Blackmores’ Financial Analysis & Accounting for Leases 1

Assessment item 2 – Blackmores’ Financial Analysis &

Accounting for Leases
Student Name
HA 3011 Advanced Financial Accounting
Instructor name
Dated: January, 27 2018
 Blackmores’ Financial Analysis & Accounting for Leases 2

Contents
Assessment Task Part A: Impairment Analysis .............................................................................. 3

Assets tested for Impairment ....................................................................................................... 3

Test for Impairment ..................................................................................................................... 3

Impairment Expenditure.............................................................................................................. 3

Key Estimates in Conducting Impairment Testing ..................................................................... 4

Subjectivity involved in the impairment testing process & the way it influence the outcome of
the impairment testing ................................................................................................................. 4

Iinteresting, confusing, surprising or difficult to understand about the impairment testing ....... 5

New Insights ................................................................................................................................ 5

Fair Value Measurement ............................................................................................................. 5

Assessment Part B: Accounting for Leases .................................................................................... 6

References ....................................................................................................................................... 9
 Blackmores’ Financial Analysis & Accounting for Leases 3

Blackmores’ Financial Analysis & Accounting for Leases

Assessment Task Part A: Impairment Analysis
This part of assessment is related to the analysis of the Impairment testing of the assets.
Impairment of the assets is an important aspect for them to maximise their potential. The
company selected for the same part is Blackmores Ltd. Blackmores is basically an Australian
based supplement company locating in the region Australia. The company was founded in year
1930, and since their inception they have been working perfectly for company’s efficiency in
particular manners. Blackmores has current market capitalisation about AU$ 2 Billion.
Assets tested for Impairment
This is the first question out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment
(Brigham and Houston, 2012). A number of assets in the Company's annual report have been
tested for impairment purposes. Blackmores Ltd.'s annual report clearly states that the company
has considered their property plant and equity (PPE) and some intangible assets under
impairment testing. The loss from PPE disposal in 2016 was 2.3 million U.S. dollars, increasing
to 8.7 million U.S. dollars a year later. This shows that the value of disposal in 2017 has
increased compared with that in 2016
Test for Impairment
This is the 2nd question out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment.
Blackmores Ltd. has applied two different tests in its annual report to assess the actual provision
for impairment losses / benefits. The first model promised by Blackmores Ltd in its annual report
is an impairment model that subtracts the depreciated value from the actual value of the asset and
reports it in the company's annual report (Brinckmann et al., 2010). The second model for
selection and visualization on the same side is the Pure Play Method (PPM), where the value of
an asset is analysed against a similar asset of another company for the same domain name.
Impairment Expenditure
This is the 3rdquestion out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment.
According to the analysis, the impairment charge for 2016 was 220.3 million U.S. dollars, rising
 Blackmores’ Financial Analysis & Accounting for Leases 4

to 279.2 million U.S.

dollars. It is clear that the IMPAIRMENT CHARGES IN
impairment expenses of US$ MILLION
279.2
Blackmores Limited 300 220.3
200
increased by 26% in
100
FY2017 compared with that 0
of 2016. These impairment 2016 2017

charges have been disclosed in the Company's balance sheet and cash flow components.
Key Estimates in Conducting Impairment Testing
This is the 4th question out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment.
Impairment testing is now an integral part of the company. This means that companies must
conduct impairment tests to analyse the real value of their assets in a professional manner. Some
key estimates should be considered in the impairment test (Chandra, 2011).
The company's intangible assets can be analysed through amortization. Although
depreciation and amortization are two different things and measurement tools, they are reported
equally in the context of Blackmores Ltd. The depreciation and amortization costs mentioned in
2016 were $ 220.3 million. In 2017, the cost increased significantly, reaching 279.2 million U.S.
dollars. The company has long considered the validity of these estimates in a professional and
organized manner.
Subjectivity involved in the impairment testing process & the way it influence the
outcome of the impairment testing
According to Clark et al., (2009), subjectivity is the question and extent of prejudice
shown in the annual report. For a multinational company, the issue of subjectivity and prejudice
is a shame. As the company's annual report refers to a thorough and in-depth analysis of external
auditors, the level of subjectivity and bias is at a lower node. This is the 5thquestion out of 8
questions that needed to be answered in this particular assignment in particular for the purpose of
completing the task sheet for this assignment. Blackmores Limited is a well-known Australian
efficient company; the report has been complete and thorough analysis and external audit.
Therefore, the probability of subjectivity is at a lower level in the company, which is indeed a
very efficient sign from the company's point of view, in terms of market management. All in all,
 Blackmores’ Financial Analysis & Accounting for Leases 5

