Financial Accounting: Financial Statement Disclosures, Share Capital, Income Tax, Revaluation of Property, Plant and Equipment, Impairment of Assets

Running head: FINANCIAL ACCOUNTING
Financial Accounting
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1FINANCIAL ACCOUNTING
Table of Contents
Question 1: Financial statement disclosures..............................................................................2
Requirement i:........................................................................................................................2
Requirement ii:.......................................................................................................................4
Question 2: Accounting for share capital...................................................................................5
Requirement i:........................................................................................................................5
Requirement ii:.......................................................................................................................6
Question 3: Accounting for income tax.....................................................................................7
Requirement i:........................................................................................................................7
Requirement ii:.......................................................................................................................8
Question 4: Revaluation of property, plant and equipment.......................................................9
Question 5: Impairment of assets.............................................................................................11
References:...............................................................................................................................12

2FINANCIAL ACCOUNTING
Question 1: Financial statement disclosures
Requirement i:
Scenario 1:
AASB 116 states that accounting estimate changes after revising the economic life of
an asset; however, no change is to be made in the accounting policy. Thus, the accounts are
not needed to be restated retrospectively. In other words, the change would have effect on the
financial reports of the accounting years only (Aasb.gov.au, 2018). For this scenario, the
following calculations are made:
Book value on 1st July 2017 = ${800,000 – 2 x (800,000/10)} = $640,000
Depreciation expense per year for the remaining six years = $640,000/6 = $106,667
However, it is noteworthy to mention any variation in accounting estimate is required
to be disclosed as notes to accounts.
Scenario 2:
The amount of $20,000 due for repairs would come under the current liabilities
section in the statement of financial position as accounts payable on 30th June 2018. However,
the accrual, accounting and matching principles restrict the repair expense to be disclosed as
an expense on 30th June 2017, as the expense falls under the accounting year 2018. However,
since this account has been closed in 2017, adjustment is to be made with the help of retained
earnings account reflecting the accumulated profits until the current date (Henderson et al.,
2015).
Scenario 3:

3FINANCIAL ACCOUNTING
With the decline in value of an investment after the accounting year, it is said to be
non-adjusting event. AASB 110 mandates disclosures of these events in the form of notes to
accounts when evidences regarding material amounts could be found (Aasb.gov.au, 2018).
From the given situation, the value of investment has declined massively from $600,000 to
$250,000 and this information is considered to carry immense significance to the users of the
financial statements. Although no adjustment is needed in asset valuation for reporting in the
statement of financial position in 2018 despite the decrease in market value, notes to accounts
should be used as a medium for disclosure. However, it is necessary to write down
investment to $250,000 and this would result in loss for Superstore Limited. Therefore, for
such write down, debiting the sales account or profit and loss account and crediting the
investment account by $350,000 is necessary.
Scenario 4:
AASB 110 requires a company to consider for event adjustments by adjusting the
potential financial influence in the financial statements before issue and finalisation (Warren
& Jones, 2018). If after the reporting date, any error or fraud is identified, it is possible to
adjust the event. Therefore, Max and advertising expense are the two accounts that require
adjustments.