Company Accounting Assignment

COMPANY ACCOUNTING AND ANALYSIS
Accounting For AASB Its Application And Frameworks In RL Ltd.
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COMPANY ACCOUNTING AND ANALYSIS
First and foremost I wish to point out and correct the statement by the CEO Chris
Thor concerning the tax return report that he claims it’s only what is needed for decision
making. Kindly Mr CEO be informed that decision making process involves wide aspects
from costing, expenses, revenue generation and allocation, asset management and of course
taxation as you state therefore be informed that all these factors plus many others must be put
into consideration before making the decision not only one part of it. However, Mr CEO if
the decision you claim you want to make involves the tax part alone then you can proceed
with the consideration the tax return issued to you, Lo (2010.Pg 25)
I now wish to handle the points and concerns raised by the CEO one by one in
accordance with the lawful guidelines and regulation applicable. Reference is made to the
issue raised by the CEO on payment of tax and hereby wishes to inform him that under
AASB112, para.5 the law allows and requires a company not to pay any income tax at all if
under certification it is operating on a loss basis Sorensen (2010.Pg 80). The firm instead is
then obliged to keep the record of the same upon the filing of tax loss return that is claimable
in future when offsetting the loss of the future annual profits based in Nicholas (2007.Pg 70).
This regulation further outlines what is to be referred as tax loss or profit so as to distinguish
what is recoverable and what ought to be paid as explained in Shaviro(2008.Pg 423).
Taxation Determination TD 2007/2 reference on income tax further emphasizes the
need to file tax loss return as well as safe record keeping of these documents outlining the
losses so as to support tax credits in the near future Devereux(2006.Pg 41).Firms that report
losses are expected to file tax loss return as well as safe keep of record for compliance
purposes and tax audit if any.
The board should therefore know that there exist no tax payment done in this year
from the income since the company is making loss, however what probably the CEO might
be claiming to be payment is what possibly referred to as tax loss return in the reports that are

COMPANY ACCOUNTING AND ANALYSIS
deemed to be mandatory for compliance purposes just as what would happen if we had made
profit a tax profit return would be filed as per the regulation set in the Australian Business
Tax Guide17, para 6.1. In addition, the reason why there is tax loss return filling is for
purposes of notifying Australian Tax Office on the company tax position at the moment as
well as during facilitation of tax audit process if any Richardson(2007.Pg 700). This is further
insisted in AASB 101, para .88 that requires disclosure of any material factor to the users in
our case through filling of tax return loss we are informing ATO who is our user in the
context.
I however wish to take a different interpretation on the issue away from this on
payment of income tax, and assume that the CEO is referring to taxes on salary, goods or
services and even those withhold at source, in this case, I however, wish to inform him that
we have no option of not paying this taxes whether we like it or not since these are statutory
in nature and must be paid. For example,Pay As You Go there is no room for not paying
these taxes simply because as long as the employees are enjoying their salary benefit up to
date then the tax man(ATO) likewise need to enjoy her share, in any case, it is always
collected at source. The same approach accorded to PAYG is what applies to Goods Sales
Tax whereby the payment being made is just a collection being done on behalf of the tax
office similar to any withholding tax that the firm standards as an agent of the principal i. e
tax office hence needs to remit that amount after payment.
I therefore, wish to conclude on this matter on how to treat income loss for taxation
purposes by saying that it is irrational and unlawful to pay taxes as claimed by the CEO
whereas in reality no gain is made and thus that payment in the company books ought to fall
part of tax audit query. The tax man is considerate enough as long as all the documents are
safely kept and the taxpayer is aware of his or her role for tax purposes i.e. when to act as
agent and when to act as a taxpayer. The board is therefore notified that there are no traces of

