Discuss about the Financial Reporting and Analysis for Papanastasopoulos.
In the words of Doukakis and Papanastasopoulos (2014), accounting distortion denotes any type of divergence and deviation between the information reported with the help of the financial statements and the overall business reality. In other words, it is the method of using accounting options inconsistently to raise or decline the flow of items through the income statement for increasing or decreasing reported profit for a particular timeframe.
In the case of Crown Resorts, as observed from the annual report, the recoverable amount of an asset is ascertained by verifying the asset impairment. If there is an indicator of impairment, a formal estimate is made of the recoverable amount. When the recoverable amount of the asset is lower in contrast to the carrying amount, it takes into account the asset as impaired.
The recoverable amount is higher of fair value minus selling cost and value in use (Ellul et al. 2015). In order to assess impairment, the grouping of assets is made at the lowest levels for which the cash flows would be separately identified and they are independent from the other asset groups. Thus, it is using an impairment-only approach, while most of the Australian resorts use the amortisation and impairment approach for depicting the actual value of fixed assets. Thus, there is a distortion in the accounting figure of goodwill, which could be improved, if Crown Resorts adopts the later approach. However, no accounting distortions could be identified from the annual report of the organisation.
Doukakis, L.C. and Papanastasopoulos, G.A., 2014. The accrual anomaly in the UK stock market: Implications of growth and accounting distortions. Journal of International Financial Markets, Institutions and Money, 32, pp.256-277.
Ellul, A., Jotikasthira, C., Lundblad, C.T. and Wang, Y., 2015. Is historical cost accounting a panacea? Market stress, incentive distortions, and gains trading. The Journal of Finance, 70(6), pp.2489-2538.