Posted: May 22nd, 2015

applying your accounting knowledge to a real life case, critically analysing the issues involved, arguing a case from different perspectives, and communicating your views on those issues with logical explanations.

Requirements :

Objectives

This is a major assessment item for this course. The main objective of this assignment is to develop your critical analytical skills and written communication skills to a point that you have demonstrated your competence in applying your accounting knowledge to a real life case, critically analysing the issues involved, arguing a case from different perspectives, and communicating your views on those issues with logical explanations.

Preamble

This assignment is about the controversies surrounding the recent introduction and application of ‘fair value’ measurement system by the International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB). The assignment presents an article written by one of the most renowned journalist Adele Ferguson and published in ‘The Age’ newspaper on 14 June 2012 (Business section, page 1 & 8). The article captures the realities of possible asset write downs by many Australian companies. The article refers to the accounting standard and possible measures ASIC (Australian Securities and Investment Commission) might take. Read the article carefully and note the specific dilemma facing many Australian companies. Note that the article names Qantas, Billabong, Harvey Norman and BlueScope Steel, among others. You will be asked to select five companies including the above four and Channel 10, collect their annual reports for 2009-2010 and 2010-2011 to check the asset values and compare them with their market capitalisation as part of your research. You may have to collect relevant information from the websites of the ASIC, ASX, the relevant companies and other sources. You will also need to conduct your own research on the topic and extract practical issues and problems of implementing the impairment regime.

Required:

1. Collect the 2009-10 and 2010-11 annual reports for Qantas, Billabong, BlueScope Steel, Harvey Norman and Channel 10. Trace the share price movement and market capitalisation of the selected companies over the same reporting periods. Determine the amounts in dollars and percentages by which the companies have lost their values. Market capitalisation is calculated as market value per share multiplied by number of shares outstanding. Show graphs and charts plotting and comparing book values and market values and gaps between them.

2. Name the accounting standard referred to in the above article. Summarise the essential features and requirements of the standard and suggest how the selected companies should apply the accounting standard under the current market condition.

3. Examine the company’s annual reports to check if the companies have already impaired some of their assets, and how they have done that. If the companies did not impair their assets then what reasons they have given for such non- impairment.

4. Examine each individual asset class reported by these companies and the valuation principles followed by the companies. What is likely to happen if the companies are to follow the accounting standard and impair some of their assets? Is there any way these companies may avoid such write downs? Which companies and how? How such anomalies between companies are going to affect the users/analysts?

5. How is ASIC going to enforce the accounting standard on companies? What role do you think the auditors are likely to play in this exercise?

Important points:

1. Your submission should be a blend of analysis, findings, views, and opinions from existing writings as well as your own analysis on the relevant issues. Bear in mind that your answers must address the relevant issues/questions. Your personal opinion in your own language is essential. Please do not copy entire paragraph/section from other resources. Concentrate more on your own analysis and arguments.

1. Your submission should include the following sections:

A title page

An introduction showing that you understood the questions and present a roadmap of your submission

Evidence of a thorough review/research of relevant literature (a minimum of 5 articles)

Addressing each part/subpart of the requirements (1-5) listed above.

Clearly identifying and critically analysing the core issues in each question

A conclusion.