The primary objective of writing this report is to have a brief understanding of Briscoe group limited financial accounting disclosure. In this report we have discussed about Briscoe group limited which is a is a non-trading holding company situated in New Zealand that provides management services to different division of the entity. The organization conduct their business through two segment that is Homeware and athletic products. Briscoes Limited, which is based in New Zealand a specialized homeware store usually offers premium branded product, and the Sports Authority Limited, which is commonly trading using the name of Rebel Sport, is a retailer of brand athletic goods, these are the two main subsidiaries of the company. The report starts with brief understanding of the importance of going concern assumption with explanation about various factors of going concern and how it impacted Briscoe group limited. The paper also provide explanation about whether the entity has fulfilled the disclosure requirement under NZ IAS 19, IFRS 2 and NZ IFRS 16. In addition, two possible issues relating to the given standard were also discussed.
Most organizations do not face major challenges about their viability in a typical year, but 2020 is very far from typical. Several preparers and directors were now asking question for going concern assumption. Due to the detrimental impact of the covid 19 pandemic disruption, entity of different sizes are facing tremendous impact, it is affecting almost all industrial sectors. Every day,it has become the requirement of management as well as those charged with governance to make challenging decision in relation to different types of issues such as operational as well as strategic issues faced by the entity (CAANZ, 2021).
The financial statement reporting implications as well as audit engagements are very complicated. There is an existence of extraordinary uncertainty in relation to the future profitability, economy, and many other inputs that is very an important part of financial reporting. Those who prepare financial statement have to consider numerous implications of financial reporting in an immediate or medium-term basis. There will be numerous financial reporting implications for preparers of financial statements to consider in the immediate and maybe medium term (IFAC, 2020). As a result of the aforementioned reason, financial statement preparers are increasingly doubting the going concern assumption in the midst of the stressed economic situation caused by the pandemic.
The idea of going concern become very crucial especially when there is an economic downturn, and in some cases, management may conclude that a profitable company is not a going concern, for example, due to major cash flow challenges. It is essential for an individual to understand that determining whether or not to apply the going concern foundation of accounting when compiling financial statements is generally the responsibility of management to (Chen, 2019). Management will have to make judgements on various uncertain future outcomes of events or conditions in order to determine whether or not an entity will continue to run their business in the near future. ISA 570 display three major aspects that management must evaluate while taking decision whether or not an entity can issue financial statements on a going concern basis:
- The degree of uncertainty in relation to the outcome of any event or condition rises intensely when the condition, event, or outcome occur again in future. Hence, due to this reason many financial reporting systems that require to have an explicit management review usually specify the time period during which all relevant information of the entity must be considered by the management.
- The decision in relation to the result of an events or situations often get influence by the size and complexity involve within the business, the nature and size of its business, as well as the extent to which it is influenced by external forces.
- Any prediction about the future is based on data derived during the time of prediction. Any Subsequent occurrences may give results that are incompatible with reasonable judgements previously made (accaglobal.com, 2022).
Impact of Covid 19 on Briscoe Group Going Concern
It was on March 11, 2020, World Health Organization declared a global pandemic. COVID-19 has caused disruptions and uncertainty in businesses and economies around the world. These disruptions primarily hampered Briscoe Group's activities during the first half of the fiscal year. All brick-and-mortar stores were forced to close as of March 26, 2020, due to the Level 4 lockdown. According to the previous result reported, there was a significant impact on the business during the first-quarter trading, this has resulted in 35.6 percent decrease in revenues compared to the corresponding time last year. However, consumer demand has been robust for the Group since New Zealand's statewide lockdown ended, and this enhanced demand has been sustained during the year. The Group recorded a 28.2 percent gain in sales for the second quarter, with half-year sales only 3.5 percent lower than the same period the previous year. The Group's online infrastructure and 'Click and Collect' capacity was outstanding, that allowed the Group to cope up with their increasing online demand, particularly during the successive Level 3 lockdowns imposed in Auckland in August 2020, February 2021, and March 2021. Some of the impact of Covid 19 that Briscoe Group financial statements had faced are discussed below.
