Introduction
This report proposes to review and evaluate the property, plant, and equity (PPE) disclosure and range of measures employed by two companies based in Australia, Adbri and Boral. The information for this statement was gathered from the annual reports released by the companies in 2018 and 2019. This paper will discuss and analyze the PPE disclosure of the two companies, compare the methods utilized to measure the amounts of the reported items, and provide recommendations to minimize discrepancies in the PPE accounts.
Methodology
Adbri PPE Disclosure
Adbri is a manufacturer of various construction materials, focusing primarily on cement. The company has 160 facilities in Australia, forming a substantial PPE portfolio (About us, 2020). The 2019 annual report estimates the value of PPE at 1,033.7 million Australian dollars (Adelaide Brighton Ltd, 2019). It showed a slight increase since 2018 when it was calculated at 1,024.6 million (Adelaide Brighton Ltd, 2018). The PPE is measured at its historical cost with subtracted accumulated depreciation and impairment losses (Adelaide Brighton Ltd, 2019). Furthermore, the amount includes any disbursement attributed directly to the purchase or acquisition (Adelaide Brighton Ltd, 2019). The expenses for maintenance or replacement of PPE are recognized separately (Adelaide Brighton Ltd, 2019). The devaluation is assessed by applying the straight-line method to assign the cost of PPE over its estimated useful lifespan with 20-40 years allocated to buildings and 3-40 years to plant and equipment (Adelaide Brighton Ltd, 2019). Overall, the methods employed by Adbri are valid and allow to measure the value of the company’s property, plant, and equipment.
Boral PPE Disclosure
Boral is an international company specializing in the production of construction products and materials. The company currently has three divisions with an extensive PPE portfolio (About Boral, 2020). According to the 2019 report, the total PPE value was estimated at 2,880.4 million Australian dollars (Boral Limited, 2019). In 2018 the overall amount was assessed at 2,782.1 million (Boral Limited, 2018). In both accounts, PPE is measured at “the cost of the asset, less accumulated depreciation and impairment losses” (Boral Limited, 2019, p. 106). The company also accounts for self-constructed PPE, with the general cost being the worth of the materials used, the price of labor, and expenses ascribed to the production (Boral Limited, 2019). The spending on the repair or replacement of a part of the company’s PPE is also considered (Boral Limited, 2019). Depreciation of the company’s property is calculated on a straight-line basis using assigned percentages for devaluation, with the value of buildings deflating at 1-10 percent a year rate and other assets depreciating at the rate of 1-5 percent (Boral Limited, 2019). All measures employed by Boral are valid and help to evaluate the company’s assets in full.
Discussion
Adbri and Boral utilize a similar approach to calculating the PPE value, albeit with a few inconsistencies. Both companies account for the initial price of the assets and take into consideration depreciation and impairment losses. Adbri does not include the cost of maintenance and replacement of PPE into its value, assessing it separately, whereas Boral accounts for any expenditures on repairments. It is unclear from Adbri’s report whether it possesses any self-constructed PPE as it is not calculated independently. Given the measures used, both companies are validated in adding assets to the list of PPE. Overall, Adbri and Boral present a detailed financial statement, and there is no need for further clarification of the total amount of property, plant, and equipment. However, Adbri would benefit from stating whether any of its PPE is self-constructed with an explanation of how its cost is evaluated and from expressing the rate of depreciation in percentages.
Conclusion
Adbri and Boral offer comprehensive annual reports, accounting for the companies’ tangible and intangible assets. Both businesses employ the same measures when estimating PPE and are validated in adding items to the list of property, plant, and equipment. However, Adbri should clarify whether the business utilizes self-constructed PPE and provide an explanation for the selected rate of asset depreciation as it is broad and may be unreliable.
Reference List
About Boral (2020).
About us(2020).
Adelaide Brighton Ltd (2018) Adelaide Brighton Ltd 2018 annual report. Web.
Adelaide Brighton Ltd (2019) Investing in the future: Annual report 2019. Web.
Boral Limited (2018) Boral annual report 2018.
Boral Limited (2019) Boral Limited annual report for the year ended 30 June 2019.