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1. Financial Analysis
JB- Hi fi limited

2. Introduction
The assignment analyses the latest financial report of JB-hifi
limited, an ASX listed company in respect of revaluation and de-
recognition of property, plant and equipment and revaluation of
other non-current assets as well as the intangible assets and
goodwill of the company.

3. 1 Revaluation of Property , Plant and Equipment
• Items of property, plant and equipment revalued by the Entity in the latest
annual consolidated financial report 2015 and previous years are as
referred to in the current report.
• In 2015, plant and equipment was revalued downwards to the tune of $
1,119,000 on account of impairment loss.
• The impairment exercise has been carried out each year by the company.
It is difficult to obtain separate amount for depreciation and amortization on
a perusal of only the current year report as details are provided for clubbed
depreciation and impairment for previous years before 2015. In 2013, the
total amount accumulated as depreciation and amortization was $
93,096,000; in 2014 it was to the tune of $ 113,223,000. In 2015, the total
accumulated amount was $ 126,000,000.
• No impairment was done in 2014 as per the current report.

4. 1 Cont.
• This information has also been provided segment wise for the years 2014
and 2015. In 2014, the depreciation and impairment for Australia segment
was $ 33,304,000, while for the New Zealand segment it was 2,226,000
summing up to a total of $ 35,530,000. In 2015; it was $ 37,895,000 for
Australia and $ 2,348,000 for New Zealand summing up to total of $
40,243,000.
• The summary of significant accounting policies, part m provides details of
the methodology adopted for the impairment of assets by the company. As
per the note, Goodwill as well as tangible assets like property, plant and
equipment are assumed to have an indeterminate useful life. These are
not amortized and are subject to impairment by the company. This
exercise is also done where change in events and circumstances suggest
the need for impairment calculation The test is also carried out where
change of events or circumstances indicate that the amount that is being
carried cannot be recovered.

5. 1 Cont.
• Loss on impairment is identified when the asset’s book value exceeds the amount
it can be recovered for. The recoverable amount is taken to be the higher of the
item’s fair value less selling costs and the depreciated value on date as in use.
For calculating the impairment charge, the items of assets are grouped to the
level so as to be able to separately identify the associated independent cash
inflows from the asset. Non-current assets including plant and equipment that
suffered impairment in the previous years are monitored annually for possibility of
reversal.
• Thus the revaluation of assets has been attempted by the company in 2015 and
other previous years so as to accurately present the true value of these assets at
fair price devoid of the depreciation charge that represents the use and normal
wear and tear of the asset (plant, property and equipment in this case).
• To be noted that revaluation implies an upward as well as downward revision in
the book value of assets is identified in the income of the current year in which
the impairment took place. Thus, JB is complying with AASB 136 dealing with
impairment of assets in this regard. (Jbhifi.com.au, 2016)

6. 2 De-recognition of Plant , property and Equipment
• The summarized accounting policies used for the financials in the Annual report
2015 mentions in note s that an items of non-current assets ought to be de-
recognised whether on sale or where it is certain that may be of no further use to
the company. The profit or loss on such an event is basically the difference
between the sale receipts and the amount at which the asset was being carried
which is ultimately charged or recognized in the income statement of the
concerned year.
• A perusal of the financials of the company for the year reveals that disposals to
the tune of $ 4,530,000 took place during 2015 and $ 991,000 in 2014. The
proceeds from the disposal of plant and equipment are mentioned as $ 496,000
in 2015 and $ 674,000 in 2014 in the consolidated cash flow statement under the
Investing cash flows of the company.
• Other important point to be noted is that as per the report no asset has been
retired due to the establishment of the fact that the asset may be of no future
benefit to the company.

7. 2 Cont.
• The net loss on the sale of non-current assets (as mentioned in the reconciliation
statement of operating cash inflow to the income for the year) is $ 997,000 for
2015 and $ 382,000 for 2014 and has been charged to the income of the
respective years in the year which the assets were disposed of.
• Though the computations for the net loss on each category or asset group has
not been included in the notes, the computation is well in compliance with the
relevancy regulations particularly AASB 116 dealing with property, plant and
equipment. As such the carrying amount of all items of property, plant and
equipment that were derecognised as per the conditions specified for them to be
derecognized are treated accordingly. (To be noted that there was no recognition
as per criteria 2 dealing with DE recognition when expected future economic
benefits were exhausted as per the annual report in the current year as well as
relevant previous years. The gain or loss due to the DE recognition is recognised
as profit or loss when expected future economic benefits were exhausted.
• To be noted that as per the standard, the gain is to be classified as income rather
than revenue. However, in JB case, the disposals have resulted in a net loss to
the company in both the years.

