(PDF) Accounting Policies and procedure

Accounting Policies
and Estimates on
Property, Plant and
Equipment

EXECUTIVE SUMMARY
The report defines that accounting treatments for plant, property and equipment in an
accounting year which includes professional judgement and their influence on measuring the
amount of PPE. Components of property, plant and equipment are evaluated as per the cost
which is than less accumulated impairment losses and accumulated depreciation.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION ..........................................................................................................................4
TASK...............................................................................................................................................4
A) Professional judgement can impact accounting policies and estimates............................4
B) Accounting policies and estimate uses to measure PPE....................................................5
C). Critically evaluate whether the professional judgement applied in accounting estimates
and policies of PPE.................................................................................................................5
D). Recommendation..............................................................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES ...............................................................................................................................8
Appendix..........................................................................................................................................9

INTRODUCTION
Accounting strategies are really the particular rules and processes introduced by the
manager of a firm which are used to develop financial accounts (Bergmann, 2012). Accountant
of an organisation makes use of different accounting standard and principle to prepare and
present the best authentic financial statements so that stakeholder are able to make following
decision. In this report Cardno Limited have been selected that mainly provides services which
are related with developing and improving social and physical infrastructure for communities at
global level (About Cardno limited, 2019).
In this project, discussion on professional judgement can impact accounting policies,
accounting estimates used by
company to measure PPE and appropriate recommendation have been discussed.
TASK
A) Professional judgement can impact accounting policies and estimates.
AAS prepare accounting strategies established by the AASB resulting in financial
statements comprising appropriate and accurate data on the operations, other activities and
circumstances to which they relate. An organization shall continuously select and execute its
accounting strategies for equivalent activities, other situations and circumstances, except “if
specifically required or authorized by an Australian Accounting Standard to categorize products

for which different strategies may be suitable” (Goebel, 2015). It is observed that an organisation
should modify their accounting policy in case only, if it is advised by Australian Accounting
standard or outcomes in financial reports gives accurate and more appropriate information on the
impacts of operations, other occurrences or circumstances on the economic situation, financial
performance or cash flow of the entity. In the absence of appropriate AAS accountant uses its
professional judgement that support in applying and developing suitable policy which gives
reliable outcome in information such as:
 Related to the financial decision-making needs of stakeholder
 demonstrate the actual financial position, performance and cash flow of company
 represent the transaction are neutral, prudent and are complete as per the material
concepts.
B) Accounting policies and estimate uses to measure PPE.
“AASB 116, is a standard related to treatment of plant, property & Equipment that
enables users of financial reports that can distinguish information about company investment in
their property, plant and equipment and relevant modification within an accounting year”,
(Australian Accounting Standard 116, 2019). In the Cardno Limited the items plant, property and
equipment are basically measured at low cost which is less than accumulated depreciation and
impairment losses. Cost involves spending straight related to the asset's purchase. The price of
self-built property involves the expense of equipment and direct labour, any other expenses
directly related to a working condition of the asset (Taplin, Yuan and Brown, 2014). The cost of
scrapping and eliminating products and rebuilding the place where they are situated and the cost
of capitalizing lending. As portion of that machinery functionality is capitalized which is
essential in the context of specific equipment's or plant. Initial costs were included in the
carrying proportion of asset or are recognized as a distinct asset whenever long term economic
advantages are associated with that particular product. these are likely to flow within Cardno
limited that makes easier to reliable measure the cost of such item. The treatment for amount
spend on replacing any part of these items are de-recognised. “Depreciation is computed on the
quantity of depreciation” (Brief, 2013), that is the expense of an asset or certain amount replaced
by cost, less its resale value. this amount is recognized in profit or loss according to straight-line
methods over each portion of a land, plant and machinery item's projected helpful life. Rented
assets would be amortized for the short term as well as their valuable lives if it is fairly certain

