This is a group assignment that I did with my degree classmates lately. I would like to share it with the world. I hope this is useful.
1. Compare the property, plant and equipment of the 2 SGX listed companies, Breadtalk Group Ltd and Soup Restaurant Group Ltd, using different model (cost model and valuation model) to discuss the differences in recognition, measurement and presentation. (IAS 16)
A company’s assets are vital, but cannot be easily liquidated. In most companies’ financial statements, Property, Plant and Equipment (PPE) would be treated differently from one company to another. This is because of improvements, replacements, and betterments (Melville, 2014). Based on IAS 16, PPE should be initially recognized at cost which includes necessary cost to bring the asset to working condition for its intended use (IAS Plus, n.d).
For Breadtalk Group Ltd, from 2012 to 2013, Breadtalk’s PPE increases from $157,408,000 to $225,860,000 worldwide (Breadtalk Group Ltd, 2013). In terms of presentation, these are reflected in the Balance Sheet as the net book values, following the basic requirement of IAS 16. Therefore, the historical cost and total depreciation of the PPE is not presented here. The yearly depreciation amount is reflected in the cash flow statement instead. The method used for depreciation measurement is based on straight-line basis (Breadtalk Group Ltd, 2013). A more detailed measurement for PPE is then disclosed further in Notes 10. In the notes, Breadtalk classified their PPE and recognise them based on different types which are Leasehold Property and Land, Machinery and Equipment, Furniture and Fittings, Office Equipment, Renovation, Construction-In-Progress and Electrical Works (Breadtalk Group Ltd, 2013). These PPE groups are recognised individually at cost price. Further measurements which in turn will derive to the net book values includes disposal values, write offs, reclassifications, attributable to assets held for sale and translation difference (Breadtalk Group Ltd, 2013).
Soup Restaurant Group Ltd presented two financial statements in their 2013 annual report which consists of company accounts and group accounts. The group accounts figures will be used for analysis to make a fair comparison with Breadtalk Group Ltd. In the Soup Restaurant Group Ltd.’s group accounts, under the non-current assets, their Plant and Equipment increases from $3,979,873 to $4,736,186 from year 2012 to 2013 (Soup Restaurant Ltd, 2013). These figures are also based on net book values. Unlike Breadtlak Group Ltd, this company’s depreciation amount is reflected in their Income Statement under “Depreciation and Amortization” instead of being grouped together with many other expenses. Just like Breadtalk Group Ltd, the depreciation of plant and equipment is reflected in their cash flow statement under non-cash expense. In 2013, Soup Restaurant Ltd stated that they used straight line method for their depreciation. In the notes, the company recognised their PPE at cost price and these prices are be grouped in air-conditioners, computers, electrical equipment, furniture and fittings, kitchen equipment, machinery, motor vehicles, office equipment and renovation (Soup Restaurant Ltd, 2013). Further measurements include additions, disposals, written off and exchange differences (Soup Restaurant Ltd, 2013) in order to arrive to net book values. This method is the same as Breadtalk also.Lastly, since this company presented their group accounts, for the purpose of consolidated of cash flows, calculation for the Group’s addition to PPE was being comprised as well (Soup Restaurant Ltd, 2013).
To sum up, in terms of presentation, Breadtalk did not prepare the consolidated account because they are not a parent company. However, Soup Restaurant is a parent company of the subsidiary account. In terms of measurement, Breadtalk own properties that should be revaluated in every few years. Soup Restaurant, on the contrary, does not own any property. Since there are no depreciation for properties, we can conclude that Breadtalk depreciation expense over its’ total value of PPE may be lower than Soup Restaurant as a certain bulk of their PPE comes from property ownership.
Breadtalk Group Ltd. (2013). Annual Report 2013. Retrieved 19 January, 2015, from http://breadtalk.listedcompany.com/misc/ar2013.pdf
IAS Plus. (n.d.). Deloitte. Retrieved 19 January, 2015, from http://www.iasplus.com/en/standards/ias/ias16
Melville, A. (2014). International Financial Reporting: A Practical Guide (Fourth Edition ed.). United Kingdom : Pearson Education Limited.
Soup Restaurant Ltd. (2013). Annual Report 2013. Retrieved 19 January, 2015, from http://souprestaurant.listedcompany.com/misc/ar2013.pdf