Crown Resorts Limited Analysis - Case Study Example

ANALYSIS OF CROWN RESORTS LIMITED ADHERENCE TO ASIC REQUIREMENTS By Student’s Name Code + Course Name Professor’s Name University Cite, State Date Table of Contents Executive Summary..................................................................................................3 1.0 Introduction..........,...............................................................................................4 2.0 Accounting Standard Related to Disclosures of Sources of Estimation Uncertainty and Judgments in Accounting Policies Application.................................................4 2.1 Sources of Estimation Uncertainty.............................................................4 2.2 Disclosures of Accounting Policies.............................................................5 3.0 Crown Resorts Limited Current Accounting Practice......................................5 3.1 Significant Accounting Judgements, Estimates and Assumptions..............5 3.2 Crown Resorts Limited Disclosures of Significant Accounting Policies.....6 4.0 Potential Gap...........................................................................................................8 5.0 Recommendations.....................................................................................................8 6.0 Conclusion.................................................................................................................8 References........................................................................................................................10 Appendix..........................................................................................................................11 Executive Summary The accounting standards related to disclosures of estimation and uncertainty and accounting policies applications are fairly expounded within AASB10- Preparation of Financial Statements. The paper analyses the annual report of Crown Resorts Limited to ascertain whether they adhere to these stipulations. Sources of Estimation Uncertainty The report indicates that the carrying amounts of specific assets and liabilities are mostly established on judgements, assumptions of all future operations. This is evident in items like impairment of goodwill and casino licenses with indefinite useful lives: whereby the entity ensures that goodwill and casino licenses postulating and indefinite useful lives are impaired annually, fair value of investments: is applied on a Level Three method by the firm in the course of estimating the fair value of financial assets among others. Disclosures of Accounting Policies The entity uses historical cost as a measurement basis for all items except where derivatives financial instruments and investments are concerned. Business combinations are executed using the acquisition method. In fact, all other items like income taxes, plant, property and equipment have also been disclosed in respect to the measurement values and recognition. Conclusion It has been concluded that Crown Resorts Limited has made stringent efforts to ensure that all accounting standards have been adopted and cases where the adoption has not be made, the firm’s management has made sure to indicate the same. Thus, the only recommendation for the entity is to ensure that it practices consistency in preparation of future reports in order to allow users of the GPFRs easier time to comprehend all matters under consideration. 7.0 Introduction The ASIC has made efforts to ensure that companies adhere to all of AASB requirements related to quality and completeness of companies’ disclosures in regards to estimation uncertainties and significant judgements in accounting policies (ASIC, N, d). This paper focuses on analysing Crown Resort’s Limited annual report in order to ascertain whether or not they have been disclosed in regards to the requirements stipulated as above. 8.0 Accounting Standard Related to Disclosures of Sources of Estimation Uncertainty and Judgments in Accounting Policies Application 2.1. Sources of Estimation Uncertainty According to AASB 101-Presentation of Financial Statements, any entity operating within the Australia market and listed in the ASX is expected to disclose all of the information pertaining to the assumptions it made about its future operations as well as any fundamental sources of estimation uncertainty at the end of each reporting period (AASB.2015). These assumptions should postulate a substantial level of risk that results in material adjustments to the underlying carrying amounts of assets as well as liabilities within the following reporting financial period. These notes to assets and liabilities should involve details pertaining to their nature as well as their underlying carrying amounts as at the end of the financial period. A firm is expected to adhere to the disclosures positioned within paragraph 125 in a way that will assist the users of the financial statements to understand the judgements made by the management at hand in relation to the future and, also attributed to other sources of estimation uncertainty (AASB.2015). It is noted that the nature and extent of the information provided varies in regards to the nature of the underlying assumptions as well as other situations. The common examples of the types of disclosures that an entity adopts include; the nature if the assumption or other estimation uncertainty, sensitivity of carrying amounts to the methods, assumptions as well as estimations related to their computation, the foreseeable resolution of an uncertainty and the extent of reasonably possible results expected in the following reporting period and, a broad explanation of changes that have been made to all previous assumptions affecting assets and liabilities in the event that the uncertainty remains unresolved (Jean, Steve, Vicky, & Jillian, 2012. 2.2 Disclosures of Accounting Policies Under this accounting requirement, entities are required to disclose in a summary of all of its immediate significant accounting policies the measurement basis that was adopted in the course preparing the financial statements, and other relevant accounting policies that were adopted to aid with the understanding of financial statements (AASB.2015). It is important that entities disclose their measurement basis like historical costs, current cost or in other cases net realizable values because it affects the analysis conducted by users at any given moment in time (Brant, Glover & Wood, 2012). In the event that a firm adopts more than a single measurement basis, it is fair that it provides indication of all the categories of assets and liabilities that are affected by each measurement basis. 