Financial Accounting and Reporting Investment Property

Question: Describe about the Report for Financial Accounting and Reporting for Investment Property. Answer: 1: Report of Plant, Property and Equipment in the consolidated balance sheet statement The plant and equipment is mentioned under the non-current assets of the consolidated balance sheet declared in the annual report of the company JB Hi-Fi Limited. The plant and equipment of the company is registered to be $176208000 during the year 2015 (Annualreports.com. 2016). However, the financial declarations of the corporation JB Hi-Fi Limited is prepared and presented using the historical cost convention barring certain financial assets and liabilities as well as certain specific categories of the plant and equipment. The plant and equipments considered under the finance leases are essentially mentioned at cost after deduction of the accumulated depreciation as well as impairment. The cost for the plant and equipment mainly comprises of the expenditures that is directly associated to the cost of acquisition of the particular item (Deegan 2012). However, at the time of settlement, all or else the parts of the purchase concern is deferred and the cost is determined by discounti ng the total amount that is essentially payable in the future period. As per the financial reports of the company, the depreciation is enumerated on different plant and equipment as well as leasehold augmentations. As such, the items of the plant and equipment are essentially derecognized at the time of disposal (Annualreports.com. 2016). Total carrying amount for plant, property and equipment at the end of the reporting period The carrying amount indicates the total amount at which a particular asset can be identified after deduction of the overall accumulated depreciation as well as accumulated losses for impairment. In other words, it can be said that the carrying amount of the plant and equipment comprises of the cost of replacement of a part of a particular item at the time when the cost is incurred provided that the criteria for recognition are fulfilled (Deegan 2013). However, as mentioned in Paragraph 28 of AASB 116 (plant, property and equipment), the carrying amount of a particular plant and equipment of the company JB Hi-Fi Limited might be reduced by way of government grants that are in compliance with the AASB 120 Accounting for Government Grants and Disclosure of Government Assistance (Aasb.gov.au. 2016). Again, under the recognition notion stated in the paragraph 7, a particular business entity cannot identify with the carrying amount of a specific plant, property and equipment different cost s associated to the daily servicing of the said items (Annualreports.com. 2016). Moreover, the business entity follows the principle for recognition mentioned under paragraph 7 of the accounting standard AASB 116 under which the cost of replacement of the item at the time when the cost is incurred is taken into consideration under the carrying amount of a specific items of plant and equipment (Aasb.gov.au. 2016). Again, the carrying amount of the replaced parts are derecognized as per the de-recognition provision stated under the paragraph 67 to 72 of this accounting standard. 2: Composition of the Plant, Property and Equipment at the end of the reporting period The plant and equipment also known as the tangible fixed assets can be considered to a category of assets that have physical existence (Samkin and Deegan 2012). A particular business entity holds the plant and equipments for the purpose of internal use of the corporation that are anticipated to generate various economic benefits in the upcoming period (Horngren et al. 2012). The composition of the plant and equipment for the corporation therefore comprises of land, furniture and fixtures, buildings and many others (Botzem 2012). As mentioned in the annual report of the company JB Hi-Fi Limited, the plant and equipment at the end of the end of the reporting period 2015 is registered to be $ 176208000 (Annualreports.com. 2016). Valuation of the particular assets The valuation of the particular plant and equipment requires the identification of the cost of the item that is equal to the cash price of the item equivalent at the period or the date of recognition (Ryan 2012). However, in case if the payment for the plant and equipment of the company gets deferred beyond the period of the general credit terms, the variance in the cash price equivalent and the overall payment can be identified as interest for the duration of the credit until and unless such amount of interest can be capitalized according to the principles of AASB 12 (Aasb.gov.au. 2016). Again, one or else greater than one item of property and equipment of the business entity might be acquired as against the non-financial assets or else the mixture of economic and non-economic assets (Henderson et al. 2015). Again, the cost of this kind of items of property as well as equipment can be enumerated at fair value if not the switch over transaction are deficient in marketable substance or else the fair value of asset that are neither received nor surrendered can be dependably assessable (Henderson et al. 2015). The entity can select either the cost model as mentioned in the paragraph 30 or else the revaluation model stated in the paragraph 31 of the accounting standard as the accounting strategy and can apply this strategy to all the different categories of the plant and equipment. In case of JB Hi- Fi Limited, the plant and equipment of the firm are mentioned at the cost after deduction of the accumulated depreciation as well as amortization. In addition to this, the cost of the plant and equipment of the company JB Hi-Fi Limited includes the expenses that can be directly associated to the cost of acquirement of the firm. In case of the deferred settlement of the purchase consideration, the company determines the cost after discounting the amounts that the company has to pay in the future period to the present value as on the period of acquirement (Macve 2015). 