the subjectivity of Blackmores Limited can be said to be at a low level, which is indeed a very
effective and powerful sign for the company that they must maintain this particular aspect of
core efficiency and productivity.
Iinteresting, confusing, surprising or difficult to understand about the impairment
testing
This is the sixth question out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment. The
whole concept of damage and damage is indispensable and effective (Czinkota Ronkainen and
Moffett, 2011). The concept of harm is not easy to measure because there are some things that
are inexplicable. First, impairment testing and methods for tangible and intangible assets have
been completely changed. This is a bit confusing for me because assets are assets and should be
dealt with together. However, in the case of tangible and intangible assets, the factors of
impairment are quite different. Old researchers with basic concepts of tangible and intangible
assets are easier. These ideas are crucial to their core efficiency and productivity (Eun and
Resnick 2010).
New Insights
This is the 7thquestion out of 8 questions that needed to be answered in this particular
assignment in particular for the purpose of completing the task sheet for this assignment.An
analysis of the financial statements of Blackmores Ltd found that the company was highly
efficient in documenting loss updates and related issues. I also got the complete message that the
company's core efficiency may increase over time. Blackmores Ltd is using this information in a
professional manner, and they also stay in the same long-term status. Blackmores Ltd must apply
the right strategy at the right time to improve its core efficiency and productivity so they can
easily manage their market benefits.
Fair Value Measurement
After the recent economic crisis, most of the focus has been put forth on the factor of Fair
Value Measurement. This is the last question out of 8 questions that needed to be answered in
this particular assignment in particular for the purpose of completing the task sheet for this
assignment (Eun and Resnick 2010)IFRS-13 specifically deals with the same aspect. From the
annual report of Blackmores Ltd, it is clearly found that the position of the company is high and
efficient and they can easily maintain their value and well-being in the market. The assets of the
 Blackmores’ Financial Analysis & Accounting for Leases 6

company have been tested for impairment and other major factors on a regular basis which is
helping them to maximise their values accordingly.
Assessment Part B: Accounting for Leases
This particular part of the assignment is known as Part-2 of the assignment which is
relating to one of the most important elements of accounting known as Leasing. Leasing is an
important outcome from the viewpoint of a company, as it has a direct impact over the asset’s
provisions of the company (Eun and Resnick 2010). Leasing is one of many things in an
organization. Leasing is a contract that allows an individual to use a particular asset for a
specified period of time. The International Accounting Standards Board (IASB) has explicitly
mandated that companies comply fully with leasing standards and sign efficient contracts.
Australian Accounting Standards Board (AASB) has implemented a standard of 136, that the
company for impairment testing. Based on the same criteria, companies must perform
impairment tests on both their current and non-current assets in order to have a thorough
understanding of shareholders. Blackmores Ltd. is a well-known, efficient company with a
reputation in the biotech industry. The five different questions have been answered below which
are needed to be answered in this part of assessment.
1. This is the first sub-issue to be covered in the same area and may include the main
criteria for leasing and the related agreements. The International Accounting Standards
Board (IASB) is designed to provide information about International Accounting
Standards (IASs). The IASC chairman believes that the previous accounting standards
did not reflect the economic reality because they did not split or split. This means that
these standards do not apply. The previous leasing standard did not regard the standard as
a business expense, having nothing to do with the company's financial status. Therefore,
to get the right job, can the real economic reality be brought to the company? In the past,
leases were called liabilities, inefficient from different perspectives (Ferreira and Otley
2009). The sensitivity and intangibleness of the company's major assets should be
analysed. Impairment tests are also based on the same long-term output and results.
Another interesting thing that I found from the annual report or analysis report from
Blackmores Ltd is the analysis by fair value measurement. This means that companies
must use the latest data to analyse their capabilities as this is the only one that they have
 Blackmores’ Financial Analysis & Accounting for Leases 7

