Advance Financial Accounting

I must need A grade.

Both files attached

HA3011 Advanced Financial Accounting

Assessment item 2 — Assignment

Due date: 11.00pm Friday Week 10

Weighting: 20%

Assessment Task Part A (10 Marks)

In the excel file “Find Your Company” you will find the listed company you have been given

for this course. This file will be made available on Friday of Week 4. Complete this assignment

for the company you have been given. Please be careful to use the listed company you have

been given. Your assignment will not be marked if you use a different company to the one you

have been given; and you will be asked to resubmit your assignment using the right company.

Go to the website of your company, by clicking on the URL next to your company in the list

of companies in the file “Your Company”. Then go to the Investor Relations section of the

website. This section may be called, “Investors”, “Shareholder Information” or similar name.

In this section, go to your firm’s annual reports and save to your computer your firm’s latest

annual report. For example, these may be dated 30 June 2015 or 31 March 2016. Do not use

your firm’s interim financial statements or their concise financial statements. You are need to

do the following tasks:

Please read the relevant footnotes of your firm’s financial statements carefully and include

information from these footnotes in your answer.

Within your firm’s latest annual report

(i) From your firm’s annual report find out the asset/s that your firm has tested for
impairment.

(ii) How did your firm conduct the impairment testing?

(iii)Has your firm recorded any impairment expenditures during the period?

(iv) Identify the key estimates and assumptions used by your firm in conducting the
impairment testing.

(v) Do you find any sort of subjectivity involved in the impairment testing process? How
can this subjectivity influence the outcome of the impairment testing?

(vi) What do you find interesting, confusing, surprising or difficult to understand about the
impairment testing?

(vii) What new insights, if any, have you gained about how companies conduct
impairment testing?

(viii) Based on your assignment, comment on the “fair value measurement”.

For your understanding of the impairment testing process, you may download and read the

following articles using ProQuest:

1.
Md Khokan Bepari, Sheikh F. Rahman, Abu Taher Mollik, (2014) “Firms’

compliance with the disclosure requirements of IFRS for goodwill impairment

testing: Effect of the global financial crisis and other firm characteristic s”, Journal

http://www.emeraldinsight.com/author/Khokan+Bepari%2C+Md

http://www.emeraldinsight.com/author/Khokan+Bepari%2C+Md

http://www.emeraldinsight.com/author/Rahman%2C+Sheikh

http://www.emeraldinsight.com/author/Taher+Mollik%2C+Abu

of Accounting & Organizational Change, Vol. 10 Issue: 1, pp.116-

149, https://doi.org/10.1108/JAOC-02-2011-0008

2. Carlin, T.M. and Finch, N. (2010), “Resisting compliance with IFRS goodwill
accounting and reporting disclosures evidence from Australia”, Journal of Accounting

& Organizational Change, Vol. 6 No. 2, pp. 260-280. [Google Scholar] [Link]

[Infotrieve]

3. Carlin, T.M. and Finch, N. (2011), “Goodwill impairment testing under IFRS: a false
impossible shore?”, Pacific Accounting Review, Vol. 23 No. 3, pp. 368-392. [Google

Scholar]

[Link] [Infotrieve]

4. Carlin, T.M., Finch, N. and Laili, N.H. (2009), “Goodwill accounting in Malaysia and
the transition to IFRS – a compliance assessment of large first year adopters”, Journal

of Financial Reporting & Accounting, Vol. 7 No. 1, pp. 75-104. [Google Scholar]

[Link] [Infotrieve]

Assessment Task Part B (10 Marks)

In an address entitled ‘introductory comment to the European parliament’ (made in Brussels,

Belgium) on 11 January 2016, the Chairperson of the IASB, Hans Hoogervorst, made the

following comments in relation to the new accounting for leases (as reported 11 January 2016

on the IASB website at www.ifrs.org):

I would like to make some comments about our upcoming Leases Standard, which we will

publish the day after tomorrow. Currently, listed companies around the world have around 3

trillion euros’ worth of leases, especially in sectors such as the airline industry, retail and

shipping. Under current accounting requirements, over 85 per cent of these leases are labelled

as operating leases and are not recorded on the balance sheet. Clearly, the accounting today

does not reflect economic reality. Despite operating leases being off balance sheet, there can

be no doubt that they create real liabilities. During the financial crisis, some major retail chains

went bankrupt because they were unable to adjust quickly to the new economic reality. They

had significant long-term operating lease commitments on their stores, and yet had deceptively

lean balance sheets. In fact, their off balance sheet lease liabilities were up to 66 times greater

than the debt reported on their balance sheet. Moreover, the current accounting for leases leads

to a lack of comparability. An airline that leases most of its aircraft fleet looks very different

from its competitor that bought most of its fleet, even when in reality their financing obligations

may be very similar. There is no level playing field between these companies. These problems

will be resolved in the upcoming Leases Standard. All leases will be recognised as assets and

liabilities by lessees. The accounting will better reflect the underlying economics. This change

is expected to affect roughly half of all listed companies and will not be popular with everyone.

