Assessment Guide ACC-ACF2100 Group Assignment Semester 1, 2022 Objective This group assignment aims to help you review the learning objectives in Topic 5 and Topic 6 and, at the same time, help you enhance teamwork skills, data analyst skills, and critical thinking. “Being able to collaborate and bounce ideas, concepts, and analyses off of your highly intelligent peers is invaluable. There is usually more than one answer in accounting – working with a team to understand the most appropriate solution is beneficial.” “Accountants need to perform analytics on large data sets to aid financial decision-making and visually display results from data analytics or other data sets, which is key for monitoring and reporting financial results to non-financial users.” —- Daniel Lever, Senior Audit Manager Introduction AASB 136/IAS 36 Impairment of Assets requires firms to perform impairment tests on assets when there is an indication that assets are not worth as much as they were previously. Regulators, standard setters, and the accounting profession point to the outbreak of COVID-19 as an indication of asset impairment. The ASIC stated that the values of assets would be one of its focus areas of regulation under COVID-19. 1 The AASB stated
that COVID-19 directly impacted asset impairment. 2 In a survey conducted by PricewaterhouseCoopers (PWC), 82% of Chief Financial Officers believed that COVID-19 had the potential to impact their businesses significantly. 3 Given the requirement of the accounting standards and the pressure from regulators and standard setters, we expect firms to impair their assets as they should during COVID-19. However, accounting theory suggests that firms may be reluctant to impair their assets under COVID-19 for at least two reasons. First, accounting theory suggests that accounting numbers are often written into the managers’ compensation contracts to encourage managers to work hard toward improving firm performance. For example, Woolworths Group links executives’ compensation to earnings before interest and tax. Management at Woolworths Group can earn higher compensation if they can produce higher earnings before interest and tax. Therefore, the measurement of income statement accounts would determine managers’ personal benefits. For this reason, managers are reluctant to impair assets because asset impairment entails the recognition of impairment loss into the profit/loss statement, resulting in a lower amount of profit and further a 1