A 1334$m and 1035$m respectively, recording the average depreciation

 

A financial statement or report for a year can provide meaningful data that a shareholder can use to evaluate their equity investments and help them make conversant decisions as how to vote on corporate matters. Also, the company management can use the report to make communication with outsiders, parties about the company’s progress and accomplishment.According the question and the report provided, the depreciation and the useful life of assets is the main topic of discussion. Depreciation is the allocation of the acquisition cost of an asset, less its estimated residual value over the assets ‘useful life. The useful life is the estimate of average number of years an assets is considered useable before its value is fully depreciated.The consolidated financial report for the year end 2017, Wesfarmers Limited provides us the average cost and depreciated amount of each assets; Property, Plant and Equipment which is according IAS16/AAS16 (Australian Accounting Standards).The table enlists Property into Freehold land and Buildings with cost of 1334$m and 1035$m respectively, recording the average depreciation of 26$m for building. The Freehold land being a “free hold” has no depreciation.Plant and Equipment also divided into three assets; Leasehold improvements, Plant and equipment and Mineral lease and development recording cost of 1773$m, 13544$m and 1010$m and the depreciation expense is 127$m, 933$m and 22$m respectively. These recorded data are the disclosure of the rate of depreciation, Accumulated depreciation and the cost can provide a reader the Average percentage of useful life i.e. Accumulated depreciation/Average recorded cost and Average useful life i.e. Average cost/ Depreciation expense. These equation is useful for decision making when non-current assets haven’t been revaluated or when an entity has failed to disclose the useful life in vague.Hence using the equation the average useful life of a non-current assets can be determined, which hasn’t been actually disclosed in the report directly.
Average useful life (in yrs) = Average cost                                                              Depreciation expense

For Building, Average useful life = 1035/26                                                           = 39.80 years In this way we can calculate average useful life of  other assets.

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The Amount of depreciation charged on these assets for the current year and the prior year has total of 1108$m and 1162$m respectively. There isn’t any difference in depreciation charged for the buildings and has depreciation amount of 26$m for both years 2016 and 2017. For leasehold improvements the depreciation amount has been increased from 124m$ in 2016 to 127$m in 2017, an increment of 3 million dollars. However, Mineral, lease and development and Plant, vehicles and equipment has been able to decrease the amount of depreciation charged form 959$m to 933$m and 53$m to 22$m from year 2016 to 2017 respectively. This shows that the average depreciation amount has been decreased and by 54$m within a year.Therefore, the financial report illustrates that the useful life of the non-current assets is or can be  increased by additions or revaluation of the assets.