country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

ACG 3101 Financial Accounting And Reporting I

tag 0 Download10 Pages 2,420 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT
  • Course Code: ACG 3101
  • University: Florida State University
  • Country: United States

Question:

Background You are a recent accounting graduate and have been employed in the Financial Reporting Unit of Myer Holdings Ltd, an ASX listed firm. Preparations are underway for the completion of the general purpose financial report for the year ended 29 July 2018 and you have been asked by the Chief Financial Officer to identify any major accounting issues which will need to be considered. Your attention is drawn to a media release by ASIC on 31 May 2018 (ASIC Media Release 17?162) and this identifies areas of concern where attention will be directed in the ASIC surveillance program. Not surprisingly given a recent academic paper1 ‘impairment of assets’ receives specific mention.

Required:

You are required to prepare a report for the CFO considering whether impairment of assets is an issue requiring address for the firm. The report should, with reference to AASB 136:

a) With reference to Myer outline what evidence is there that impairment testing of assets is necessary;

b) With reference to Myer outline the processes required to be addressed in determining any asset impairments that might be necessary

c) With reference to Myer outline the information needed in determining asset impairments

d) Evaluate the flexibility management has available in the determination of asset impairments .

 

Answer:

Introduction:

The current paper has been prepared for the purpose of recognising any noteworthy accounting problems that requires to be examined with regards to Myer Holdings Limited. The company is a high-end chain store in Australia trading with varied commodities such as- outfit, accessories, footwear, home ware, fragrance, books, stationery, food and other grocery products (Myer 2018). The study would focus on discovering the proofs that impairment examination is vital for Myer. The second portion of the study would highlight the methodologies that are required to be discussed in order to determine any asset impairment for Myer Holding Limited. The next part of the study would focus on the data that is needed for determining any asset impairment related to Myer. Lastly, the paper would assess the flexibility management for the determination of impairment of the assets.

a) Evidence that impairment testing of assets is necessary for Myer:

It is crucial for any business corporation to examine at each date of balance sheet whether any sort of asset impairment has been detected or not. This points out that the carrying cost could be greater than the sum of recovery (Beyer et al. 2015). When the corporation discovers any such proof, it is required to evaluate the recoverable value of the asset. As stated in AASB 136, there are few definite detections of impairments, that involves internal as well as external data. According to “Sub-sections a-d of Paragraph 12 of AASB 136”, four external causes involve proof of impairment, they are mentioned below:

  1. Notable decrease in the market value.
  2. Unfavourable variations in the market, economy, law and technology.
  3. Increase in the market interest rates.
  4. Market funding lesser than the net assets of the business corporation (Aasb.gov.au 2018).

However, “Sub-sections e-g of Paragraph 12 of AASB 136” points out that there are a few internal sources which are responsible for asset impairment, they are mentioned below:

  1. Physical damage or devolution.
  2. Asset is idle, considered for removal or partial adjustment.
  3. Worst economic performance in comparison to evaluated performance.
 


As stated in the annual report of Myer 2017, it accomplishes the needs cited in AASB 136. It has been detected that Myer has recognised $65,615,000 impairment due to adjustments and store exit prices, which is in line with “Paragraph 12(f) of AASB 136”. In this regard Cataldo and Anthony (2017), has cited that the price related to the store exit and asset impairments take into consideration net prices of stores and dispersal centre space full utilisation during or after the end of the financial year.

The business corporation examines its assets, plant and equipments, by following the impairment policy of non-financial assets (Investor.myer.com.au 2018). Myer identified an impairment of $4,542,000 in 2017 on assets, plant and equipments concerned with noteworthy commodities both from current and restrained functionalities. The assets concerned with the restrained functionalities are moved to assets being held for sale. Furthermore, Myer calculates goodwill by deducting impairment loss following actual identification. Other intangible assets are computed at cost from this accumulated depreciation and impairment loss is subtracted. In 2017, the business corporation has identified impairment loss $38,811,000 on intangible assets valued at $985,657,000.

