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Myer Holdings Financial Reporting Analysis

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 1891 words Published: 10th Jun 2020

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Executive Summary

Regrading to the concern of board members to the company’s reputation in terms of disclosure satisfying the requirement of Conceptual Framework for Financial Reporting (CF), this report will mainly focus on the following areas, especially in the area of property, plant, and equipment. Firstly, identification of criteria for selecting and changing accounting policies (according to AASB 1080 is analyzed. Later a brief explanation is given of how professional judgment can impact accounting policies and estimates Secondly, it analyses the latest annual report of Myer Holdings Limited 2019, whether it meets the requirements for PPE as per AASB 116. Thirdly, it will disclose how the PPE satisfies the fundamental and enhancing qualitative characteristics of financial information. And finally, the discussion of the extent of PPE to the requirement of the objective of GPFR, conclusion and few suggestions are discussed for the improvement of the company. To sum up the result of the report, the presentation of PPE of Myer basically fulfills the requirement of accounting standards. But for some specific kinds of details, such as the explanation of estimation and the flowing process of PPE, the company does not declare fully. So upon the AASB116, the entity should add back the explanations of the method used and some elaboration of PPE transactions.


1.1  Company background

Myer Holdings Ltd. is one of Australia’s largest department store groups and a leader of retailing. The total sales of Myer for the year ended in 2019 is $2991.8 million (Investor.myer.com.au, 2019). It currently has 62 stores in prime retail locations across Australia and offers fashion and apparel collection for all, including men, women, and children.

1.2 Purpose of the report

An accurate and faithful representation of financial statement is a crucial foundation for every entity around the world, as it will directly affect the reputation in public and the confidence of investors. The intentional fault of representation will even commit “business crime”. Referring to this scenario, this report is going to review the latest annual financial statement (i.e. 2019) of Myer and whether these disclosures are aligned with Conceptual Framework for Financial Reporting (CF)’s objectives and qualitative characteristics.

Criteria for selecting and changing accounting policies and how professional judgement can impact accounting policies and estimates

According to AASB 108 paragraph 13, an entity should select and apply its accounting policies consistently for a similar type of transactions, unless an Australian Accounting Standard specifically permits categorization of items in case of which different policies may be appropriate (Accounting Policies, 2015). Myer Holding Limited has been following the straight-line method to depreciate its property, plant, and equipment consistently over the years; therefore it complies with paragraph 13 criteria. However, according to Ivan (2016, p. 1128), different conclusions are attainable while applying the IAS/IFRS for similar circumstances, where it can’t necessarily be said that one conclusion is right and other, wrong. For this reason, the judgments made by accounting professionals can get a bit challenging because of the varying nature of their professional duties and the flexibility of the current regulatory standards.

Accounting policies and the estimates Myer uses to measure PPE

2.1 The extent to which the latest annual report of Myer meets the disclosure requirements for PPE as per AASB 116

On the basis of Myer’ latest annual report (2019, p.50 note C1), it states that the ‘land is not depreciated and that other assets are depreciated using the straight-line method in order to allocate their cost price net of their residual values, over their useful lives’. It also declares that the buildings are assumed to be depreciated for 40 years, fixtures and fittings for 3 to 12.5 years and property, plant and equipment to be depreciated by 10 to 20 years. Moreover, reviewing the report (2019, p.50 note C1), it clearly shows that the PPE’s carrying amount at the beginning of the period is $214,993,000, accumulated depreciation is $258,574,000 and carrying amount at the end of the period is $202,373,000. Likewise, that kind of presentation is also applied to the freehold buildings. The information on accounting policies and presentation of the balance sheet from the report does almost satisfy the requisite disclosure according to AASB116 paragraph73. However, it doesn’t give a reason or explanation for the use of current depreciation methods and write down the residual value for each. Moreover, it is impossible to recognize the additions for each whether is from the business combination or new capital investment as it integrates them into one through the balance sheet. Besides, there is no information about what kinds of PPE they have. Since the report does not have enough detail about PPE, regarding paragraph 74 and 76, it is hard to recognize whether it satisfies the requirements of them. For example, as there is no modification on the value of PPE in 2019, the effect of the change is not required to state. As a whole, this annual report does disclose the basic information of the PPE, which meets the requirement as per AASB 116. However, some kinds of detail such as the sales of PPE and the residual value for each could not be found.

