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ACC510 (ATMC) - Financial Reporting Task 2 - 2017 Major Assignment Semester 2 - 2017 Student Name: Campus

   

Added on  2020-03-16

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ACC510 (ATMC) - Financial ReportingTask 2 – Major AssignmentSemester 2 - 2017Student Name:Student ID #:Campus:

Table of ContentsQuestion 1. Case Study 3.1....................................................................................................................3Accounting Justification:................................................................................................................3Relevant Issues:.............................................................................................................................31.Highest & Best Use................................................................................................................32.Application to aged care home..............................................................................................33.Two possible uses..................................................................................................................3Question 2. Ex 7.14................................................................................................................................4Accounting Justification:................................................................................................................4Relevant Issues:.............................................................................................................................41.Impairment Test 31/12/16....................................................................................................4a.Calculations:.......................................................................................................................4b.General Journal Entries 31/12/16:.....................................................................................52.Impairment Test 31/12/17....................................................................................................5a.Calculations........................................................................................................................5b.General Journal Entries 31/12/17:.....................................................................................6Question 3. Case Study 6.1....................................................................................................................7Accounting Justification:................................................................................................................7Relevant Issues:.............................................................................................................................71.Difference between two phases:...........................................................................................72.Accounting for Research & Development:.............................................................................73.Decision / Conclusion / Reasons and Justification:................................................................7Question 4. Ex 9.19................................................................................................................................8Accounting Justification:................................................................................................................8Relevant Issues:.............................................................................................................................81. Deficit of Fund...........................................................................................................................82. Net Defined Benefit Liability......................................................................................................83. Net Interest................................................................................................................................84. Reconciliation............................................................................................................................95. Summary Journal.......................................................................................................................9Page 2 of 10

Question 1. Case Study 3.1Accounting Justification:Para B2 of AASB 13 deals with the concept of Fair valuation measurement and accounting. Fair value may be defined as the value at which an asset may be sold by the willing seller to the willing buyer in a rational free market at the arm’s length price. The topic has also been extensively covered in Para 11 and 36 of the conceptual framework of general purpose financial statements. The topic of fair valuation is a widely subjective and debatable one as it may vary from person to person and situation to situation based on the assumptions taken and the circumstances of the case. [ CITATION Abb17 \l 1033 ] It may see huge variations in values being computed by 2 different users as it depends on the estimates and judgements being taken into consideration. The transaction cost involved here in selling the asset or transferring the liability to the other party will only be recognised if following 2 conditions are satisfied:1.It should directly relate to the party.2.The transaction cost would not have been incurred if the entity had not decided to sell the asset or transfer the liability.Relevant Issues: In the given case study, the most relevant and critical issue is the determination of fair valueand how it fluctuates according to its use by the different entities. The value of PPE may differ entirely if based on the fair values as it has separate uses for a non-profit organisation and one which deals in profits. [ CITATION Ale16 \l 1033 ] Thus, it has to be seen that what is the best and the highest use of the asset relevant to the circumstance to determine the correct fair value.1.Highest & Best UseHighest and best use may be defined as how the non-financial asset can be put to the best possible use to extract the maximum economic benefit out of it. Or, if can be sold to the other party who has the ability to extract the best out of it or sell it at the best possible price. While using this concept, 3 things need to be considered. i.e., physical presence of asset, economic feasibility and legal status of the transaction. [ CITATION Das17 \l 1033 ]2.Application to aged care homeWhen the above principle is applied to the aged home care, the value of the assets may come out to be substantially less when the same is compared against the commercial or business entities. But, in true sense, the value of the asset or property should bot change according to who is using it but should be uniform based on the exit price in the market as on the final measurement date.3.Two possible usesFair valuation is the essence of modern day accounting and is used in wide areas like the determination of impairment amount of the tangible and intangible assets, inventory valuation in the books and several other reporting requirements as per IFRS framework.Page 3 of 10

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