Accounting Theory Impairment policies of Aurizon

Question: Compare and contrast the compliance of the company with the IASB framework and its accounting standards in:a) how plausible is the applied impairment,b) how verifiable is the value declared, andc) the extent to which intangibles are off balance sheet but mentioned elsewhere in the annual report. Answer: Introduction Present study is focused on comparison and contrast of accounting policies adopted by Aurizon in preparation of financial statement with the framework of IASB framework and related accounting standards. For this aspect impairment and valuation policies of companies is considered in the report in order to comment of viability of financial statements. Main Body Impairment Policies of Aurizon In accordance with the Annual report of Aurizon, assets of the company are subjected to impairment each financial year. The company consists large portfolio of non-current tangible assets thus there is a high possibility of a reduction in haulage volume or constant improvements to the productivity of asset possibly will require some assets to be impaired (Huffman, 2014). Financial statement of the company shows impairment of $528 million in current financial year i.e. 2016. In a previous financial year, this amount was $20M. Due to impairment, profit of the company is reduced drastically. Significant Items related to impairments are Investment in Associates ($226M), Rollingstock ($177M) and Strategic infrastructure projects ($125M) (Annual report of Aurizon, 2016). Notes to accounts of annual reports provide a clear indication that AASB 136 and IAS 36 complies in an appropriate manner however reference of this standard is not provided in the explanation. Verifiability of Value Declared Value declared by Aurizon in their financial statements can be verified by the stakeholders as the company had provided accounting policies associated with it in detail manner (Barker, 2015). Further, valuation methods and justification are cited through which reader of financial statement can easily understand the accounting approach of the company and can verify the valuation by considering provided information (Annual report of Aurizon, 2016). Further, the company had recorded assets at is fair value by considering provisions of prudence in order to show true and reliable information to stakeholders. Valuation of assets is done by independent experts in order to ensure reliability and accuracy of financial figures cited in the annual report of the company. Intangible Asset as off-Balance Sheet Item By considering position statement of Aurizon, it can be noticed that value of the intangible asset is $190M in 2016 and in the previous year, it was $127. The company had not recorded intangible asset as off-balance sheet item. The company had complied with the provisions of AASB 138 and IAS 38. They had recognised the intangible by considering the fact that it provides future economic benefit to the business entity (Annual report of Aurizon, 2016). Further, proper treatment for amortisation and impairment is made by considering Australian Accounting Standards. Further, expense related to research stage are recorded in the income statement (Van Mourik and Katsuo, 2014). Further detail description of their policies regarding intangible assets with computations is stipulated in notes to accounts. Conclusion In accordance with the present study, the conclusion can be drawn that financial statements of Aurizon are in accordance with the framework of IASB framework and related accounting standards. The company had provided appropriate disclosure of their accounting policies to provide a better understanding of financial statements to stakeholders. References Books and Journals Barker, R., 2015. Conservatism, prudence and the IASB's conceptual framework. Accounting and Business Research. 45(4)Pp.514-538. Huffman, A.A. 2014.Value relevant asset measurement and asset use: Evidence from International Accounting Standard. 41(Doctoral dissertation, The University of Utah). Van Mourik, C. and Katsuo, Y., 2014. The IASB and ASBJ conceptual frameworks: same objective, different financial performance concepts. Accounting Horizons. 29(1).Pp.199-216. Online Annual report of Aurizon. 2016. [Online]. Available through https://www.aurizon.com.au/~/media/aurizon/files/.../annual%20report%202016.ashx . [Accessed on 19th December 2016].