Advanced Financial Accounting Assignment (Doc)
Added on 2020-05-16
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Finance
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Running head: ADVANCED FINANCIAL ACCOUNTINGAdvanced financial AccountingName of the Student: Name of the University: Author’s Note:
1ADVANCED FINANCIAL ACCOUNTINGTable of ContentsIntroduction:...............................................................................................................................2Discussion:.................................................................................................................................3Firm’s disclosure to leasing for exploring compliance with relevant accounting standard:......3Analyzing the annual report of Acacia coal limited relating to lease disclosure:......................4Analyzing the annual report of Abilene Oil and gas limited relating to lease disclosure:.........5Firm’s disclosure of liabilities including provisions and contingent liabilities for exploringcompliance with relevant accounting standard:.........................................................................8Analyzing the annual report of Abilene Oil and Gas limited relating to liabilities disclosure:.9Analyzing the annual report of Acacia coal limited relating to liabilities disclosure:.............11Firm’s disclosure of earnings per share for exploring compliance with relevant accountingstandard:...................................................................................................................................13Analyzing the annual report of Acacia coal limited relating to earnings per share disclosure:..................................................................................................................................................14Analyzing the annual report of Abilene Oil and Gas limited relating to earnings per sharedisclosure:................................................................................................................................16Conclusion:..............................................................................................................................19Reference List:.........................................................................................................................20
2ADVANCED FINANCIAL ACCOUNTINGIntroduction:The report is prepared to explain and demonstrate the compliance of the companieslisted on Australian stock exchange concerning various particular areas. Selected companyfor illustrating the compliance disclosure are companies from energy sectors that is AcaciaCoal limited and Abilene Oil and Gas limited. Explanation of disclosure is done in severalareas such as leasing, liabilities that includes contingent liabilities and provisions and earningper shares. Report is prepared to explore the comparison of both the chosen organizations inareas of lease, liabilities and intangible assets. Evaluation of the compliance disclosure in theselected areas is done by conducting analysis of annual report of these companies. Acaciacoal limited is a public listed company on Australian stock exchange that is engaged indevelopment and exploration of coal and mine. It is based in West Perth in Australia. Onother hand, Abilene Oil and Gas limited is an oil exploration, production and developmentcompany having interest in oil operating assets based in South Melbourne in Australia. Forthe evaluation of the disclosure of accounting, standard requirement in respect of threeselected areas, which is leasing, liabilities and earnings per share is done by analyzing theirrespective financial reports. Discussion:Firm’s disclosure to leasing for exploring compliance with relevant accountingstandard:The accounting treatment for lease is currently treated under the standard AASB 117where the liability pertaining to lease relating to future payments is measured at present valueand it is discounted at the rate that is implicit in the lease. Lease incorporate the payment suchas fixed payment, amount that is payable under a residual value guarantee and leaseincentives that are deducted from payments. Two types of expenses are recognized over the
3ADVANCED FINANCIAL ACCOUNTINGlease terms and this involves depreciation on the right to use assets and the interest on leaseliabilities. For the operating lease, recognition of lease payment by lessor should berecognized as income on any systematic basis and on a straight-line basis. Costs of assetsshall be recognized by lessor including the depreciation that is incurred on the earning oflease as an expense (aasb.gov.au, 2018). The determination of whether the underlying assetsshould be recognized as operating lease for impairment and accounting for any impairmentloss should be done in accordance with IAS 136. Any considerable changes in carryingamount of the net investment of operating leases should be provided with a qualitative andquantitative explanation (Carlon et al., 2015). A maturity analysis of all the receivableconcerning lease payments should be recognized by organization. Disclosure requirementsleading to assets that are subjected to operating leases shall be done in accordance with theother applicable standards. Under the existing lease accounting standard, classification of lease is done to theextent of rewards and risks that is incidental to leased assets ownership with the lessee orlessor. Classification of lease as finance lease is done if the rewards and risks incidental toownership is transferred substantially (Hoggett et al., 2015). On other hand, if there is nosubstantial transfer of all rewards and risks to the assets ownership, then lease is regarded asoperating lease. Analyzing the annual report of Acacia coal limited relating to lease disclosure:It has been ascertained from the annual report of the companies that is Acacia coallimited and Abilene Oil and Gas limited that they currently comply with existing leasingstandard that is AASB 117. While evaluating the annual report of Acacia Coal limited, theinformation about leases is mentioned in the notes to financial statements. Acacia coal groupis required to comply with the minimum obligations concerning expenditures as specified by
4ADVANCED FINANCIAL ACCOUNTINGQueensland state government for maintaining the current rights of tenure to explorationtenements (acaciacoal.com.au, 2018). Exploitation of group related to lease forms the basis of future evaluation ofexpenditure and capitalized exploration. Currently the group is undergoing the assessment ofthe adoption of new leasing standard IFRS 16 and its influencing their operating lease. On theimplementation of the standard, there will be capitalization of right to use assets in thestatement of financial position that is measured at unavoidable future lease payments presentvalue to be made over the lease term (acaciacoal.com.au, 2018). Annual report of Acacia limited does not make a detailed disclosure of the lease in thenotes to financial statements. Company has employed the existing lease standard AASB 117,they are seeking adaption of the new lease standard that is AASB 116, and this will lead to
5ADVANCED FINANCIAL ACCOUNTINGelimination of classifications of finance and operating lease. There will be capitalization ofright to use assets in the financial statements that are subjected to exceptions and themeasurement is done using the present value of unavoidable payment relating to future leaseover the term of lease. Adoption of new lease standard will be providing several benefits tocompany relating to lease recognition (Narayanaswamy, 2017). Analyzing the annual report of Abilene Oil and gas limited relating to lease disclosure:Abilene has fifty percent net working interest in leases that covers approximately15000 acres of Wherry Oil fields and Welch Bornholdt. Company has announced it infinancial year 2015 about its agreement to fund exercise across the final and third option ofacquiring leases in some project. On other hand, the application of new lease standard byAbilene Oil and Gas limited, some of the expectations concerning the organization is relatedto short-term lease or lease hat are less than 12 months and leases of low value assets(abilene.com.au, 2018). There will be depreciation charge of leased assets and recognition ofleased liabilities as interest expenses. However, the expenses under the new standard will behigher as against expenses recorded under the AASB 117. There will be separation ofcomponents of principal and interest under the new standard. Company regarding the newstandard assesses changes and it is expected that there will not be any material impact on thefinancial statements. However, from the analysis of the annual reports of both the companies,it can be seen that there was not much information was provided regarding lease and theobligations to lease standard. Additional information was not made in the annual reportsrelating to leasing standard.
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