Financial Accounting - Desklib

This article provides answers to questions related to financial accounting. It covers topics such as investment company performance, IAS 36 impairment of assets, and loss of asset records due to a virus. The article also includes references for further reading.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student
Name of the University
Author Note

1
FINANCIAL ACCOUNTING
Table of Contents
Answer to question 1.......................................................................................................................2
Part 1............................................................................................................................................2
Part 2............................................................................................................................................2
Answer to question 2.......................................................................................................................2
Answer to question 3.......................................................................................................................2
References........................................................................................................................................2

2
FINANCIAL ACCOUNTING
Answer to question 1
The investment company performance is an outcome of the income that is earned on
investment that is made. This changes the investment’s fair value while they are in hold (Barth,
Nobes and Tarca 2015). The company’s information that are to be checked are as follows:
1) The Dividend and Interest earned in the current year.
2) Information about risk in the portfolio
3) Turnover of the portfolio and related transaction costs such as Commission.
4) The change in the fair value of investment as compared to the similar investment
companies in the market
5) The securities fair value that the investment company holds
6) The change in the value of the share during an year
Part 2
An item of a business meets its definition under the conceptual framework if the
economic benefits of the same are met which are associated with the item in the future can be
measured with reliability(Macve 2015).
The Conceptual Framework states that in the income statement the recognition of the
income takes place when increase in future economic benefits related to an increase in the asset
or decrease of a liability takes place and cannot be measured. Increase in the fair value of the

3
FINANCIAL ACCOUNTING
investment shares does represent the increase of asset. For an investment company this important
component represents the performance (Dong, Ryan and Zhang 2014).
Answer to question 2
IAS 36 impairment of assets takes care of the with the policies that an entity can apply to
ensure that the assets are to be recognized at their recoverable amounts. The asset would
represent in such a way the amount is to be recovered through the sale of the asset (Macve 2015).
In that case, the asset is denoted as impaired and the standard IAS 36 recognizes it as an
impairment loss. It also mentioned when a business shall change an impairment loss and the
disclosures that are prescribed in the case given the issue is that the Australian company adopts
the standards that would not represent fairly in this would be beneficial if the company does not
adopt the policy and avoid the case (Dong, Ryan and Zhang 2014).
Answer to question 3
The informations regarding the assets of the company are valuable.In the mentioned
situation the details of the non-current assets in the company has been destroyed that includes all
the details of the depreciation as well. As per the board of directors, the issue is due to the virus
in the computer. The boards of directors of the business are facing a problem regarding the
solution of the loss of all records of the assets (Barth, Nobes and Tarca 2015). The only advice
that is to be given is that the management shall keep a backup of all the records including the
details of the depreciation to avoid such situation. The loss that has been occurred cannot be

4
FINANCIAL ACCOUNTING
recovered but can be avoided thereon. There is no need to change the accounting policy or
disclosure procedure.
References
Barth, M.E., Nobes, C. and Tarca, A., 2015. Conceptual framework for financial reporting: an
introduction to the special issue by the guest editors.
Dong, M., Ryan, S. and Zhang, X.J., 2014. Preserving amortized costs within a fair-value-
accounting framework: Reclassification of gains and losses on available-for-sale securities upon
realization. Review of Accounting Studies, 19(1), pp.242-280.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Magnan, M., Menini, A. and Parbonetti, A., 2015. Fair value accounting: information or
confusion for financial markets?. Review of Accounting Studies, 20(1), pp.559-591.
.