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You have been randomly assigned an Australian publicly listed company (refer to the separate excel spreadsheet provided to identify your company). Using the financial reports for your company, you are required to prepare an essay that addresses the 7 requirements listed below. 
1. Introduction (Company’s main operation/ what the assignment is about/ Topics covered)
2. (a) Select a non-current asset from the financial statements of your company. Provide details of this item (including identify the valuation method used for this item). 
(b) With reference to qualitative characteristics, provide an argument for using an alternative valuation method for this non-current asset. 
3. (a) Provide details of the intangible assets reported by your company.
(b) Evaluate how the company fulfilled its disclosure requirements in relation to intangible assets.
4. (a) Provide details of the provisions and contingencies recorded or disclosed by your company. 
(b) With reference to one specific contingency recorded or disclosed by the company, provide an argument for and against the inclusion of the contingency in the financial report. 
5. (a) Provide details of leased items that are recorded or disclosed by your company. 
(b) Discuss the classification and presentation requirements relevant to leased items, and in doing so provide an explanation for how the leased items of your company have been presented on the financial statements. 
6. (a) Provide details of the revenue disclosed in the annual report of the company.
(b) Justify the revenue recognition criteria for a specific (major) revenue of the company.

The company which has been analyzed here is K & S Corporation Limited, which is listed on the Australian Stock Exchange. It deals in logistics, transportation, warehouse management, distribution channel management and contract management. It is headquartered in Australia and has 3 major divisions namely Fuels, Australian transport and the New Zealand Transport. The fuel division of the company is dealing in distributing of fuels to the customers from various sectors like those of fishing, farming and other retail sector customer in the South east Australia (Belton, 2017). The New Zealand transport division is engaged in providing the logistic services to the customers in New Zealand and similar is the case for Australia Transport. The given report highlights the financial aspects and the reporting issues with respect to the tangible and intangible assets of company, the provision, contingent assets and liabilities appearing in the books and the revenues and leases accounting. Towards the end of the study, necessary conclusions have been drawn on the given aspects (Bromwich & Scapens, 2016).

The balance of property, plant and equipment of the company as on 30th June 2017 stands at $ 350.998 MN. The plants and equipment’s are being valued at cost reduced by accumulated depreciation and the impairment losses, if any, as of date. Similarly, the land and buildings are being valued at fair values reduced by accumulated depreciation and the impairment losses, if any, till date since it is a non-depreciable asset (Das, 2017).

Alternatively, the plants and the equipment can also be valued at market price less the accumulated depreciation till date. The market value is something at which the buyer and seller or the asset or liability is willing to exchange the same at arm’s length prices. In such a transaction, it is assumed that both the parties involved in the transaction are having considerable knowledge of valuation of the assets and liabilities and no decision is being done under compulsion. In case the valuation is being done in this manner, it will show a true and fair market value of asset in the books as on the given balance sheet date as the value of assets never remains constant considering time value of money (Alexander, 2016).

As per the Annual Report of the company, the intangibles of the company include Goodwill and other intangible assets. As per IAS 38 released by International Accounting Standards Board, the company has sufficed all the disclosure requirements with respect to intangible assets. As per the IAS, the intangibles should be valued at cost initially and later on the same can be recognized either at cost or it can be revalued as well. A company is also required to give information on the different classes of intangible asset appearing in the balance sheet differentiating between the self-generated and the acquired intangibles (Carlin, 2009).

The method adopted by K & S Corporation for valuation of the Goodwill has been clearly disclosed in the notes to accounts. It is not self-generated but has been acquired in the business combination. The company has disclosed that they have valued the goodwill at cost less impairment loss, if any. The impairment loss, if any, on the goodwill cannot be reversed. Similarly, the company has disclosed the valuation of other intangible assets as well along with the useful lives that have been considered for each of the assets. The assets which are having the finite life are being amortized over the useful life period only (Dichev, 2017).

Intangible assets

Provision may be defined as liability which has not yet been materialized but which is certain to occur in the coming future and which can be measured with reliability. It is a recognized in the books when the obligation arises due to some past events and which involves the outflow of resources and a reliable estimate of the same can be done. The company has disclosed all the provisions along with the basis in the notes on financial statements and also mentioned information about its reversal (Félix, 2017). If the company is expecting the amount to be reimbursed, then the reimbursable amount is being shown as assets and expenses net of reimbursement is being shown on the liability. In case the time value is involved, the company has used the concept of discounting the provision amount as existing market rate. The company’s balance sheet has both current and non-current provisions in the form of employee benefits and workmen compensation provisions, etc.

