Accounting Business Reporting for Decision Making

164 Accounting: Business Reporting for Decision Making

REALITY CHECK

JB Hi-Fi Ltd Notes to the financial statements for the financial year

ended 30 June 2015

1. Summary of Significant Accounting Policies
   The principal accounting policies adopted in the preparation of these financial statements are set out
   below. These policies have been consistently applied to all the years presented, unless otherwise
   stated. The financial statements are for the consolidated entity consisting of JB Hi-Fi Limited and its
   subsidiaries. For the purpose of preparing the consolidated financial statements, the Company is a for-
   profit entity.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian

Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the

Corporations Act 2001.

(i) Compliance with IFRS

The consolidated financial statements of JB Hi-Fi Limited also comply with International Financial

Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) Historical cost convention

These financial statements have been prepared under the historical cost convention, except for financial

assets and liabilities (including derivative instruments), and certain classes of property, plant and

equipment measured at fair value.

(iii) Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting esti-

mates. It also requires management to exercise its judgement in the process of applying the

Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or

areas where assumptions and estimates are significant to the financial statements, are disclosed in

note 2.

2. Critical Accounting Estimates and Judgements
   Estimates and judgements are continually evaluated and are based on historical experience and other
   factors, including expectations of future events that may have a financial impact on the entity and that
   are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and assumptions

that have a significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities within the next financial year are discussed below.

Impairment of goodwill and other intangible assets

The Company tests annually whether goodwill and other intangible assets have suffered any impairment,

in accordance with the accounting policy stated in note 1(o). The recoverable amounts of cash-

generating units have been determined based on value-in-use calculations. These calculations require

the use of assumptions. Refer to note 14 for details of these assumptions and the potential impact of

changes to the assumptions.

(b) Critical judgements in applying the entity’s accounting policies

Inventories

The net realisable value of inventories is the estimated selling price in the ordinary course

of business less estimated costs to sell. The key assumptions require the use of management

judgement and are reviewed annually. These key assumptions are the variables affecting the

expected selling price. Any reassessment of the selling price in a particular year will affect the cost

of goods sold.