Essay On Corporate Reporting Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

INTRODUCTION

Information has become the most useful commodity in the twenty-first century, a commodity so important that many markets now depend on it for their effective operation. Traders need information to trade financial securities; investors need information to make astute financial decisions; governments need information to craft sound economic and public policy and corporations need information to satisfy and cater to the demands of their customers. Information is now considered a right, and concealing information from clients and investors it is considered as a crime.

For shareholders, the most important document to retrieve information about a company is its Annual Report. Standards are set so that all the important information related to company that is useful to investors could be disclosed

COMPANY BACKGROUND

Morrison’s is one of the big four retail outlets in the United Kingdom. In terms of market share Morrison’s is ranked fourth. The top three retail outlets with the highest market share are Tesco, Asda and Sainsbury’s (Garner, 2014). The online sales have disrupted the old ways of doing business. Many of the competitors of Morrison’s had taken advantage of this opportunity and have grabbed the market share and loyalty of online customers. On the other hand, Morrison’s has proved laggard and have launched its online store in 2014.(Morrisons, 2014)

Overview of IAS 16 Property, Plant and Equipment:

The objective of IAS 16 is to deal with the property, plant and equipment, its recognition, valuation, impairment loss and with the amortization of the asset.

The asset is recognized as property, plant or equipment of a company if it is used for more than one financial year, as it is not intended to do trading of the asset.

Future economic benefits from assets to the company are probable.

The value of an asset can be measured reliably.

Property, plant and equipment can be measured at historical model or revaluation model. In Morrison’s financial statements, the accumulated depreciation and accumulated impairment losses are deducted from the cost of property, plant and equipment, in order to ensure the fair presentation of financial reporting framework. In addition to this, direct attributable costs are included in the cost of asset as per the requirement of IFRS.

APPLICATION OF IAS 16 AND 36 ON THE FINANCIAL STATEMENTS OF MORRISON’S

The account of property, plant and equipment of Morrison shows the balance of $8616m in 2013 and a closing balance of PPE in 2014 is $8625m.

The analysis of note 3.3 regarding property, plant and equipment shows following things:

Additions: The additions of $805m were made during the year to 2014. It includes assets under construction of £236m (2013: £395m). Other factors included are leasehold land and buildings held under finance lease with a cost of £308m (2013: £308m) and accumulated depreciation of £19m (2013: £16m). Freehold land and buildings are property of £81m relating to the arrangement with Ocado.

The cost of financing has also been included in the cost of the project which is in accordance with the IAS 16, as the standard accepts this inclusion of cost.

Impairment: the impairment and test was conducted on under-performing stores and each store’s recoverable amount determined as the higher of value in use and fair value less costs to sell on a case-by-case basis. The former is determined by projecting individual store cash flows over the store’s useful life with a growth rate applied after five years that is consistent with the IGD’s forecast of long term growth rates in the retail industry. A discount rate of 6.5% (2013: 6.8%) was used. Fair value less costs to sell is based on valuations prepared by independent values using a vacant post

An impairment loss of £457m has been recognized during the year on the assets described in note 1.4. The Recoverable amount is based on value in use in the majority of cases. The events and circumstances that led to this loss are discussed in note 1.4.Essay On Corporate Reporting Case Solution

Transfer: 13m of property, plant and equipment had been transferred to the investment properties. This has been correctly deducted from the account and correctly included in the investment properties account.

Disposals: There are disposals in freehold land and building and in vehicles of 2m and 6m respectively. There is no any further information regarding these disposals..................................

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