Due to the impact of Covid-19, the Board cancelled the final dividend of 12.5 cents per share (cps) for the fiscal year ended 26 January 2020 on March 23, 2020. The Group paid an interim dividend of 9.00 cps on October 1, 2020, followed by a special dividend of 6.00 cps on January 20, 2021. In April 2020, Briscoe Group was eligible for and received a $11.5 million wage subsidy from the New Zealand Government. This was fully reimbursed in October 2020. The Group worked with landlords to obtain rent relief; nevertheless, the rent relief had no meaningful impact on the financial results. The New Zealand Government's restoration of depreciation allowances for commercial buildings has necessitated the adjustment of deferred tax balances. Other than small inconsequential adjustments in inventory for a few impacted categories, there were no other provisions given in the financial statements for the fiscal consequences of Covid-19 for the period ended 31 January 2021. On March 16, 2021, the Board of Directors voted to pay a final dividend for the fiscal year ended January 31, 2021. It was decided to pay dividend at a rate of 13.50 cents a share for all outstanding shares as of March 24, 2021, with full redemption credits attached. Thus, based on the above result we can say that covid 19 has impacted the business but Briscoe group limited manage to handle the going concern of their business.
About Briscoe Group Limited
Briscoe Group Limited is a New Zealand based non-trading holding company. The organization was incorporated in New Zealand and domiciled as limited liability business organization that is traded on the New Zealand Stock Exchange (NZX). (briscoegroup.co.nz, 2021). Its registered office is located at 1 Taylors Road, Morningside, Auckland. Management services are provided by the company to its subsidiaries. Homeware and athletic items are two segments of the entity. These comprises of Briscoes (New Zealand) Limited, which is a specialized homeware store who offer their customer branded products, and a company called the Sports Authority Limited, operating as Rebel Sport, this entity is a retailer of brand athletic goods, Rebel Sport operates roughly 30 storefronts in different cities, as well as via an online store. On the other hand, a subsidiary named as Living and Giving Limited, runs four stores in Lower Hutt, Auckland and Christchurch, beside this they also run an online store. Over 40 locations in New Zealand Briscoes Homeware operates their business. Briscoes Homeware, Rebel Sport and Living & Giving, are some of the names of brands under which the entity sells their items (Reuters, 2022).
After evaluating Briscoe Group Limited's annual report 2021, we discovered that the entity conformed with the NZ IAS 19 standard since the information organization supplied full disclosure needed to be reflected in the business's financial statement. According to the data in the annual report liabilities for wages and salaries, that also include some non-monetary benefits, accumulated sick leave, and annual leave which are needed to be settled within 12 months of the reporting date are recognized in other payables for disclosing employees' services up to the date of reporting and it also measure the amounts which the organization is supposed to pay when the liabilities of the entity get settled. Non-accumulating sick leave liabilities are reported when the leave is taken and determined at the rates due and payable (Barker & Teixeira, 2020). Employee entitlement liabilities are recorded at the present value of the projected future cash flows. When a contractual obligation develops for an established level of payment based on both corporate and individual performance criteria, a liability is recognized for bonuses payable to employees. The annual report of the organization. The liability incurred for long service leave are usually classified as a non-current liability and calculation is done using projected unit credit method since the present value of expected future payments are need to be done in respect of services provided by employees up to the date of reporting (xrb.govt.nz, 2022).
Comment on Briscoe Limited Disclosure Requirement
The topic of share-based payment is covered in IFRS 2. According to the definition given a share-based payment is usually defined as transaction in which a business organization receives goods or services in exchange of their equity instruments or they agree to incur liabilities based on the price quoted for the enterprise shares or for other equity instruments. Our analysis revealed that Briscoe Group Limited complied with the IFRS 2 disclosure requirement because they provided a complete disclosure in the annual report about the nature and extent of share-based payment arrangements that were prevailing during the period, as well as how the fair value of the goods or service has been measured, or the fair value of the equity instruments conferred, during the period was determined. Furthermore, the impact of share-based payment transactions on the organization’s profit or loss for the period, as well as its financial situation, was also discussed (iasplus.com, 2022).