that Cardno limited will acquire possession at the end of lease period. Land is not devalued or
depreciated.
It is also observed that in case if once, plant, property and equipment's are classified for
sales than these item are not entitles to amortised or devalued. In every reporting period
accountant of respective company use to make modification in depreciation method, resale value
and overall lives of plant, property and equipments. Any other renovations or repairs amount
throughout the accounting era are awarded to profit or loss account in which they occurred.
C). Critically evaluate whether the professional judgement applied in accounting estimates and
policies of PPE.
Yes, it has been critically evaluated that from the Australian accounting standard each
and every judgement that are applied to accounting estimate and policies of plant, property and
equipment. As it is observed that the original implementation of the accoutring strategy is to
liquidate assets related to AASB 116 Property, “Plant and Equipment and there is a shift within
the accounting strategy that is related with reassessment applicable to AASB 116 instead of
previous Norm” (Needles, Powers and Crosson, 2013). It is very much essential for companies to
disclose the financial statements which define the accurate information about plant, property and
equipment such as:
 The measurement bases used for determining the gross
carrying amount.
 Depreciation methods used.
 The overall life and depreciation rate used
 Gross amount and accumulated depreciation
in the beginning and end of the period related with PPE.
 Total of reconciliation amount that specific accounting year.
 Existence and quantities of property and assets, plant and equipment constraints promised
as liability security.
 The sum of expenses identified in the carrying quantity of a property, plant and
equipment item during construction.
An organization prepare reports according to “AASB 108, thus existence and impact of a
change in accounting estimate have its impact in the reporting year or is anticipated to get an
affect in corresponding periods of the values of PPE” (Hodgson and Russell, 2014.). These

disclosure may occur for property, plant and equipment from modifications in projections that
regard with residual values, actual lives, depreciation methods and the predicted cost of
dismantlement or removing and replacing any part of PPE. According to the industry norms,
property, plant and equipment are the tangible assets which are mainly hold by company that are
used within the production process or even supply of goods and services, used for rental and
administration purposes and are expected to be remain within company for more than a year
(Nobes and Perramon, 2013). It is very much essential for an organisation to choose the suitable
cost model or revaluation model in the context of accounting policy that must be applied to each
and every class of plant, property and equipment.
D). Recommendation.
From the annual report of Cardno limited, it has been recommended that to get more
reliable results and identification as an asset, a property, plant and equipment product whose
book value could be efficiently assessed and shall be held at a depreciated amount which is less
than any subsequent amortisation amount at the valuation date.
CONCLUSION
In the conclusion of this report, it has been concluded that accounting policies and
standards are beneficial to be implemented within an organisation by internal accountant while
preparing financial statements. These accounting norms and suitable IFRS for respective AASB
are helpful to prepare more accurate and authentic financial accounts that defines the reliable
information to stakeholder. AASB 116 is a standard that is helpful for prescribing the accounting
treatments of plant, property and equipment so that potential user can get the meaningful
information about these items.

REFERENCES
Books and Journals:
Bergmann, A., 2012. The influence of the nature of government accounting and reporting in
decision-making: Evidence from Switzerland. Public Money & Management. 32(1).
pp.15-20.
Goebel, V., 2015. Estimating a measure of intellectual capital value to test its
determinants. Journal of Intellectual Capital. 16(1). pp.101-120.
Needles, B. E., Powers, M. and Crosson, S. V., 2013. Financial and managerial accounting.
Nelson Education.
Nobes, C. and Perramon, J., 2013. Firm size and national profiles of IFRS policy choice.
Australian accounting review. 23(3). pp.208-215.
Taplin, R., Yuan, W. and Brown, A., 2014. The use of fair value and historical cost accounting
for investment properties in China. Australasian Accounting, Business and Finance
Journal. 8(1). pp.101-113.
Hodgson, A. and Russell, M., 2014. Comprehending comprehensive income. Australian
Accounting Review. 24(2). pp.100-110.
Brief, R. P., 2013. Depreciation and Capital Maintenance (RLE Accounting). Routledge.
Online
Australian Accounting Standard 116. 2019. [Online]. Available Through:
<https://www.legislation.gov.au/Details/F2005C00133>.
About Cardno limited. 2019. [Online]. Available Through:
<http://www.annualreports.com/Company/Cardno-Limited>
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Appendix
Statements of financial Position
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