount of the property plant and equipment shall be liable to be de recognized in the
following situations or the circumstances:
1. When the particular asset is disposed off during the year or
2. When the particular asset is not able to give any economic benefits to the company in the
future years to come out of the utilization of that particular asset (AASB, 2014).
Secondly, when the item is derecognized, the gain or loss shall be disclosed in the statement of
profit and loss for that particular end.
The similar fact and description has been given by the company in the Note number ten of the
annual financial report of the company.
In case, the company is in its routine business sells and purchase the property plant and
equipment, then the applicability of this accounting standard will not be invoked rather the
provisions of the Australian Accounting Standard number 118 on Revenue Recognition shall be
invoked.
As per the annual report of the company, the property plant and equipment has two major
headings – plant and equipments and leasehold improvements. The company in total has
derecognized the non - current assets amounting to dollar 4.7 million (Company Official
Website, 2017).
S. No. Disposals Plant and
Equipment (In
$ Million)
Leasehold
Improvements
(In $ Million)
Total (In $
Million)
1. Ending 30th of
June 2017
4.5 0.2 4.7
2 Ending 30th of 4.0 0.4 4.4

June 2016
The screenshot of the same is given hereunder from where the figures have been arrived
As per the note number 10 of the annual financial report of the company, the company has
recorded the loss on disposal of the property plant and equipment in the statement of profit and
loss for that particular year end under the head of the “Other Expenses”. The detail of the same
is not available in the annual financial report (Company Official Website, 2017).
By further analyzing the annual report, it has been observed that in the Note Number sixteen, in
accordance with the accounting standard on cash flow, the company has prepared the
reconciliation statement for arriving at the Net profit from the cash flows from the operating
activities of the company. In that statement, the net losses on disposal of the assets have been
mentioned as follows:
S. No. Disposals Ending 30th of June 2017 Ending 30th of June 2016
1. Net Loss on Disposal 4.5 4.1

In this figure, the net loss on the disposal of the property plant and equipment has been included.
The bifurcated figure for Plant and equipment and the leasehold improvements have not been
provided in the annual report of the company. The screen shot of the same is given below from
where the aforesaid figure has been obtained.
Thus, the company has been following the relevant provisions of the accounting standard
number 116 but has not given the detailed figure of the net loss on the disposal of property plant
and equipment as faced by the company by which the investor will have less information about
the working condition of the assets of the company. To conclude, the company has derecognized
its item of property plant and equipment and has recognized the loss on said disposal in the
statement of profit and loss.

REFERENCES
AASB, (2014), “Property Plant and Equipment”, available at
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun14_07-14.pdf
accessed on 16/01/2018.
Company Official Website, (2017), “Annual Report”, available at https://www.jbhifi.com.au/
accessed on 16/01/2018.