Advanced Financial Accounting

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
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1ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Answer to question 1:......................................................................................................................2
Answer to question 2:......................................................................................................................5
References and bibliography:..........................................................................................................6

2ADVANCED FINANCIAL ACCOUNTING
Answer to question 1:
MEMORANDUM
Date: 17 September 2019
To: Angela Kirk, CEO of Wakefield Ltd
From: [Name, Designation]
Subject: Accounting treatment of investment in shares of companies
Introduction:
This memorandum is prepared to explain necessary accounting treatments for investment
in shares of companies in the financial books of accounts, and statutory requirements as per
accounting standards AASB9 and AASB10.
Investment in shares and degree of control:
Business organizations are always aiming at maximizing their wealth. With the increase
in volume of business and achievement of their short-term objectives, business organizations
intend to expand their business through various ways. Generic rout of business expansion is to
invest in capital asset and capitalizing surplus funds and reserves. Another way of business
expansion is to acquire a substantial controlling interest through acquisition of shares of an
existing company. It may always not happen that the target company will be a profitable
company. Sometimes, to gain a tax benefit, a loss making company can also be acquired by a