COMPANY ACCOUNTING AND ANALYSIS
income tax paid at all especially within this period of income tax loss but if there existed
Goods Sales Tax, Pay As You GO or any other withholding tax then the payment made is just
giving what belonged to the Caesar or rather what was kept on behalf of the tax man
Frank(2009.Pg 70).
Concerning the issue raised on the income statement, I wish to explain this basing it
on the information raised by the CEO on payment of tax while we are making profits
Zander(2015.Pg 650). It is generally acceptable for a business to make profit or loss as
outlined in AASB101, paragraph 10A, therefore it is in accordance with the law for any firm
to present its income statement with a loss in any case this is why it is referred to a statement
of profit or loss and other comprehensive income in AASB101,para.10(b).We can’t therefore
assume that we are only in business for purposes of profit making alone then what would
occur if the market does not favour your business? Will you force the market to consider
you? This question clears the doubt on income loss reporting.
Just as outlined above there are exist no permanent good days in business today the
business may be booming only to get into recession the following day thus no absolute best
moment hence the possibility of a loss or profit occurring. Whether a business is showing
going concern concept or not there exist an obligation of reporting its performance via the use
of profit or loss income state since the users of the information have a right to that
information Hamilton(2014.Pg 24).
I therefore, justify my sentiments by stating that there is nothing wrong with the
statements if in reality a loss was reported. More so if the loss is reported and tax is being
paid on this loss still there is no problem with the income statement the problem is with the
person paying or persons acting on behalf of the company on tax matters since they seem not
to know on how to account for tax in case a firm makes losses.

COMPANY ACCOUNTING AND ANALYSIS
The tax department at RL Ltd should be held accountable on this payment since the
regulation allows a firm to carry forward it is lost into future upon making profits hence a
room for set off. The only task the RL tax department is allowed by law concerning the loss
is just to file a tax loss return and not payment of the same. I therefore inform and advise the
board that there exists absolutely no problem or alarming issue with the statements instead
they should access its tax department competency on the issue and subject them to
disciplinary action if found culpable since they are making the company pay on tax liability
they ought not to have paid as stipulated in the regulations.
This is further explained by an Australian Company by the name NEC that was seen
to report a loss of AU$44.4m in the FY 2017 a decrease of what was reported in year 2016 of
AU$8.2,with this it is a practical example since the firm was allowed to set off the tax loss in
the future there was no tax payment done in this year.
AABB 13 clearly guides on all that entails valuation and measurement of assets and
their respective disclosure in the books. AASB13, para 2 defines what fair value is and its
application during valuation. I totally agree with the CEO that by RL Ltd valuing assets at
fair value it will clearly depict the worth value of the assets at the time of valuation. However
I definitely disagree with him that at the fair value he can increase the value of the assets
anytime he wishes so, I disagree with him because AASB13, para 2 defines fair value as the
market-based measurement not the individual entity valuation at a measurement date.
This is further explained by stating that no persons or entity has control over the fair value
but rather the prevailing current market conditions is what dictates the exit value at the time
of product exit. The valuation market conditions vary with geographical locations and
seasons hence making the process ambiguous thus need to involve special professional
expertise the so-called actuarial who are guided by their professional ethics on how to

COMPANY ACCOUNTING AND ANALYSIS
approach the issue. The use of values in the process of valuation likewise knocks down the
CEO claim on his discretion to value the assets anytime he feels so.
AASB 13 is further seen to challenges the CEO will value the asset since he will be
having no substantial basis to claim on what made him do the valuation. Moreover, it is of
great importance for him to realize that fair value valuation of the asset is reported in the
statement of financial position and its respective notes are disclosed via notes annexed to the
statement Schroeder(2011.Pg 12). The note on this expects the participants in the market to
disclose on what characteristics they based while doing valuation as well as explanations on
the reasons for valuation not forgetting the economic benefit resulting from this
Khorana(2006. Pg. 379).
With these guidelines I wish to inform Mr CEO AASB 13 does not allow any entity
or individual persons to value assets as per their discretion and claim the measuring process
to be that of fair value because there exist no prevailing market conditions Bosch(2012.Pg
23).
All of you will agree with me that the valuation price is not the initial the acquisition value.
Likewise, you will agree with me that valuation can be up or down depending on the
prevailing market conditions. AASB13, para 61 and 62 explains that during valuation in the
valuation techniques cost approach or the cost of the item is deemed to be the benchmark of
valuation Salinas(2009. Pg 40). According to AASB13, Para 19(e) there exist great
explanation on why the need to report cost value. The regulation states that for purpose of
calculation of gain or loss that is to be included in the statements hence the need to disclose
where the assets originate from and their respective correspondence change whether
downwards or upward.Al Jifri(2009.Pg 130). It is therefore clear that for the ascertainment of
gain or loss on valuation especially for item eligible for disposal hence the need to clearly
disclose in the notes on how the gain or loss came about Christensen(2013.Pg 740). Clause

