Word limit: 1,200 words

According to the 2019 AASB Conceptual Framework for Financial Reporting, the objective of general-purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity. Financial information is considered to be useful if it is relevant and faithfully represented for the users to make informed decisions. Furthermore, if the users have a choice between investing in different entities, financial information also needs to be comparable between those entities.

Amongst other measures, an entitys assets base are indicators of its financial stability and hence investors rely on an entitys accounting for its assets, specifically, the disclosures, to make informed investment decisions. One of the largest assets on any companys balance sheet is Property, Plant and Equipment (PPE) and AASB116 Property Plant and Equipment provides guidelines for the accounting treatment for PPE. The key considerations relating to Accounting for PPE are the initial recognition, subsequent measurement, depreciation charges and impairment (if any).

Your friend is looking to invest in a company and their decision will be based on the companys disclosures about PPE for the year ended 30 June 2022. Based on the assets base, your friend has selected a potential company from the ASX300 list but is currently unsure of whether this is a correct investment choice. Being a Financial Accounting and Reporting student at Macquarie University and keen to assist your friend in making the right investment decision, you think that the best way to evaluate the relevance and faithful representation of the companys disclosures on PPE is to compare the chosen company with another company (also listed on ASX300) that is operating in the same industry as well as similar in size. You have advised your friend that you will undertake this comparison exercise and provide investment guidance.

In order to write the report, you have to:

1. Choose a company (Company 1) from the ASX 300 list.

2. Download the Annual report for Company 1 for the year ended 30 June 2022.

3. Identify another company (Company 2) that is in the same industry as Company 1. It is preferable to choose a company whose revenues for the year ended 30 June 2022 do not vary more than 20% +/- to Company 1.

4. Download the Annual report for Company 2 for the year ended 30 June 2022.

Analyse both the Annual Reports and write a business report to your friend providing the following:

a. Based on your analysis, identify, and compare the disclosures provided in the annual reports of both companies in relation to their PPE. Your analysis must cover the following for both companies:

i. Measurement basis and your opinion as to why the company may have chosen this basis.

ii. Carrying values of the PPE at the beginning and end of the year.

iii. Depreciation method(s) and amounts, including all estimates related to depreciation.

iv. Any impairments or reversals of impairment related to the PPE.

b. Based on your findings in Part a, evaluate which company has provided more relevant and faithfully representative information. Justify this with your knowledge of the fundamental qualitative characteristics of financial information under the Conceptual Framework.

c. Based on your findings in Part b, recommend which company will be a better investment option due to the extent of the relevance and faithful representation of the disclosures on PPE.

d. Provide two (2) recommendations to improve the disclosures on PPE made by the company not chosen in Part c above so that they provide more relevant and faithfully representative information.

You need to attach a copy of the relevant parts of the annual reports showing the disclosures made by the company for asset values and impairment. Do not attach the entire annual report.