Accounting help on: Report writing on Australian firms

Abstract

This report has been designed for the two Australian firms listed on the ASX such as Harvey Norman and JB –Hi –Fi. This report critically explains the company’s disclosure of AASB 116, AASB101 and AASB 1031. AASB 116 Plant, property and Equipment shows the accounting calculation for the plant, property and equipment comprising their determination and recognition of the carrying amounts, impairment loss and depreciation. On the other side AASB 101 AASB 101 needs the statements of finance to comprise all four statements such as balance sheet, operating statement, cash flow statement and statement of alterations in the equity. It has been evaluated that Harvey Norman records equipment and plant at historical cost minus impairment loss and accumulated depreciation whereas JB Hi –Fi records the equipment and plant at cost minus accumulated depreciation and impairment loss.

Introduction

Harvey Norman is the leading retail chain in Australia. The main activities of the Company are, investment of the property, retail and franchising. The company provides products for home and office use to business operators and the retailers. The company provides various products such as fixtures, furniture, TV, laptops, home appliances and electronic products for the Consumer.

JB Hi-Fi Limited is famous as discount retailer for recognized local entertainment products. The company offers various types of products such as user electronics, car stereo systems, DVDs and music systems. The company does not work in a warehouse and delivers all stock to consumers and store directly.

AASB 116 plant, property and Equipment

It is very clear that AASB 116 Plant, property and Equipment shows the accounting calculation for the plant, property and equipment comprising their determination and recognition of the carrying amounts, impairment loss and depreciation (IAS Plus guide, 2008). In simple words, non-current assets considered as assets which don’t fulfill the current assets definition and characteristics (IAS 16, 2003). In general, there are two models for accounting of non -current assets such as revaluation model and cost model.  AASB 116 permits the choice among the models and choice must be based upon significance of the information like costs indulged in method adoption, consequences on the income statement and regardless of any method, assets are depreciated at the same rate.

Harvey Norman

It can be said that financial report of Harvey Norman will reveal for each and every category of the plant, property and equipment like Land and Building is computed at the fair value minus accumulated depreciation (Harvey Norman, 2010). After the evaluation of annual reports of Harvey Norman (2009& 2010) it can be said that values of property, plant and equipment are computed in compliance with IFRS and AASB. It has been examined that depreciation is computed on the straight line basis within the expected useful life of the assets. It is clear from the financial report of Harvey Norman that equipment and plant is calculated at the historical cost minus impairment losses and accumulated depreciation.

Land – not depreciated

Buildings – 20 to 40 years

Owned plant and equipment – 3 to 20 years

Equipment and Plant under finance lease – 1 to 10 years

For plant, property and equipment, impairment loss is recognized in the profit and loss statement.  Though, because building and land is computed at the revalued sums and impairment loss on building and land is treated as the revaluation decrement. Properties in the New Zealand possessed by consolidated entity, on any revaluation is computed at the fair value and examined by the independent valuer in relation with statutory requirements of New Zealand. It is viewed that any kind of revaluation surplus has been credited to reserve of asset revaluation comprised in equity part of balance sheet whereas any kind of the revaluation deficit is understood in profit & loss statement and directly offset the earlier surplus of similar asset in the reserve of asset revaluation. The yearly move from the reserve of asset revaluation is created to the retained earnings for depreciation associating to the surplus of revaluation (Bromwich, 2004). In, fact any kind of accumulated depreciation at the date of revaluation is removed in comparison to the gross carrying sum of assets and net sum is reexamined to revalued sum of asset.  The combined entity has accepted the changes to AASB 140 that brings properties under construction throughout the range of AASB 140 Investment property. It is viewed that from 1 July 2009, all properties under the construction were moved to the investment properties. The recent year under the balances of construction associate to the occupied properties of the owner.

JB –Hi Fi

It is viewed that at JB –Hi Fi leasehold improvements, property, plant and equipment are calculated at the cost minus impairment and accumulated depreciation (JB Hi –Fi, 2010). Cost comprises expenditure which is related to the buying of the item. It can be said that computation of Plant and Equipment at JB- HI are done in compliance with Accounting Standards of Australia and IFRS. Depreciation is computed on the basis of straight line method to deduct the net costs of each and every asset throughout its estimated life to its expected residual value. Leasehold Improvement is depreciated within the lease period or expected useful life whichever is shorter implementing the method of straight line. The expected useful lives, depreciation method and residual values are examined at the ending of reporting period with the consequence of the changes understood on the prospective basis. The expected useful lives are implemented in the computation of the depreciation