Accounting changes are often controversial and can be met with warnings of adverse economic

effects and costs of system changes. The IASB has looked at all these possible risks very

carefully and we will publish a detailed effect analysis on the Standard. Our conclusion is that

the risks and costs of the new Leases Standard are manageable. First of all, IFRS 16 will not

put the leasing industry out of business. Leases will remain attractive as a flexible source of

finance. It will remain appealing to companies to lease assets so that they do not bear the risks

of owning them. While the cosmetic accounting benefits of leasing will disappear, the real

business benefits of leasing will not change as a result of the new Standard. We do not deny

there will be costs involved in updating systems to implement the new Leases Standard, but

https://doi.org/10.1108/JAOC-02-2011-0008

we have done our best to keep these costs to a minimum. For example, we are not requiring

companies to recognise assets and liabilities for short term and small ticket leases. This should

be especially beneficial for smaller companies. In sum, we expect the benefits of the new

Leases Standard to greatly outweigh its costs. The new visibility of all leases will lead to better

informed investment decisions by investors, and to more balanced lease-versus-buy decisions

by management. IFRS 16 will lead to improved capital allocation, which should be beneficial

for economic growth.

Requirements

(i) Explain why the chairperson of the IASB believes that the former accounting standard for

leases did ‘not reflect economic reality’?

(ii)Explain the reason why, under the former accounting standard, reporting entities’ ‘off

balance sheet lease liabilities were up to 66 times greater than the debt reported on their

balance sheet’.

(iii) Why does the Chairperson of the IASB argue that under the former accounting standard

for leases there was ‘no level playing field’ between some airlines companies?

(iv) Why do you think the Chairperson of the IASB said that the new accounting standard for

leases ‘will not be popular with everyone’? What would cause this unpopularity?

(v) What are some of the possible reasons why the chairperson of the IASB would say “the

new visibility of all leases will lead to better informed investment decisions by investors, and

to more balanced lease versus buy decisions by management?

