Financial Management

Author’s Name

Institution’s Name
 Part-1

Impairment of Assets in Goodman Fielder Limiteda

This particular part of the assignment needs a specific company to analyse. The selected
company for the same part is Goodman Fielder Limiteda (GFL).

i. Asset Test for Impairment

From the annual report of the company, it is clearly found that assets amounted to US$ 249.1
Million has been tested for the purpose of Impairment. It was reported as Impairment Losses for
the company. The Impairment losses increased in the financial year 2016 as compared to the
same period of last year. The impairment of the assets that held in the financial statement of the
company for year (FY) 2015 was amounted to US$ 28.2 Million, which was lower than the one
found in the year 2016.

ii. Test for Impairment

The International Accounting Standard Board (IASB) has designed the criteria for the
companies to assess the actual value of its assets (Carlin & Finch, 2011). The International
Accounting Standard (IAS-36) specifically designed and exhausts by the companies for the
purpose of impairing their assets. Impairment of the assets in accordance with the same
requirement enables them to report the net worth of the company as per the market value of the
asset (Chalmers et al., 2011). Likewise, other organisations, the factor of impairment deems
equally efficient and poised for the efficient representation for GFL as well. The annual report of
the company clearly identify that the company used a Comparative Approach for the purpose of
Impairment. IAS defines the approach as the one in which the worth of the assets will be
compared to the same asset containing the same features and physical existence. This particular
method is also known as Pure Play method, and it has a great worth understanding in the books
of accounting.

iii. Impairment Expenditure

This particular part of the assignment is relating to identify the expenditure specifically
associated with the impairment of the assets. The impairment of GFL is divided under four
different heads, which are impairment of receivables, impairment of inventories, impairment of
financial assets and impairment of intangible assets (Cotter, 2012). The expenditure that recorded
in the financial year 2016 under the head of impairment of receivables is amounted to US$ 2.1
Million which was lower in 2015. The impairment of inventories and impairment of intangible
assets in the year 2016 were amounted to US$ 42.4 Million and 204.6 US$ Million. However,
there is no expenditure which has been recorded and reported under the head of impairment of
financial assets. It is also noted that the impairment expenditure under all the heads have been
increased in the year 2016 as compared to 2015.

iv. Key Estimates in Conducting Impairment Tests

Impairment of the assets have now become an integral and significant part of the businesses,
especially in the long run (Cotter, 2012). GFL is a well renowned Australian company which is
also in the mind-set to comply with the impairment tests. The main key factors that stride under
the umbrella of Impairment of GFL are Depreciation and Amortization. The impairment testing
as mentioned in the annual report of GFL is revealing that the impairment values are different in
both, tangible and intangible assets. The same criteria of netting off the assets have been
considered. Depreciation of the Plant has been related to the tangible assets, and the value
amounted to the same head amounted to US$ 7.2 Million, while it was US$ 5.4 Million in the
year 2015. It means that the depreciation amount has increased considerably in the year 2016 for
GFL.

Apart from depreciation, there is yet another major thing known as Amortization. It is also
depreciation, but it is applied on the intangible assets. The Amortization of the leasehold
improvement amounted to US$ 0.5 Million in the year 2016, which was relatively higher in the
year 2015.

v. Subjectivity (If found Any)

This part is relating to the consideration of the subjectivity found in the annual report for
GFL. By definition, subjectivity is relating to quality that influences with the personal feelings
and opinions of others. There is no undue influence and pressure is found in the computation of
the depreciation and amortization (Hanna et al., 2013). The audited report and excerpt is clearly
presented on the preface of the annual report, which evident that there is no subjectivity is found
in the analysis and computation of the company. All the impairments tests have been applied by
the finance department of the company in accordance with the industry requirements, and the
same is applied in the context of GFL.

vi. Interesting, Confusing and Surprising about Impairment

This particular part of the assignment is identifying interesting, confusing and surprising
aspects that associated with the case of impairment. There are certain things that seems
interesting and confusing. Firstly, the different line of computation of tangible and intangible
assets surprised and confused me (Huian, 2013). There are in fact, different accounting standards
that measures the calculation for the tangible and intangible assets. These accounting standards
will then uses for the purpose of analysing the impairment. When the characteristics are same,
then why it is necessary to apply different techniques and features for the same. Apart from these
negative things, there is an interesting aspect which is found from the annual report of GFL. It is
found that the company uses Fair value of accounting for the analysis of its assets, which is an
important outcome in the current economic outlook.

vii. Insight

From this entire analysis, it is clearly found that the impairment testing is quite essential and
effective. I have found some important information from the impairment analysis. This particular
aspect is essential and the information would be essential.

viii. Fair Value Measurement

Fair Value Measurement is an important and highly valuable concept that uses for the
purpose of having a specific and to the point. The concept of Fair Value is found in IFRS-13,
which is an important aspect. It basis its result on the latest information about the assets, and the
actual values it covers (Huizinga & Laeven, 2012). It uses the actual market value of the assets
for the purpose of analysing and completing the information effectively in the market.
 Part-2