Leasehold Improvement 1 -15 years

Plant, Property and equipment – 1.5 to 15 years

Difference Among Harvey Norman and JB Hi –Fi

The main difference among the Harvey Norman and JB –Hi Fi is Harvey Norman calculates depreciation on equipment and plants under the finance lease under 1 -10 years whereas JB Hi –Fi calculates depreciation for leasehold improvements 1-15 years. It could be stated that at Harvey Norman equipment and plant is calculated at the historical cost minus impairment losses and accumulated depreciation whereas at JB –Hi Fi leasehold improvements, property, plant and equipment are calculated at the cost minus impairment and accumulated depreciation. It is analyzed that leasehold improvements, equipment and Plant under finance lease are computed at cost minus impairment and accumulated depreciation.

AASB 101 presentation of the Financial StatementsAASB 101 needs the statements of finance to comprise all four statements such as balance sheet, operating statement, cash flow statement and statement of alterations in the equity (Holmes, 2010). AASB 101 indicates that the function of the accounting standards of the Australia is assumed to show the accurate overview of the statements of the finance.

Harvey Norman

It is examined that revised standard 101 at Harvey Norman separates no –owners and owner’s alterations in equity. The Directors of the Company have claimed that presentation of the financial statements in year 2009 & 2010 has been made in compliance with IFRS and AASB.

In year 2010 in comparison to 2009 at Harvey Norman, this revised standard distinguishes owner & non owner alterations in the equity. With the non –owner alterations in the equity shows in the reconciliation of every element of the equity and comprised in new comprehensive income statement. The comprehensive income statement shows all components of recognized expense and income in the one single or two connected statements (IAS Plus guide, 2008).  The entity has decided to reflect two statements. It can be said that the management of the Harvey Norman shows the financial statements in such a way which properly classifies the income and expense that is ultimately useful to the users. It is evaluated that statements of finance of the foreign controlled business entities showed in relation with the overseas principles of accounting and for purposes of consolidation, adjusted for complying with the policy of the group and GAAP in Australia.

JB Hi –Fi

It is viewed from the annual report of JB –HI Fi directors stated that in relation with Accounting Standard 101 Presentation of the Financial Statements are in compliance with the Australian Equivalents to IFRS and makes sure that annual report including the financial notes and statements are in compliance with IFRS.  It has been examined from the annual report of JB- Hi is directors are accountable for the fair presentation and preparation of the annual report in relation with Corporation Act 2001 & Accounting Standards of Australia. This accountability comprises maintaining and establishing internal controls applicable to the fair presentation and preparation of the annual report which is free from any kind of material misstatements, whether because of error or fraud; applying and selecting relevant policies of accounting  and creating accounting estimates which are rational in the situations.

It has been analyzed that application of AASB 101 & AASB 8 shall not impact any of the sums recognized in the statements of finance but shall alter the disclosures currently created in association to the Group financial statements and operating segments. These Standards shall be applied first in the Group financial report which associates to the period of reporting initiating after the efficient date of the Standard that shall be the reporting period starting on 1^st July 2009.At the JB Hi –Fi, it is observed that the utilization of the AASB 101 shall not impact the sums understood in the statements of finance, but will alter the disclosures currently created in association to the Company’s Group presentation of statements of the finance and operating segments themselves (Barth, 2006). This type of standard shall be the first implemented in the Group financial report which associates to the yearly period of reporting starting after the date of every standard that shall be the yearly period of reporting starting on 1^st July of 2009. It is viewed that consolidated statements of finance of JB Hi –Fi Company complies with the IFRS as published by IASB. It is very clear that consolidated statement of finance incorporate the liabilities and assets of the subsidiaries of the JB –Hi Fi on 30 June 2010. In general, creation of the financial statements needs the implementation of certain vital accounting estimates. It also needs the management for exercising its judgment in process of implementing the accounting policies of the Company.

AASB 1031

On the other side, the materiality belief influences whether the items or summation of the items are required to be recognized, disclosed, measured in association with the specification of Accounting Standards of the Australia (Holmes, 2010).  In general, when items or summation of items are not material, then materiality application does not show that those item could not be disclosed, measured or recognized, but that business entity could not be needed to disclose, measure or recognize those item in relation with the specifications of the Accounting Standards of the Australia (Holmes, 2010). Generally, materiality relies on the nature and size of the misstatement or omission evaluated in the situations. The application of the materiality has 2 main features like as it influence the economic activities of the clients and carried out on basis of the financial statement and effect the release of the accountability by the management and governing body of the business entity.