Myer Holding Limited examines at the end of each financial year, whether there is any impartial proof that its receivables are impaired. The recoverable sum of the business corporation is being computed at the current value of the evaluated futuristic cash flows, which is rebated at the beginning effective rate of interest (Engel 2016). The short-term receivables are not rebated and it does not identify impairment provision for receivables unless proofs are being found.

Myer Holding Limited analyses the carrying values of the non-financial assets, goodwill and intangible assets for impairment. At the time of examining impairment, the sum of the recoverable asset is evaluated to recognise the margin of impairment loss. The recoverable sum is considered to be the higher between the value-in-use and fair value subtracted from selling price (Wu et al. 2015). An asset which is not producing any sort of uncontrolled cash flows, The recoverable sum is examined at the level of CGU. Therefore, the business corporation accepts impairment loss whenever the carrying cost of the asset or CGU goes beyond the recoverable sum. These accounting policies of Myer are parallel to the external impairment indicators stated in AASB 136.

 

b) Processes to be addressed in determining any asset impairments for Myer:

Few methods are required to be addressed for determining asset impairments for Myer Holding Limited, which are shortly discussed below:

Reasonable and supportable cash flows:

The evaluations constructed previously need revisions (Frecknall-Hughes 2016). Myer Holding Limited requires constructing evaluations based on the current management-acknowledged budgets or evaluations. Moreover, these require to be carried out depending on acceptable and feasible hypothesis presenting the best evaluation of the economic consequences from the end of the management over the leftover useful life of the CGU or asset. Myer gives greater weight to external proof. For example, the cash predictions or flows are contrasted with the predictions of the experts for the retail sector along with the opinions of economic estimators and external analysts.

Compliance of value-in-use with AASB 136:

As stated by Gruber (2015), for calculating value-in-use, it is important to evaluate cash flows for assets in their present situation. With regards to Myer Holding Limited, the main limitations addressing the expectations to be made in value-in-use evaluations of cash flows are incorporated with future reshaping or adjustments along with capital investment. However, it does not identify the advantages and prices of future adjustments in the cash flow evaluations unless the business corporation is dedicated to adjustments and incorporated provisions.

Scrutiny of discount rate:

The risk-free rates of interest, which the Australian Central Bank has set are decreasing in many territories; furthermore, the rates of rebate are affected by other elements in impairment calculations (Islam, Miah and Fakir 2015). These elements involve price of capital, cash flow risks and corporate borrowing rates that could increase the overall rate of discount. Myer uses the “Capital Asset Pricing Model (CAPM)” for determining the rebate rate. This helps the management of Myer to vary many inputs under existing market conditions. Even though there is decrease in national base rates, there are rises in risk premiums, which have offset the decrease for Myer. However, the business corporation requires to consider currency risk, country risk and cash flow risk by using varied rates for different periods based on risk levels.

Market capitalisation:

If market capitalisation is lesser than total value of assets, it activates an impairment examination (Maas, Schaltegger and Crutzen 2016). When any situation like this appears, Myer encounters a feasible problem to accurateness of expectations, which is justified. This is because the market capitalisation of Myer has declined from $696.03 million in 2016 to $693 million in 2017 and as cited in “Paragraph 12(d) of AASB 136”, Myer requires to carry out an impairment assessment.  

Reconciliation of conclusion to existing environment:

After completion of the financial computations, it is important for any business corporation to cross-check the ultimate answer by comparing with the external market information (Macve 2015). The management of Myer revises estimations regarding to cash flow increase and then they are compared with the present evaluations of economic growth by gaining expert reports.