Leases Standards
Accounting Standards have been designed specifically for the purpose of analysing the
information and present the same in an efficient way, so that fruitful and timely decisions could
have been taken on the time. International Accounting Standard Board has made the statement
clear to every single company to comply with the standards applicable on them (Lew et al.,
2011). The accounting standards are divided into two main categorises which are international
financial reporting standards (IFRS) and Generally Accepted Accounting Principles (GAAP).
Both of the principles are essential and applicable over the companies based on the information
provided. Each of the annual report is based on the same information pertaining to the analysis.
Among different heads that cover specifically in both of these line of standards, the name of
Leasing is one of them. From past few years, there is a considerable change is found in the
leasing agreements and the representation of the same aspect in the financial reports in both of
the accounting standards. There are certain parts of this part of the assignment that needed to be
answered accordingly and completely in order to manage the work in a professional and ethical
manner. The answers in a simultaneous way is as follows

i. The IASB seems highly active and efficient as far as providing factual and accurate
information to the shareholders. In fact, it always urges the companies to provide
complete and actual information of the company to them via their financial reports.
The companies which are unable to provide high level of accuracy in terms of
knowledge management and passing on are unable to maximise the positioning of
their shareholders properly (Li & Sloan, 2017). The Chairperson of the IASB has also
identified the same issue while discussing about the previous method interlinks with
the Leases Agreement. According to them, the past method of leases were not
efficient because it expelled the determination and elements pertaining to non-
division. There was no division that allows the company to identify the operating and
financial lease. Previously, Leases were termed as liabilities for the company, but in
the new form of the accounting standards, leases should be treated as operating
expenses of the company. Based on the same analysis, it can bring certain economic
 reality in the same outcome, and can help them to secure their positioning in the
market. This particular outcome would be more accurate and practical from the
viewpoint of the companies, especially in the long run.
ii. The next question of this part is relating to analyse the fact that why the Off-Balance
Sheet item is 66 times higher than the debt. The answer to this question is relating to
the treatment of the leases. The treatment of the leases should be based on the
operational expenses as compared to liabilities, as more accuracy would have been
found in the analysis, when liabilities are treated as operational expenses as compared
to liabilities (Li & Sloan, 2017). In this way, the off-balance sheet items found way
higher than the actual debt of the company, and the idea seems totally off-colour and
non-practical in the current economic outlook. Hence, this idea is quite efficient in the
long run perspective of the company.
iii. This particular part of the assignment is relating to the agreement of leasing limited to
the manufacturing companies or not. Leasing is a must for manufacturing companies
(Li et al., 2011). However, leasing plays a role in some of the factors or companies,
such as the aviation industry. However, the IASB clearly recognizes that there is no
competitive environment among airlines. This means that the types of leases they use
are primarily operating leases that may enhance their business perspective but fail to
increase their financial returns (Li & Sloan, 2017). Therefore, the responsibility factor
may increase. This particular result will be an ideal result for airlines as many airlines
are using the same mechanism to improve core productivity and efficiency.
iv. The fourth question relating to the analysis of lease and lease agreement is relating to
the awareness and education relating to the same argument and the mechanism of
non-popularity pertaining to the same. Education and awareness are some of the
major causes of the unacceptability of the same mechanism. This means that these
people have a lower level of education and awareness and may increase their
problems (Ramanna & Watts, 2012). People do not know the type of lease and how to
overcome the lease by this factor. Therefore, the popularity will be on the lower
nodes. Therefore, the IASB must take some measures to make people aware of this.
v. The last section of the same part is likely to get an idea whether or not the latest
accounting standard pertaining to operational leases is helpful for the purpose of bring
more practicality and operational efficiency for the company (Li & Sloan, 2017).
There are different examples wherein authors have found that more accuracy can be
delivered within the companies and their operative capabilities while using the new
laws pertaining to the leases, which are accurate in terms of dividing the leases into
operational and financial lease. It is the matter of economic reality and inform the
shareholders about the actual information. When the leases are recorded as an
operational part of the company, then it will become more efficient for the companies
to record the data accordingly and inform the shareholders accordingly (Li & Sloan,
2017). Considering the same aspect, they can inform the investors and shareholders in
a professional manner for their productivity and efficiency. Hence, the companies are
becoming more and more familiar with the current factor as the factor will be more
insolating and efficient for them as far as taking timely actions and measures are
concerned, and become more practical within their capacity to attract more and more
shareholders professionally and ethically in the long run perspective.
References

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Good Fielder Annual Report. [Online]. Accessed from < http://www.goodman.com/-

/media/Files/Sites/Global/Investor%20Centre/GMG%20Goodman%20Group/reports%20
and%20newsletters/Annual%20Reports/20160928_annual_report_2016.pdf?la=en>
Accessed on 15th January 2018

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