Accounting Business Reporting for Decision Making

CHAPTER 5 Balance sheet 179

JB Hi-Fi Ltd has both identifiable and unidentifiable intangible assets recognised on its balance sheet.

The identifiable intangibles listed are brand names, location premises and rights to profit share. Good-

will is the unidentifiable intangible. Recalling our previous discussion, goodwill can be recognised only

when an entity acquires another entity and the consideration exceeds the fair value of the net assets

acquired. The recognition of goodwill on the balance sheet indicates that JB Hi-Fi Ltd has been involved

in business acquisitions in the current or previous reporting periods. The information disclosed in the

notes to the accounts includes additions and write-downs during the reporting period.

Liabilities

To illustrate the classification of liabilities, an extract of the liability section of the 2015 balance sheet

for JB Hi-Fi Ltd is shown in figure 5.9. The various liability classes disclosed on the balance sheet for a

large entity such as JB Hi-Fi Ltd are as follows.

• Trade and other payables — the cash expected to be paid to entities or individuals to whom money is

owed. This class is often called trade payables, trade creditors or accounts payable.

• Borrowings — debt funding that requires interest payments. It is useful for users to be able to identify

and separate the entity’s liabilities requiring periodic servicing in the form of interest payments from

the liabilities that do not involve regular interest payments.

• Tax liabilities — differences in the accounting and taxation rules used to determine accounting profit

and taxable income respectively can result in the entity having future tax obligations.

• Provisions — qualify as liabilities on the basis of satisfying the definition and recognition criteria.

However, they are recorded as a liability subcategory on the basis that there is greater uncertainty in

the amount or timing of the sacrifice of economic benefits relative to other liabilities.

• Other financial liabilities — a financial liability is any liability that is a contractual obligation to deliver

cash or another financial asset to another entity or a contractual obligation to exchange financial assets

or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.

Often the other financial liabilities category includes derivative financial liabilities. However, sometimes

the derivative financial liabilities are separately listed. A derivative financial liability is a financial lia-

bility whose value depends on the value of an underlying security, reference rate or index.

JB Hi-Fi Ltd

Balance sheet (extract) as at 30 June 2015

Consolidated

Note

2015

$’000

2014

$’000

Current liabilities

Trade and other payables

Provisions

Other current liabilities

Current tax liabilities

Other financial liabilities

15

16

17

325 604

40 585

4 566

9 474

107

302 979

36 840

4 111

8 184

79

Total current liabilities 380 336 352 193

Non-current liabilities

Borrowings

Provisions

Other non-current liabilities

Other financial liabilities

18

19

20

139 461

6 073

25 664

—

179 653

8 699

24 638

25

Total non-current liabilities 171 198 213 015

Total liabilities 551 534 565 208

FIGURE 5.9 Extract of JB Hi-Fi Ltd 2015 balance sheet — liability section

Source: JB Hi-Fi Ltd 2015, preliminary final report, p. 58.