Sheet2

Code

Limited

AMP

Banking Group Ltd

ANZ

Group

APA

News and Media Limited

APN

ASX

Limited

AWB

Limited

CSL

Limited

CSR

T Group

DUE

Advanced Business Solutions Limited

DWS

Student Id	Company Name	Company	ASX
abd3013	Australian Agricultural Company Limited	AAC
abnn3032	Ausenco Limited	AAX
abnn3040	Adelaide Brighton Limited	ABC
abnn3059	Abacus Property Group	ABP
abnn3127	Alchemia Limited	ACL
abnn3135	Adavale Resources Limited	ADD
abnn3213	AGL Energy Limited	AGK
aig3037	Amalgamated Holdings Limited	AHD
ame3035	Automotive Holdings Group Limited	AHE
aps3138	Asciano Group	AIO
aup3011	Air New Zealand Limited	AIZ
aww3126	AJ Lucas Group Limited	AJL
azz3236	Aristocrat Leisure Limited	ALL
azz3249	Alesco Corporation Limited	ALS
azz3273	Amcor Limited	AMC
azz3473	Amcom Telecommunications Limited	AMM
bcm3041		AMP
ccc3098	Austin Engineering Limited	ANG
ccc3108	Ansell Limited	ANN
ccc3121		ANZ
ccc3167	Arrow Energy Limited	AOE
deu3052		APA
dy30300	AP Eagers Limited	APE
dy30593	Australian Pharmaceutical Industries Limited	API
dy31357		APN
dy31360	Aquarius Platinum Limited	AQP Author: Author: CARRYING AMOUNT OF GOODWILL AND FIAR VALUE EQUAL. ANY NEGATIVE ADJUSTMENT TO ANY ASSUMPTION , SUCH AS PRICE DECLINE, INTERST ARTE RISE, GROWTH RATE FALL WILL RESULT IN IMMEDIATE GOODWILL IMPAIRMENT RECOGNITION.
dy31382	ARB Corporation Limited	ARP
egu8280	Ausdrill Limited	ASL
eic3105	ASX Limited
eii3018	ASG Group Limited	ASZ
ekm3083	Austbrokers Holdings Limited	AUB
emv20387	Austar United Communications Limited	AUN
emv20577		AWB
emv20578	Asia Pacific Holdings Limited	AXA
emv3154	Billabong International Limited	BBG
emv3461	Bendigo and Adelaide Bank Limited	BEN
emv3464	Bell Financial Group Limited	BFG
emv3582	Bradken Limited	BKN
emv3588	Brickworks Limited	BKW
emv3609	Boral Limited	BLD
emv3613	Boom Logistics Limited	BOL
es3018	Bank of Queensland Limited	BOQ
esk30287	Breville Group Limited	BRG
evs3013	BlueScope Steel Limited	BSL
exl3001	BT Investment Management Limited	BTT
exl3005	Brambles Limited	BXB
gia3030	Cabcharge Australia Limited	CAB
glo3025	Commonwealth Bank of Australia	CBA
isn3075	Coca-Cola Amatil Limited	CCL
kac3067	Credit Corp Group Limited	CCP
kem3032	Cash Converters International	CCV
kem3067	Codan Limited	CDA
mnt3154	Cardno Limited	CDD
msi3017	Challenger Financial Services Group Limited	CGF
nhe3020	Challenger Infrastructure Fund	CIF
npi3002	Centrebet International Limited	CIL
npi3086	Chandler Macleod Group Limited	CMG
nva3002	Centro Properties Group	CNP
osn3222	Coffey International Limited	COF
osn3233	Cochlear Limited	COH
pcc3055	Campbell Brothers Limited	CPB
pfec3154	Computershare Limited	CPU
pfec3180	Crane Group Limited	CRG
pfec3209		CSL
pfec3212		CSR
pfec3257	Clean Seas Tuna Limited	CSS
pfec3263	Caltex Australia Limited	CTX
pfec3448	Customers Limited	CUS
prt3186	Crown Limited	CWN
prt3203	Corporate Express Australia Limited	CXP
prt3268	ChemGenex Pharmaceuticals Ltd	CXS
pu3080	Coal Of Africa Limited	CZA
rev3001	Decmil Group Limited	DCG
saa3003	David Jones Limited	DJS
sp3199	Domino’s Pizza Enterprises Limited	DMP
sp3200	Downer EDI Limited	DOW
sp3217	Data3 Limited	DTL
sp3218		DUE
sp3221	Devine Limited	DVN
sp3222		DWS
sp3224	Dexus Property Group	DXS
sp3228	Dyesol Limited	DYE
sp3244	Emeco Holdings Limited	EHL
stn3042	Elders Limited	ELD
swi3205	Equity Trustees Limited	EQT
tfc3050	Eservglobal Limited	ESV
tns3253	Fantastic Holdings Limited	FAN
twg3060	Forge Group Limited	FGE
uem3004	Foster’s Group Limited	FGL Author: Author: IMPORTANT FOR DETAILED ANALYSIS
vss31242	Flight Centre Limited	FLT
vss31330	Fisher & Paykel Appliances Holdings Limited	FPA Author: Author: NEWZELAND FIRM
vss31383	Fleetwood Corporation Limited	FWD Author: Author: GOODWILL AMORTIZATION IS CARRIED OUT BI ANNUALLY
vss32195	Fairfax Media Limited	FXJ
vss32258	FlexiGroup Limited	FXL
wco3011	Goodman Fielder Limited	GFF
xp3379	Goodman Group	GMG Author: Author: IMPORTANT FOR GOODWILL IMPAIRMENT EXAMPLE
Author: Author: IMPORTANT FOR DETAILED ANALYSIS	Author: Author: CARRYING AMOUNT OF GOODWILL AND FIAR VALUE EQUAL. ANY NEGATIVE ADJUSTMENT TO ANY ASSUMPTION , SUCH AS PRICE DECLINE, INTERST ARTE RISE, GROWTH RATE FALL WILL RESULT IN IMMEDIATE GOODWILL IMPAIRMENT RECOGNITION.	Author: Author: NEWZELAND FIRM	Author: Author: GOODWILL AMORTIZATION IS CARRIED OUT BI ANNUALLY