Super Retail Group Financial Report Analysis

This Report was commissioned on the request of the plug-in in parity to ACACIAS press release 12-MURMUR ACACIAS argonas of focus for 30 June 2012 fiscal report. A review of the relevant disclosures show In overseer retail Group Lads 2012 Annual Report is assessed against relevant polices that relate to grammatical constituent 8, aims and history policy public opinions under ACACIAS press release.Executive Summary release 12-MURMUR SAISS neighborhoods of focus for 30 June 2012 fiscal report. A review of the relevant disclosures do in Super Retail Group Lads 2012 Annual Report is assessed against relevant policies that relate to element 8, estimates and score policy intellects under Saiss press release. The outline of SAAB standards 108 Presentation of financial Position, CASABAS Impairment of Assets, SAABS 38 nonphysical Assets and SAABS 37 Provisions, dependant upon(p) Liableness and Contingent Assets atomic number 18 divulge.Super Retail Group (SIR) Lads accounting practice is ensconced in regards to the standards examined. From this abstract, differences end be determined in the ways SIR applies the relevant standards and the requirements of the standards in singing to estimates and nonions. From this analysis, it is determined that SIR has failed to disclose either Judgments and genuine estimates and assumptions that may affect important measures seen In the financial statement and the entities positions. Recommendations of refining the presentation of the disclosures and the ways in which it should be structured are sketch.ASIA has identified the consume for disclosures within this area for users to assess the reported financial position, as entities did not make substantial disclosures of sources of estimation uncertainty and signifi rumpt Judgment in applying accounting policies. An analysis of the relevant counting standard, ISOBAR in particular divide 17-124, Disclosure of news report Policies and paragraph 125-133, Sou rces of appraisal Uncertainty, CASABAS Impairment of Assets, CASABAS Intangible Assets and CASABAS Provisions, understand Grogs current accounting practices reflected in the 2012 Annual Report.A further discussion into the differences between the accounting standards apply and its requirements and the natural covering of them are examined. Through this, recommendations are then outlined into refining the gap between Grogs current accounting practices and the requirements of the standards. Relevant Accounting standardized The relevant accounting standard connect to disclosures of sources of estimation uncertainty and Judgments can be found within ISOBAR Presentation of Financial Statements.Other key standards that are relevant to Grogs disclosure of assumptions, estimates and Judgments are SAABS 36 Impairment of Assets, SAABS 38 Intangible Assets and CASABAS Provisions, Contingent Liabilities and Contingent Assets. 2. 1 ISOBAR This standard outlines the presentation of financial statements for planetary purpose financial statements, in order to ensure that there is compare between the entities reporting purposes as thoroughly as between new(prenominal) industries reports. The standard discusses the minimum requirement for reporting content and guidelines for the structure in which it is to be set at.Paragraph 117-124 distinguishes the disclosure of accounting policies in relation to Judgment. Managements Judgment made in applying accounting policies that may realize effected earthshaking joins found in financial statements and the financial position. Seen in paragraph 125-133 Sources Of Estimation Uncertainty, it is vital that entities disclose the key assumptions made grading future prospects and other uncertain estimates that are used in identifying carrying centers of assets and liabilities.Along side this, the nature and carrying amount must be disclosed at the reporting date. 2. 2 SAABS 36 Under SAABS 36 it is essential for assets to be test ed for impairment when the carrying amount exceeds its recoverable amount. In undertaking these annual proceedings, a number of related Judgment and estimated assumptions need to be encountered. There is a need for Judgment when ascertain cash-generating assets (Paras. 68). Paragraph 30-57 outlines the associated requirements for com hurle value-in-use.Paragraph 30. A specialised solelyy identifies the need for an estimate of future cash flows that the entity expects to gene localize from the asset. These cash flow projections are outlined in paragraph 33. A, where it is found on reasonable and supportable assumptions made by managements estimates, re- stated further in paragraph 34, where this assumption is based on the difference between past cash flow predictions and true cash flow amounts. These projections need to be consistent with previous projections.Paragraph 38 continues to flesh out the significance for management to use the conquer assumption that would vanquish fleet managements estimates of stinting conditions that will continue throughout the assets expedient life. When calculating the value-in-use, there is a need to determine a discount rate and under paragraph 55 the rate is a pre-tax rate. Paragraph 126-137 states that entities should be encouraged to disclose the assumptions and various estimates taken in order to determine the CHUG recoverable amount during the period.Paragraph 134 requires that a disclosure of the groups key assumptions, verbal description of managements approach to identifying these assumptions, the period future cash flow as well as the discount rate applied. . 