Australian Accounting Standards Analysis Report 2022
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Running head: AUSTRALIAN ACCOUNTING STANDARD ANALYSIS Australian Accounting Standard Analysis Name of the Student: Name of the University: Author Note:
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AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS EXECUTIVE SUMMARY3 This report includes the solution related to the question under the assessment 3. All such answer will be giving by analyzing the Australian Accounting Standard Board. At first it talks about the accounting and difficulties face by standard setters. After the first it states about the provision related to goodwill and writing off such. And at last it includes the matter related to restructuring matters.
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS Table of Contents INTRODUCTION...........................................................................................................................4 DISCUSSION..................................................................................................................................4 Solution to Assessment 3.............................................................................................................4 Answer to Q.1...........................................................................................................................4 Answer to Q.2...........................................................................................................................6 Answer to Q.3...........................................................................................................................6 CONCLUSION................................................................................................................................8 REFERRENCELIST......................................................................................................................9
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS INTRODUCTION This report is about the assessment 3 in which answer related to all question are discussed. This report analysis the question as per Australian Accounting Standard. It outlines the AASB 138/IAS 38 and issues faced at time of setting standard. After this it include the explanation of situation when goodwill is recognized and occurrence of its write-off AASB 136 also explaining the situation of flawed investment strategy because of write-off of goodwill (Camfferman and Zeff 2015). And at last it explain accounting related to the provision of restructuring, should tooth ltd create a provision for acquisition and circumstances when Tooth Ltd. decided to close down its own division instead of Nail Ltd. division. DISCUSSION Solution to Assessment 3 Answer to Q.1 Under AASB 138/IAS 38 states that amortization is the systematic allocation of an intangible asset whose amount get deprivable over passing of time. Under this assets is separable mean it could be moved or taken out from the entity or even can be sell. Intangible assets which is related to an item of expenditure which has e solution could per this Expenditure on intangible asset was at before taken as an expense but it shall not be now taken as expense(Brusca and Martínez 2016). And active assets will only be now revalued at fair price when there is a market for such asset. Internally generated asset now shall not be taken as asset except when it’s related to internal generated development expenditure.
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AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS The Difficulties faced by standard setters are: Many a time’s definition of standard is not clear or it’s very difficult to understand. The outcome of such that there occurs large number of principles which create big conflict. In suchsituationfindingthesolutionbecomesdifficultbecauseofdisagreement. Disagreement lead to difficulty in setting up the standard which lead to unacceptable by the society. Political involvement in implementing standard which impact to economic behavior. Involvement of political create a doubt on the fairness of the standard as investors look toward it for decision making. Impact of such lead to low financial score(Bamber and McMeeking 2016). And so the standards are without much logic and involve personal benefits. Accounting theories are very conflicting in nature as there is no single theory which have same recognition all around the globe.As there is no perfect explanation of accounting terms like profit, value, capital and etc. different countries have different meaning which lead to conflict. As there is number of accounting standard agencies like AASB. So there is always conflict between AASB with other accounting agencies which create difficulties.
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS Answer to Q.2 Goodwill is an asset for the company which provides future economic benefit arises by acquiring another other assets in a business and so they are separately identify(Adamyk and Adamyk 2017) a)However in a business an item is acquired it will form part of goodwill recognized at the date of acquisition. When the value of goodwill fall, the reason behind such that is the fall in the value of brand, the negative information about the company spreading in the market, as after 2002 it became mandatory to access the goodwill every year(Yao, Percy and Hu 2015). An impairment cost is charged to goodwill in case of fall in the value. b)Significant goodwill write-off may signal a flawed investment strategy because it does not have negative impact on cash flow, it’s simply like other write off in which for some period of time net income gets decrease and thus it can hurt the company in liquidity perspective in the short run to the company. Answer to Q.3 a)The accounting for restructuring provision as per AASP137 is one time cost which paid by company when it is recognize. In long run it is beneficial for the company though it takes short term cost. A provision can be recognized when there is an obligation at present because of the past event, there may be an economic benefit in future for which at
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS present there is an outflow of resources for such an estimation of reliable amount. In general restructuring is plan process which is implicated by management. Provision for such can be distinguish as per accrual basis from other liabilities. Trade payable is the liabilities to pay for good or service received. And Accrual are liabilities which are pay for goods and service that have received but not paid. b)Yes, Tooth ltd. should create a provision for restructuring as a part of its acquisition accounting entries because there will be an event in future as a result of present event. There will be large amount of outflow of resources for which there is must need of a provision for it, though this will result an economic benefit in future for the company. c)In such circumstances if Tooth ltd. closes its own division instead of closing a division of Nail ltd. than at first it need to decide when to close down the division as in case when closing the division of Nail Ltd it was decided at the time of acquisition. Management and Board have to take the decision as per it, as closing down the own division would be much easy and less time consuming compare to closing another’s company division. As in case of closing the own division does not require to take and announce to stakeholder related to Nail Ltd. if the own division get before the acquisition only but if own division is planned to close after acquisition the Nail ltd. have to be informed for such division closing. And most importantly a well structure plan is to be prepare for such own division closing and forecasting need to be done to have clear vision regarding the closing of own division instead of closing division of Nail Ltd(Bond, Govendir and Wells 2016). There is also one important thing which is to decide of time frame as timing of closing the own division compare to Nail Ltd(Kabir and Rahman 2016). will play a big role.
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AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS CONCLUSION However at last, it is conclude that at different question it has discussed about different matters briefly to give better understanding to the each questions. And all the such explanation to the Assessment 3 is been based after analyzing the Australia Accounting Standard Board which ensure to have fair and true solution of the matters have been done.
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS REFERRENCE LIST Adamyk, O. and Adamyk, B., 2017. Accounting methods for public sector entities.CZECH JOURNAL OF SOCIAL SCIENCES, BUSINESS AND ECONOMICS.–2017. Yao, D.F.T., Bamber, M. and McMeeking, K., 2016. An examination of international accounting standard- setting due process and the implications for legitimacy.The British Accounting Review,48(1), pp.59-73. Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136.Accounting & Finance,56(1), pp.259-288. Brusca, I. and Martínez, J.C., 2016. Adopting International Public Sector Accounting Standards: a challenge for modernizing and harmonizing public sector accounting.International Review of Administrative Sciences,82(4), pp.724-744. Camfferman, K. and Zeff, S.A., 2015.Aiming for global accounting standards: the International Accounting Standards Board, 2001-2011. Oxford University Press, USA. d'Arcy, A. and Tarca, A., 2018. Reviewing IFRS goodwill accounting research: Implementation effects and cross-country differences.The International Journal of Accounting,53(3), pp.203- 226.(d'Arcy and Tarca 2018) Kabir, H. and Rahman, A., 2016. The role of corporate governance in accounting discretion underIFRS:GoodwillimpairmentinAustralia.JournalofContemporaryAccounting& Economics,12(3), pp.290-308.
AUSTRALIAN ACOOUNTING STANDARDS ANALYSIS Percy, M. and Hu, F., 2015. Fair value accounting for non-current assets and audit fees: Evidence from Australian companies.Journal of Contemporary Accounting & Economics,11(1), pp.31-45.