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ACC-ACF2100 Group Assignment
Objective
This group assignment aims to help you review the learning objectives in Topic 5 and Topic
6 and, at the same time, help you enhance teamwork skills, data analyst skills, and critical
thinking.
“Being able to collaborate and bounce ideas, concepts, and analyses off of your highly intelligent
peers is invaluable. There is usually more than one answer in accounting – working with a team to
understand the most appropriate solution is beneficial.”
“Accountants need to perform analytics on large data sets to aid financial decision-making and
visually display results from data analytics or other data sets, which is key for monitoring and
reporting financial results to non-financial users.”
---- Daniel Lever, Senior Audit Manager
Introduction
AASB 136/IAS 36 Impairment of Assets requires firms to perform impairment tests on assets when
there is an indication that assets are not worth as much as they were previously. Regulators,
standard setters, and the accounting profession point to the outbreak of COVID-19 as an indication
of asset impairment. The ASIC stated that the values of assets would be one of its focus areas of
regulation under COVID-19. 1 The AASB stated that COVID-19 directly impacted asset
impairment. 2 In a survey conducted by PricewaterhouseCoopers (PWC), 82% of Chief Financial
Officers believed that COVID-19 had the potential to impact their businesses significantly. 3 Given
the requirement of the accounting standards and the pressure from regulators and standard setters,
we expect firms to impair their assets as they should during COVID-19.
However, accounting theory suggests that firms may be reluctant to impair their assets under
COVID-19 for at least two reasons. First, accounting theory suggests that accounting numbers are
often written into the managers’ compensation contracts to encourage managers to work hard
toward improving firm performance. For example, Woolworths Group links executives’
compensation to earnings before interest and tax. Management at Woolworths Group can earn
higher compensation if they can produce higher earnings before interest and tax. Therefore, the
measurement of income statement accounts would determine managers’ personal benefits. For this
reason, managers are reluctant to impair assets because asset impairment entails the recognition of
impairment loss into the profit/loss statement, resulting in a lower amount of profit and further a
lower amount of managerial compensation. Second, accounting theory suggests that asset
impairment sends a negative signal to the market that the firm’s assets are overvalued. Market
participants will downward adjust the valuation of the firm. This makes it more difficult for firms
to acquire resources from the market. Given these implications of the accounting theory, firms
could impair assets less than they should under COVID -19.
In this group assignment, you and your groupmate will write a research report to investigate firms’
asset impairment surrounding the outbreak of COVID-19. The research sample includes five (5)
public firms listed on the Australian stock exchange: (1) Woolworths Group Limited, (2)
Wesfarmers limited, (3) Aurizon Holdings Limited, (4) Computershare Limited, and (5) Elders
Limited. The research period covers four years ranging from the fiscal year ending 30 June 2018
to the fiscal year ending 30 June 2021 (i.e., two years before COVID-19 and two years after
COVID-19). The research focus is the asset impairment on property, plant, and equipment. The
research methodology involves data analysis and the interpretation of findings.
Requirement
The research report consists of several parts: the title, Part A to Part F, and the Appendix.
Part Requirement Word
limit
Skills
required
Title Impairment of Property, Plant, and Equipment around COVID-19
Part A State your understanding of the two valuation models of PPE: the
cost model and the revaluation model. Review the 2021 annual
report of the five (5) firms and discuss which model these firms use
in measuring PPE.
150 Information
acquisition
skill
Part B State how to perform impairment tests for individual assets and
cash-generating units. Review the 2021 annual report of the five
(5) firms and summarize how these firms perform the impairment
test on PPE.
150 Information
acquisition
skill
Part C Collect data on the beginning-year carrying amount of PPE and the
impairment of PPE from notes to financial statements for each of
the five (5) firms from 2018 to 2021.
Data
collection
skill
Part D Average the five (5) firms’ impairment and impairment ratio (i.e.,
impairment of PPE divided by the beginning-year carrying amount
of PPE) for each year from 2018 to 2021 and plot bar graphs to
present the impairment and impairment rate around the COVID-19.
Data
visualisation
skill
Part E Perform a correlation analysis to investigate whether the PPE
impairment among the five (5) firms is correlated with the severity
of COVID-19 measured as the total number of new cases reported
in the firm’s head office state by 30 June 2021.