Contingent liability is a liability which may be incurred on the happening of some event which is currently uncertain. This is something which has not yet materialized and therefore is being shown as notes to the financial statements. The company has disclosed the contingent liability of interlocking guarantees given by company to the subsidiaries and the legal claim in relation to the same (Werner, 2017).

In addition to the above, the company also has minor legal claims which are pending against it. The liability for the same has not yet been admitted and the claims are being defended in the court. Here the amount has been considered to be very insignificant by the directors. There are generally two views to reporting of the contingent liability, first if the amount is insignificant as in this case and it is not expected to materialize, then its disclosure may affect investor’s decision despite not having critical impact on financials. Secondly, if the same is disclosed, it leads to transparency and viability of the financial statement and thus encourages global reporting standards (Gooley, 2016).

Contingent assets are assets which again are dependent on the happening of some future event and might result in a gain. As per the concept of prudence, it is advisable not to report any such futuristic gain or asset in the books of accounts and therefore the given company in hand has not recorded any such asset in its books.

The lease can be categorized into finance lease and operating lease. Finance lease is considered as one of the financial assets of the company. In the given case, the company has acquired Property, plant and equipment worth $46.10 million through finance lease. The company has abided by AASB 16 on leases and discussed on the classification and valuation of the leases in books (Jefferson, 2017). It has classified those assets as level 2 assets, the lease to be long term leases and the expenses on account of the same to be operating leases. The company has leased certain premises in Australia, New Zealand, New South Wales, Victoria and Northern Territory. The operating lease rental has been classified by company into 3 categories namely less than 12 months, more than 12 months but less than 5 years and more than 5 years. The company also leases few of the property under non-cancellable lease agreements ranging from 1 year to 15 years, which can further be renewed

Revenue recognition is one thing which is very important and critical for any company. K & S Corporation Limited recognizes revenue when the conditions are met as per the accounting standards. These conditions are risk and ownership in the goods must have been transferred, the economic benefit is certain to arise to the entity and amount is collectible and it can be reliably measured (Knechel & Salterio, 2016). If the amount is not certain or the economic benefit to entity is not certain, the amount is not recognized as revenue. The given company has mentioned some specific details with respect to recognition of revenue, some of which are mentioned below:

  1. Sale of goods: For recognition of revenue in case of sale of goods, the company must have transferred the risk and reward to the buyer and the amount must be measurable. The risk and reward is considered to be transferred on the delivery of the goods. The amount recognized as revenue is net of discount and sales return. In case of fuel, the revenue is recognized when the fuel is provided.
  2. Provision of services: The company is recognized the revenue from warehousing management on provision of requisite services and where the amount is certain, collectible and measurable(Heminway, 2017).
  3. Interest: For recognizing the interest revenue, the company uses the effective interest method. Under this, interest amount is being calculated at the amortized cost of the financial asset as per the effective interest rate which is the discounting rate and then the interest revenue is being allocated over the relevant period.
  4. Dividend: The dividend revenue is recognized when the same has been declared by the company and the right to receive the same has been received.


From the above discussion and analysis on the annual report of K & H Corporation Limited, it can be concluded that the annual report for year ended 30th June 2017 has been prepared in compliance with the Australian Accounting Standards and all the relevant notes and disclosures have been made in annual report. All the valuations, revenue accounting, estimates and the basis of assumption has been nicely explained making it transparent and reliable for the end user.


Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher Education, 71(4), pp. 411-431.

Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd.

Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on. Management Accounting Research, 31(1), pp. 1-9.

Carlin, T. F. N. a. L. N., 2009. Goodwill accounting in Malaysia and the transition to IFRS – a compliance assessment of large first year adopters. Journal of Financial Reporting & Accounting,, 7(1), pp. 75-104.

Das, P., 2017. Financing Pattern and Utilization of Fixed Assets - A Study. Asian Journal of Social Science Studies, 2(2), pp. 10-17.

Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), pp. 617-632.

Félix, M., 2017. A study on the expected impact of IFRS 17 on the transparency of financial statements of insurance companies. MASTER THESIS, pp. 1-69.

Gooley, J., 2016. Principles of Australian Contract Law. Australia: Lexis Nexis.

Heminway, J., 2017. Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents. SSRN, pp. 1-35.

Jefferson, M., 2017. Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland. Technological Forecasting and Social Change, pp. 353-354.

Knechel, W. & Salterio, S., 2016. Auditing:Assurance and Risk. fourth ed. New York: Routledge.

Werner, M., 2017. Financial process mining - Accounting data structure dependent control flow inference. International Journal of Accounting Information Systems, 25(1), pp. 57-80.

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