Advance Financial Accounting

Running head: ADVANCE FINANCIAL ACCOUNTING
Advance Financial Accounting
Name of the Student
Name of the University
Author’s Note

ADVANCE FINANCIAL ACCOUNTING2
Answer to question 1
Memorandum
Date: 6 September 2019
To: Angela Kirk, Chief Executive Officer of Wakefield limited
From: Ross May, Chief Accountant
Subject: Accounting requirement for the proposed investment
Introduction
The main purpose of this particular memorandum is to explain as well as the accounting
requirement for the investment that has been proposed for purchasing the investment
from the company that is Hobson limited.
Accounting requirement of investment
Accounting for the investment is important for an organisation as it includes the overall
accounting treatment that is to be sourced or followed during the time of selling and
purchasing certain kind of investment from a different organisation. In the case that has
been provided in this particular study points out the process of purchasing a certain
amount of investment form another company along with mentioning their accounting
treatment (Lara, Osma & Penalva, 2016). Angela Kirk has been appointed in the post of
Chief Executive Officer of Wakefield limited that would consider the recent consideration
of the company in their normal course of business. Angela Kirk has the planning to buy
the shares of Hobson limited for which the company is required to examine their
available financial statement that has already been prepared by the company. The
inclusion of debt instrument that has been classified under AASB 9 that deals with
financial instruments along with equity instruments (Magnan, Menini & Parbonetti,
2015). The investment of the company that are associated with the business would be
more profitable and for this particular reason, Angela kirk has chosen Hobson limited for
acquiring certain amount of investment.

ADVANCE FINANCIAL ACCOUNTING3
Angela Kirk has proposed the investment process that would generally involve the
purchase of certain amount of shares that would be effectively profitable for the
company. Shares that are issued by the company would involve the process of
accounting that would reflect in their books of accounts (Tayeh, Al-Jarrah & Tarhini,
2015). The total amount of shares that would be purchased by Wakefield limited from
Hobson limited varies from 5 % to 70 % of holding shares of the subsidiary company.
Angela Kirk is interested in this type of investment that would be performed in the
business perspective of Hobson limited as each particular shares is equivalent to one
single vote for the general meeting. This particular one vote would be beneficial during
the time of annual general meeting for selecting the directors of the company ( Yu &
Wahid, 2014). The treatment of accounting for the process of investment includes
paying more than $ 1000000 for acquiring the debt instrument that would assist in the
process of allocation of fund. Moreover, it also includes the operating leases which
points out different types of investment that would be accounting for the overall process
of investment in the company and business courses.
Accounting for investment
The treatment for accounting in the process of acquiring of investment is reflected in the
financial statement of the company and is required to be disclosed with certain
standard. The total amount of interest that is to be recognised by the company is to be
covered by the accounting standard 9 that helps in measuring the total amount of
revenue which has been earned by the business (Ruch & Taylor, 2015). As per the
case study, the acquiring of investment form the company that is subsidiary in nature
would be reflected in the statement of financial position also known as the balance
sheet that is mainly prepared by the management of the company. The investment from
Hobson limited would be acquired by the Wakefield limited for the proposed investment
along with allocation of resources that are effective in nature (Butler & Ghosh, 2015). It
also helps the company in gaining certain amount of interest from the investment that
has been made in the business.
Recognition of profit