Fosters Case
SCHOOL OF
ACCOUNTING
BAO2203
Corporate Accounting Assignment
Hao Cheng 3781727 Yang Siyu 3778363 Tutor: Ghazaleh Shokrollahi Thursday 10 a.m. – 11 a.m. 1 p.m. – 2 p.m.
Question 5:
Fosters, the beverage giant of Australia has been all over the news recently, as the company has reported a huge loss and the stock price keeps falling. All of these problems might be brought by its troublesome wine business. This report will try to explain why Fosters is under this infaust circumstance by answering the eight following question.
Question 1: Why is an impairment test considered necessary?
Impairment test is considered necessary nowadays since economic environment is changing rapidly and all companies are subject to increased scrutiny by auditors, regulators and even investors for accurate and timely reporting of impaired assets. Volatility and ever changing nature in the financial markets has resulted in the necessity of impairment test. Therefore, companies have to be required to test goodwill and other intangible assets, such as goodwill, brand name, financial assets, and investments for potential impairment on an interim basis. We know goodwill is an important part of total value of company. If any company acquires any other company, goodwill would be a vital indictor to determine the acquisition value. Thus, impairment of intangible assets such as goodwill is extremely important for any accountant.
Question 2: Which assets are subject to impairment testing?
In the example of Fosters Ltd, the continuous loss from the sales in Australia, the US and Europe made Fosters hope a quick takeover, which requires an impairment test for the other companies to value Fosters’ acquisition cost. The following steps should be followed to determine the acquisition cost.
Firstly, the fair market value of net assets
ACCOUNTING
BAO2203
Corporate Accounting Assignment
Hao Cheng 3781727 Yang Siyu 3778363 Tutor: Ghazaleh Shokrollahi Thursday 10 a.m. – 11 a.m. 1 p.m. – 2 p.m.
Question 5:
Fosters, the beverage giant of Australia has been all over the news recently, as the company has reported a huge loss and the stock price keeps falling. All of these problems might be brought by its troublesome wine business. This report will try to explain why Fosters is under this infaust circumstance by answering the eight following question.
Question 1: Why is an impairment test considered necessary?
Impairment test is considered necessary nowadays since economic environment is changing rapidly and all companies are subject to increased scrutiny by auditors, regulators and even investors for accurate and timely reporting of impaired assets. Volatility and ever changing nature in the financial markets has resulted in the necessity of impairment test. Therefore, companies have to be required to test goodwill and other intangible assets, such as goodwill, brand name, financial assets, and investments for potential impairment on an interim basis. We know goodwill is an important part of total value of company. If any company acquires any other company, goodwill would be a vital indictor to determine the acquisition value. Thus, impairment of intangible assets such as goodwill is extremely important for any accountant.
Question 2: Which assets are subject to impairment testing?
In the example of Fosters Ltd, the continuous loss from the sales in Australia, the US and Europe made Fosters hope a quick takeover, which requires an impairment test for the other companies to value Fosters’ acquisition cost. The following steps should be followed to determine the acquisition cost.
Firstly, the fair market value of net assets
Bibliography: Deegan, C 2010 Australian financial accounting, 6th edn, McGraw-Hill Australia Pty Ltd, North Ryde, NSW 2113 John Durie, 2010, ‘Tried and emotional over Foster’s future as stock take a hit’, The Australian, 25 August Kluwer, 2007, International financial reporting standards (IFRSs) 2007 Fosters’ Annual report, 2010, http://www.fostersgroup.com/investors/1964.aspx Matt Stevens, 2010, ‘Joyless Johnston keeps brewer sober’, The Australian, 25 August Patell, J.M P.J. Patel, 2011, “Current Issues Impacting Impairment Testing”, viewed 29th April, 2011 <http://www.accountingtoday.com/news/Current-Issues-Impacting-Impairment-Testing-57111-1.html>