 

c) Information needed in determining asset impairments for Myer:

Assets are said to be impaired when their carrying costs go beyond the recoverable values. This shows that a business corporation earned money on an asset; moreover, the varying conditions made the purchase to be net loss. Various kinds of data could help in determining asset impairments for Myer and they are discussed below:

Testing and identification:

The administrative variances, substantial variances in company viewpoint or consumer choices and alteration in the usage rate of an asset could result in impairment of tangible assets. Furthermore, it is not always feasible to examine all the assets for profitability in all accounting years. Rather, Myer requires to wait until indirect changes or event exemplifies that any particular carrying value could not be recovered.  

Forms of triggering events:

There are certain incident activating verges that could be explained and identified easily. Suppose, Myer requires to examine for impairment at the time gathered prices are higher than values actually assumed of preparing or purchasing an asset. More specifically, it is more expensive than the assumptions prepared for acquiring any business asset (Martin, and Roychowdhury 2015). The other activating incidents are incorporated with each other; an asset could be related with the history of existing period losses or losses related to operating cash flows. For Myer, the assets could portray a movement of decline in market amount. Moreover, few activating incidents exist owing to indistinct explanations. If Myer faces negative variances in legal influential dynamics or normal economic conditions, the management could carry out impairment examinations except a wide group of probable interpretations for adversity.

Determination of asset impairment:

Myer is needed to rate assets correctly at fair value, in accordance with AASB 136 so that the financial reporting quality could be improved (Asic.gov.au 2018). The categories of similar assets require to be examined collectively having the set of examination at the lower level of recognisable cash flows, which are considered to perform separately of other assets. With the help of such examinations, Myer would be able to determine fairly, if the carrying amount is higher than recoverable amount incorporated with the asset usage and removal. In case, this could be exhibited, Myer could carry out for impairment examinations.

d) Evaluation of flexibility management in the determination of asset impairments:

As cited in AASB and IFRS, it is important for any business corporation to assess the requirement of conducting impairment examinations with regards to non-current assets other than goodwill and the examination is mostly conducted at the end of a financial period (Schaltegger, Etxeberria and Ortas 2017). As Myer has huge numbers of reporting units and their size is large relative to goodwill acquisition, the managers could gain higher compliance in goodwill allocation. Such basic compliance in goodwill allocation provides the chance of later avoiding or overestimating losses from impairment. The goodwill could be dispersed to units, in which consequent impairment could be concealed by the internally produced profits or losses that are not identified. The managers could allocate goodwill either to units of low growth so that impairment could be increased or to units of greater growth for slowing impairment (Stanley 2017). Hence, it could be stated that the management of Myer has enough value of flexibility in determining future losses from impairment. Moreover, the business corporation could rearrange its reporting framework in future periods adequately resulting to redistribution in the accession of goodwill.

 

Conclusion: 

On the basis of the above assessment, it is essential that Myer identified an impairment of $4,542,000 in 2017 on property, plant and equipment related to noteworthy commodities from both current and restrained functionalities. The assets related to restrained functionalities are moved to assets being held for sale. Furthermore, Myer calculates goodwill by deducting impairment loss following proper identification. In case of Myer, the main limitations inscribing the estimations to be prepared in value-in-use assumptions of cash flows are incorporated with future rearrangements or adjustments along with capital investment. However, it does not identify the advantages and prices of future adjustments in the cash flow assumptions unless the business corporation is dedicated to adjusting and incorporated provisions.

After completion of the financial computations, it is important for any business corporation to cross-check the ultimate answer by comparing with the external market information. The management of Myer revises the estimations regarding the cash flow growth and then they are compared with the current assumptions of economic growth by gaining expert reports. The categories of similar assets require to be examined collectively having the set of examinations at the lower level of similar cash flows, which are considered to operate autonomously of other assets. With the help of such examinations, Myer would be able to determine fairly, if the carrying amount is more than recoverable amount incorporated with the asset usage and removal. In case, this could be exhibited, Myer could carry out for impairment examination. Lastly, it has been detected that the management of Myer has sufficient value of flexibility in determining future losses from impairment. Furthermore, the business corporation could identify its reporting framework in future periods adequately resulting to reapportion in the accession of goodwill.

