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Super Cheap Auto Case Study

In: Business and Management

Submitted By i983por
Words 1881
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Accounting analysis
By strictly complying with the AASB and relevant legislations, the financial reports of the SUL present a true and fair view of the underlying business reality of the company. The significant decrease of the net debt during the 2009/10 financial year, as emphasized in the Chairman’s report, was largely driven by the reduction of short-term cash advances (Super Cheap Auto Group Limited, 2010, p.3). To the group, cash advances have been drawn as a source of short-term financing on a needs basis. Therefore, they are likely to be part of the working capital of the group which must be recognized as current liability under AASB101. In this light, the flexibility for understating this liability is clearly limited. In addition, there are certainly more flexibility in the recognition of provision for impairment of receivables which is governed by AASB 137. The recognition involves the estimation of the possibility that the sub-tenants and wholesalers won’t be able to repay the receivables. Due to unexpected difficult economic situations in, $947,000 receivables were written off (Super Cheap Auto Group Limited, 2010, p.54). On the other hand, the group did have an accounting choice of not impairing another part of the trade receivables ($3,009,000) which were past due (Super Cheap Auto Group Limited, 2010, p.54). Moreover, other critical accounting estimates and judgements include the impairment of goodwill and the value of intangible assets relating to acquisitions. Due to the underperformance of Goldecross Cycles, the goodwill recognized upon its acquisition was impaired by 2 million (Super Cheap Auto Group Limited, 2010, p.58). The annual impairment test of goodwill as required under AASB 3 and AASB 136 involves the value-in-use calculation, which gives significant flexibility to the management in terms of the projection of cash flows and selection of…...

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