3: Methods of depreciation for various categories of plant, property and equipment The company JB Hi-Fi Limited applies the straight line depreciation method in order to write off the net cost of the assets over a specific estimated economic life to the respective residual value (Annualreports.com. 2016). However, it is also expected that the adoption of the accounting standard AASB 2014-4 that refers to the Amendments to Australian Accounting Standards Board (Clarification of the Acceptable Methods of Depreciation and amortization effective from the date January 2016 (Aasb.gov.au. 2016). It is said to have no material financial influence on the financial declarations of the corporation JB Hi- Fi Limited (Annualreports.com. 2016). As per AASB 116, the company can utilize different depreciation methods to allocate the depreciation amount on a specific asset on essentially a systematic basis throughout the economic life of the asset (Aasb.gov.au. 2016). The mechanisms for calculation of depreciation comprises of the straight-line method, depreciation as per the diminishing balance method along with the units of production method (Laing and Perrin 2014). The straight line depreciation method leads to a constant and even charge over the economic life in ncase if the residual value of the of the asset does not transform (Yao et al. 2015). As per the AASB 116, paragraph 62, the other methods of depreciation on plant, property and equipment include the diminishing balance method that refers to a reduced charge over the economic life economic life of the asset (Aasb.gov.au. 2016). Again, yet another method of depreciation includes the units of production method that leads to a charge that is founded on the anticipated utilization or else output (Hanlon et al. 2014). The approximated useful life of the assets, the residual values as well as depreciation method of the company can be reviewed at the end of each and every reporting period where the effect of the alterations can be identified on particularly a prospective basis (Hu et al. 2015). The approximated useful lives that the company uses for the calculation of the depreciation be categorized into two different types (Hu 2012). The leasehold improvements are said have3 the estimated economic life of around 1 to 15 years. Again, as per the annual report of the company JB Hi-Fi Limited the plant and equipments are said to have the estimated economic life of 1.5 years to 15 years (Annualreports.com. 2016). 4: Disclosure of the rates of depreciation and the useful lives of the assets As per the accounting standard AASB 116 (Plant, Property and Equipment), the disclosure requirements refer to certain regulations stated under paragraph 73 of the standard (AASB 2015). According to the disclosure requirements, the financial declarations of the corporations JB Hi-Fi limited need to reveal for each and every category of the plant and equipment the measurement bases that can be used for the process of determination of the overall gross carrying amount of the plant property and equipment (Hanlon et al. 2014). In addition to this, the disclosure requirements of the financial declarations include the specifications regarding the depreciation method that can be use in the present case (Pawsey and Crase 2013). Again, the disclosure requirement also has the need for the declarations of the estimated economic lives of the each category of the plant and equipments of the company (Annualreports.com. 2016). Furthermore, the company also has the need to disclose the gross carrying amount of each category of the plant, property and equipment of the corporation JB Hi Fi Limited. In addition to this, the disclosure requirements of the company also include the specifications regarding the reconciliation of the definite carrying amount during the beginning as well as the end of the specific reporting period disclosing the additions, classification of the assets, acquirements through different types of business combinations, changes from revaluations, losses due to impairment and many others (Aasb.gov.au. 2016). The management of the company JB Hi- Fi also presents the continuous disclosures in order to provide the timely and at the same time relevant information to all the shareholders of the corporation (Annualreports.com. 2016). In addition to this, the management of the corporation JB Hi Fi Limited is also committed to meet the continuous disclosure requirements. The Board of the business entity JB Hi Fi Limited has also authorized the policy of continuous dis closures in order to make it certain that the processes for the identification as well as disclosure of sensitive information according to the Corporation Act as well as the Listing rules specified in the Australian Stock Exchange (ASX). The company JB Hi Fi Limited also presents disclosures concerning the environmental sustainability, carbon disclosure, management personnel disclosures. In the future period, the management would also like to introduce the rules and regulations stated under the AASB 2013-3 that states