Introduction
Understanding a company’s financial performance and position depends extensively on its financial reporting. Businesses listed on the Australian Stock Exchange (ASX) must comply with accounting standards established by the Australian Accounting Standards Board (AASB). With an emphasis on topics like goodwill, asset revaluation, impairment testing, and non-controlling interest (NCI), this study compares and examines the financial reporting disclosures of Telstra Group Limited and Endeavour Group, two well-known Australian parent corporations.
Goodwill Method
Telstra Group LTD and Endeavour Group both do their accounting using the acquisition method concerning goodwill. In the case of free goodwill, it represents the surplus of consideration transferring at the above fair deal value for specific assets for a business merger. This technique consequently endorses the significant effort of tangible assets such as brand name or client background (Abed et al., 2022). Adopting one accounting standard assures that the two companies fairly reflect the true worth of their business combinations and the associated financial impacts. With this, the stakeholders are offered a transparent view of their asset’s valuations and their company’s operation financial performance.
Calculation and Disclosure of Goodwill
Goodwill, or gain on bargain purchase, arises when the acquirer pays a different amount of cash for the assets and liabilities compared to the fair value of net identifiable. This is done through the notes to the consolidated financial statements, which are inherently transparent to the stakeholders and display the method used for determining goodwill. Through this disclosure, the subsidiaries of the banking conglomerate provide the necessary financial details that will instil confidence among the stockholders, financial institutions, and any other interested party (de Silva Lokuwaduge & de Silva, 2020). This disclosed transparency is not only a material of the valuation process. It is also a lever to estimate if there is any strategic rationale owing to the acquisition and its results in the financial health and future growth trajectory the company can attain.
Revaluation of Assets
Revaluations of subsidiary assets are typically carried out following relevant accounting rules and reported in financial statements as they become necessary. However, the frequency and extent of these evaluations may vary depending on factors unique to each firm and industry standard. Enterprises ensure compliance with the recognizable accounting principles that keep accurate and open asset reviews to develop confidence between management and stakeholders (Thuy et al., 2021). The discrepancies in the magnitude of revaluation occur due to the intricate factors engaged with an entity’s financial reports and strategic decisions, which require market conditions and legal obligations. In this method, asset valuations are guaranteed to represent their current market value correctly and give stakeholders relevant information about the company’s and its subsidiaries’ financial performance.
Impairment Testing of Goodwill
The impairment tests of goodwill may be carried out yearly and on-demand, depending on when the organization’s criteria are met, which causes a trigger. Such an exercise involves deducting the recoverable amount of the cash-generating unit where goodwill is incorporated from the book value of this same unit. In cases when the asset value goes beyond the recovery value, impairment feelings are developed, and the goodwill carrying amount by that entity is reduced (Abed et al., 2022). Performing these evaluations helps companies obtain the actual image of the value of goodwill on financial columns in a transparent manner, conforming to the requirements of the regulations and the country’s legal rules. This way of assessing financial reporting helps the stakeholders evaluate the real economic value of goodwill and its significance for the company’s health, making investment decisions and being aware of business risks.
Non-Controlling Interest (NCI)
Noncontrolling interest (NCI) refers to the portion of a subsidiary’s equity not held by the parent business. NCI, calculated as the fair value of minority shareholders’ holding at the purchase point, represents ownership separate from that of the parent company. This element is separated in the consolidated financial statements to clarify the interests of minority owners (de Silva Lokuwaduge & de Silva, 2020). Companies follow transparency guidelines by clearly stating NCI, giving stakeholders a clear picture of ownership and stock allocation within the business structure. In corporate investments and governance, these disclosures help investors and analysts make educated decisions by enabling them to determine the degree of minority ownership and its effect on financial performance.
Evaluation and Recommendations
Telstra Group Limited and Endeavour Group abide entirely by the financial reporting guidelines established by the Australian Accounting Standards Board. Yet, some aspects need to be addressed to raise the performance level. As a point of concern, basic goodwill calculation, impairment testing techniques, and explanations of techniques should be covered in depth. The companies must clarify the blanks with more detailed statements representing the plotlines. Moreover, different levels of detail in the financial statement are examples, whereas Telstra Group Limited tend to provide more thorough disclosure than Endeavour Group (Thuy et al., 2021). To prevent loss of information between the two companies, Endeavour Group should boost the quality of its reporting and disclosure practices, thus making them more precise in better agreement with the industry’s best practices and meeting AASB requirements.
Although Telstra Group Limited and Endeavour Group are dedicated to financial openness, their reporting and disclosure protocols may be refined. By improving the clarity and completeness of their disclosures, both businesses may offer stakeholders a more excellent knowledge of their financial performance and position, which would boost stakeholder confidence in their operations.
References
Abed, I. A., Hussin, N., Ali, M. A., Haddad, H., Shehadeh, M., & Hasan, E. F. (2022). Creative accounting determinants and financial reporting quality: a systematic literature review. Risks, 10(4), 76. https://doi.org/10.3390/risks10040076
de Silva Lokuwaduge, C. S., & de Silva, K. (2020). Emerging corporate disclosure of environmental social and governance (ESG) risks: An Australian study. Australasian Accounting, Business and Finance Journal, 14(2), 35-50.http://dx.doi.org/10.14453/aabfj.v14i2.4
Thuy, C. T. M., Khuong, N. V., Canh, N. T., & Liem, N. T. (2021). Corporate social responsibility disclosure and financial performance: The mediating role of financial statement comparability. Sustainability, 13(18), 10077. https://doi.org/10.3390/su131810077
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