Accounting Analysis of Worley Parsons

Topics: Asset, Balance sheet, Depreciation Pages: 6 (1647 words) Published: May 14, 2012
Accounting Analysis, including:
 an analysis of the company’s accounting policies that are likely to affect interpretation of its financial reports (at least 3 policies)  a comparison to those of a competitor in the same industry. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments. WORLEYPARSONS

WorleyParsons uses several estimates and underlying assumptions. One of these is with regards to goodwill and intangible assets with identifiable useful lives. Identifiable intangible assets with finite lives are carried at cost less accumulated amortization and adjusted for an accumulated impairment loss. The assets are assessed at each reporting date as to whether there is any indication that the asset may be impaired. Goodwill is an intangible asset with an indefinite life which is tested at least twice a year for impairment. The recoverable amount test is based on a value in use calculation. These calculations use cash flow projections based on financial forecasts of how the business is expected to operate based on current performance and the business environment but taking into account expected future changes. The goodwill allocated to the groups of cash generating units (CGUs) and the key assumptions used for impairment testing are as follows:

The first five years forecast cashflows are based on management’s estimates of the short and long term prospects for the industry and previous experience. The growth rate beyond five years is assumed to be 3% per annum. The calculation of value in use for the cash generating units is most sensitive to the following assumptions: • growth rates used in years 1 to 5;

• change in discount rates; and
• long term growth rate.
Paladine Energy
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in the Income Statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on the intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.

A summary of the policies applied to the Group’s intangible assets is as follows:

Right to use water and power supply

Useful lives

Life of mine...
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