Company And Its Recognition And Measurement -Myassignmenthelp.Com

Question: Discuss About The Company And Its Recognition And Measurement? Answer: Introducation The company selected is the Woolworths Limited. The income of the company is identified from the Statement of Profit and Loss account for the year end along with the notes to the financial statements of the company. In the annual report of the company for the year ending 25th of June 2017, the total income of the company as mentioned in the statement of Profit and Loss account is $55475 million and the note number 2.1.1 of the financial statements have provided the breakup of the total income figure into six different segments as Australian Food, New Zealand Food, Endeavour Drinks, Big W, Hotels and Unallocated (Bradshaw and Sloan, 2012). Revenue in case of goods is recognized when the significant risks and rewards of ownership have been transferred to the customer and in case of services based on completion stages. It is measured at consideration received or receivable depending upon fulfillment of recognition requirements. GAAP is Crucial for Financial Reporting and Business Practices Financial reporting is defined as the communication of the financial information of the company to the investors and the stakeholders of the company. Financial report generally includes two types of statements balance sheet and statement of profit and loss account. The former provides the financial position of the company and the latter provides the financial performance of the company. Along with the above statement the next statement is the disclosures which every organization whether private or governmental is required to made (Bradshaw and Miller, 2016). GAAP is defined as the Generally Accepted Accounting Principles. These are defined as the set of rules, methods, concepts, objectives and the standards that has been developed over time and are required for the preparation of the financial statements of the company. The GAAP includes the accounting standards as established by Financial Accounting Standards Board and Governmental accounting standards board. The adoption of the GAAP ensures that the financial data so delivered by the organization to their users shall be relevant and reliable and shall in no case represent the manipulative data or figures. Secondly, the adoption of GAAP facilitates the comparison of the financial statements of the company in very easy manner. The financial results of the organization can be compared over the time and also with other organization prevailing in the same industry or sometimes in different industries (Street, D.L and Gray, 2014). Thirdly, it facilitates the clear financial rules and ensures the provisioning of unbiased and true and correct information of the organization whether profit making or not for profit making. Illustrating the Implementation of GAAP Every company implements the GAAP. The principle of the GAAP includes four areas recognition, measurement, presentation and disclosure. All the standards on accounting has been prepared and presented on these four major principles. In the given case the .company Woolworths Limited has implemented the GAAP. The example that has been chosen is the recognition and measurement of the property plant and equipment. As per the significant accounting policies of the company number 3.3 of the annual report of the company, the carrying value of the property plant and equipment has been measured at cost less accumulated depreciation, accumulated amortization and the accumulated impairment losses. The assets have been depreciated on the basis of the straight line method as envisaged by the Corporations Act 2001. The amount has been depreciated over the estimated useful lives of the assets. In case where the items of property plant and equipment have been depreciated different useful life then those items have been separately mentioned in the annual report. Thereafter, the accounting treatment of the profit or loss that has occurred on sale of asset has been explained as the net gain or loss will be transferred to the statement of the profit and loss. As the GAAP principles includes the measurement and recognition of items of the financial statements and that too in accordance with the traditional method of accounting that has been followed over the past years and hence in the same manner it shows that the company is in compliance with GAAP (Leuz, 2013). GAAP Not chosen by Company and Its Impact GAAP are the set of rules, methods and principles that provides how the accounting treatment of anything is done. But there always remains the room in which the manipulative practice erupts (Cuijpers and Buijink, 2015.) In the case of the given company Woolworths Limited, the major area where the GAAP has not been exercised is the discontinuance of the Home Improvement business of the company. In the case of the Home Improvement business, the segment has been sold and discontinued and many other related components and events have happened due to which the accounting of the company has been reflected as complex and the same has been reported by the auditors of the company as the key audit matters by which the investors of the company shall be apprised and duly informed (Daske, 2016). The accounting for the interrelated components so made by the company in the financial statements have reflected that the company have adopted the significant judgments and the required estimates in arriving at the carrying value of the assets and the liabilities that are remaining and has been held at the date of the balance sheet which is 25th of June 2017. The auditors have very categorically mentioned that judgments and estimates have been considered form carrying value of: The assets and liabilities of home consortium transaction under which the sale has taken place , The assets and liabilities that the company has retained after discontinuing the business and Accounting treatment of the put and call option of Hydrox Holdings and Lowes respectively (Company Official Website, 2017). The above non compliance with the GAAP has exhibited that the company has followed some manipulative practices through which the discontinuance of business have been materialized. It is because although many of the interrelated components have been occurring during the same period but the company has not adopted the GAAP through which the auditors would have been able to measure and recognize the value of the assets and liabilities so recognized and derecognized. The impact is that the investors will lost their confidence in financial results of the company as the clear picture has not been provided. References Bradshaw, M.T. and Sloan, R.G.,(2012), GAAP versus the street: An empirical assessment of two alternative definitions of earnings.Journal of Accounting Research,40(1), pp.41-66. Bradshaw, M.T. and Miller, G.S., (2016), Will harmonizing accounting standards really harmonize accounting? Evidence from non-US firms adopting US GAAPJournal of Accounting, Auditing Finance,23(2), pp.233-264. Cuijpers, R. and Buijink, W., (2015), Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequencesEuropean accounting review,14(3), pp.487-524. Daske, H., (2016), Economic Benefits of Adopting IFRS or US?GAAPHave the Expected Cost of Equity Capital Really Decreased?Journal of Business Finance Accounting,33(3?4), pp.329-373. Leuz, C., (2013), IAS versus US GAAP: information asymmetrybased evidence from Germany's new marketJournal of accounting research,41(3), pp.445-472. Street, D.L. and Gray, S.J., (2014), How wide is the gap between IASC and US GAAP? Impact of the IASC comparability project and recent international developments.Journal of International Accounting, Auditing and Taxation,8(1), pp.133-164. Company Official Website, (2017), Annual report 2017, available on https://www.woolworthsgroup.com.au accessed on 21/01/2018.