Accounting Issues: Year Ending 30 June 2018

The article discusses the accounting issues faced by a company in Australia and suggests solutions. The issues include fixed selling price of assets and tax computation accuracy. The article explains the use of AASB 116, AASB 138, and AASB 112 in resolving the issues. The article is relevant for accounting students and professionals.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student
Name of the University
Author Note

1FINANCIAL ACCOUNTING
Martin Muller
Managing Director, Muppets Ltd
Level 13, 248 Adelaide Street,
Brisbane QLD 4000
13 March 2018
Re: Accounting Issues: Year Ending 30 June 2018
Dear Ellen,
I just received your letter and have noted the accounting issues you have informed to me and
for your information I have decided the various suggestions regarding the two issues for your
accounting team.
Issue 1
For the first issue where the director has fixed the selling price of the assets and the
production manager has rejected the idea of increasing the accumulated depreciation. The
company must adapt the accounting standard of AASB 116 property, plant and Equipment
that deals with account for plant and equipment and property (Kraal, Yapa & Joshi, 2015).
The principle value of the standard is to initially recognize the asset and treat the assets in
two process of revaluation and cost (Tran, 2015). The standard considers most of the
physical assets unless the asset is particularly covered by some other standard like the
inventory. The assets are recognized when future economic benefits are associated with it
(Steenkamp & Steenkamp, 2016). After the recognition process the assets value shall be
revalued. In the given scenario the value of the assets are to be revalued must be decreased
therefore it should be expensed unless it shows the reversal of a previous revaluation increase

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of the same asset in which case it should be debited to equity under Asset Surplus to the
extent of the previous increase. The company may even adapt the accounting standard of
AASB 138 that deals with account for Intangible assets.
The primary objective of this standard is to account the technique in which the intangible
assets or the non-monetary assets without physical existence are recognized, measured both
upon and post initial recognition and disclosed within financial statements (Hu, Percy, &
Yao, 2015). The standard outlines the treatment for both identifiable and non-identifiable
intangible assets, as well as those generated internally and externally. In the given scenario of
the value of the asset that is excess that amounts to $100000 can disclosed as intangible asset
as per AAAB 138 (Loyeung & Matolcsy, 2015).
Issue 2
For the given issue where the directors are worried that the tax computation at 30% is
accurate or not, the company must adopt the standard AASB 112 that allows the reporting
entity to account for income taxes, particularly the differences between tax law and financial
reporting. The concept of temporary difference has been discussed in this regard, which is the
difference of the carrying amount of an asset or liability and its tax base (Bugeja & Loyeung,
2015).
The calculation of the tax is done in accordance with the tax rates in Australia this is
currently 30%. The Current and deferred tax should be recognized as income or expense and
included in profit or loss unless it relates to a business combination or the transaction is
recognized directly to equity (Hanlon, Navissi & Soepriyanto, 2014). For calculating the
Current tax of the assets or the liabilities for the current and prior periods, it shall be
evaluated at the expected amount that are to be paid to recover from the authorities of
taxation, using the tax rates and tax laws that have been enacted or substantively enacted by

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the end of the reporting period. In this case while measuring the Deferred tax liabilities and
the assets shall be measured at the tax rates that are anticipated to apply to the period the
liability is settled or the asset is realized, on the basis of tax laws and tax rates that have been
enacted or substantively enacted by the end of the reporting period (Russell, 2017).
The various disclosures of the assets includes all items relating to tax should be
disclosed separately in the statements (Yao, Percy & Hu, 2015). Major items of tax expense
should be disclosed, including:
− Expenses of the tax assets
− The prior period adjustments
− The deferred tax amount of expenses or income that are related to the origination and
reversal of temporary differences
− The Expense amount of deferred tax that are related to changes in tax rates or the
imposition of new taxes
− The benefit amount arising from a prior unrecognized tax loss, tax credit or temporary
difference of a prior period (Bond, Govendir & Wells, 2016)
− The reversal of a prior write-down or write-down, of a deferred tax asset
− The tax income amount or expenditure that are related to alterations in the accounting
policies and error correction
Then comes the items that need separate disclosure:
− The total of the items that are reported directly in equity
− tax relating to each component of other comprehensive income
− A tax reconciliation profit to accounting profit or a description of the differences
−Changes in the Tax rate

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− The other details and the amount of deductible temporary differences, unused tax credits
and unused tax losses
− Temporary differences that are associated with the investments in subsidiaries branches
and associates (Tran & Zhu, 2017)
− Details of deferred tax assets.
According to the AASB 112 the tax assessment is done for the previous year at the
beginning of the covering period beginning on or after 1st January 2018 (Bodle, et al., 2018).
Earlier application is permitted for periods beginning after 24 July 2014 but before 1 January
2018. If an entity applies this Standard for financial statements covering periods beginning
before 1 January 2018, the entity shall disclose that fact.
Kindly note the solutions to the issue and implement the same in the process of
accounting.
Regards
Martin Muller
Email: [e-mail]

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References
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goodwill?. Journal of Contemporary Accounting & Economics, 11(3), 245-261.
Hanlon, D., Navissi, F., & Soepriyanto, G. (2014). The value relevance of deferred tax
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Russell, M. (2017). Management incentives to recognise intangible assets. Accounting &
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Steenkamp, N., & Steenkamp, S. (2016). AASB 138: catalyst for managerial decisions
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