NZ IFRS 16 discusses the concepts of lease in this standard discussion are made about lease measurement, recognition, presentation, as well as disclosure. The main goal of this standard is to safeguard that both lessor and lessees give accurate information about their lease transactions. The new lease accounting standard goes into effect on January 1, 2019 (Findex, 2022). According to the information contained in the annual report, lease liabilities and right-of-use assets originating from a lease are first measured based on present value basis. Right-of-use assets are originally recognized at cost at lease commencement, consisting of the initial amount of lease liabilities after subtracting any lease incentives received.
Following that, depreciation is provided using the straight-line approach from the start date to the end of the lease period for right-of-use assets. When examining the lease term, the Group uses its best judgement to determine whether an extension or termination option is likely to be exercised. Thus, based on the information provided, we can conclude that the organization has met the disclosure requirement because it has provided all of the information required to be published in the annual report.
Financial Reporting Standard
Disclosure requirements (Sub-heading)
Paragraph number in Financial Reporting Standard
Page number of the annual report
NZ IAS 19
Description of the defined benefit plan
Disclosure of amount if any on fair value
Actual return on plan assets
Any amount not recognized as assets
Disclosure of each type of share-based arrangement
Number and weighted average exercise price of share option
Disclosure about fair value determination
Explanation of any modification made
NZ IFRS 16
Recognition of recognized number by time or by asset class
Describing the leasing arrangements
Disclosure about any contingent rent, purchase option, renewal, restriction etc
While making disclosure of the accounting information under different financial reporting standards there might be some chances of difficulties while making disclosure. Some of the possible issues that Briscoes limited may face while reporting disclosure of the following standard are discussed below:
- The updated standard provides less freedom in how things are presented in income statements.
- There might be tension between neglecting future service and evaluating unvested benefits—often, involving vesting conditions are connected to length of service.
- IFRS 2 Share-based Payment Payments is a difficult standard to achieve due to its complexity and the fact that many companies conduct such transactions only infrequently.
- A minor modification in an agreement's wording can occasionally result in a dramatically different accounting treatment, making it simple to make unintended mistakes in its implementation (RSM Global, 2021).
- The organization's spending profile may dramatically change.
- Financial institutions regulated by the Reserve Bank of New Zealand must adhere to strict capital ratios. These ratios necessitate the retention of a certain level of capital based on the value of assets owned. Bringing all operational leases onto the balance sheet will increase these organizations’ assets and capital requirements.
Understanding about going concern of any organization is very important to determine whether the entity will survive in future or not. In this report we have understood how the organization was affected due to the rising covid 19 as well as after analyzing the annual report for the year 2021 it is revealed that the entity has fulfilled all the disclosure requirements needed under NZ IAS 19, IFRS 2 and NZ IFRS 16. We have found out that beside having a complete disclosure in the annual report Briscoe limited might face some issues such as complexity in measurement, significant changes in expenses of the entity, inadvertent mistakes while disclosing the accounting information under different financial reporting requirements.
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Findex. (2022). NZ IFRS 16 – leases: Are you prepared for the secondary implications? Findex. Retrieved March 31, 2022, from https://www.findex.co.nz/insights/article/nz-ifrs-16-leases-are-you-prepared-for-the-secondary-implications
iasplus.com. (2022, May 31). IAS Plus. IFRS 2 - Share-based Payment. Retrieved March 31, 2022, from https://www.iasplus.com/en/standards/ifrs/ifrs2#:~:text=deduction%20from%20equity.-,Disclosure,during%20the%20period%20was%20determined
Reuters. (2022). BGP.NZ - Briscoe Group Limited Profile. Reuters. Retrieved March 31, 2022, from https://www.reuters.com/companies/BGP.NZ
RSM Global. (2021, May 25). RSM insight: Common issues in accounting for share-based payments. RSM Global. Retrieved March 31, 2022, from https://www.rsm.global/insights/global-ifrs-news-and-updates/rsm-insight-common-issues-accounting-share-based-payments
xrb.govt.nz. (2022). New Zealand equivalent to international accounting ... - XRB. xrb.govt.nz. Retrieved March 31, 2022, from https://www.xrb.govt.nz/dmsdocument/2862
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