Superannuation Accounting Journal Entries
Added on 2020-02-24
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ACC510 - 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:..........................................................................42.Impairment Test 31/12/17..........................................................................................4a.Calculations..............................................................................................................4b.General Journal Entries 31/12/17:..........................................................................4Question 3. Case Study 6.1........................................................................................................5Accounting Justification:.....................................................................................................5Relevant Issues:..................................................................................................................51.Difference between two phases:.................................................................................52.Accounting for Research & Development:..................................................................53.Decision / Conclusion / Reasons and Justification:.....................................................5Question 4. Ex 9.19....................................................................................................................6Accounting Justification:.....................................................................................................6Relevant Issues:..................................................................................................................61. Deficit of Fund.................................................................................................................62. Net Defined Benefit Liability...........................................................................................63. Net Interest.....................................................................................................................64. Reconciliation..................................................................................................................65. Summary Journal............................................................................................................6Page 2 of 14
Question 1.Case Study 3.1Accounting Justification:A conceptual framework is a framework that aims to provide a distinct idea about the concepts that are needed in order to prepare accounting statements in the fair view accounting method. It is completely imperative to highlight in the framework that fair value is of two types namely the fair value view and the alternative view. The Fair Value View is such that it assumes markets to be perfect in nature and that the investor requirements are fulfilled by deriving the fair value from the current market prices. The Alternative View assumes imperfect and incomplete markets and that investor needs should be met even in such a situation.Therefore the primary aim of the fair value model is evaluating the transaction cost of selling an asset that would take place in an open market by deriving the fair value from the current market prices.AASB 13 has established a framework structure which is appropriate for fair value accounting system and is permitted by Australian Accounting Standard (AAS).According to the terms of AASB 13, the term fair value is defined as the price or amount that is taken in as a result of selling an asset or the payment done in order to forward a liability in accordance to a transaction that isorderly in nature among the differentmembers of the market at the measurement date. While the consistency of the concepts of fair value accounting are well maintained but AASB 13’s framework provides further clarification and guided application procedure. However, AASB 13 makes no attempt to remove the judgment that is used for estimating fair value.Relevant Issues:The issue at hand that has been mentioned in the question is that if the example of an aged- care home is taken into account. In the example it is further mentioned that if the building is broken down into a block of flats then the carrying amount would be $10 million for the asset account in the books of accounts, but this value is not real because the aged-care home is built for altruistic purposes. Thus with proper reference to the above mentioned issue the following questions are answered.1.Highest & Best UseThe concept of highest and best use refers to the assumption that the current use of an asset is being done in accordance to the highest and best possible use unless different factors of market conditions imply that usage of the asset in a different way by the participants of the market would increase its valuation.The highest and best use of a non-Page 3 of 14
financial asset takes into account the use of the asset that is possible physically, legally permissible and is a financially feasible project.2.Application to aged care homeThe usage of highest and best use strategy to aged care homeis applicable or notdepends on four conditions that must be fulfilled in order to whether the project is financially feasible, physically possible, legally permissible and maximally productive. 3.Two possible usesThe two possible uses are market approach and income approach.The market approachinvolves valuation techniques at par with the market prices and other types of market data obtained from observing the nature of transactions for the same assets. The market approach makes good use of prices and information that is linked, generated by market transactions.The income approach leads to conversion of amounts in the future (for instance cash flows) to a discounted amount. When the income approach is made use of, the fair value measurement gives a better view of current market expectations about those amounts that will arise in the future.Page 4 of 14
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