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Financial reporting disclosures in the Australian Corporate Sector

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´╗┐Financial reporting disclosures in the Australian Corporate Sector Table of contents Executive summary ???????????????????????????.. 3 1. Introduction ???????????????????????????..3 2. Respective accounting standards requirement ??????????????..4 1. Intangible Asset with an Indefinite Useful Life ..............................................4 2. Allocating Goodwill to Cash-generating Units................................................5 3. Disclosure concerning impairment testing.......................................................5 1. Current accounting practice of CCA ??????????????????..6 1. Intangible assets and write-down ?????????????????6 2. Impairment tests for investment in IBAs and goodwill ?????????7 3. Impairment tests for brand name with indefinite lives ?????????.8 1. Potential gap ???????????????????????????..9 2. Recommendation ??????????????????????????9 3. Conclusion ????????????????????????????..10 References????????????????????????????????11 Executive summary The purpose of this report is to assess the financial reporting disclosures in the Australian Corporate Sector of CCA Ltd and classify in regards to asset impairment and related disclosures by comparing in details the current reporting practice based on CCA Ltd annual financial report (2010) with the specific requirements of the respective accounting standards. The measurement and recognition criteria for property, plant and equipment, and intangibles, these assets are measured at cost or revalued amount and, for each asset, the cost or revalued amount is allocated over its useful life. The exception is where intangible assets have indefinite useful lives, in which case no amortization is charged. In the statement of financial position at the end of a reporting period, the assets are reported at cost or revalued amount less the accumulated depreciation amortization. Because there are many judgements in the depreciation amortization process ? estimates of useful life, residual values and the pattern of benefits. ...read more.


Paragraph 132 encourages, but does not require, disclosure of key assumptions used to determine the recoverable amount of assets or cash-generating units. 1. Current accounting practice of CCA Ltd. 1. Intangible assets and write-down In a short term, intangible asset is defined that a non-physical asset having a useful life more than 1 year. CCA annual report (2010, pp.43) represents that ?Intangible assets, excluding software development assets, related within the business are not capitalized and costs are taken to the income statement when incurred. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized.? The estimated useful lives of existing finite lived intangible assets for the current and prior year are as follows ? Customer lists 5 years Brand names 40 to 50 years Software development assets 3 to 10 years Goodwill is technically an intangible assets, it is usually listed as a separate item in a company?s balance sheet. Goodwill is the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is not amortised buy will be tested annually or more frequently if required, for any impairment in the carrying amount. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. ...read more.


Many companies use the capital asset pricing model to determine the discount rate. Many of the inputs into this model will have changed given current market conditions. For example, with many national base rates reduced, the risk-free rate of government bonds will have fallen in many territories. However, risk premiums have risen, which may more than offset this fall. 1. Conclusion Intangible assets, and in particular goodwill from business combinations, are an increasingly important element of published consolidated balance sheets. This report investigated the requirement according to the respective accounting standards related to indefinite life intangible assets (including goodwill) and the current accounting practice of CCA Ltd. It then took recommended actions could bridge the gaps between the CCA?s current practice and the accounting standards requirements and offers some recommendation to satisfy the potential ASIC reviewers. Under the CCA Ltd current accounting practice, brand names are recorded in intangible assets with finite useful lives and is amortised on a straight line basis. However, for respective accounting standards, brand names are an indefinite useful life in an intangible asset and should not be amortised. 1. Reference list ASIC, 2011, Attachment to 11-139MR: ASIC?S review of 21 December 2010 financial reports and focuses for 30 June 2011 Coca Cola Amatil, 2010, Annual report, Ernst&Young, Sydney Evans, E, 2011, Intermediate financial accounting, 2011 edn, John Wiley & Sons Australia, Ltd, Queensland PWC, 2010, Understanding the accunting for impairment of assets, PWC, viewed 1st of October, < http://www.pwc.com.au/assurance/ifrs/assets/back-to-basics/Back-to-Basics-Accounting-impairment-assets-Oct10.pdf> ...read more.

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