Accounting, Finance, SPSS Case Study: Company Accounting

Company Accounting
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Company Accounting
Company overview
Emperor Watch & Jewelry Ltd is headquartered in Hong Kong and listed in the Hong Kong Stock Exchange (HKEX) under stock code HKG: 887. It deals with jewelry and watches and operates retail stores. Emperor PLC’s products are mainly from European brands, including Rolex, Tag Heuer, Tudor, Vacheron Constantin, and Zenith.
HKFRS & HKAS
The Hong Kong Financial Reporting Standards (HKFRS) and Hong Kong Accounting Standards (HKAS), set the basis for measurement, recognition, presentation, and disclosures when dealing with transactions and events crucial in preparing financial statements.
Question One:
(i) Property, Plant & Equipment (PP&E)
(a) Nature of PPE Assets
These comprise illiquid physical and tangible assets such as land and buildings, fixtures and fittings, office equipment, and motor vehicles. The company applies the principles of HKAS 16 in accounting for PP&E.
(b) Changes to PP&E during the year
No land and buildings were acquired. The firm added leasehold improvements for HK$50,466,000, furniture, fixtures and equipment for HK$20,946,000. There were disposals of leasehold improvements worth HK$17,330,000 and furniture, fixtures and equipment disposals of HK$6,261,000. In the case of motor vehicles, there were no additions or disposals. There’s a loss on disposal of PP&E of HK$3,559,000, proceeds from the sale of PP&E of HK$328,000 indicating derecognition of fixed assets. HKAS 16 stipulates derecognition of the carrying amount of assets on disposal or non-expectation of economic benefits in future.
(c) Measurement basis
As per HKAS 16, PP&E items are measured at cost. As of 31st December 2019, the company had a carrying value of HK$1,850,058,000 worth of PP&E assets. The cost value of an asset less its accumulated depreciation charges or accumulated impairment losses gives us the net book value which appears in the balance sheet. The net book values also factor in the recognition of additions and derecognition of disposals.
(d) Disclosures
The company discloses, that straight line method is used to depreciate PP&E items, that some shops’ performance was below expectation leading to a conclusion that there was an impairment; that the recoverable amounts of Cash Generating Units (CGUs) were determined based on the value in use and that lease terms for certain shops would come to an end in the following financial period.
(e) Other significant issues
The management revealed that the leasehold land & building are located in Hong Kong, a key determinant of its value.
Emperor Watch & Jewelry Group is cognizant of foreign exchange risks in valuation of its PP&E items. Therefore, they factor in exchange realignment for all assets to readjust their values to the correct monetary value in local reporting currency.
(ii) Investment Property
(a) Nature of Investment Property
These are properties that a company holds as a right-of-use asset to earn rental income or appreciation, or both. The company could be the legal owner or lessee. HKFRS 16 is applied...