COMPANY ACCOUNTING AND ANALYSIS
14 of AASB 137 strongly defines recognition for provision to apply to entities that have
current reliable and estimable obligation of previous transactions and that whose returns in
wait can settle the debt in place hence if this is not met the aspect of recognition of provision
is missed.
Valuation measurement is climaxed by the comparing the fair or rather market value
with the face value or cost value for the purposes of disclosure and reporting Huang(2012.Pg
1600).Therefore by having these notes on the cost of the assets is indeed flavouring and
explaining the materiality and compliance of the report with the set standards of International
Financial Reporting Standards especially IFRS 7 Epstein(2006 Pg. 71). With this explanation,
the CEO is therefore not supposed to worry about the notes on the cost model since they are
lawful appended and give more information to the users of the information Beatt(2006.Pg
280).
The number four issue on why not all assets are consistently valued stand to be a good
observation and I deem it important to the extent of suggesting for the valuation exercise to
be conducted across all the assets Fiechter(2011.Pg 100). I therefore personally support the
CEO concern on valuation because according to AASB101 all financial position items at the
time of reporting are expected to show the actual value of the business thus the reason why I
think we should do valuation but not to all items because something like cash and cash
equivalents we cannot value not unless it is in foreign rate form Lang(2010. However, my
point of concern on this is what then is the appropriate valuation model and technique should
the valuation be conducted for. We need to ask ourselves this question simply because assets
are classified differently and more likely there exist differences while accounting for them
Shaffer(2011.Pg 21).
For instance inventory are always valued at cost hence can’t subject them to the fair
value concept it is recognized at cost as per IAS 2 hence there exists no rule of valuing it at

COMPANY ACCOUNTING AND ANALYSIS
market prices. Each concept should be treated differently since they have different end effects
and they are recognized and accounted for differently and under different regulations.
Debtors on the other hand are valued at the net realisable value since there exist the need to
report on what was to be recovered from the debtors. Most of the non-current asset those
which depreciates are valued at net book value with the likes of land appreciating upwards
hence subjecting to the market fair value model will be wrongly reporting Busacca(2007.Pg
310).
During financial reporting recognition, disclosure and measuring of assets are viewed
as of great importance since they present the actual position of the company at the reporting
date. Valuation therefore sets the benchmark analysis for practical applicability during
recognition and measuring of assets in the financial position as well as its disclosure
implication in the foot notes of the financial statements pursuant to accounting standards in
place.
It is hence more practical to value assets at the time of reporting the accounts as well
as at the time of disposing these assets. For instance if we want to value a building whose
walls and pillars were repaired and painted therefore we need to capture each and every cost
relating to that building has to be put into consideration, therefore relevant factors like
depreciation and value of money aspect has to be considered.
Intangible assets, the likes of intellectual properties the likes of goodwill, patent,
trademarks e.tc should be valued at net book value Chalmers(2008.Pg 240). Looking at all
these set of assets we notice the mode of valuation are different hence need to clarify the
issue of consistency in valuation of assets as raised by the CEO by saying that as long as
valuation will be done appropriately and through the right model technique and to the
appropriate asset I don’t see the problem with valuing all assets but only to those which are
worth valuation Mard(2007.Pg 51). Correct recording during and after valuations should be

COMPANY ACCOUNTING AND ANALYSIS
done and kept in accordance with the regulation while respective closing and opening
balances disclosed since this what form the basis of reporting and positioning. Records from
the participants in valuation should likewise be kept well for purposes audit and reference.
The CEO point of concern on the five items raised are great importance since it has
assisted and educated RL Ltd company on areas they need to put more extra attention or
rather pull up their socks and that which they should uphold and keep up cause they are of
benefit to them. I further wish to say that all the aforesaid solution and suggestion issued
above are in compliance with respective set regulations. All the relevant regulations have
been quoted to suit the users of the information of RL Ltd to further understand the pressing
interpretations of the issues raised by the CEO. I hope have likewise concretely advised the
CEO and the board on the next course of action.

COMPANY ACCOUNTING AND ANALYSIS
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