IntroductionThis paper seeks to present a detailed analysis covering presentation of non-current assets in financial statements of Sainsbury Plc. The first section is an overview of Sainsbury and the period this company presents its financial statements. This will be followed by an assessment covering on recognition, measurement, and disclosure of non-current assets in the company. The essay will then proceed to investigate whether information provided by published financial statements on non-current assets satisfy differentiated needs of users of such financial statement. To succeed in this analysis, it is imperative to note prescription provided by International Accounting Standards 2007 on presentation of financial statements.
Briefly, the paper will investigate whether Sainsbury follows IAS 2007 guidelines to the later. Overview of SainsburyFounded in 1869, the company has managed to develop more than 1000 stores. Sainsbury is sensitive to the needs of customers and places emphasis on nature of experience faced by customers during their shopping in the company. This aspect is reflected in both vision and goal of the company. According to Sainsbury (2012, p. 10), the company’s vision is “to be the most trusted retailer, where people love to work and shop”.
This company has registered success in all areas of focus i. e. food, general merchandise and clothing, complementary channels and services, property and new business, simply because of the strong culture and values. Despite intense challenges faced by retailers in 2010/11, Sainsbury remained profitable with a 6.8% growth in sales. As a public company, J Sainsbury trades its shares on London Stock Exchange. The company’s financial year normally ends in March, a time span of 52 weeks. Recognition, measurement, and disclosure of non-current AssetsNon-current assets include property, plant, and equipment in addition to goodwill and other intangible assets.
Guidelines on recognition, measurement, and disclosure of non-current assets are contained in IAS 16. This act outlines how property, plant, and equipment are supposed to be treated such that users of this information are in a position to understand the value obtained from investing in property, plant, and equipment. The standard further enables users of financial report to deduce changes that have taken place in these assets and the subsequent financial implications.
Some of the pertinent issues revolving around accounting treatment of property, plant, and equipment are variables such as deduction of carrying amounts, recognition, depreciation, and impairment of losses. RecognitionIAS 16 provides that a Company must set its recognition threshold of property, plant, and equipment and disclose it in the notes section of the financial statement (IASB, 2007). The threshold should not be too high or low since it will temper with quality of the information. If there were changes in recognition threshold, it must be disclosed in the financial statements.
Sainsbury has outlined clearly in notes to the financial statements recognition used by the company. Through various classifications of assets and valuation, it means that Sainsbury Plc has recognized non-current assets appropriately. MeasurementIAS requires publicly traded companies to record non-current assets in historical or fair value system. Besides, assets that fall under the same class must be measured using the same measurement basis. In applying the historic cost approach when measuring assets, a person is required to record in historic cost all assets under a class apart from land, building, and other items of property, plant, and equipment that are anticipated to live longer (IASCF & IASB, 2007).
The standard provides that fair value approach may not deviate from depreciated historic approach if non-current assets have short life. This forms the reason for the application of historic cost on classes of non-current assets with short useful lives. This is why infrastructure, land, building, heritage, and other long-lived assets were excluded in historical basis. IAS 16 goes ahead to stipulate that companies must record long lived non-current assets at fair values.