8. 2 Cont.
• The company has disclosed in respect of each group of
property, plant and equipment, the basis of measurement,
methods of depreciation, schedule of depreciation rates with
useful life of each asset group, the carrying amount grossed
and the accumulated depreciation duly reconciled with the
opening and closing balances of the mentioned periods.
(Jbhifi.com.au, 2016)

9. 3 Intangibles and Goodwill
• The details of the type and number of assets regarded by JB as intangible was $
84,541,000 in 2015 and $ 85,218,000 in 2014 as per the balance sheet of the
company.
• The other intangibles recognised by the company include brand names and
trademarks, profit sharing rights and premium on location. The company
considers the technical and commercial life of these for the determination of
useful life and indefinite life. These assets are not subject to amortization and are
annually reviewed for impairment (as discussed in 1 above) and assessment of
the indefinite useful life assumption.
• The computations have been done as per the Australian cash generating unit
formula as the management intends to utilise these for the foreseeable future.
The recoverable amount is calculated on the basis of value in use.
• These assets have been shown in Note 14 for both the years at their opening and
closing book amounts. Brand names $ 43,094,000, location premium $ 2,388,000
and profit shares $ 3,542,000 in 2014. The carrying amount for these intangibles
has not changed for the current year 2015.

10. 3 Cont.
• The accounting treatment adopted for acquisition of goodwill which is also an intangible
asset is mentioned in the report. Goodwill is the excess of the cost at which a business
was acquired over the company’s share in the net identifiable assets computed at fair
value of the business on the acquisition date. Goodwill arising on acquisition of
associates is disclosed as part of investment in associates.
• Goodwill is monitored for impairment annually or before if required due to change in
circumstances. The profit or loss on the sale of a business include goodwill as well. It is
assigned to the cash-generating units on the basis of the expected benefit of the synergy
due to acquisition. The CGUs are also tested for impairment as described above.
• Where the amount expected to be recovered from the CGU is less than the amount at
which it is being carried, impairment loss on goodwill is assigned to the CGU first and
subsequently to the other assets on a pro rata basis. It is recognised immediately to the
income statement of the current year and will not be reversed in the next year. On
disposal, the attributed goodwill is included for calculating the profit or loss on the sale of
the CGU unit. The recoverable amount is calculated on the basis of value in use.

11. 3 Cont.
Goodwill as bifurcated in note 14 of the report for the CGU is as
follows:
• JB Australia $ 13,724,000 for both years
• JB New Zealand $ 13,669,000 for 2015 and $ 14,346,000 for 2014
• Impact records $ 1,727,000 for both years and
• JB solutions $ 6,397,000 for both years
The recoverable amount was calculated with a discount rate of 11%
for all the above except for New Zealand where it was 11.5%. The
discount rate was calculated on the basis of the company’s weighted
average cost of capital. Goodwill was $ 36,194,000 in 2014 and $
35,517,000 in 2015. (Jbhifi.com.au, 2016)

12. 4 Revaluation of Non- current assets
• Items of non-current assets revalued by the Entity in the latest
annual consolidated financial report 2015 and previous years are as
referred to in the current report. The instances where the group non-
current assets were revalued downwards are basically the same as
mentioned in 1 above.
• No case of upward revaluation was noted in the annual report for the
company. In addition, leasehold rights have also been tested for
impairment revaluation.
• The impairment exercise has been carried out each year by the
company. In 2015, plant and equipment was revalued downwards to
the tune of $ 1,119,000 on account of impairment loss.
• No impairment was charged to leasehold assets during the year.

13. 4 Cont.
• The summary of significant accounting policies, part m provides details of the
methodology adopted for the impairment of assets by the company. As per the
note, Goodwill as well as noncurrent assets like property, plant and equipment
are assumed to have an indeterminate useful life. These are not amortized and
are subject to impairment by the company. This exercise is also done where
change in events and circumstances suggest the need for impairment calculation.
The test is also carried out where change of events or circumstances indicate
that the amount that is being carried cannot be recovered.
• Loss on impairment is identified when the asset’s book value exceeds the amount
it can be recovered for. The recoverable amount is taken to be the higher of the
item’s fair value less selling costs and the depreciated value on date as in use.
For calculating the impairment charge, the items of assets are grouped to the
level so as to be able to separately identify the associated independent cash
inflows from the asset. Non-current assets including plant and equipment that
suffered impairment in the previous years are monitored annually for possibility of
reversal.

14. 4 Cont.
• Thus, the revaluation of assets has been attempted by the company in
2015 and other previous years so as to accurately present the true value
of these assets at fair price devoid of the depreciation charge that
represents the use and normal wear and tear of the asset.
• To be noted that revaluation implies an upward as well as downward
revision in the book value of assets is identified in the income of the
current year in which the impairment took place. Thus, JB is complying
with AASB 136 dealing with impairment of assets in this regard.
• To be noted that depreciation charge is not included as revaluation as the
charge is assumed to be due to timing and normal wear and tear. No other
revaluation has been noted in any other non-current asset for the company
as revealed from its latest annual report. The revaluation on account of
impairment as discussed above is in compliance with the accounting
standards applicable in this behalf in Australia as the company is listed on
the ASX stock exchange. (Jbhifi.com.au, 2016)

15. References
• Jbhifi.com.au. (2016). JB Hi-Fi | Australia’s Largest Home
Entertainment Retailer. [online] Available at:
https://www.jbhifi.com.au [Accessed 7 Sep. 2016].