 

References:

Aasb.gov.au., 2018. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AASB136_07-04_ERDRjun10_07-09.pdf [Accessed 12 Oct. 2018].

Abernathy, J.L., Beyer, B., Masli, A. and Stefaniak, C.M., 2015. How the source of audit committee accounting expertise influences financial reporting timeliness. Current Issues in Auditing, 9(1), pp.P1-P9.

Asic.gov.au., 2018. 17-162MR ASIC calls on preparers to focus on the quality of financial report information | ASIC - Australian Securities and Investments Commission . [online] Available at: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2017-releases/17-162mr-asic-calls-on-preparers-to-focus-on-the-quality-of-financial-report-information/ [Accessed 12 Oct. 2018].

Cataldo, I.I. and Anthony, J., 2017. CPA Yaeger Review-Financial Accounting and Reporting. Oxford Press.

Engel, C.J., 2016. A Primer on the Accounting and Reporting Requirements for Not-for-Profit Organizations. Journal of Public Management Research, 2(1), p.14.

Francis, B., Hasan, I., Park, J.C. and Wu, Q., 2015. Gender differences in financial reporting decision making: Evidence from accounting conservatism. Contemporary Accounting Research, 32(3), pp.1285-1318.

Frecknall-Hughes, J., 2016. Financial Accounting and Reporting. Cengage Learning.

Gruber, S., 2015. Intangible values in financial accounting and reporting: An analysis from the perspective of financial analysts. Gabler Verlag.

Investor.myer.com.au., 2018. Myer Investor Relations. [online] Available at: https://investor.myer.com.au/Reports/?page=Annual-Reports [Accessed 12 Oct. 2018].

Islam, M.S., Miah, M.S. and Fakir, A.A., 2015. Environmental Accounting and Reporting-An Analysis of Bangladeshi Corporate Sector. Journal of Business Studies, 2(1/2).

Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment, management accounting, control, and reporting. Journal of Cleaner Production, 136, pp.237-248.

Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.

Martin, X. and Roychowdhury, S., 2015. Do financial market developments influence accounting practices? Credit default swaps and borrowers? reporting conservatism. Journal of Accounting and Economics, 59(1), pp.80-104.

Myer., 2018. About Us. [online] Available at: https://www.myer.com.au/c/about-myer/the-company/about-us/content-about-us.html [Accessed 12 Oct. 2018].

Schaltegger, S., Etxeberria, I.Á. and Ortas, E., 2017. Innovating corporate accounting and reporting for sustainability–attributes and challenges. Sustainable Development, 25(2), pp.113-122.

Stanley, R., 2017. Influence of Classification of Accounting Entities for Reporting in the Context of Legislative Changes1. STRATEGIC MANAGEMENT, 22(1), pp.7-11.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Financial Accounting And Reporting I. Retrieved from https://myassignmenthelp.com/free-samples/acg-3101-financial-accounting-and-reporting-i.

"Financial Accounting And Reporting I." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/acg-3101-financial-accounting-and-reporting-i.

My Assignment Help (2020) Financial Accounting And Reporting I [Online]. Available from: https://myassignmenthelp.com/free-samples/acg-3101-financial-accounting-and-reporting-i
[Accessed 06 April 2020].

My Assignment Help. 'Financial Accounting And Reporting I' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/acg-3101-financial-accounting-and-reporting-i> accessed 06 April 2020.

My Assignment Help. Financial Accounting And Reporting I [Internet]. My Assignment Help. 2020 [cited 06 April 2020]. Available from: https://myassignmenthelp.com/free-samples/acg-3101-financial-accounting-and-reporting-i.


