Discuss about the Disclosures Required In Financial Reporting- Impairment Disclosure And Analysis As Per AASB 136.
As the title suggest the report revolves around the impairment of assets. Each company operating across the globe is involved in increment of its Assets base. Higher asset base of any company shows its strong nature of working in the economy. For high asset base, correct valuation of asset is required to be done after considering the necessary depreciation and impairment. This report helps to understand impairment of asset in detail. The report has been framed using proper structure and is divided into major five parts. First part helps to understand impairment policies adopted by the company and their disclosure in annual report of the company. Second part describes the major challenges faced by the board while checking the asset for impairment. Third part describes that the chosen company discoursers are as per the required principles laid in AASB 136. The forth part helps in understanding the need of proper impairment disclosures which ultimately helps in achieving the objective of general purpose financial reporting. The report has been ended with proper conclusion and recommendations. Reliance Worldwide Corporation Limited has been chosen for the analysis. The report has been prepared using the information present in annual report of the company for the year ending 30th June 2017 along with secondary data available on reliable internet sources.
Reliance Worldwide Corporation Limited is the company having head quarters in Australia and is doing business across the Globe. The company’s annual report for the year ending 30th June 2017 reported the following impairment which has been done by company:-
Many challenges have been engaged in doing testing of an asset for impairment. Some of the issues have been listed below:
The following are the disclosures made by Reliance Worldwide Corporation Limited in its annual report for the period ending 30th June, 2017 with are required to be disclosed as per the requirements of AASB 136 :-
The objective of General purpose financial reporting is to provide full and accurate information to its different stakeholders along with future stakeholders so that they can take decisions regarding the investments in the company. The full information to users can be communicated through annual report which contains the financial information along with policies adopted by company in generation of financial information.
The disclosures in annual report regarding impairment of asset has been consistent with requirements of the general purpose financial reporting in the following manner:-
The above points shows that the disclosures as per AASB 136 in annual report of the company is ultimately follow the objective of financial reporting disclosures (Lohrke, 2012; Colson, 2015).
Conclusion And Recommendation
Disclosures in annual report of any company are mandatory requirements as per the corporation act, 2001 and are main objectives of preparation of annual report by the company which facilitate its investors in decision making. Asset and asset valuation is major concern of the investors because their hard core money has involved in generation of the asset. In valuation of assets, impairment is the major factor which can manipulate the value in such a way that the company can enhance its performance in one transaction. So, impairment testing along impairment disclosures is the main issue for consideration by different users of accounting information. To conclude the report, it has said the impairment disclosures in Reliance Worldwide Corporation Limited has been done as per the rules laid in AASB 136 and all the relevant disclosures have been made in annual report of the company despite of some pendency in respect of assumptions made by company.
It is recommended to have the test for impairment of assets on regular basis or as and when the need arises. Secondly, the company shall identify the cash generating units properly which shall be adequate to the needs of the company.
References
AASB 136, (2010), “Impairment of Assets”, available at https://www.aasb.gov.au/admin/file/content102/c3/AASB136_07-04_ERDRjun10_07-09.pdf accessed on 26-04-2018.
Chow E and Marchev M, (2012), “Impairment Issues to watch” available at https://www.pwc.com.au/assurance/ifrs/assets/ifrsinbrief-se-15may13.pdf accessed on 26-04-2018
Colson, R.H., (2015), “General purpose financial statements”, The CPA Journal, 134(3), p.78 – 82.
Reliance Worldwide Corporation, (2017) available at https://www.rwc.com/accessed on 26-04-2018.
Dolson M, (2015), “A Look at Current Financial Measures” available at https://www.pwc.com/hu/hu/services/assets/ifrs_kiadvanyok/in_depth/testing_for_impairment_in_the_upstream_industries.pdf accessed on 26-04-2018
Lohrke, C., (2012), “The effects of differing information presentations of general purpose financial statements on users’ decisions” Journal of Information Systems, 12(2), pp.99-107
Renshall, M, (2012), “Added Value in External Financial Reporting: A Study of Its Aims and Uses in the Context of General Purpose Financial Reports” Institute of Chartered Accountants in England and Wales.
Riedl, E.J., (2014), “ An examination of long-lived asset impairments” The Accounting Review, 85(9), pp.936-945
Zucca, L.J., (2012), “A closer look at discretionary write-down’s of impaired assets”, Accounting horizons, 58(5), pp. 52-71.
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