Assignment Accounting Issues

Added on - 28 May 2020

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718 Geelong Street,Melbourne, VIC 30009 January 2018Christopher SampsonManaging Director, Beachlife LtdLevel 7, 927 William Street,Brisbane QLD-4000Dear Christopher SampsonThe information in the email regarding the accoutring issues sent to me on 13 November2017 is acknowledged by Magenta and Associates. In response to the email relevantamendments and advice is been drafted in the letter, which could be useful for the board ofBeachlife Ltd in making adequate decision. Furthermore, the amendments and adviceprovided by the accounting team is reliable, as it is backed by years of experience and high-end professionals. The adjustment needed for the accounting issues is depicted in the letter,which could be presented to the board of Beachlife Ltd. Therefore, by using the adjustmententries on the accounting issues Beachlife ltd could adequately draft the annual report anddepict their actual financial position. I whole heartedly thank you for providing ourorganisation with the opportunity to serve you with the problems faced in the accountingtreatment. Rest assured any other accounting issues arising in the preparation of the annualreport can be dealt with us. However, for the current accounting issues adequate sources areprovided, which could allow the board in eradicating the accounting issues.Beachlife Ltd comes under public limited company structure, where it needs to acknowledgethe regulation imposed by Corporation Act 2001. In addition, Beachlife ltd also needs tocomply with Section 292, Section 296 and Section 334, which is used in drafting annualreport of the organisation ( 2018). These clauses and sections directly force theorganisation to comply with accounting standards, which are used in the preparation of theannual report. Therefore, the use of AASB standard and IAS standard are mainly used by theorganisation to ethically portray their actual financial condition in the annual report.Moreover, the advice on accounting issue that is provided to Beachlife ltd mainly comprisesof AASB standards dealing with the issues. The issues regarding warranty expense and loss isdirectly addressed in the letter, which could help in drafting accurate financial report.Stating the measure used in confining the infringement claim to the annual report:The major accounting issue that is faced by Beachlife ltd is claim from infringement ofpatent, which could, incur in immediate future. This issue is mainly not providing the
19 January 2018Christopher Sampsonaccurate financial condition of the company, where relevant loss can be expected by theorganisation. In the particular situation, contingency liability measure could be used by thecompany for addressing the accounting issue. The current financial report of the organisationneeds to include contingency liability section in the annual report for addressing the patentaccounting issue. The contingency measure is mainly taken from AASB 137 paragraph 10,where the treatment of the issues can be identified. The paragraph mainly states that any kindof loss, which will be incurred in near future due to the actions taken past will come undercontingency liability ( 2018). This situation will mainly be recorded in balancesheet section, where liability of the company will increase. The ruling of AASB 137 mainlyconsists of the all the relevant contingency liabilities that is faced by organisations(Adhariani, Sciulli and Clift 2017).The table below mainly indicates the probability or chance of loss, which might incur by thecompany in immediate future. However, the highest probability section and chance will bechosen by the organisation to enlist in their annual report. This mainly indicates theprobability of 60%, where $50,000,000 will be enlisted in the annual report of Beachlife Ltd.The highest probability is chosen due its high chance of occurrence in near future, whichcould allow the company to take accurate measure for depicting its loss in annual report.ParticularsValueProbability1st chance$87,000,00030%2nd chance$50,000,00060%3rd chance$30,000,00040%The above measure could allow the company in depicting the future loss in their annualreport, which has a probability of 60% occurrence. Therefore, the board with the advice forinfringement of patent expense could adequately draft its annual report. Hence, the board ofBeachlife Ltd could conduct the advised measure for reducing the impact of accounting issuein the annual report. This would require the board to enlist 50,000,000 in the contingencyliability section of the annual report (Hudson 2016).Stating the measures that could be used for second accounting issue identified by theboard of Beachlife Ltd.Christopher Sampson mainly identified the second problem, which was faced by BeachlifeLtd, while preparing their annual report was the inclusion of warranty expenses. Thisinclusion of the expenses could eventually allow the organisation in depicting its actualfinancial position for the fiscal year. In AASB 137, relevant measures that needs to be takenfor warranty expense is adequately discussed. In accordance with AASB 137 Paragraph14(a), the obligations, which intends to raise expenses of the organisation are enlisted in itsannual report (Jones 2017). Moreover, the issue also arises, whether to enlist sale ofequipment in current fiscal year or next fiscal year. AASB 118 Paragraph 9, is mainly used inrecognising the sale of equipment in the current fiscal year. This directly indicates that withthe revenue recognition method depicted in AASB 118, revenue generated by the company
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