the amendments to the AASB 136 that mentions the Recoverable Amount Disclosures for Non-Financial Assets (Aasb.gov.au. 2016). As per the annual report of the company JB Hi-Fi Limited the plant and equipments are said to have the estimated economic life of 1.5 years to 15 years 5: Amount of depreciation charged on the asset for the current as well as the previous years As mentioned in the annual report of the company JB Hi- Fi Limited for the year 2015, it can be hereby ascertained that the depreciation on plant and equipment is calculated to be $22987000 (Jbhifi.com.au. 2016). The depreciation charge on the plant and equipment of the business entity rose to $22987000 during the year 2015 as compared to the figure of $ 21869000 registered during the year ago period 2014. Furthermore, the depreciation on the leasehold improvements was recorded to be $ 16137000 during the period (Jbhifi.com.au. 2016). The depreciation on leasehold improvements increased from $ 13661000 recorded during the year 2014 to $16137000 registered during the year 2015. Again, the impairment for the plant and equipment of the company is registered to be $1119000 (Jbhifi.com.au. 2016). Therefore, altogether the charge for the depreciation and impairment is enumerated to be $39124000 during the year 2015 as compared to the year ago figure of $ 35530000. Therefore, the depreciati on charge as on June 2015 is recorded to be $22987000. Furthermore, the EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) for the company JB Hi-Fi Limited is recorded to be $240031000 after deduction of the depreciation and amortization amounting to $39124000 (Jbhifi.com.au. 2016). 6: Review of the purchase of the items of plant, property and equipment during the year The purchase of the plant and equipment during the reporting period 2015 can be reviewed from the cash flows of the company for investing activities as regards the plant and equipment of the company. The payments for the plant and equipment reflect the investments of the company for the purpose of acquirement. However, the proceeds from different sales of plant as well as equipment reflect cash inflow. In case of the deferred settlement of the purchase consideration, the company determines the cost after discounting the amounts that the company has to pay in the future period to the present value as on the period of acquirement represents the cash inflow from the plant and equipments of the company. Again, the payments for the plant and equipments represent the cash outflow of the firm for plant and equipments. As per the annual report of the company JB Hi-Fi Limited for the period 2015, the payments for the plant and equipment that replicates the acquirement cost among many others a mounts to $42466000 (Jbhifi.com.au. 2016). Again, the income proceeds from the plant and equipments of the corporation JB Hi-Fi Limited amounts to $ 496000 during the year 2015 (Jbhifi.com.au. 2016). Treatment of any borrowing cost incurred as part of the cost of properties under development As rightly mentioned in the annual report of the company JB Hi Fi Limited, there are borrowing costs that the company incurs for the purpose of construction of any kind of qualifying assets and are capitalized during a particular period of the time that is necessary for completing and preparing the specific asset for the proposed or else for the purpose of sale (Jbhifi.com.au. 2016). In addition to this, the other costs of borrowing of the company are essentially expensed. However, the borrowings of the company are initially identified at the fair value that is essentially the net of the transaction cost that the company incurs. However, the borrowings of the company are primarily enumerated at the amortized cost. Again, the borrowings of the company can be further categorized as the current liabilities if not the business concern possesses an unconditional authority to defer the process of settlement of the particular liability of the firm for the duration of at least 12 months afte r the date of reporting of the business concern (Jbhifi.com.au. 2016). Commitments of the company for future capital expenditure not provided for in the financial reports As per the annual reports of the company JB Hi Fi Limited, the capital expenditure of the company can be appraised from the overall outflow of cash of the corporation that was recorded to be $44.4 million during the year 2015. The net cash outflow of the firm has increased from $38.2 million registered during 2014 to $44.4 million during the period 2015 (Jbhifi.com.au. 2016). The components of the cash outflow represent the capital expenditures as well as the acquisitions of the corporation. The capital expenditures of the firm refer to the investments of $42.5 million that were carried out during the reporting period in different capital expenditures projects. The capital expenditure of the firm increased from $6.6 million during the reporting period from the previous years figure of $35.9 million (Jbhifi.com.au. 2016). The projects on capital expenditures primarily comprised of opening of new stores, conversion of home stores of JB Hi-Fi, process of relocation as well as up gradati on of the stores of the company along with the development of the online as well as digital projects. The company also paid franchise of $2.4 million for the acquirement of interest in the Network Neighborhood Business (Jbhifi.com.au. 2016). The investing actions of the business concern is expected to develop the earnings for the firm. 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