3 SAABS 38 SAABS 38 dilate the accounting procedures applied for nonphysical asset assets that are not specified otherwise in other standards. This standard deals with a number of assumptions and estimates that are infallible when applying it.Paragraph 22 examines the need for entities to assess the prospect of anticipated future economic benefits using reasonable and supportive assumptions that will exist over the useful life of the asset. Paragraphs 33-41 identify the requirements regarding acquisitions as part of a business combination, these intangible asset assets must be recognized separately from heavywill. Paragraph 41 examines the convention of entities being allowed to use techniques that squander been developed for estimating fair values. The standard requires certain disclosures outlined in paragraphs 118-128.These disclosures provided basis for understand of assumptions and estimates involved in determining Finite or in decisive useful lives, amortization rates and the reasons for identifying an intangible asset having indefinite useful life Amortization methods used for definite lives The gross carrying amount for any accumulated amortization Reconciliation of the carrying amount at start and end of period Information grading any restrictions on the face of intangible assets or any assured as security for li abilities 2. CASABAS SAAB 137 outlines the accounting procedures for purvey, contingent liabilities and contingent assets. Under paragraph 36 the best estimate required to settle the present agreement at the end of the financial period is the amount recognized as a homework. This estimate discussed in paragraph 38 is determined by the Judgment of management and takes into account risk and uncertainties, the discounting of present value (discounting at a pre-tax rate) and future events that may affect present obligations.Further Judgment needed by management is necessary when dealing with risks and uncertainties in order to avoid overstating or understating accounting elements. When disclosing the application of this standard paragraph 84-92, in relation to Judgments and assumptions, an entity shall detail the major assumptions made relating to future events further addressed in paragraph 48 that is the description of future events that may affect the amount of the provisions like liness to occur. In summary an entity shall disclose the reconciliation of the movements of each household of provision and detailed teaching regarding the nature f the obligation.Under feeling 3 found in SIR Ltd 2012 Annual Report, three satisfying factors have been disclosed that may result in an alteration of future material adjustments imputable to estimates and assumptions (Refer to supplement 1) I. Estimated impairment of goodwill I. Estimated value of intangible assets relating to acquisitions iii. Estimated make good provisions The associated SAAB standard, previously discussed are SAABS 36 Impairment of Assets in relation to point I, SAABS 38 Intangible Assets corresponding to ii, and iii, is the reflection of CASABAS Provisions, Contingent Liabilities and Contingent Assets.Specific paragraphs have been discussed earlier in order to understand the Grogs accounting practices. 3. 1 Critical Accounting Estimates and Assumptions SIR Ltd applies SAABS 36, CASABAS and SAABS 38 regarding estimates and Judgment disclosures under ISOBAR paragraph 125-133 as discussed previously. Estimated impairment of goodwill deals with the application of SAABS 36 disclosed under line of reasoning 1. 0. In applying SAABS 36. 68, SIR has classified the recoverable amounts for CHUG, which are determined based on the measured value-in-use.The assumptions require the application of paragraph 134, outlining the assumptions under note 14. (Refer to Appendix 2). The growth rate and discount rate for each subsidiary and the period of which these assumptions are based on, that is a five-year period approved by the bill of fare has been outlined. The assumptions disclosed regarding value-in-use is that budgeted gross margins are determined by past and evaluate future performance. There is consistency between the use of weighted clean growth rates and forecasts included in industry reports.Disclosures of managements explanation as to why certain subsidiaries were not calculat ed using value-in-use is present. SIR Ltd has identified the intangible assets that undertook assumptions and estimates as sucker names and supplier agreements, as well as put options. The use of paragraph 41 has been performed by SIR Ltd in valuing score names using the relief from royalty method and multi-period unornamented requital method in valuing supplier agreements. In determining these calculations, assumptions are made by management.The value of put options has undertaken estimations. These three intangible assets were acquired as a business combination. SIR disclosures of the assumptions and estimates reflecting the application of SAABS 38. 