Assignment ACC210(ATMC) Financial Accounting

ACC210(ATMC) - Financial Accounting
Task 2 – Major Assignment
Semester 2 - 2017
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Student ID #:
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TABLE OF CONTENTS
Question 1..................................................................................................................................4
Measurement of fair value.........................................................................................................4
Determine subject of measurement........................................................................................4
Determine valuation premise/method.....................................................................................4
Determination of market........................................................................................................4
Determine Valuation technique..............................................................................................5
Question 2..................................................................................................................................5
1. Calculations & General Journal Entries 1/7/16 to 30/6/17:................................................5
Working Note:....................................................................................................................6
2. Calculations & General Journal Entries 1/8/18:.................................................................8
3. Calculations & General Journal Entries 30/6/18:...............................................................8
Question 3................................................................................................................................10
Explain accounting issues.....................................................................................................10
2. Differences Internally Generated vs Acquired.............................................................10
3. Reasons for Reluctance.................................................................................................11
Question 4................................................................................................................................12
Deficit of Fund.....................................................................................................................12
Net Defined Benefit Liability...............................................................................................12
Net Interest........................................................................................................................12
3000000............................................................................................................................12
Reconciliation.......................................................................................................................12
Journal Entries......................................................................................................................13
References................................................................................................................................15
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QUESTION 1: MEASUREMENT OF FAIR VALUE
Determine subject of measurement
The subject matter of measurement is the land and property which is demolished and renewed
by the entity engaged in manufacturing of women shoes. The cost of land and factory will be
recognised only if the entity is certain about its future economic benefits and the asset’s cost
can be measured reliably1. The entity does the evaluation of all the costs associated with
property, plant and equipment under this recognition principle (Plant, Property and
Equipment AASB 116), at the time when they are incurred. These costs include the costs
which are incurred initially at the time of acquiring or constructing the asset and subsequent
costs incurred to replace or reconstruct the asset2. The costs associated with the day to day
service are not to be included in the carrying amount of asset. These costs are recognized
separately in the profit or loss account.
Determine valuation premise/method
After the land and factory is recognized as an asset whose fair value is measureable reliably
shall be represented at revalue amount minus any accumulated depreciation and impairment
losses; this will give its fair value at the date of the revaluation3. Revaluations shall be made
regularly for ensuring that there is no material discrepancy in carrying amount and the fair
value of the asset at the end of the reporting period.
Determination of market
The fair value of asset is usually determined by evidence provided by appraisal of market
undertaken by professionals. The fair value asset is usually their current market value. The
1 Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson
Higher Education AU.
2 AASB 116.Property Plant and Equipment. 2016. (PDF). Available through <
http://www.aasb.gov.au/admin/file/content105/c9/AASB116_07-04_COMPjun09_07-09.pdf>. [Accessed on
30th September 2017.]
3 Davies, B., 2014. Defined Benefit vs Defined Contribution or is There a Third Way? Defined Ambition
Schemes: An Alternative Approach to Risk Sharing.
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entity must allocates the initial amount of the non-current tangible assets to its significant
parts and apply depreciation to each part separately. On the other hand if the entity acquires
the physical asset on lease basis, it is appropriate to depreciate the asset separately. The
disclosure required by standard requires reflecting the following-
 The existence of any title on the property, plant and equipment pledged as
security and their respective amounts4;
 The amount of expenditures which are being recognised in the carrying
amount of property, plant and equipment in its construction phase;
 the amount of contractual obligations which are to be paid for the acquisition
of the assets5;
 If the impairment is not disclosed separately in the comprehensive income
statement, that is included in profit or loss account in total.
Determine Valuation technique
As per the valuation technique provided by IAS 116, the valuation of land will be done in the
following manner-
Market value of land+ demolishing cost+ cost of construction
10, 000, 00+ 10, 000, 00+780000= 27, 80,000
QUESTION 2
Calculations & General Journal Entries 1/7/16 to 30/6/17:
(Amount in $)
Date Account DR CR
1-07-2016 Machine A/c DR. 100000
Bank A/C Cr. 100000
(Being machine A purchased)
4 Ji, X.D. and Lu, W., 2014. The value relevance and reliability of intangible assets: Evidence from Australia
before and after adopting IFRS. Asian Review of Accounting, 22(3), pp.182-216.
5 Basu, A. and Andrews, S., 2014. Asset allocation policy, returns and expenses of superannuation funds: recent
evidence based on default options. Australian Economic Review, 47(1), pp.63-77.
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