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Financial Reporting Assignment: Fair Value Treatment for Woolworths Group



For the financial reporting assignment, you are required to choose a company which uses IFRS, based in any country, which operates in one of the following business sectors:

  • Banking
  • Retail
  • Hotels

If the company operates in several business sectors, its main activity should be in one of the three sectors listed above. You should look at the consolidated statements and related notes.

The company you select should have its equity share capital listed on a stock exchange. It should publish its annual financial statements and annual report in English, accessible on the company’s website. To repeat: the company should use IFRS for its reporting; and this will exclude US corporations. Use the latest available annual report (e.g. with year ending 31 December 2019 or 31 March 2020).

You are required to write a report (maximum 1,250 words, excluding the reference list and excluding any factual material about the company included in appendices). Your report should use your chosen company to examine the practical problems of applying fair value measurement. Your report should cover the following aspects:

(a) Give a brief explanation of the concept of fair value and discuss how IFRS 13 sets out guidelines for measuring fair value in practice.

(b) Identify the principal types of non-current asset owned by your chosen company (e.g. land, brands, and investments). To establish this, you should look at the balance sheet and the notes to it. Depending on the company chosen, the assets may be intangible, tangible or financial – if there are many different types of non-current asset, restrict your report to three of the types of asset with large values.

(c) Explain, for each of the principal assets identified in (b), which measurement basis is required or allowed by IFRS.

(d) For each of the principal assets, identify whether the company has used the cost basis or the fair value basis for continuing ‘subsequent measurement’.

(e) For any type of asset for which fair value has been used, discuss the problems that your chosen company is likely to have met when measuring the fair value. Where fair value has not been chosen, discuss the possible reasons for this.


  • Introduction

The report on financial reporting assignment is prepared to uphold the fair value treatment in the business scenario while preparing the financial reports. In this context, the IFRS 13 would be discussed and its subsequent treatment in the business scenario of the Australian retailer, Woolworths. Accordingly, the report would seek how the different kinds of assets are treated and recorded while preparing the annual financial reports. The report would hold a critical analysis of the determination of the value of the assets along with its challenges in tandem with the IFRS 13.

  • Concept of fair value

Simplistically, fair value is the approximated price of the properties and obligations recorded in the company accounts. IFRS 13 Fair Value Measurement states that as per the implications of the International Financial Reporting System (IFRS), the assets ought to be determined at its fair value and the organisation needs to disclose the matters related to its determination. The regulation strives to determine the fair value based on the ‘exit price’ trajectory adopting the ‘fair value hierarchy’ resulting in market-oriented over the company-specified aspect(Iasplus, 2020). IFRS 13 came into being in May 2011 and since January 2013, it became applicable while preparing the financial reports.

The objective of IFRS 13 is to define the fair worth using the IFRS guideline and disclosing the techniques for such measurements. IFRS 13 applies to the business for determining the fair worth of the asset and disclosing it in the books of accounts by deducting the sales price from its fair worth (Tran & Zhu, 2017). The aspect of IFRS strives for reliability and comparability in determining the fair value by identifying the financial assets for determination and comparing it with the standard prices in the market to get its proper valuation.

  • Principal types of non-current assets in Woolworths

Woolworths possess trade receivables, property, plant and equipment (PPE), intangibles,other financial assets,and deferred tax resources under the non-current assets item. For proper determination of the fair value of the aforesaid assets, 3 specified items are chosen – PPE, intangible resources, and other financial resources having the maximum value.

  • Measurement of the principal assets

Property, plant and equipment –

The PPE of Woolworths valued at $9,519 million in 2019 while it was $9,026 million in 2018. It is a tangible asset item comprising warehouses, freehold land, distribution infrastructure, and store fit outs, retail and other properties, and technology. The organisation has undertaken the fair value approach considering the historical cost of the tangible items(Barker & Schulte, 2017). The carrying values of the assets along with depreciation, impairment, and proceeds from sales of assets are considered. So it follows the cost approach laid by the IFRS 13 to have the current price that could be required to replace its service capability.

Intangible assets

Woolworths hold intangibles worth $6,526 million in 2019 while it was $6,465 million in 2018. The intangible assets of the company comprisebrand names, goodwill, and licences. Goodwill is a major item of intangible assets and it is measured by the fair worthof the resourcesassimilated by the business.The same phenomenon is applicable for items like brand names, licences as the costs represent the fair worth of such elements at its acquisition date(Wang, 2019). The intangibles also follow the cost approach wherein the accumulated amortisation and impairment are deducted from the current costs to have the carrying amount of the properties at the termination of the period.

