Advance Financial Accounting - Desklib

Running head: ADVANCE FINANCIAL ACCOUNTING
Advance financial accounting
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1ADVANCE FINANCIAL ACCOUNTING
Question 1
Answer (a)
Net comm. Wireless Limited is involved in the development of wireless machine to
machine, fixed wireless broadband, industrial internet of things and cable and fibre to the
technologies for distribution point. It operates through 2 segments – machine to machine
business and broadband business. The M2M business sector is specialized in development of
the technologies sold to the telecommunication carriers, system integrators, phone providers
and enterprise customers all over the world. On the other hand, the broadband sector provides
communication devices ranged from entry level to high level gateways (History | NetComm
Wireless, 2018).
Answer (b)
For the year ended 30th June 2017, Netcomm wireless did not make any investment in
other company’s equity shares.
Answer (c)
Financial instrument is the monetary contract among parties. It can be traded, created,
settled or modified. It can be cash, evidence of ownership interest in a company or
contractual right of receiving or delivering cash (Birt, Rankin & Song, 2013). Therefore,
investment in another company’s equity share that does not results into significant influence
will not satisfy the definition of financial instrument.
Answer (d)
Derivative is the contract among 2 or more parties and whose values are based on the
agreed upon existing set of the assets like index or financial assets like security. Common
existing instruments include currencies, commodities, bonds, stocks and market indexes.

2ADVANCE FINANCIAL ACCOUNTING
Forward contracts, future contracts, warrants and options are also regarded as the common
derivatives (Birt, Rankin & Song, 2013). For instance, the futures contract is the derivative
as its value gets affected through the performance of underlying contract. Therefore,
investment in another company’s equity that does not results into significant influence will be
considered as derivative financial instrument.
Answer (e)
Investment in another company’s equity will initially be recognized at cost and
subsequent to initial recognition it is adjusted for post acquisition changes in investor’s share
of investee’s net assets. Further, the investor’s profit or loss is inclusive of the share from the
investee’s loss or profit and other comprehensive income that includes the share of investee’s
other comprehensive income.