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ACC510 (ATMC) Financial Reporting Study

   

Added on  2020-04-07

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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................................................................................................................................5Accounting Justification:................................................................................................................5Relevant Issues:.............................................................................................................................51.Impairment Test 31/12/16....................................................................................................5a.Calculations:.......................................................................................................................5b.General Journal Entries 31/12/16:.....................................................................................62.Impairment Test 31/12/17....................................................................................................6a.Calculations........................................................................................................................6b.General Journal Entries 31/12/17:.....................................................................................7Question 3. Case Study 6.1....................................................................................................................8Accounting Justification:................................................................................................................8Relevant Issues:.............................................................................................................................81.Difference between two phases:...........................................................................................82.Accounting for Research & Development:.............................................................................83.Decision / Conclusion / Reasons and Justification:................................................................8Question 4. Ex 9.19................................................................................................................................9Accounting Justification:................................................................................................................9Relevant Issues:.............................................................................................................................91. Deficit of Fund...........................................................................................................................92. Net Defined Benefit Liability......................................................................................................93. Net Interest................................................................................................................................94. Reconciliation..........................................................................................................................105. Summary Journal.....................................................................................................................10Page 2 of 11

Question 1. Case Study 3.1Accounting Justification:Paragraph 36 and paragraph 11 of the conceptual framework and Paragraph B2 of the AASB13 deals with the fair value measurement, recognition and disclosure. Fair value may bedefined as the amount receivable on the sale of the asset at the market price to the willingbuyer by the willing seller, both being the knowledgeable parties and the transaction beingtaking place at arm’s length price in a free market. [ CITATION Abb17 \l 1033 ] The concept ofcomputation of fair value is a subjective and debatable topic and keeps on changing basedon the assumptions, judgements and estimates being taken into account. It may changefrom person to person depending on the methods used based on the circumstances of thecase. The transaction cost that that is being incurred in selling an asset or transferring aliability in the principle market needs to meet the following 2 criteria in order to berecognised:1.It should be directly attributable to the entity.2.This cost would not have arisen had the entity not sold the asset or transferred theliability.Relevant Issues: The relevant issue in the given question is the calculation of the fair value in the real lifesituations and why does it vary so frequently based on the assumptions being taken. In casethe property, plant and equipment are being measured at fair value, the same is going tofluctuate a lot on different days based on computation being done by different people.[ CITATION Ale16 \l 1033 ] Fair valuation is generally being used for the non-financial assetsand it may be fairly difficult to get the exact and correct fair value for the assets being usedby aged old homes as the same asset will have higher value based on highest and best use.1.Highest & Best UseThe terminology highest and best use is defined as the best possible use to which the assetcan be put or the what is the highest value that can be extracted from the asset when it issold to the other market participant who puts it to the best economic use and gets themaximum benefit out of it. Further, while calculation of the fair value, 3 factors need to beconsidered namely the physical existence, the legal status of the transaction and thefinancial feasibility of the transaction. [ CITATION Das17 \l 1033 ].2.Application to aged care homeThe same asset may be valued at different prices in the open market based on the fair valuewhich may change depending on the assumptions and the use to which it is put to. Thesame asset may be valued low for an old age home whereas the same may be valued higherfor any commercial entity. But truly it should be based only on the exit price at the time ofmeasurement rather than the type of entity using it.Page 3 of 11

3.Two possible usesThe uses of fair valuation is huge and wide. It can be used for a variety of accountingpurposes like measurement of fair value at the time of impairment of tangible andintangible assets, determining the value of assets at the time of take-over of any entity,valuation of the inventory in the books, etc.Page 4 of 11

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