The aim of this research question is to develop a well-laid out report on “Financial Reporting Disclosures in Australian Corporate Sector” in close consideration to relevant accounting standards applicable in Australia. The primary objectives of this study is to summarise as well as comment on the “goodwill method” adopted and followed by the chosen companies along with synopsis on the “revaluation of assets”, “Non-Controlling Interests” and “Impairment of goodwill” conducted by the chosen companies. In order to fulfil the aims and objectives of the study, two ASX listed companies operating in two different business sectors namely “BHP Group Limited” operating within the “materials” industry or sector and “Woolworths Group Limited” operating within the “food and staples retailing’ sector or industry has been chosen (Asx.com.au., 2022). Finally, it is worth mentioning that all data concerning goodwill and its impairment along with revaluation of assets and NCI related data have been duly extracted from the annual reports of each company published in its official websites.

Firstly, mentioning about the adopted goodwill method by each company under consideration, the “AASB 3” first of all states that if there is an acquisition which took place, then in such a case the acquirer should separately recognise any assets acquired or any liabilities which have been assumed at fair value other than goodwill and such transactions will not qualify as goodwill. The accounting standard, “AASB 3’ also states that a goodwill can only be recognised if the consideration paid during the acquisition is above the net of fair value of “assets” acquired and assumed “liabilities” and “NCI’s (Aasb.gov.au., 2015).” Here, as per the mandates of “AASB 3”, the “Woolworths Group” have recognised goodwill at an excess cost of acquisition above the fair value of the assets arising and liabilities assumed from acquisition or consolidation. According to the data published by Woolworths in their annual report under notes in “Page number 102”, the “Group” only recognised goodwill if the cost paid in consideration for any acquisition is more than the fair value of the assets acquired and liabilities assumed along with assumed NCI’s as mandated by the “AASB 3.” Simultaneously, “BHP Group” have also religiously abided by the mandates of “AASB 3” where they recognised goodwill at an excess cost of acquisition above the fair value of the assets arising and liabilities assumed from acquisition or consolidation.

After mention about the goodwill, the revaluation of assets is also to be taken into consideration where according to “AASB 10”, if there is a previously recognised revaluation surplus through the “Statement of Comprehensive Income”, then that should be transferred to retained earnings after the disposal of the asset itself (Aasb.gov.au., 2011). This mandate has been duly followed by the BHP Group where they have specifically stated under page number 162 of their annual report 2021, that they had “Equity investment reserves” which was previously recognised through the “Statement of Comprehensive Income” have been duly transferred to the retained earnings after the financial assets was sold. The similar accounting treatment has also been followed by the “Woolworths” which too have “Equity instrument reserve” which have been portrayed within the “Statement of Comprehensive Income” but not transferred to the retained earnings as the asset is yet to be disposed or sold.

Now, mentioning specifically about the “Impairment of Goodwill”, the accounting standards applicable in Australia, specifically mandates that the carrying amount of the goodwill is to be recognised within the financial statements after deduction of the “Impairment” or “Accumulated amortisation.”  It is to be noted that according to AASB 138” there are two prime methods of measurement of intangible assets after recognition, one is “Cost Model” and the other is the “Revaluation model.” Under the “Cost model”, the asset is measured at cost and then the “Impairment loss and amortisation” is deducted from it to reveal the “carrying amount” of the intangible asset such as goodwill. While, under the “Revaluation model”, the asset after recognition gets carried on to its revalued amount which is the fair value at the date of revaluation (Aasb.gov.au., 2018). In the present case, both the chosen companies of “BHP” as well as “Woolworths” have followed the “Cost model” where they have deducted the “amortisation and impairment” from the cost of the intangible asset, “Goodwill” to find out its carrying amount in which it is listed on the “Balance Sheet.”