long been able to imagine. This special ability helps businesses measure what matters to
them.
2. This is a second sub-issue included in the same area, which may include key leasing-
related standards and related agreements and analysis of the fact that off-balance sheet
items are being added. Assets can cover some important results. Using the same analytics
and fairness metrics, companies can easily attract more shareholders to their network and
increase their financial and strategic outcomes. This specific issue is to resolve the higher
seesaw event, which is 66 times more obligatory (Ilmanen, 2011). The basic explanation
for the same debate is how to deal with IFRSs. It is assumed that the impairment of
tangible and intangible assets is different. Devaluation related to tangible assets can be
analysed according to the depreciation amount corresponding to the actual decrease. In
financial terms, tangible assets are assets that can be physically contacted by hand and are
efficient from the company's perspective. On the other hand, intangible assets are assets
that cannot be touched by hand. The technology proposed by the International
Accounting Standards Board believes that these leases should be treated as an
organization's cost of doing business, with direct or indirect contact with the
organization's salary interpretation. In spite of this, measures will be at a higher level if
they are dealt with obligations, responsibilities and obligations. This is the main
motivation for why obligations are 66% above the current rent (Kieso et al.,2010).
Therefore, in the current circumstances, it is more practical than others. Companies must
report their expenses accordingly. Impairment losses should be presented in the balance
sheet and in cash flows. Similarly, according to 2016 and 2017, the company has reported
impairment for both financial years
3. This is the third sub-issue in the same area, and may include major leasing-related
standards and their related agreements, as well as leasing analysis of Blackmores
Limited. In any case, the lease commitment has certain elements or organization, such as
shipping. In any case, IASB expressly joined the non-competition area of the aircraft
organization. This means that the leases they use are mainly commercial leases, which
may improve their business perspective but not set their monetary results(Kieso et
al.,2010). Therefore, the responsibility factor may increase. This concrete result is a
 Blackmores’ Financial Analysis & Accounting for Leases 8

perfect result for airlines, and many airlines are using similar components to achieve their
hub's profitability and productivity.
4. This is the second last-question which has been included in the same aspect, which is
likely to include the main standards pertaining to leases and their relevant agreements,
along with the analysis of the fact of increasing the awareness relating to the leases and
other factors. Education and awareness are some of the major causes of the
unacceptability of the same mechanism (McNeil, Frey and Embrechts, 2015). This means
that these people have a lower level of education and awareness and may increase their
problems. People do not know the type of lease and how to overcome the lease with this
factor. Therefore, the popularity will be on the lower nodes. Therefore, the IASB must
take some measures to make people aware of this aspect.
5. The leases which are recorded as an operating lease then it will become more efficient for
the companies, as this particular aspect will be recorded exponentially(McNeil, Frey and
Embrechts, 2015). This particular aspect will be efficient for the companies, as they can
easily inform the investors about the same aspect for their efficiency in a professional
manner.
 Blackmores’ Financial Analysis & Accounting for Leases 9

References
Brigham, E. F., and Houston, J. F. (2012). Fundamentals of financial management. United
States. Cengage Learning.
Brinckmann, J., Grichnik, D., and Kapsa, D. (2010). Should entrepreneurs plan or just storm the
castle? A meta-analysis on contextual factors impacting the business planning–
performance relationship in small firms. Journal of Business Venturing, 25(1), pp. 24-40.
Chandra, P. (2011). Financial management. United States. Tata McGraw-Hill Education.
Clark, G. L., Dixon, A. D., and Monk, A. H. (Eds.). (2009). Managing financial risks: from
global to local. United Kingdom. Oxford University Press.
Czinkota, M., Ronkainen, I. A., and Moffett, M. H. (2011). International business. United States.
Wiley.
Eun, C. S., and Resnick, B. G. (2010). International Financial Mgmt 4E. United States. Tata
McGraw-Hill Education.
Ferreira, A., and Otley, D. (2009). The design and use of performance management systems: An
extended framework for analysis. Management accounting research, 20(4), pp.263-282.
Ilmanen, A. (2011). Expected returns: an investor's guide to harvesting market rewards. United
States. John Wiley & Sons.
Kieso, D. E., Weygandt, J. J., and Warfield, T. D. (2010). Intermediate accounting: IFRS
edition (Vol. 2). United States. John Wiley & Sons.
McNeil, A. J., Frey, R., and Embrechts, P. (2015). Quantitative risk management: Concepts,
techniques and tools. United States. Princeton university press.