Question

GlaxoSmithKline is a global pharmaceutical and consumer health-related products company located in the United Kingdom. The company prepares its financial statements in accordance with International Financial Reporting Standards. 

 

Required: 

1. Use the Internet to locate GlaxoSmithKline’s most recent annual report. The address is www.gsk.com/en-gb/ investors/. Locate the significant accounting policies disclosure note. 

2. How does the company value its property, plant, and equipment? Does the company have any other options under IFRS for valuing these assets? How do these options differ from U.S. GAAP? 

3. What are the company’s policies for possible reversals of impairment losses for goodwill and for other non-current assets? How do these policies differ from U.S. GAAP?

Answer 1

1.

From the significant accounting policies disclosure notes in the recent annual report sourced from the internet, following facts are revealed:

 

2.

GS company values its property, plant and equipment at its cost as decreased by the provision for depreciation and impairment. In addition to reporting property, plant and equipment at cost less provision for depreciation, GS company also has the option to report the property, plant and equipment at their fair value after revaluation. But once the revaluation method is opted for by the company, it must report all assets within the class of PP&E through revaluation only on a regular basis. GS company has this option as it maintain financial records in accordance with IFRS.

 

On the other hand revaluation of property, plant and equipment option does not exist under US GAAP. Under US GAAP, property, plant and equipment are required to be reported at cost less provision for depreciation and impairment only.

 

3.

GS company policies indicates that impairment of goodwill are not reversed. There is no difference with U.S. GAAP in this regard, since US GAAP too does not allow reversal of goodwill impairment.

 

However, GS company can reverse the impairment losses on other noncurrent assets, if there been a change in estimates used to ascertain recoverable amount but subject to the extent the revised recoverable amount does not exceed the book value of the assets less provision for depreciation or amortization before the impairment is effected.

 

On the contrary, U.S. GAAP does not allow reversals of impairment losses in whatever conditions.

On the contrary, U.S. GAAP does not allow reversals of impairment losses in whatever conditions.