Financial Accounting and Reporting: Wesfarmers Company Analysis Report

This report provides an analysis of financial accounting and reporting practices, focusing on the application of professional judgment and the assessment of asset impairment within the context of Wesfarmers, a conglomerate company. The report examines key financial statements, including income statements, balance sheets, and cash flow statements, and their role in decision-making for both management and investors. It delves into the concept of professional judgment, its implications for financial users, and its application in determining asset impairment, particularly concerning property, plant, equipment, goodwill, and intangible assets. The report references AASB 16, the accounting standard related to impairment of assets, and discusses the necessary disclosures. It offers recommendations related to the consideration of risk, industry norms, and discounting factors in professional judgments regarding impairment. The report concludes by emphasizing the importance of financial accounting, reporting, and professional judgment in providing accurate and understandable financial information, which is essential for effective decision-making. The report also includes a list of relevant bibliography for further reading.

FINANCIAL ACCOUNTING
AND REPORTING

Introduction
• Financial accounting is the analysis , summary and
reporting of business transaction
• It incudes the financial statement of the company
• It helps the users in decision making process
• Governed by both local and international standard

Financial Reporting
• It provides the management and financial
information of business
• It includes income statement, balance sheet and cash
flow of the company
• It help the user in the decision making process
• It help the investors to know the financial position of
the company

Overview of the Company
• The company is Wesfarmers
• It is a conglomerate based company
• It headquarter is in Perth, Western Australia
• It was founded in 1914
• It got registered in 1984

Meaning of Professional
Judgement
• It is the process in which the management take
different assumption regarding the business
• The judgement are taken related to the
industry norms
• It should be based upon the ethics and norms of
the company.

Implications of professional
judgements upon financial users
• If the judgement is not proper than it can
affect the decision making process of the
financial user
• If the risk is not be judged properly by
the management than it can affect then
financial poitionof the company

Impairment written down of the
company
• The asset which are impairment by the company are
property, plant and equipment, goodwill and
intangible assets
• The estimation taken as the future value of the cash
flow has been discounted to the present value
• It is done so that it all the risk factor into
consideration regarding the impairment of the asset

Classification of impairment asset in
regards with company
• Buki it is brand value = $18 million and
goodwill = $777 million and it also had write off
deferred tax = $92 million and $66 million as
written down of stock
• Targets – Goodwill = $47 million, Brand name =
$238 million and other fixed asset = $21 million

AASB 16 – Impairment of Asset
• Accounting standard related to impairment of asset
• Contain all the rules and principles
• It state asset should be recorded at recovery value but if
the recoverable amount is more than recovery than the
asset should be considered as impairment asset
• The amount between the two should be consider as loss

Disclosure of Impairment Asset
• It should show all the amount which is
recorded in income statement
• It should show the reversal amount
which is recorded in income statement
• It should show the amount which is
been consider in the equity of the
company

Professional Judgement in
Impairment of asset
• In 2017 the discount rates was 8.9%
and 11%
• In 2018 the discount rates is 8.6% and
11.8%

Recommendation regarding
Impairment asset
• The risk should be consider properly in the
professional judgement
• Management should check all factors
related to the industry norms
• Discounting factor should be consider as
per the industry norms