9.0 Crown Resorts Limited Current Accounting Practice 9.1 Significant Accounting Judgements, Estimates and Assumptions The report indicates that the carrying amounts of specific assets and liabilities are mostly established on judgements, assumptions of all future operations. The following are aspects that are deemed to be carrying a significant level of risk that might cause material adjustment to the carrying amounts of specific assets and liabilities in following reporting period; Impairment of goodwill and casino licenses with indefinite useful lives: whereby the entity ensures that goodwill and casino licenses postulating and indefinite useful lives are impaired annually (Crown Resorts Limited, 2014). This is made possible by conducting an estimation of recoverable amounts of the CGUs for which the goodwill and casino licenses with useful lives are assigned. The assumptions used for this case are also discussed in detail. Fair Value of Investments: is applied on a Level Three method by the firm in the course of estimating the fair value of financial assets (Crown Resorts Limited, 2014). It is approximated by use of inputs for the asset that are not focused on observable market data. Taxes: all of CRL’s deferred tax assets are disclosed in relation to the unused tax losses to an extent that it will be probable that taxable profit will made available against the losses that can be incurred (Crown Resorts Limited, 2014). For this accounting item, management judgement is needed in order to establish the amount of deferred tax assets that can be ascertained at any given moment in time based on a likelihood of effective timing and levels of future taxable profits. Doubtful debts; of the entity are recognised in case there is a level of objective evidence for which individual trade debt is significantly impaired. Significant items: are forms of transactions or activities that are positioned outside the normal course of business (Crown Resorts Limited, 2014). They are mostly disclosed in a separate manner in order to allow users of financial reports to perceive the performance of the Group in a more comparable manner as that of comparative timing. 9.2 Crown Resorts Limited Disclosures of Significant Accounting Policies Basis of Preparation: Crown Resorts Limited states that the preparation of the general-purpose financial report was conducted in adherence to the Corporations Act 2001, AASB as well as other outstanding authoritative pronouncements (Crown Resorts Limited, 2014). The measurement basis for the report adopts historical cost except for all derivatives financial instruments as well as investments that are measured using the fair value while equity method is used for measuring all investments in associates of the firm. Basis of Consolidation: the entity revaluates whether or not it has significant influence over an investee in case presented facts and situations ascertains that there might be alterations to either one or more of the existing three elements of control. Cases of subsidiary acquisitions are accounted for by way of adopting the acquisition method of accounting (Crown Resorts Limited, 2014). Most importantly, the financial statements of the subsidiaries are prepared for a similar reporting period as their parent group using consistent accounting policies. Possible adjustments are effected in order to equalise impeding dissimilar accounting policies that might be in existence. Income tax: of the firm, which involves both current tax assets and liabilities for the present and previous financial period, are measured at the estimated amounts that are expected to be recovered within the current periods’ taxable income (Crown Resorts Limited, 2014). Notably, deferred income liabilities are recognised at all their immediate temporary differences except in cases where the deferred income tax liability arises from initial recognition of either an asset or liability in a transaction that does not fall under a business combination. Property, Plant and Equipment; of this entity are determined at their respective costs less any possible accumulated depreciation as well as any impairment in value (Crown Resorts Limited, 2014). Both depreciation and amortisation are computed by straight-line methods over the approximated useful life of the assets involved. Derivative Financial Instruments and Hedging; of the entity are carried as assets whenever their immediate fair values is deemed to be positive and as liabilities in case the fair value is negative. Possible gains and losses of these fair vales derivatives are always placed within the P&L for the current financial period (Crown Resorts Limited, 2014). 10.0 Potential Gap Crown Resorts Limited has made substantial efforts to present its general-purpose financial reports in respect to the requirements of accounting standards. In fact, in cases where certain requirements have been omitted, the entity has ensured to let the users of these reports understand the same as a way of avoiding possible conflicts and misjudgements (Kun Yu, 2012). In my opinion, the entity has not left any gap uncovered in regards to these stipulations as required by ASIC and AASB. 11.0 Recommendations Crown Resorts Limited has ensured to cover most, if not all, accounting standard requirements related to disclosures of sources of uncertainty judgements and, also providing a summary of significant accounting policies adopted throughout the preparation of the report. Thus, they only viable recommendation for this case is for the entity to ensure consistency in its commencement with the stipulations and always bring to the limelight any possible alterations that might have been brought about in the course of conducting future operations. 12.0 Conclusion The discussion above has been to tackle the numerous requirements of both disclosing accounting policies as well as evaluating sources of estimation uncertainty. It has been noted that a firm should strive to adhere to presenting its reports in a way that recognises measurement basis as well as any possible assumptions and material adjustments adopted to expound on future operations. Evaluation of Crown Resorts Limited’s annual reports indicate that the firm has ensured to cover all possible gaps between its current accounting practices and stipulations of ASIC and AASB 101. References List ASIC. N, d. 14-332MR - Attachment - Findings from 30 June 2014 financial reports. Retrieved on April 13, 2015 from http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-332mr-attachment-findings-from-30-june-2014-financial-reports/ AASB.2015. AASB10-Presentation of Financial Statements. Retrieved April 13, 2015 from http://www.aasb.gov.au/admin/file/content105/c9/AASB101_09-07_COMPsep11_07-12.pdf Brant E. C, Glover, SM & Wood. DA 2012 Extreme Estimation Uncertainty in Fair Value Estimates: Implications for Audit Assurance. AUDITING: A Journal of Practice & Theory vol.31, no.1, pp. 127-146. Crown Resorts Limited.2014. 2014- Annual report. Retrieved on April 13, 2105 from http://www.crownresorts.com.au/CrownResorts/files/68/6857731f-4c85-457d-92b6-0a8a814dca03.pdf Jean C. B, Steve G. S, Vicky A & Jillian R. P. 2012. Another Piece of the “Expectations Gap”: What Do Investors Know About Auditor Involvement with Information in the Annual Report? Current Issues in Auditing vol.6, no.1, pp.A17-A30. Kun Yu.2012 Does Recognition versus Disclosure Affect Value Relevance? Evidence from Pension Accounting. The Accounting Review vol.88, no.3, pp.1095-1127. Mastilak.MC. 2011 Cost Pool Classification and Judgment Performance. The Accounting Review vol.86, no.5, pp.1709-1729. Appendix Read More