Harvey Norman

It is evaluated that the items or summation of the items in the financial statements of Harvey Norman are required to be disclosed, recognized and measured in relation with the accounting Standards of the Australia (Harvey Norman, 2010). The application of the AASB 1031 is it persuades the economic actions of the clients and users carried out on the foundation of the financial statement.  It is very clear from the financial report of the Harvey Norman that items like deferred revenue expenditure has been recorded in accordance with AASB 1031. After the evaluation of financial report of Harvey Norman, it can be said that items or summation of the items in the financial statements of Harvey Norman are done in compliance with AASB or IFRS. In general, showing items in the financial statements in relation with AASB and IFRS shows the feature of materiality application.

JB Hi –Fi

The financial report of the JB –Hi Fi indicates that items like advertising expenditure for the initiation of new product and services has been made in accordance with the AASB 1031. With the help of AASB 1031, it is easy to evaluate that the net cash offered by or implemented in the investing, operating and financing activities as sufficient for the recent period of reporting. It is evaluated from the financial report of JB Hi –Fi that the net cash offered for the activities of operating, investing and financing were sufficient for the reporting period 2009 & 2010. It can be said that items in the financial statements of JB –HI Fi for the period 2009 & 2010 are in compliance with requirements of IFRS and Accounting Standards of Australia.

 Disclosures

Harvey Norman

It has been examined that financial reports of the Harvey Norman of year 2009 & 2010 have been made in relation with the Corporation Act 2001, Accounting Standards of the Australia and fulfills with other law requirements. The annual report of Harvey Norman complies with Accounting Standards of Australia as published by AASB and IFRS as published by IASB. Interpretations and Accounting Standards of Australia which have currently been amended or issued but are not effective and adopted by the Group for the period ended on 30 June 2010.

JB –Hi Fi

The JB Hi Company views to offer timely and relevant information to its stakeholders and committed to fulfilling their goals to the market for the continuous disclosure. In general, providing adequately and timely information to the stakeholders helps them in making useful decisions regarding the Company. The aim of the JB –Hi Fi is to provide adequately provision to the material information in relation to the Company. The Board of the Company has approved the policy of continuous disclosure to make sure that the methods for disclosing and identifying price sensitive and material information in relation with the Act of Corporations and listing Rules of ASX are apparently articulated. This kind of policy forms out some obligations for the employees associating to the kin of information which should be disclosed. It has been examined that, Secretary of the Company in discussion with Chairman and Executive Officer is accountable for any sort of communication with ASX. The annual report of the Company JB –HI is in relation with Corporations Act 2001.

• Providing a fair and true outlook of the organization and consolidated entity financial situation as on 30 June 2009.
• Complying with Accounting Standards of the Australia
• The annual report complies with IFRS.

How Disclosures help the users in decision –making.It could be stated that the financial statements are very important for the shareholders and investors because investors generally invest in the company on the basis of its performance in comparison to the last year. The presentation of the financial statement gives an idea to the investor about the net profit earned during the year, cash flow generated during the year and changes in equity during the year. In general, financial statements offer users with the information about the obligations and resources of the entity at the date of reporting and the resources flow among the dates of reporting. This type of information is helpful for users who make evaluations of the capability of the entity to offer services and goods at the given level and resources level which might require to be offered to the business entity in the upcoming time so that it may continue to fulfill its obligations of service delivery. The continuous disclosure policy has approved by the Board of Directors at JB –HI Fi which reveals that the Company is providing material and fair information in relation with Corporation Act 2002 to the users of the Company and which helps them in their decision making.

Conclusion

At last, it is concluded that both the companies such as Harvey Norman and JB Hi- Fi records the plant, property and equipment in accordance with AASB 116. It can be said that at Harvey Norman and JB HI Fi, the presentation of financial statements in year 2009& 2010 has been done in relation with IFRS and AASB. Generally, presenting items in financial statements in compliance with AASB and IFRS has shown the sign of materiality. It is viewed that, at JB –Hi Fi in year 2009, application of AASB 101 & AASB 8 shall not impact any of the sums recognized in the statements of finance but shall alter the disclosures currently created in association to the Group financial statements and operating segments.  However, it could be stated that both the companies have presented the financial statements such as income statement, balance sheet and statement of alterations in equity in accordance with AASB 101. Lastly, both the companies have recorded the items or summation of the items of the financial report in accordance with AASB 1031.

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