MAA363 Corporate Accounting Report: Yellow Brick Holdings Analysis

This report provides a comprehensive analysis of Yellow Brick Holdings Ltd's accounting treatment of intangible assets. It begins with an introduction to intangible assets, their definitions, and examples. The report then analyzes Yellow Brick Holdings' intangible asset policy, including how it discloses these assets in its interim financial statements. A key focus is the company's compliance with AASB 138, examining definitions, recognition, measurement, and disclosure requirements. The report evaluates the company's compliance with the standard and discusses the potential impact of continued impairment of intangible assets on the company's debt covenants. Finally, the report concludes by assessing how Yellow Brick Holdings' accounting for intangible assets has influenced potential buy/sell/hold investment decisions. The analysis includes details on goodwill valuation, software valuation, and the company's financial statement disclosures related to intangible assets.

Corporate Accounting

Contents
Corporate Accounting.....................................................................................................................1
Introduction......................................................................................................................................3
1. Analysis of the Yellow brick holding ltd. Intangible asset policy and how they have made
their disclosure in the interim financial year statements.............................................................4
2. Evaluation of the Yellow Brick holdings ltd. compliance with the AASB 138 Intangible
assets and various definition, recognition and measurement and disclosure that are done in
their financial report....................................................................................................................6
3. The discussion of whether continued impairment of intangible assets may in future impact
on the company’s compliance with debt covenants....................................................................8
4. Conclusion as to whether, and if so, how Yellow Brick Holdings Ltd’s accounting for
intangible assets has influenced your Buy/Sell/Hold decision....................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

Introduction
The term intangible asset is defined as the identifiable non-monetary asset which does not have
any physical substance so as to touch or feel. Hence this is considered to be an intangible asset as
these are tangible and cannot be touched or feel by the humans. This is seen that the intangible
assets are considered made by the entities by themselves as some of the examples of the
intangible assets include patents, copyrights, goodwill, customer relationship,software etc.
These are hence considered to be the asset which is shown in the balance sheet on the assets side
but the owner does not have the physical view of the asset with them (André, Dionysiou and
Tsalavoutas, 2018). This report is based on Yellow Brick Holdings Ltd. Which Australian
company and is holding a various intangible asset with them. The company had a problem in
compliance with the AASB 138 hence it leads to the generation of the financial report later. So in
this video, we will be providing how the company accounted for the intangible assets and how
they have disclosed their interim financial statements. Also, evaluation and discussion on the
compliance with the AASB 138 would be done by the company. The discussion than would be
moved to whether the company continued impairment with the intangible asset may in future
impact the company’s compliance with the debt covenants. At last, the conclusion would be
provided where this would be analysed how the accounting for intangible assets has influenced
the buy or sell decision of the shareholders.

1. Analysis of the Yellow brick holding ltd. Intangible asset policy and how they have made their
disclosure in the interim financial year statements.
It is seen that intangible assets are considered to be one of the main and important parts of the
company’s financial asset. This is considered as the asset of the company that is used as the
fictitious assets which help in increasing the value of the company’s financial assets and also
helps in increasing the worth of the company. This is considered that the AASB 138 has been
prescribed by the government of the country so as to regulate the accounting treatment of the
intangible assets (Baskerville and Grossi, 2019). This standard is made applicable to the business
organisation if and only if the required criteria are met.
This is seen that the objective of the standard is to calculate how the intangible assets are
recognised and how they are measured. The standard help in identifying both the treatment of
identifiable and non-identifiable assets. There are various key reporting requirement that are
required to be made as per the standard. This is seen that the para 9-17 of the act provides
definition of identifying the intangible assets. While the para 18-45 provides the recognition of
intangible assets. This is seen that post recognition of the intangible asset cane be measured
through using cost or revaluation method. For the disclosure of each class of the intangible asset
there are various requirements that are supposed to be made. These includes,
 Useful life or the amortisation rate.
 The method that has been used for the purpose of amortisation
 Gross carrying amount
 Accumulated amortisation and the impairment losses that are associated with the asset
 Line items and the statement of comprehensive income in which the amortisation of the
intangible asset is included,
 The basis of determination of the intangible asset and the life of the asset how that has
been determined.
The company yellow brick ltd. Is considered to be having fixed policy so as to measure the
intangible asset and achieve the objective of maximising the performance of the company. This
is seen that the company used to measure the asset at the fair value initially at the date of
acquisition of the asset. This is seen that the company has the strategy to recognise the intangible
assets that are acquired by them separately at the cost. The company also has the objective of
following the policy where they have made the strategy to not to amortise the indefinite life