18-128 are found under note 1 . Q. Iv-v (Refer to Appendix 3). Brand names are determined as indefinite, supplier agreements have a useful life of 20 years, and amortization is calculated in regards to the timing of projected cash flows over the estimated useful life. Reasons for specific notice names being classified as indefini te is outlined under note 14. . The key factors that management has taken in portraiture brands useful life is also estimates in accounting for provisions for make good on the removal of leasehold improvements or return leasehold premises to the certain state. The make good provision is recognized when SIR has a present obligation from the occurrence of past events. Leasehold improvement costs are capitalist and amortized over the useful life or the shorter of the period of the lease disclosed in note 18. C (Refer to Appendix 5). Note 1 . States that the amounts for provisions have been reliably estimated, and are not recognized for future operating losings (Refer to Appendix 6). Further disclosed under note 1 . Z, is Grogs application of make good costs. They are recognized as a provision at the beginning of the agreement and these estimated true payments are discounted using appropriate market yield at reporting date. (Refer to Appendix 7). 3. 3 square Judgment Significant Judg ment is essential for SIR to disclose when applying the listed standards. There have been no Judgments disclosed under note 3.Accounting Standard Requirements The one epochal gap found between ISOBAR and the current practices of SIR Ltd is the failure of disclosing prodigious Judgment. ISOBAR . 122 expound an entity should disclose a summary of the significant accounting policies of management Judgments (apart from those of estimations) pa in applying the entitys accounting policies, which has affected significant amounts recognized in financial statements. SIR Ltd has failed to disclose a summary of Judgments made that may affect significant amounts on financial statements.However SIR has disclosed estimates and assumptions however certain areas are not successfully outlined. Assumptions are clearly outlined in the notes, however a detailed description and reasoning of managements approach to identifying these is not present. Management estimates relating to put options have no t been clearly stated within the notes. The assumptions regarding the valuation ethos of brand names and supplier agreements have not been outlined (royalty method and multi-period excess earnings). ISOBAR . 125 has not been effectively applied in Grogs disclosure of assumptions.There is no randomness regarding the assumptions of future events. Assumptions and estimates overall have been disclosed, however briefly without detail, as required by ASIA. In order for SIR Ltd to comply with the standard of disclosures of estimates and judgments by which ASIA requires, certain adjustments for future disclosures are needed. The need for ease of locating information requires the implementation of fined structure essential. Under note 3, Critical accounting estimates and judgments, a clear distinction between estimates and Judgments is integral.A distinct need can be seen within note 3. A. I to refer to note 14 for details and should be outlined in ii and iii. It is difficult to locate the relevant information regarding estimates value of intangible assets relating to acquisitions and estimated value of makes good provisions, however assumptions are lock away outlined throughout the notes despite a lack of clarity regarding referral to note 3. Any related estimates and judgments made by management need to be discussed under note 3, regarding the nature of the element relating to estimates or Judgment.The differences mentioned previously need to be refined assumptions relating to the future events, estimates relating to put options and methods used to value brand names and supplier agreements need to be outlined. It is important for SIR to disclose all related information that may assist users in making economic decisions. Therefore it is essential for SIR to outline all assumptions, estimates and Judgments made that affect significant amounts within the financial statement and financial position.