Question

Analyse Wesfarmers Ltd's disclosure quality with regards to the disclosure requirements on accounting intangibles

Please analyse the disclosure quality from the following two aspects based on the annual report of Wesfarmers:

1) Identify the particular information (i.e. the amount or any other specific information) provided by the company in their reports that satisfy the various disclosure requirements contained in the Corporation Act 2001 and the AASB accounting standards;

2) Analyse how the disclosed information (from requirement #1) affect the decision-making of the users of accounting information.

Answer 1

1. An entity shall disclose the following for each class of Intangible assets,

1. Whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortization rates used.

2. The amortization methods used for intangible assets with finite useful lives.

3. The gross carrying amount and any accumulated amortization at the beginning at end of the period.

4. Additions indicating separately those from internal development, and which are acquired through the acquisition.

5. If any impairment loss then should be recognized.

6. Any exchange differences in the translation of financial statements into presentation of currency.

7. Other changes in carrying amount during the period.

8. A class of intangible assets is a grouping of assets of a similar nature and use in entity’s operations.

9. A change in accounting that has a material effect in the current period and have any change in subsequent periods. Such disclosure may arise from changes in : assessment of a intangible asset’s useful life, the amortization method, residual values.

10. An entity should disclose which intangible asset is acquired by way of government grants and initially recognized at fair value.

2.

The disclosed information affect decision making of the users of accounting information.

1. Where fair values are provided in financial reports, there appears to be healthy skepticism amongst financial analysts about the veracity of those values.

2. Where fair values of intangibles assets are provided in the financial reports, they should be determined by an independent valuer and supported by disclosure of information about the measurement model adopted together with key assumptions and sensitivities.

3. Reliable measurement of internally generated intangible assets arise in relation to both a cost model and fair value model.