Other financial assets

Woolworths hold other financial assets worth $737 million and $575 million in 2019 and 2018. The item consists of derivatives, listed equities, investments, and loans granted to related parties. The listed securities at $91 million and $96 million in 2019 and 2018 are determined at its fair worthwith implications of the requisite variations in the financial reports and subsequently transferred to the retained earnings. The market approach as laid by the IFRS 13 is used in this case to have the price extracted from market transactions and later gets mend into retained earnings(Prodanova, et al., 2019).

  • Basis of measurement

Property, plant and equipment –

This particular item has undertaken the cost approach for determining its value and the approach is relevant to the organisation over the years. The cost approach is in tandem with IFRS 13 with the implication of the carrying amount at the end of the subsequent periods(Tran & Zhu, 2017). So to carry forth the legacy of the assets in this category, the cost approach seems to be suitable and Woolworths strived for transparency through proper disclosure of the methods.

Intangible assets –

The intangible assets also undertook the cost approach to determine its value under the suggested framework of IFRS 13. In this category, the item of goodwill deserves a mention as there are instances when Woolworths acquire other businesses valuing its goodwill over the fair worth(Zyla, 2020). and like other assets, also undertake the pattern as a recurring practice over the years. The same after going through the adjustments is presented in the financial statements along with the accompanying notes having a proper explanation of the accounting procedure. So the disclosure aspect is well-taken care upholding the implications of IFRS 13.

Other financial assets –

Financial instruments like derivatives and listed equity securities, investments comprise the category of other financial assets. The item of listed equity securities undertook the market approach for the determination of its value in alignment with the regulation of IFRS 13(Malone, et al., 2016). The risks could not be avoided in this case as the item, derivatives undergo the risk of fair value measurement which might not align with the organisational assumptions.

  • Challenges in fair value measurement

Measuringfair value is a vague concept that ought to be determined after due consideration of the associated factors and such factors could pose risks to the business. There are items like derivatives,securities which undergo the risk of fair worth measurement at the termination of the financial period. There are aspects like unadjusted price in the prevailing markets which entail Woolworths to undertake a harsh business decision or decisions purely on assumptions affecting its potentiality(Prodanova, et al., 2019). Then there are fair value measurements extracted from sorts of inputs that are highly market-oriented and fluctuates at times taking relevance of the market characteristics. So in this way, the fair value measurement of the assets could pose an undue problem to Woolworths in recounting its correct asset worth. Again, Woolworths might face an issue with the proper valuation technique sending a wrong signal to the market in proper maintenance of its financials.

  • Conclusion

The fair value measurement is an important determinant in the financial accounting process as its proper recording and disclosure pose a significant aspect in the presentation of the financial reports. Accordingly, the IFRS 13 Fair Value Measurement takes relevance of the determination process of the sorts of the non-current resources like PPE, tangibles, and other financial resources. The financial workings of Woolworths reveal that for determination of the fair worth of the tangibles and PPE, the cost approach is undertaken as per the IFRS framework. The company has also disclosed the process of accounting in its report showcasing the relevance of the accounting standard. Contrarily, the listed securities takes the market approach for its determination and also undergoes its share of risks to have the proper market trajectory.

  • Bibliography

Barker, R. & Schulte, S., 2017. Representing the market perspective: Fair value measurement for non-financial assets. Accounting, Organizations and Society, Volume 56, pp. 55-67.

Iasplus, 2020. IFRS 13 — Fair Value Measurement. [Online]
Available at:
[Accessed 08 November 2020].

Malone, L., Tarca, A. & Wee, M., 2016. IFRS non?GAAP earnings disclosures and fair value measurement. Financial reporting assignment Accounting & Finance, 56(1), pp. 59-97.

Prodanova, N. et al., 2019. Approaches for obtaining audit evidence at fair value measurement. International Journal of Economics and Business Administration, 7(3), pp. 279-292.

Tran, A. & Zhu, Y., 2017. The impact of adopting IFRS on corporate ETR and book-tax income gap. Austl. Tax F, 32(1), p. 757.

Wang, X., 2019. Compliance Over Time by Australian Firms with IFRS Disclosure Requirements. Australian Accounting Review, 29(4), pp. 679-691.

Zyla, M., 2020. Fair value measurement: Practical guidance and implementation. New York: John Wiley & Sons.


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