Westfield measurement, impairment and hedge accounting of financial

 

Westfield Corporation, ‘Westfield Corporation Annual Financial Report 2016’,
viewed 22 January 2016, .

Australian Accounting Standard
Boards 2016, ‘Conceptual Framework for
the Preparation and Presentation of Financial Statements’, viewed 20 Jan
2018, .

References

 

 

Summing up all, Westfield
has efficiently implemented Australian Accounting standards including GAAP in
its financial reporting and business practices. Certain new amendments have not
yet been adopted by the Corp. which the company has stated not to make
significant impact on its financial report. Though, it still needs to make the
terms and illustration simpler and less vague that will serve its stakeholder in
decision making.

The company has not yet
adopted the recently issued and amended AASB 15 which deals with the earnings from
contracts accumulated from customers which is set to get implemented by January
1, 2018. According to this standard company should apply to report valuable
information to the user of financial statements regarding the type, sum,
timing, and uncertainty of income and cash flows accumulated from a contract
made with a customer. According to the company, the adoption will not have a
significant impact on the amounts recognised in the current financial
statements. For the annual report 2016 the company has not adopted AASB 9
regarding financial instruments that includes, ‘the standards to improve and
simplify the approach for classification, measurement, impairment and hedge
accounting of financial assets and liabilities compared with the requirements
of AASB 139 Financial Instruments: Recognition and Measurement’ (p.46). The
company states that the implementation of this standard will not have a substantial
effect on the amounts recognised in the financial statement. Westfield Corp.
have not adopted amendments on IFRS 16 regarding leases which specifies the
recognition, measurement, presentation and declaration of lease. Furthermore,
other recent amendments made on accounting standards as a result of related
standards and annual improvement consisting AASB 2010-7, AASB 2013- 9, AASB
2014-1 and AASB 2014-10 are unlikely to affect the financial statement
significantly if in case restated on application of these new standards.
Westfield corporation still needs to focus on guiding the current investors and
potential investors by enhancing the understandability of the accounting
information by indicating precise data. Complex terms and jargon are seen in
the report which should be excluded or replaced with simpler terms to avoid
misleading information which would affect the decision making.

Westfield Corporation
applies GAAP on it’s financial reporting system. It follows the principles of
GAAP for its financial reporting which is clearly seen in the Annual Financial
Report for the year ended 31 December 2016. As stated on the statement of
compliance in the Westfield Corporation Annual Financial Report (2016), ‘the
financial report complies with Australian Accounting Standards and
International Financial Reporting Standards issued by the International
Accounting Standards Board and was developed on a historical cost basis, except
for investment properties, investment properties within equity accounted
investments, derivative financial instruments, financial assets which was
calculated at fair value through profit and loss and other financial
liabilities’ (p. 46). There is a consistency in the adopted accounting policies
in this annual financial report with those used on the annual financial report
prepared for the year 2015.  In addition,
the company has adopted the new or amended standards including AASB 2014-3
Accounting for Acquisition of interest in joint operation, AASB 2014-4
classification of Acceptable Methods of Depreciation and Amortisation, AASB
2014-9 Equity method in Separate Financial Statements, AASB 2015 -1 and AASB
2015-3 Withdrawal of AASB 1031 Materiality. Also, Westfield has adopted new or
amended standards which became applicable from January 2016 that comprises AASB
2015-2, Disclosure Initiative which was amendment for AASB 101. Westfield
Corporation Annual Financial Report (2016), ‘the financial report has been
prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the
Australian Accounting Standards Board’ (p.47).

Westfield corporation is
a multinational company that operates in many counties including Australia with
23,000 outlets across the world (Westfield Corporation Annual Financial Report,
2016). Westfield recognizes its revenue if that is probable and occur benefits to
the Group which also has a reliable dimension to measurement. It uses a straight-line
approach for the term lease to calculate rental income that accumulate from investment
properties while contingent rental income is termed as income in the financial
year it is accrued. Revenue from property management is recognised on an
accruals basis, in accordance with the terms of the relevant management
contracts. The recognition of the revenues and gains is done on accrual approach
(Westfield Corporation Annual Financial Report, 2016).

The identification and calculation
of a company’s income for a specific financial year is depicted in the
company’s income statement from the annual financial report. The income
statement from different companies vary based on its regulatory strategies,
operational structure and organizational category. Income statement of a
company will assist to recognize the company’s annual income as well as its
financial position. The Australian Accounting Standards Board(AASB) is the regulatory
body in Australia to set the standards and systems used by companies to determine
the earnings of the companies operating in the country.

GAAP is based on
established concepts, objectives, standards and agreements that have advanced
over time to direct the course of preparing and releasing the financial
statements. The major objective of GAAP is to provide valuable financial
information to stockholders, creditors, potential investors and other
stakeholders. GAAP consists of principles which deals with acknowledgement,
measurement, demonstration and disclosure of financial information. The central
philosophies of GAAP are its basic accounting principles that are constant and globally
recognized. It comprises of nuts and bolts techniques like the double-entry
method, which indicates that every single monetary exchange must be recorded
with a significantly equal no of entry on each side. This rule confirms that in
the balance sheet, the total amount on the assets side equals the total sum of liabilities
and shareholder equity. Also, it ensures that the amount a firm owns is the
amount that it owes to its investors. Other than this, it comprises of comprehensive
tools with comparatively subjective application. They consist of standardized set
of rules stated as the principles of regularity, consistency and sincerity.
Generally Accepted Accounting Principles helps in preparing standardized
financial report which ultimately results in the reduction of risk related to
fraudulence activities and transactional blunders. In the absence of GAAP,
companies will not produce truthful and precise economic information which is
needed to the company’s stockholders, creditors and other stakeholders.

Generally Accepted
Accounting Principles (GAAP) are the set of instructions, guidelines,
approaches, and techniques implemented by firms from a wide-array of industries
to formulate consistent and homogenous financial statements bringing
standardization in the financial reporting. GAAP is used by public as well as
privately-owned companies in Australia as part of their firm’s accounting
system to analyse, record and report economic activities and information in an
objective, impartial and unbiased manner.