Accounting and Financial Reporting: Explanation for Accounting Issues

Accounting and Financial
Reporting
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Table of content
Memorandum 3
Issue 1 3
Issue 2 4
Issue 3 5
References 8
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Memorandum
To: Daniel Ford (Director, Power ltd.)
From: Julia (CFO, Cargo ltd.)
Date: 1st March, 2019
Subject: Explanation for accounting issues
To resolve issues related with financial information and recognising assets and liabilities at
fair value here is the explanations. These are based on norms of AASB, corporation act etc.
Issue 1
First issue raised by board of directors of Power ltd is related with adjusting consolidated
financial statements at fair value. According to AASB standard 13 all assets and liabilities
are required to be measured at fair value. It is a market based valuation and not entity based
measurement (Hoque, 2018).
Market information and observable market transaction might or might not be available for
some assets and liabilities (Berger, 2018). Main objective of fair value measurement in
both the situations is to identify the rate at which orderly transactions are taking place
between market participants. It should be as per current market conditions. Concept of fair
value focuses on accounting measurement of assets and liabilities. This standard applied on
organisations that own equity instruments. AASB 3 includes standards for business
combinations. It happens in form of merger, acquisition etc. The main objective of this
standard is to improve reliability, relevance and comparability of financial information
provided by one business to another. There are several principle that helps the acquirer in
recognising acquired assets and liabilities of acquire (Dyckman and Zeff, 2019). It also
states that classification of financial assets and liabilities are measured at fair value. There
are certain measurement principles related with an acquisition. As per these regulations,
acquirer must measure identifiable assets and liabilities at their fair value on the acquisition
date. All other components related with non-controlling assets are also to be measured at
fair value until and unless Australian Accounting Standards requires other measurement
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