Financial Reporting Analysis of Wesfarmers Company

Questions: 1. What Items of Receivables are Included Under the Classification Other Assets (Current)? 2. Does Wesfarmers Ltd Allow for Doubtful Debts on any of These Receivables? Answer: 1. Other current assets can be understood as the default classification of the current asset general ledger accounts, which encompass advances, paid by the company took its employees, suppliers along with the cash surrender value of the life insurance policies (Yahaya et al. 2015). From the evaluation of the balance sheet of Wesfarmers Company it has been gathered that the current assets of the company has increased in the year 2016 that is $m 188 in comparison to the year 2015 that was $m 296. Other current assets receivables classification includes accounts receivable or trade receivables of the company after deducting the doubtful accounts allowances. Wesfarmer Limited Company having other current asset receivables, includes income tax refunds, insurance claims and cash advances to the company employees. Under Wesfarmer Limited Companys current assets, it includes trade and other receivables encompassing debtors. Wesfarmers Limited Company has also considered that receivables serv e as their line of credit that is extended by the company and is due in a short time (McDonnell et al. 2015). 2. Doubtful debts are considered as those debts those a business or individual is not that likely to able to gather. Certain reasons for potential non-payment can encompass supply and delivery disputes, the product condition or the presence of the financial stress in the consumer operations (Norton 2014). Receivables are carried at the nominal accounts along with any provision for doubtful debts. Such provision for the companys doubtful debts is recognized at the time of collection of the full nominal amount that is no more probable. From the evaluation of the balance sheet of Wesfarmers Company for the year 2016, it was gathered that the company allows provisions for doubtful debts on its receivables (Ward 2013). The current liabilities of the company indicate that the bad debt provisions of the company have increased in the year 2016. Such doubtful debts increase on its accounts receivables indicates the acquisition of home base, restructuring in the safety, target and industry along with the impact of a decreased discount rate. Moreover, the bad and doubtful debts of Wesfarmers Company revealed that the trade debtors increased from the year 2015 that is 7,237 to year 2016 that is 10,562 (Wesfarmers.com.au. 2017). Moreover, the doubtful debts also appeared in the year 2016 from the finance advances and loans. Finance advances and loans those are past but are not that impaired falls under repayment of debt and is deemed probable relied on portfolio analysis along with risk modeling techniques. Wesfarmers Limited generates allowance for the doubtful debts through generating a credit balance that is balanced against the overall receivables observed in the balance sheet. For the doubtful debts, the company considers that the impairment allowance is recognized as doubtful debt that becomes uncollectable (Hastings 2015) . Moreover, Wesfarmers Company writes off the doubtful debt against the allowance account. Reference List Hastings, N.A.J., 2015. Introduction to asset management. InPhysical Asset Management(pp. 3-23). Springer International Publishing. McDonnell, J.B., Coogan, P.F., Hogan, W.E. and Vagts, D.F., 2015. Factoring and Lending Against Receivables Under Revised Article 9.Secured Transactions Under the UCC,1. Norton, A., 2014. Doubtful debt. Ward, K., 2013.Financial aspects of marketing. Routledge. Wesfarmers.com.au., 2017.wesfarmers.com. [online] Available at: https://www.wesfarmers.com.au/docs/default-source/results-presentations/2016/2016-full-year-results-supplementary-information [Accessed 5 Jan. 2017]. Yahaya, O.A., Kutigi, U.M., Solanke, A.A., Onyabe, J.M. and Usman, S.O., 2015. Current Assets Management and Financial Performance: Evidence from Listed Deposit Money Banks in Nigeria.International Journal of African and Asian Studies,13, pp.45-56.