intangible asset and has to measure them at a cost less any impairment. While the finite life
intangible asset is valued at the cost less amortisation and any impairment associated with it. The
company has a system of managing and reviewing the finite life intangible assets annually (Berry
and Jones, 2018). The change in the expected pattern of consumption of the intangible asset and
useful life of the intangible asset is considered to be accounted for the company by changing the
amortisation method or the period thereunder.
The AASB 138 is considered as identifiable non-monetary asset without the physical substance.
It is seen that there are various assets that includes goodwill, trademarks, patents and the research
and development. Some of the example of the intangible assets includes patented technology,
computer software, trademarks and trade dress, newspaper, internet domains, licensing, royalty
and standstill agreements. This is seen that these are intangibles are considered to be acquired by
the separate purchase, as part of the business combination or through the government grant,
exchange of the assets and the self-creation of the
The company also has the policy to recognise the loss or the profits that are generated from the
sale of the intangible asset which is measured at the difference between the net sale amount and
the carrying amount of the intangible assets.
The company has disclosed the intangible asset in the financial statement under note 14 which
includes the non-current assets under the head intangibles. The company has the policy to make
the asset valued at the cost and deduct the cost of amortisation that is associated with it.
The valuation of the goodwill is considered to be made at the fair value. It is recognised by the
company that if the excess of the fair value of the cost of acquisition over the fair value is
identified then the amount in excess is considered to be the goodwill. The company has
considered that the goodwill should not be amortised. Instead, this is seen that goodwill is valued
on the annual basis and this is considered that the goodwill is carried at the cost less accumulated
impairment losses. While the loss on the goodwill is taken to profit and loss account so as to
reverse the loss that has occurred.
This is also seen that the software that the company has been valued at the significant cost
associated with the software which is deferred and amortised (Bodle, et. al., 2018). This is seen
that these are considered to be on the straight-line basis over the period of expected benefit. This
is calculated at the finite life of the four years of the software.

The yellow brick holding ltd. has made note no. 14 for the non-current assets which include the
calculation of intangible assets in it. This is seen that in the financial statement the goodwill is
valued at cost. There are various intangible assets that the company has considered to be valued.
Some these includes,
The goodwill that is showing the figure of the $23548000 for the year 2018. Customer
relationship is shown at the value $4496000, brands at $1039000, software at $5138000 and the
other intangible assets are valued at $1061000. These all are the figures that are shown by the
company at the yearend 2018 in the financial statements.
2. Evaluation of the Yellow Brick holdings ltd. compliance with the AASB 138 Intangible assets
and various definition, recognition and measurement and disclosure that are done in their
financial report.
The AASB 138 is considered as the standard that helps in defining the structure of the company
intangible assets how they are measured and what are the requirement through which they should
be checked on a regular basis. The AASB 138 incorporates the standard 38 of IAS which are
issued by the international accounting standard board (D'Arcy and Tarca, 2018). This standard
helps in recognising the intangible assets, and also helps in setting the other requirements that are
seen for the disclosing intangible assets.
This is described as per AASB 138 that for the purpose of the recognition of the intangible asset
various condition must be fulfilled. These include,
 Identifiability: this implies that the asset must be able to either be separated from the
operations of the business or must be able to arise from the legal document or through the
legal rights.
 Non-Monetary: this is important for the intangible asset to be in the non-monetary form
as this is seen that it cannot be valued in a fixed or determinable amount.
 Lack of physical substance: It is considered that there should be a lack of the physical
substance for an asset that can be classified as an intangible. Hence this can be seen that
this asset cannot be physically touched or hold.
 Control: This is seen that there should be a level of control over the asset and this is
dependent on the power to obtain the future benefits that are associated with it. While
there should be able to prevent others from obtaining the economic benefits that are
associated with the asset.