The disclosures on PPE and the qualitative characteristics of financial information

According to IASB QC1- QC 39, the qualitative characteristics of financial information can be divided into fundamental characteristic and enhancing qualitative characteristic.

3.1 Analysis of how the PPE satisfying the fundamental characteristic

Fundamental characteristic includes relevance and faithful representation, which is the basic when preparing a financial report. Upon the annual report (2019), the carrying amounts of PPE at the end of 2018 and 2019 are clearly stated in the balance sheet and consolidated financial statement. Since the deprecation methods and residual values have been announced not to change frequently, the value of PPE at the end of 2020 would be possible to predict (using straight-line method). Under these conditions, the disclosure of PPE does satisfy the characteristic of relevance. In addition to this, though the annual financial report declares the depreciation method and the numerical value; in relation to the faithful representation; complete and free from error, the report doesn’t fully satisfy the requirements. Firstly, there is no explanation for the adoption of the current deprecation method. Secondly, there is no detail for the additions of each PPE so it is not attainable to recognize the sources. Finally, it does not declare the approach according to accounting standards used in estimating the depreciation years and residual values. Therefore, it doesn’t fulfill the desires of faithful representation.

3.2 Analysis of how the PPE satisfying the enhancing qualitative characteristic

The enhancing qualitative characteristic includes comparability, verifiability, timeliness, and understandability. Here is mainly focusing on the area of comparability and understandability. According to the annual report (2019, p.42), Myer states the current and last years’ carrying amounts and details of reconciliation, thus the information could be used to compare between 2018 and 2019. Now, the annual report also mentions that Myer Holding Limited does comply with the AASB and Corporation Act 2001 in terms of preparing the general financial statements. Hence, it is believed that the information of PPE could be taken to compare other entities, which are following the same accounting standards. Understandability means classifying, characterising and presenting information clear and comprehensible. The balance sheet format of PPE is easy to understand and recognize, and for each section of accounting policies, it does give the definitions with some kinds of specific accounting terms. Hence, it is possible for those who have reasonable knowledge to go through the whole report.

The extents of disclosures on PPE aligning with the objective of General Purpose Financial Reporting

The main function of GPFR is to provide accurate financial information to investors; creditors; and lenders to predict the future economic performance of the business. Besides, it is required to classify economic resources and thereby users can identify the entity’s strength and weakness. According to the latest annual report (2019, p.50), it discloses the sum of the net book amount of PPE, so that if those users wish to get the liquidity ratio to have an understanding of Myer’s current financial position- they can simply combine the data of current assets and liability. Since the yearly depreciation charge has been taken into account, the net profit for the current year is not being overstated. Furthermore, investors can more properly predict the return on the net book values of economic resources.

Recommendation and Conclusion

With the above information, it can be said that Myer Holding Limited did comply with the proper accounting standards while preparing its financial reports. Nevertheless, it could consider the following ideas for the betterment of its users.
  • As there is no clear explanation for the current use of deprecation method and estimation, the entity should consider adding them back; doing that would satisfy more the characteristic of faithful representation.
  • The information about disposal and investment of PPE should be stated; so that the users can understand more about the flowing process.
  • The disclosure of PPE would be more complete if Myer declares the type of equipment it owns.


  1. Investor.myer.com.au. (2019). Myer My Store (Full year 2019 Results). [online] Available at: http://investor.myer.com.au/DownloadFile.axd?file=/Report/ComNews/20190905/02143634.pdf [Accessed 24 Sep. 2019].
  2. Aasb.gov.au. (2015). Accounting Policies, Changes in Accounting Estimates and Errors. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB108_08-15.pdf [Accessed 24 Sep. 2019].
  3. Ivan, I. (2016). The importance of professional judgment applied in the context of the International Financial Reporting Standards. [online] Revista.cafr.ro. Available at: http://revista.cafr.ro/temp/Article_9503.pdf [Accessed 24 Sep. 2019].
  4. Aasb.gov.au. (2015). Property, Plant and Equipment. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf [Accessed 24 Sep. 2019].
  5. Aasb.gov.au. (2019). Qualitative Characteristics of Financial Information. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/SAC3_8-90_2001V.pdf [Accessed 24 Sep. 2019].


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