Academic Writing

For the assignment, you are required to choose a company that operates in one of the following three business sectors: • Retail • Food and beverage manufacture • Hotels The company you select should have its equity share capital listed on a stock exchange. It should publish its annual financial statements and annual report in English, and the most recent financial statements and report in English should be accessible on the company’s website. If the company operates in several business sectors, its main activity should be one of the three business sectors listed above. If you are uncertain whether your chosen company meets these requirements, please check with the course co-ordinator. You are required to write a report of around 2,000 words (excluding the reference list and excluding any factual material about the company included in appendices), which covers the following three aspects: (a) Identify the principal types of non-current (fixed) asset owned by your chosen company (depending on the company chosen, these may be intangibles or tangibles, or both – if there are many different types of non-current asset, restrict your report to the three most significant types of asset). (b) Discuss the problems that your chosen company is likely to have to deal with in order to measure the fair value of the types of asset you have identified. (c) Comment on whether the IASB’s approach to fair value measurement is actually practical for companies with non-current assets that are not actively traded on broad and deep markets. In writing your report, the following guidance may be helpful: (1) A report will normally have an introduction, several sections each with an appropriate heading or title, and a conclusion. (2) The context of the assignment is the International Accounting Standards Board’s preferred measurement basis for financial reporting, which is fair value. This is defined in IFRS 13 Fair value measurement as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The IASB makes it clear that fair value is a market-based measurement, not an entity-specific measurement. This may make sense for an item that is actively traded on broad and deep markets, but it is more of a problem for items that are not actively traded. (3) A useful summary of IFRS 13 is available from the IAS Plus website: [login to view URL] It is worth looking at this summary to note some of the issues involved in fair value measurement. In particular, think about the need for fair value measurements to be “market-based” rather than “entity-specific”. That is, the measurements should reflect the “highest and best use” of an asset from the perspective of “market participants”, and should not take into account any special benefits that a particular owner can achieve. (4) The three sectors suggested all have companies with significant non-current assets that are highly specific to the companies concerned. Although it is unlikely that the assets need to be measured at fair value on a recurring basis for financial reporting purposes, companies must assess whether there has been an impairment that would require the carrying value of a specific asset to be reduced. One of the bases of assessing the new amount at which the asset is shown is fair value. Hence, your chosen company may disclose information about how it determines fair value for impairment testing purposes, even if it does not actually report many assets in its balance sheet at fair value.