 Future economic benefit: The other factor that is associated with the asset is the economic
benefit that it provides. This is important for the asset to determine the flow of future
economic benefits of the assets. Further, this is seen that you should be able to measure
economic benefits which are reliable. Further, this is seen that the economic benefits
should include the revenue from selling the product or services and helps in saving the
cost.
This is seen that all the intangible assets are not necessary to meet the definition of the intangible
asset under AASB 138. It is hence seen that this is important to consider all the factors as per
AASB 138. This is seen that brands, publishing titles, customer lists and generations of internal
goodwill are not recognised as the asset of the company (Gray, Hellman and Ivanova, 2019).
The measurement and disclosure according to the AASB 138 should be initially measures as all
the asset via cost. This is seen that recognising the asset and valuing it as a factor this is seen that
it has to be measured either via cost or the revaluation model. This is seen that AASB 138
specifies that it should disclose the information separately for each class of the intangible asset.
This has been found in the financial statement of the company that the company has impairment
with the valuation of the intangible asset. The auditor of the company notices that it is
detrimental to say that the company has maintained the wrong accounting practice for the
valuation of the intangible asset.
This can be seen in the goodwill valuation of the company, as of June 2018, the carrying value of
goodwill was considered to be $23.55Mn. While this is seen that as per AASB 138 the
impairment of asset required in a business combination should be allocated to each of the
group’s cash-generating units. It is specified that each of the CGU to which the goodwill has
been allocated must be tested for the purpose of impairment that has been done annually (Hong,
2018).
It is seen that the management has assessed that the group has two CGU unit and they have
allocated the goodwill and the other intangible assets to these CGU units.
This is seen that the carrying value of the group capitalised intangible asset was $8.5Mn which
related to the software and other development programmes. This was seen that, as per AASB 138
intangible assets are considered to be internally generated if these are able to be controlled and it
is easy for them to provide the future economic benefit to the group of the people. Hence this
valuation of the asset was considered to be done at the satisfactory level.

3. The discussion of whether continued impairment of intangible assets may in future impact on
the company’s compliance with debt covenants.
The impairment of the intangible asset is considered to be the loss-making situation for the
company as this is seen that the investor will lose their interest in the company and this would
lead to decrease in the company’s financial worth. Also, the company would not be able to get
better fundraised for their operations. This has been seen that the consolidated entity has
allocated the goodwill to the two cash-generating units. Which are considered to be goodwill and
wealth management. The assets that have the identifiable useful life are considered to be tested at
least annually for the impairment. The impairment must be recognised when the carrying amount
of the asset exceeds the CGU recoverable cost. the testing for the impairment was done through
the value in use approach and the both the CGU and the other recoverable amounts were to be
determined which could be lower than the carrying amount and hence through this the
impairment loss was considered to be recognised (Ong, 2018).
Hence this can be said that the continued impairment of the intangible asset with the income of
the company would lead to loss to the company and hence this would make the company impact
their balance sheet and the income statement in the future. As this is seen that the continued
impairment would result in making the loss and this would also result in making the balance
sheet of the company weak.
4. Conclusion as to whether, and if so, how Yellow Brick Holdings Ltd’s accounting for
intangible assets has influenced your Buy/Sell/Hold decision.
This is seen that the accounting policy for the intangible asset has made the investors decision
reversed for investing in the company. it can be seen that as the company is continuously making
the impairment of the intangible asset and charging it to the income of the company which is
considered to be a difficult condition for the company (Powell and Hope, 2018). Also, the
company is having the different policy that is considered to be wrong for the purpose of valuing
the intangible asset and hence the company is having a loss. This is seen that if this practice is
continued then it would make the company bear a heavy burden in the near future and would
also make the company lose the share price. Hence the decision that is taken for the purpose is to
sell or hold the shares of the company till the date when the amount of the share increase a little.
Hence this is regarded that the immediate action of sell is to be taken as this would result in a
loss if hold for the greater period (Saha, Morris and Kang, 2019).

This can also be seen from the financial statement that there has been a change in the equity of
the company and the company has lost the investment amount significantly from the year 2016
to the year 2017.
Conclusion
From the above essay, this can be considered that the AASB is considered to be one of the most
important bodies that helps to define the rules and the standards for the regulation of the financial
statement of the company. This can be considered that the company is having an issue with the
provisions of the AASB 138 and they have not followed the rule as it is prescribed. The
intangible asset of the company are in impairment with the rule and the standard and hence
leading to loss to the company. Also, this is seen that due to this the company is having a
decrease in the share capital year by year. Also, this is advised that investors should hold or sale
the shares that they are owing as this would lead to decrease in their wealth and would lead to
loss to them.

References
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Online
Yellow brick road Annual report, 2018. [Online]. Accessed through
<http://www.ybr.com.au/ybr/media/investor-centre/annualreport18.pdf>.