Regulating Book-keeping Analysis of Intangible Assets in Technology Enterprises Ltd
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This project aims to regulate the book-keeping analysis of intangible assets and expenditures in Technology Enterprises Ltd. It explains AASB 138/IAS 38, reduction in financial statement comparability, and understanding of AASB 138/IAS 38.
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Running head: FINANCIAL ACCOUNTING Financial Accounting Name of the Student: Name of the University: Author’s Note: Course ID:
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1FINANCIAL ACCOUNTING Executive Summary: This project is made with the aim to regulate the precise book-keeping analysis of "intangible assets" and expenditures incorporated with the same in "Technology Enterprises Limited". The study takes into consideration the explanation of "AASB 138/IAS 38" incorporated with the "intangible assets". Next, this study focuses on the reduction in the comparisons of the "operating statements" due to the limitations and rules provided in "AASB 138/IAS 38". Lastly, the project emphasizes upon comprehending the grades of "AASB 138/IAS 38".
2FINANCIAL ACCOUNTING Table of Contents Introduction:...............................................................................................................................3 a. Accounting for the project in the operating statement of Technology Enterprises Limited:.3 b. Reduction in comparability of the financial statements by AASB 138/IAS 38:....................5 c. Understanding of AASB 138/IAS 38:....................................................................................5 Conclusion and recommendations:............................................................................................6 References:.................................................................................................................................7
3FINANCIAL ACCOUNTING Introduction: Every company despite of their character and magnitude are responsible to comply with various book-keeping schemes and propositions in order to fulfill the "book-keeping" analysis of the "assets and liabilities", among which "intangible assets", are considered to be crucial business "assets". The study takes into consideration the explaining of "AASB 138/IAS 38" involved with "intangible assets". These have to comply to the precise "book- keeping" propositions and grades regarding the "book-keeping" analysis of "intangible assets" and more precisely, they require to report for their "research and development" "(R&D)" costs in order to create "intangible assets" (Balakrishnan, Watts and Zuo, 2016). In Australia, the companies enlisted in "ASX" have to comply to the grades instructions provided in "AASB 138 Intangible Assets" with respect to "book-keeping" analysis of "intangible assets" alongside the "research and development" expenditures incorporated with them. Depending upon the provided data of "Technology Enterprises Ltd", the book keeper of the company is facing a notable unpredictability while handling the "projects". The study aims at giving an outline of the precise "book-keeping" analysis of the "project" tackled by the concerned company. After this, it focuses on the reduction in the comparisons of the "profit and loss statements" due to the limitations and rules provided in "AASB 138/IAS 38". Lastly, the paper emphasizes on comprehending the grades of "AASB 138/IAS 38". a.Ways through which the project could be accounted for in the financial statements: It is possible to use the current value processfor predicting the actual worth of the "project". It is owing to the reason that it would help in determining the current "project" worth and anticipated to be gained by "Technology Enterprises Ltd". Conforming to "fair value accounting", the plan has "value-in-use" of "$4,000,000" and by utilising the "present value method", the "fair value" of the plan is evaluated to be "$3,000,000". It creates the contrast between "fair value" and "value in use" of the plan apparently, that could be shown in the following way: "$1,000,000 = $4,000,000 - $3,000,000" In conformity to the above calculation, a contrast of "$1,000,000" could be noticed between the cost of "market capitalisation" and "reported price" and it requires to be taken into consideration by the administration of "Technology Enterprises Ltd". AASB 138/IAS 38: In conformity to the explanation provided in "AASB 138/IAS 38", "intangible assets" are treated in the "form" of "non-monetary" and "intangible assets" of the companies, that could be sensed palpably. While there is no clear presence, it is considered to be the notable feature of "intangible assets"along with the characteristics of "non-monetary" worth. Due to this factor, "AASB 138/IAS 38" composes of the explanation of both "monetary assets" and "non-monetary assets". A company has "two" options incorporated with "intangible assets", that involve either "internal generation" or "acquisition" of the same (Aasb.gov.au, 2019). Intangible asset identification: As stated in "AASB 138, Para 21", the companies are responsible to perceive "intangible assets" in the existence of possibility that the company would gain anticipated
