Accounting Business Reporting for Decision Making

210 Accounting: Business Reporting for Decision Making

c. The company’s total liabilities

d. The percentage of total liabilities that are:

i. current liabilities

ii. non-current liabilities.

e. Report on the company’s liquidity by comparing the current assets and current liabilities amounts.

f. Report on the company’s financing of its assets by comparing the total liabilities to total equity.

5.39 Analysing trade receivables  LO3, 4

The following table shows the balance of an entity’s trade receivables for each of the past four years.

Year 1 Year 2 Year 3 Year 4

Trade receivables $40 000 $70 000 $80 000 $120 000

As the table indicates, the trade receivables have increased in absolute value each year. Discuss

why entities are required to disclose the amounts receivable for trade receivables separately from

the amounts receivable from other debtors. To assess the reasonableness of the increase in the

trade receivables, list other financial item(s) trends that would be useful to investigate.

5.40 Measurement of assets  LO4, 10

Woolworths Ltd’s 2014 balance sheet reports the carrying value of property, plant and equipment

at $9600.7 million. The notes to the accounts (p. 126) state the following:

An assessment as to the carrying value of Woolworths owned properties as at 29 June 2014 was

performed. The basis of the assessment was a combination of external market assessments and/or

valuations and Woolworths’ property group assessments based on value in use. External valuations

are obtained every three years. Based on the most recent assessments, an impairment provision of

$84.6 million (2013: $78.9 million) is held as at 29 June 2014.

Required

Discuss the usefulness of this disclosure for decision makers. Explain why an entity may elect to

measure property at cost in the balance sheet and disclose its fair value.

5.41 Auditor’s responsibilities and declaration   LO3, 11

Using the company that you selected in question 5.38, read the independent auditor’s report. Given

the estimations and assumptions involved in preparing financial statements, discuss what the audi-

tor’s report is stating about the ‘accuracy’ of the financial statements.

5.42 Measurement of assets   LO3, 4, 10

Australian Agricultural Company Limited was formed with a grant of one million acres and the

stated aim of cultivating and improving the wastelands of the colony of New South Wales. Today

the company is a cattle producer with a significant position in the Australian food industry and is

the largest beef cattle producer in Australia. The company’s most significant asset is its cattle. On

the balance sheet as at 31 March 2015, the cattle are recorded as biological assets. The trading

cattle, classified as current assets, are valued at $200 077 000. The commercial and breeding stud

cattle, classified as non-current assets, are valued at $265 109 000.

Required

a. Identify the basis for measuring biological assets.

b. List the market indicators that inform the values of Australian Agricultural Company Limited’s cattle.

c. Describe how Australian Agricultural Company Limited determines the net market value of

biological assets. Discuss the information required to determine the measurement. Suggest how

revaluation increases and decreases, related to the cattle, are accounted for.

5.43 Measurement of assets   LO3, 10

The Commonwealth Bank of Australia measures its property assets (land and buildings) on a fair

value measurement basis using independent market valuations. As at 30 June 2015, the land and

buildings are valued on the balance sheet at $463 million. If the land and buildings had been meas-

ured using the cost model rather than fair value, the carrying value would have been $210 million.