The “NCI” or “Non-Controlling Interests” according to “AASB 10”, refers to those shareholders who either own lesser than 50% of the outstanding shares of a company and do no possess the voting rights that is those shareholders cannot take part in the decision-making process of the company. It is specifically mentioned under “AASB 10” that the “NCI’s” must be properly accounted for within the “Consolidated Financial Statements” prepared by the companies as a part of the holistic reporting process. The “AASB 10” also mandates that the “NCI’s” must be portrayed within the “Balance Sheet” specifically within the “Equity” part prepared by the parent entity separately from the equity demonstrations of the parent company owners which is controlling interests (Aasb.gov.au., 2011). The “AASB 10” also mandates that the profit or loss which is attributed to both controlling interest as well as for “non-controlling interests” should be demonstrated separately within the “Income Statement” or “Statement of Comprehensive Income” The entity have to mandatorily reveal the profit or loss attributable to the “NCI’s” irrespective of the situation of profit or loss. Lastly, a parent entity is also mandatorily asked by the “AASB 10” to report for any changes to equity attributable to the “NCI’s” separately along with any consideration paid to the “NCI’s” if any within “Equity” itself. In the present case for BHP, the “Non-Controlling Interests” profit and loss have been duly portrayed separately within the “Consolidated Income Statement” and “Consolidated Statement of Comprehensive Income” prepared by the Group. The “NCI’s” have also been specifically and separately portrayed within the “Equity” section of the “Consolidated Balance Sheet” developed by the Group. Lastly, the net transfer to the “NCI’s” at fair value as mandated by “AASB 10” has also been separately done by the Group. Now, specifically mention about the second company in consideration, the “Woolworths Group”, they too have religiously followed the mandates of “AASB 10” where they too reported the “NCI’s” separately from the interests of the owners of the Group within the “Consolidated Income Statement”, “Consolidated Statement of Comprehensive Income”, within the “Equity” section of the “Consolidated Statement of Financial Position” and “Recognition” and “Recognition of put option over NCI” within the “Consolidated Statement of Changes in Equity.”

On a concluding note, it can be said that both the companies have equally complied with accounting standards in force within Australia especially “AASB 3”, AASB 10” and “AASB 138” in carrying out accounting and recording functions concerning goodwill, revaluation of assets, non-controlling interests and impairment of goodwill. Both the selected companies have recorded goodwill as the excess amount of cost paid in consideration of an acquisition over the acquired assets, assumed liabilities and NCI’s. The companies have timely revalued the assets especially of financial nature and transferred the surplus to retained earnings directly after the asset is disposed or sold. The “cost model” of impairment of goodwill is being followed by both companies as mandated by the relevant accounting standards. Finally, all accounting and reporting requirements as mandated by AASB 10 have been duly followed by both the selected companies.

Woolworthsgroup. (2021). 2021 Annual Report [Ebook]. Woolworths Group Limited. Retrieved 11 March 2022, from https://www.woolworthsgroup.com.au/icms_docs/195984_annual-report-2021.pdf.

Aasb.gov.au. (2011). AASB 10 Consolidated Financial Statements [Ebook]. Australian Accounting Standards Board. Retrieved 11 March 2022, from https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf.

Aasb.gov.au. (2015). AASB 3 Business Combinations [Ebook]. Australian Accounting Standards Board. Retrieved 11 March 2022, from https://www.aasb.gov.au/admin/file/content105/c9/AASB3_08-15.pdf.

Aasb.gov.au. (2018). AASB 138 Intangible Assets [Ebook]. Australian Accounting Standards Board. Retrieved 11 March 2022, from https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf.

Asx.com.au. (2022). Company directory. Australian Securities Exchange. Retrieved 11 March 2022, from https://www2.asx.com.au/markets/trade-our-cash-market/directory.

Bhp. (2021). Annual Report 2021 [Ebook]. BHP. Retrieved 11 March 2022, from https://www.bhp.com/-/media/documents/investors/annual-reports/2021/210914_bhpannualreport2021.pdf?sc_lang=en&hash=15F0B58BC27ADFA860F0BE29B61E199D.