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4FINANCIAL ACCOUNTING future advantages regarding the "assets",when it is possible to gauge the "asset" priceswith dependability. Due to this factor, the company is required to ensure that the barring of expenditures and prices sustained in terms of advantage for the company after the "research" prices sustained have been deducted (Callen, 2015). For "Technology Enterprises Ltd", it is evident that the company has sustained different prices, which are depicted below: From the above chart, it could be noticed that "Technology Enterprises Ltd" has spent "$1,000,000" for various reasons in order to create the plan. Hence, it is important for the company in order to perceive the sum in terms of expenditures. Gauging intangible assets: According to "AASB 138, Para 24", a company is required to ensure that "intangible asset" is measured at price and "Technology Enterprises Ltd" is not an anomaly to this condition as well. Hence, it is required to judge its plan at price in the beginning phase, that is "$4,000,000". The expenditures which "Technology Enterprises Ltd" sustained plan creation requires to be taken into consideration in terms of "R&D" prices and "AASB 138" imposes responsibility on the company to identify its "R&D" prices as "sunk cost" in the unified earnings report. It is significant to indicate that "Technology Enterprises Ltd" could produce "intangible assets" privately within the company for a particular period. While an "intangible assets" is gained from business amalgamations, the companies require presenting the surplus of buying in terms of "goodwill" (Gassen, et al., 2017). Research cost: "AASB 138, Para 8" requires a company to accomplish well explained and strategized investigation so that it would be capable to gain proper mathematical and mechanical insight on "research" price. For "Technology Enterprises Ltd", the expense which the company has sustained is to increase the longevity of the batteries in order to produce monetary flows for "four years" by completely obeying to the instructions provided in "AASB 138". Thus, the "research" price i.e., the sum of "$100,000" has to be taken into consideration in terms of expenditures under the "sunk cost category" (De Waegenaere, Sansing and Wielhouwer, 2015). Asset development:
5FINANCIAL ACCOUNTING As per "AASB 138", an "asset" is created by a company after there is the fulfilment of the "research project". The company has to perceive the "asset" after its mechanical detect- ability is approved giving the company an option to use alongside selling the "asset" (Dutta and Patatoukas, 2016). In order to recognise the worth of the "asset" in the "balance sheet statement", it is important to recognise precisely the "book-keeping" grades and it is considered to be a crucial factor after the suitability test. "Technology Enterprises Ltd" has sustained significant "research" expenditure for plan creation. After the suitability test, it has been observed that the "project" would bring a worth of "$4,000,000" to the company. b. Decline in financial statement comparability owing to the use of AASB 138/IAS 38: "Comparability" is a vital aspect of the "operating statements" with the utilisation of which the "users" could contrast between the "financial" data of the companies (Howieson, et al., 2015). This particular aspect is presented from the "book-keeping" grades and schemes embraced by the companies. In conformity with "AASB 138", the companies obtain the alternatives of producing "intangible assets" privately or they could gain the same from business amalgamations. The above exploration makes it essential as well that the "intangible assets" are categorised as "non-monetary assets" due to the non-existence of real material. These factors are the outcome of differing identification of the "assets" from company to company depending upon the anticipated advantages they obtain, as they require to perceive advantages gained from the "intangible assets" (Trenholm, et al., 2016). Furthermore, the companies are required to take into account the classification and identification of the relevant expenditures spent on those "assets". As cited in "AASB 138", the companies are responsible to perceive the profit regarding the "intangible assets" in an identical manner at the same time the "intangible assets" gain is made as part of various "assets". Under this situation, it is important to follow the "book-keeping" instructions provided in "AASB 138" for "asset" identification the expense sustained regarding the "R&D" has to be realised. The comparison characteristic has tobeexistinginthe"operatingstatements"oftheconcernedcompany.Whilethis characteristic is existing, it gives a chance to the "profit and loss statements" in differing data for financial factors like- "assets and liabilities" with other company or varying period of the same business (Macve, 2015). In the form of comparisons, it is to be kept in mind that the diversifications among estimation, identification and analysis from company to company could affect the comparison aspects of financial data. It is majorly because of the reason that thereisnoconstantprocessregardingtheanalysis,estimationandidentificationof "intangible assets" (Maynard, 2017). Correspondingly, the "users" of the "operating statements" are restricted to comparing worth or systems of analysis or systems of identification of "intangible assets" of "one" company with similar data of another company. Therefore, the effect is direct on the "decision-making" method of the "profit and loss statement" "users". It depicts that "AASB 138"diminishesthecomparisonsofthe"operatingstatements"toaparticularlevel (Mullinova, 2016). c. Understanding of AASB 138/IAS 38: "AASB 138" is considered to be noteworthy for the Australian companies, as it behaves as a crucial paper and guidelines to carry out the "book-keeping" analysis regarding the "intangible assets". The companies could gain the needed "book-keeping" schemes and