MyAssignmenthelp.com is the best destination for students looking for college essay examples and customised solutions. Our in-house writers know how to analyse and solve some of the most complicated analytical, cause and effect, descriptive and argumentative essay topics. In addition to it, our in-house college essay writers are well aware of the various conventions that are required to be followed while drafting unique introductions, informative body paragraphs and compelling conclusions. So, hire our academic writers, and have all college essay topics drafted with precision.

Latest Finance Samples

HI5002: Finance For Business Management

Download : 0 | Pages : 16

Question: Introduction: The assessment aims in evaluating the performance of National Australia Bank and Westpac Bank for the three fiscal years. Performance evaluation is conducted by utilizing the profitability ratio and liquidity ratio of both the companies during 2016 to 2018. In addition, Share price movement of both National Australia Bank and Westpac Bank is evaluated for the previous 3 years. Moreover, the share price movement is comp...

Read More arrow

AF4S31 Strategic Financial Management1

Download : 0 | Pages : 13

Answer: Introduction The report is divided into two sub parts; the first part describes and identifies stakeholders of Tesco and how well it serves its stakeholders by undertaking either CSR activities or customer relationship management. On the other hand, the second session brings out a ratio analysis on Benedict Company. This analysis helps the company to evaluate its business operations and find the areas to improve (Wood, 2016).  &n...

Read More arrow

FIN200 Corporate Financial Management 2

Download : 0 | Pages : 10

Answer: Introduction: Global financial crisis is considered a significance economic disaster, which shook the financial sector of the world. The financial crisis augmented during 2007, which directly impacted the subprime mortgage sector of USA. The financial crisis started with the high default rates in the mortgage loan, which further escalated the problems for the financial market all over the world. The analysis of the global financial cris...

Read More arrow

GSB003 Managing Financial Resources

Download : 0 | Pages : 12
  • Course Code: GSB003
  • University: Australian Institute Of Management
  • Country: Australia

Answer: Introduction This report can be considered as a management report as it has been described in various activities that the business manager is required to conduct during the production of goods and services. Capital financing is one of the most essential parts of business management as it helps in providing cost efficient to the source of financing for business operations. It is very important that overall benefits achieved through capit...

Read More arrow

BAO2203 Corporate Accounting

Download : 0 | Pages : 10
  • Course Code: BAO2203
  • University: Victoria University
  • Country: Australia

Answer: Introduction The gross inflows of cash, other consideration, receivables that is been arising in the development of the common activities of an entity from selling of goods, providing facilities also from the sources that fetches royalties as well as dividends the amount that is collected is called revenue.  The principle that helps in recognition of revenue is concluded from the concept of accrual along with the matching concept. ...

Read More arrow Tags: Australia City Of Sydney Management Strategy and Management of Change University of Sydney 
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,245,154

Orders

4.9/5

Overall Rating

5,067

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

453 Order Completed

98% Response Time

Howard Asuncion

LLM in Criminal Law

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

1309 Order Completed

100% Response Time

Gemmie Chen

MSc in Nursing

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

230 Order Completed

97% Response Time

Liya Han

Master Of Science in Geotechnical Engineering (MSc Geotec)

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

203 Order Completed

97% Response Time

Richard Alpert

PhD in Psychology

London, United Kingdom

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

The work that was done was more than satisfactory. I am very pleased with this assignment. Thank you very much!

flag

User Id: 398087 - 05 Apr 2020

Australia

student rating student rating student rating student rating student rating

So glad I trusted MAH tutoring services!! Their expertise is incomparable!! My tutor was amazing!!!

flag

User Id: 383727 - 05 Apr 2020

Australia

student rating student rating student rating student rating student rating

AWESOME SERVICES!! Excellent tutor results! I can totally see why they are referred to as expert tutors! They know their stuff!! THANKS MAH!!

flag

User Id: 383727 - 05 Apr 2020

Australia

student rating student rating student rating student rating student rating

Received high marks. Paper was done quickly and the writer did a great job and listened to all my notes.

flag

User Id: 238770 - 05 Apr 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?