Your contribution can guide someone’s learning journey. Share your
documents today.
Running head: FINANCIAL ACCOUNTING AND REPORTING Financial Accounting and Reporting Name of the Student: Name of the University: Author’s Note: Course ID:
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
1FINANCIAL ACCOUNTING AND REPORTING McKenzie and Associates 668 George Street Melbourne, VIC 3000 6 July 2018 Mr Con Pewter Managing Director Pewter Limited Respected Mr Pewter: Based on the provided information,the relevantfinancial standard that would be applicable for the acquisition of Fishy Tales Limited is “AASB 138 Intangible Assets”. As mentioned in “Paragraph 9 of AASB 138”, the business organisations often acquire assets and liabilities on acquisition of trademarks including publishing titles and brand names. One of the items under these headings includes fishing licences and it is identified that both Pewter Limited and its acquired unit, Fishy Tales Limited are the producers of canned and frozen fish. In addition, it has been identified that goodwill related to Fishy Tales Limited has been acquired in business combination. In this context, “Paragraph 36 of AASB 138” states that intangible assets like goodwill acquired in business combination might be differentiable; however, with an associated contract, identifiable asset and liability.
2FINANCIAL ACCOUNTING AND REPORTING In accordance with the provided information, it could be stated that Pewter Limited has boosted its environmentally social image by assuring to repair any damage to the ship, Steve Irwin due to the aim of disrupting the Japanese whalers. As per “Illustrative Example 7 of AASB 138”, it is necessary for the acquiring firm to renew the trademark continuously and thus, evidence should be inherent in supporting its ability (Steenkamp and Steenkamp 2016). Evidence needs to be gathered through product life cycle studies, trends in market, competition and environment and opportunities related to brand extension. In this case, it is not possible to treat the repair cost as expense; instead, the effect would be on goodwill. Amortisation and impairment charges are to be deducted from goodwill, which would have direct impact on the balance sheet statement of the organisation (Hoyle, Schaefer and Doupnik 2015). Since the repair cost would not be treated as expense, there would be no impact on the profitability of Pewter Limited. According to “Paragraph 78 of AASB 138”, there is no active market for brands like fishing licences due to their uniqueness. Even though such intangible assets are acquired, the contract is negotiated between the purchaser and the seller due to relatively infrequent transactions. According to the provided information, Pewter Limited has acquired its subsidiary and hence, there is internal transfer of intangible asset within the business organisation. In addition, such internal transfer of brand name could not be measured due to the absence of any active market; the carrying value of the asset is required to be re-valued at the last revaluation date by subtracting accumulated amortisation and impairment losses. However, in this case, amortisation expense could be debited, while the accumulated amortisation is credited in accordance with AASB 1018 (Scott 2015). This could minimise the profitability of the organisation and as a result, retained earnings could decline as well. The impairment of asset
3FINANCIAL ACCOUNTING AND REPORTING would be carried out annually in accordance with AASB 136 and at the time indication is observed, the asset needs to be impaired.These are the following explanations that Pewter Limited needs to take into consideration in preparing its restated financial statements after the acquisition. Hence, the advice of the marketing manager of Pewter Limited should be considered by debiting the repair cost as amortisation expense and crediting accumulated amortisation.
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser