Examine the methods of reporting leases in annual reports

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Reference no: EM131214926 , Length: word count:2000

Corporate Accounting Assignment

Company - Wesfarmers Limited

Question 1: Report  

Select one Australian listed company from the list below and using their Annual Report, identify the following information. 

1. Board composition:

1) How many independent directors are there? 

2) Is there a dual CEO and Chair? 

3) What is the number of directors? 

4) What is the number of board meetings? 

5) Qualification of directors 

6) Experience of directors 

7) Are they on other boards and if so, what kind? 

8) Gender of directors 

9) Number of committees and characteristics of committees.

2. Number of       

  • Australian subsidiaries
  • Foreign subsidiaries
  • Australian associates
  • Foreign associates

3. Borrowing costs and estimated interest for company with your working.  

4. Audit report opinion and time from signing of audit report and balance date

5. Number of employees

6. Method of reporting comprehensive income  

7. Choose one issue in the Director's Declaration and state whether you agree with their assessment of the company's financial wellbeing. Give a reason for your answer from information in the report.

Select 1 company from the list of 2 companies [URL for each annual report] 

1. Fairfax Media annual report 2015 

http://www.fairfaxmedia.com.au/Investors/annual-reports 

2. Wesfarmers Limited annual report 2015

https://www.wesfarmers.com.au/docs/default-source/reports/2015-annual-report.pdf?sfvrsn=2

Question 2: Lease

Part A: In 2015, Oliver Ltd, which runs a successful chain of coffee shops, was experiencing significant cash flow problems. Their accounting consultant advised that all the shop premises owned by the company be sold and either leased back or the businesses moved to alternative leased shops. She then advised that all lease agreements for the shops should be 'operating' rather than 'finance' leases.                     

Required 

1) Discuss why, at that time, the consultant gave that advice, preferring operating to finance leases. 

2) Describe THREE disadvantages to the company of entering into finance lease agreements under the standards operating in 2015.

PART B: In 2016, the standards changed to the new accounting Standard for Leases IFSR 16, which will come into operation in 2019. However, companies can begin using these standards now. Oliver Ltd are expanding and want to lease some new shops for 10 years. Their Accountant suggests they begin the new leases under the new Standards, so they do not have to change reporting methods part-way through the leases.

Required 

1) Explain the differences between the new accounting standard for leases, IFSR 16, and the current accounting standard from the point of view of lessees and lessor. What are the implications for the shareholders and banks and other users of the Annual Report of Oliver Ltd?

2) Examine the methods of reporting leases in the Annual Reports of the 2 companies listed under Question 1 above. Explain and compare the way that they are reporting on leases. Describe any changes the companies need to make to meet the new Standard.

3) Do you think this change in the Standards on Leases is an improvement? Justify your answer by referring to examples from the Annual Reports you have read.

Please note, you are required to do research to answer this question.

Question 3: Consolidations

 Simon is the accountant for Brookwater Ltd. This entity has an 80% holding in the entity Golf Ltd. A trainee working with Simon is concerned that the consolidated financial statements prepared under AASB 10 may be misleading and asks Simon why they are not allowed to prepare the consolidated financial statements showing the non-controlling interest in Brookwater Ltd in a category other than equity in the statement of financial performance, and for the statement of changes in equity to show the profit numbers relating to the parent shareholders only.   

Write an appropriate answer for Simon to give, covering the following issues: 

1) How are prime users considered in the preparation of Consolidated Financial Statements?

2 The differences that would arise in the consolidated financial statements of Brookwater Ltd if the non- controlling interests were classified as debt rather than equity (Debt vs Equity). 

3) The reasons the standard setters have chosen the equity classification in AASB 10.

You might also find the following book useful:   

Summers, J. & Smith, B. (2010), Communication Skills Handbook, John Wiley & Sons, Third Edition, Milton Queensland.

Reference no: EM131214926

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