Acct 5432 – Metcash Group Assignment

ACCT 5432 – metcash group assignment

Valuation methods used for current assets and non-current assets:

Current Assets

1. Cash and cash equivalents (NOTE 7)
2. Trade and other receivables (NOTE 8)

1. Recognised and carried at original invoice amount (i.e. historical cost) less a provision for any uncollectable debts (pg. 72)
2. Customer loan securities: fair value (pg. 89)

1. Inventories (NOTE 9)

1. Valued at the lower of cost or net realizable value (pg. 73)

1. Cost: determined by deducting from the supplier’s invoice price any purchase incentives, allowance, discounts and net marketing income
2. Net realizable value: estimated selling price in the ordinary course of the business, less estimated costs necessary to make the sale

1. Disposable groups and assets held for sale (NOTE 31)

1. (NCA?) Measured at the lower of their carrying amount and fair value less costs to sell

1. Income tax receivable (NOTE 32)

1. Measured at the amount expected to be recovered from the taxation authority (pg.78), and at the tax rates that are expected to apply to the year the asset is realized (pg. 79)

1. Prepayment and other assets
2. Derivative financial instruments (NOTE 10) – asset when positive value, liability when negative

1. Initially recognised at fair value on the date at which the contract was entered and remeasured at fair value (pg. 72)

1. Fair value is determined by reference market values for similar instruments

1. Foreign currency forward contracts: carried at fair value (pg. 90)

1. Calculated by reference to current forward exchange rates for contracts with similar maturity profiles (pg. 72)

Non-Current Assets

1. Derivative financial instruments (NOTE 10)

1. Initially recognised at fair value on the date at which the contract was entered and remeasured at fair value (pg. 72)

1. Fair value is determined by reference market values for similar instruments

1. Cross currency interest rate swaps – US Private Placement: carried at fair value (pg. 90)

1. Calculated by reference to current forward exchange rates for contracts with similar maturity profiles (pg. 72)

1. Trade and other receivables (NOTE 11)

1. = Customer loans, allowance for impairment, other receivables  (pg. 90)
2. Non-current receivables: fair value (pg. 90)

1. Calculated based on cash flows discounted at a rate reflecting current market rates adjusted for counterparty credit risk (pg. 90)

1. Investments is associates (NOTE 12)

1. Carried in the statement of financial position at cost plus post-acquisition changes in the group’s share of net assets of the associate, less any impairment in value (pg. 73)

1. Other financial assets (NOTE 13)

1. = Investment in shares (unlisted) (pg. 92)

1. Initially recognised at cost, being the fair value of the consideration given then at fair value (pg. 72)

1. Property, plant and equipment (NOTE 14)

1. Measured at cost less accumulated depreciation and any accumulated impairment losses

1. Net deferred tax assets (NOTE 5)

1. Deferred taxes of members of the tax consolidated group are measured and recognised in accordance with the principles of AASB 112 Income Taxes (pg. 85)

1. Intangible assets and goodwill (NOTE 15)

1. Initially measured at cost then the cost model is applied to the class of intangible assets

1. Software development costs: capitalized at cost and are amortised using the straight line method over the asset’s useful economic life (range from 5 to 10 years) (pg. 94)
2. Customer contracts: carrying amount represents cost less accumulated amortization (amortised over 5 to 25 years) – recognized in SOCI under “administrative costs”

1. If an impairment indicator arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is less than the carrying amount (pg. 94)

1. Trade names: carried at cost less any impairment losses (finite or indefinite useful life)
2. Other: alliance agreement with Lenards Pty Ltd, agreement fee is being amortised over 10 years, on a straight line basis.  Carried at cost less accumulated amortization
3. Goodwill (pg. 75)

1. Initially measured at cost; being the excess of the cost of the business combination over the group’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities
2. Following initial recognition, measured at cost less any accumulated impairment losses

Definitions

• Cost: the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Australian Accounting Standards (AASB 116)
• Fair value: the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction (AASB 102)
• Net realizable value: the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated cost necessary to make the sale (AASB 102)
• Carrying amount: the amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment loss (AASB 116)

According to the notes of Metcash’s financial statements have been prepared using the historical cost (cost) basis except for derivative financial instruments which have been measured at fair value and share rights which have been valued using option price models.  Cost method of valuation is defined as “the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of other Australian Accounting Standards” (AASB 116), fair value is “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction (AASB 102).  However, further analysis of the notes shows the following method of valuation: