Report on Financial Reporting and Accounting
Added on 2020-06-06
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ACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11) Evaluation of Net Realizable Value measurement model..................................................12) Evaluation of Fair Value measurement model...................................................................33) Discussing institutional that has impact on financial reporting in the context of Richtrend..44) Discussing social culture that has impact on financial reporting in the context of Richtrend65) Recommendations after concerning implications of differences between IFRS and USGAAP.....................................................................................................................................6CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
INTRODUCTIONIn the recent times, accounting has gained high level of importance which in turn helps inpresenting as well as recording the transaction in an effectual way. Now, each and every businessunit prepares statements by following the rules of IFRS and UK GAAP. Both such accountingstandards are highly significant which in turn helps in presenting the fair and reliable view offinancial information. Besides this, IFRS and US GAAP assists in including the feature ofstandardization and comparability in final accounts. The present report is based on Rich trendBhdis which is one of the leading well diversified multinational corporations of Malaysia. On thebasis of given case situation, such business unit has purchased two smoothies brand related toorange and mango flavour. In this, report will provide deeper insight about the financialreporting and accounting measurement issues which are facing by the firm. It will also shed lighton the institutional and social cultural factors that affect the aspect of financial reporting.1) Evaluation of Net Realizable Value measurement modelThere are several number the models and theories which are supportive for the individualand company at the time of purchasing new firm and equipment. By adopting such kinds of themodels the management easily able to derive that in the market up to which extent particularasset or firm has the value. In the present study Richtrend Bhd is going to purchasing two newbusinesses which are like Mangoes and Orangees which are operating in the food industry. Atthe time of taking decisions to buy such things it is highly necessary to determine value of theprovisions, assets and liabilities up to the greater level (Birkey and et.al., 2016). For this one ofthe best measurement tool is net realizable value (NRV) through which tangible and intangibleboth kinds of the assets can be valued properly. With the help of this particular model, companycan analyse value of current assets and liabilities due to having nature of cash convertible. Apartfrom this, it is generally used by the individual for making valuation of the accounts receivablesas well as the stock available within workplace.By adopting this particular model of value measurement, Richtrend Bhd can assess thathistorical and current cost of such both the recognised companies is at the which level. Aftermaking the valuation analysis the potential purchaser would be easily able to take final businessdecisions in the fruitful manner. In generally, when historical value is lower in comparison to thepresent then it can be said that its value increasing from the past year. Therefore, it can be1
assumed that, it will become more costly in the future by which it able to charge higher pricesand generate more profit at the end of year (Measurement Bases for Financial Accounting –Measurement on Initial Recognition, 2015). In this model of measurement, the accountsreceivables amount is converted into the form of cash at the time paying outstanding invoices bythe consumers to the firm. Along with this, in order to analyse the NRV various allowances forthe accounts of doubtful are also taken into consideration.In both the potential firms like Mangoes and Orangees, stock or inventory is availablewhich is a part of the current assets and easily convert into the liquid form. NRV is the bestmethod and tool for making analysis of the stock valuation which is supportive in terms of takingpurchasing decisions. In the country like Brazil also, this specific measurement model is adoptedand used for making analysis of the cash convertible assets and liabilities (Bowling, 2014).Further, if values of the Mangoes and Orangees both the enterprises are high and profitable forthe future then buying decisions of these firms will be the most fruitful. For making calculation of the NRV there are basically two concepts are considered by theaccounting framework which are such as inventories and accounts receivable. Moreover, theexpenses which are considered while deriving the NRV of stock are such as completion,exchanging or transporting as well as the selling or disposing of the inventory (Wong andMillington, 2014). The particular formula which is used in order to perform computation of theNPV is such as follows:Net Realizable Value = Stock market value – Expected cost of completion and sell ofgoods and servicesAt the time of making valuation of assets and liabilities of both potential brands likeMangoes and orangees, Richtrend will use net realizable value model. In this one issue arisewhich is that, such both brands belong from different country due to which measurementmethods also differ. The Richtrend has to follow rules of both the countries and in order toresolve this particular issue, he uses NRV method which is at the international level.The NRV model of assets and liabilities measurement comes under the InternationalAccounting Standards which is part of International Financial Reporting Standard. By takinghelp of this particular model, Richtrend able to resolve issue of measuring these both the2
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