6FINANCIAL ACCOUNTING from the above mentioned grades relating to "intangible assets" (Narayanaswamy, 2017). As per the instructions provided in "AASB 138", "intangible assets" are considered to be the "assets", which could be recognised in the absenteeism of any real material. Furthermore, the "AASB 138" instructions depicts that companies are required to ensure the "intangible assets" gain in a way via which it would be feasible to trade or sell those in the "market" (Pratt, 2016). However, the paper of the grade consists of the explanation financial "assets" as well as "non-monetary assets". Alongside these, "AASB 138" gives options to the businesses, through which either they would produce "intangible assets" normally or the identical one mightbegainedfrombusinessamalgamationsthatwouldbringabout"goodwill" identification in terms of surplus of buying deliberation (Stockenstrand and Nilsson, 2017). "AASB 138" requires the businesses to ensure the analysis of "intangible assets" at price in the beginning phases and the privately produced "intangible assets" have to be notified at "cost value" as well. While the "intangible assets" are identified, the companies need assuring the existence of an opportunity, which the future "economic" advantages included in those "assets" would be rushed against them and those "assets" price could be analysed with authenticity (Tong and Saladrigues, 2018). However, the grades depict that the companies require to perceive expenses sustained in order to produce "intangible assets" in terms of "research and development", which are required to be revealed in the unified "profit and loss statement" in terms of "sunk costs". The feasibility of those "assets" has to be gauged by thecompanieswhilethose "assets"wouldbe "reported"in thecombined statements of financial status of the businesses (Trotman and Carson, 2018). Conclusion and recommendations: Dependingontheaboveconversation,itcouldbeobservedthat"Technology Enterprises Ltd" requires to utilise the current worth process in order to evaluate the worth of the "research and development project". In order to carry out the "book-keeping" analysis for this "project", the business has to comply with the instructions and grades provided in the "AASB 138". It has been assessed that "intangible assets" take into account "monetary" as well as "non-monetary assets". It is the responsibility of the companies to ensure that the worth of "assets and liabilities" are revealed timely in the "operating statement" when obeying the important "book-keeping" propositions and instructions. In case of "Technology Enterprises Ltd", the problem of the stockholders could be diminished, if the administration of the company gives specific crucial declarations regarding the financial attributes like- "intangible assets". The organisations are considered to be liable to "report" the worth of "assets" periodically and aptly. The administration of "Technology Enterprises Ltd" is recommended to carry out appraisal and evaluation of the "intangible assets" after assessing financial suitability of these "assets". For assuring the aforesaid, it is important for the administration of the concerned business to follow the schemes and rules in order to ensure revelation and complying incorporated with the financial "assets". These revelations regarding the financial factors of the company play a significant part in the evaluation of the financial data alongside the definitions of the "assets and liabilities" of the business. "Technology Enterprises Ltd" is not excluded from these conditions as well and they have to obey the aforementioned instructions for assuring the rush of "economic" advantages towards the company.
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7FINANCIAL ACCOUNTING References: Aasb.gov.au.,2019.Availableat: https://www.aasb.gov.au/admin/file/content105/c9/AASB138_08-15_COMPoct15_01-18.pdf [Accessed 13 May 2019]. Balakrishnan, K., Watts, R. and Zuo, L., 2016. The effect of accounting conservatism on corporate investment during the global financial crisis.Journal of Business Finance & Accounting,43(5-6), pp.513-542. Callen, J.L., 2015. A selective critical review of financial accounting research.Critical Perspectives on Accounting,26, pp.157-167. Cascino,S., Clatworthy,M.,GarciaOsma,B.,Gassen,J.andImam,S., 2017.The Usefulness of Financial Accounting Information: Evidence from the Field. De Waegenaere, A., Sansing, R. and Wielhouwer, J.L., 2015. Financial accounting effects of taxaggressiveness:Contractingandmeasurement.ContemporaryAccounting Research,32(1), pp.223-242. Dutta, S. and Patatoukas, P.N., 2016. Identifying conditional conservatism in financial accounting data: theory and evidence.The Accounting Review,92(4), pp.191-216. Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015.Issuesin financial accounting. Pearson Higher Education AU. Kimmel, P.D., Weygandt, J.J., Kieso, D.E. and Trenholm, B., 2016.Financial Accounting. Wiley Custom Learning Solutions. Macve, R., 2015.A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge. Maynard, J., 2017.Financial accounting, reporting, and analysis. Oxford University Press. Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments: recognition and assessment" for bank financial accounting.Modern European Researches, (1), pp.60-64. Narayanaswamy, R., 2017.Financial accounting: a managerial perspective. PHI Learning Pvt. Ltd.. Pratt, J., 2016.Financial accounting in an economic context. John Wiley & Sons. Stockenstrand, A.K. and Nilsson, F. eds., 2017.Bank Regulation: Effects on Strategy, Financial Accounting and Management Control. Taylor & Francis. Tong, Y. and Saladrigues, R., 2018. The predictability of financial, accounting-based, and industrialfactorsonthesuccessofnewlyincorporatedSpanishfirms.Intangible Capital,14(1), pp.127-145. Trotman, K. and Carson, E., 2018.Financial accounting: an integrated approach. Cengage AU.