Financial Accounting

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

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FINANCIAL ACCOUNTING
Table of Contents
Question 1: Financial Statement Disclosure..............................................................................2
Requirement 1.......................................................................................................................2
Requirement 2.......................................................................................................................4
Question 2: Accounting for share capital..................................................................................7
Question 3: Accounting for income tax.....................................................................................8
Requirement i:.......................................................................................................................8
Requirement ii.......................................................................................................................8
Question 4: Revaluation of property, plant and equipment.......................................................9
Question 5: Impairment of assets............................................................................................10
Reference.................................................................................................................................14

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FINANCIAL ACCOUNTING
Question 1: Financial Statement Disclosure
Requirement 1
Situation 1
As per the information which is provided, guarantee is provided by the management of
Superstore for goods which are sold for a year from the selling date. As per past results, the
company has released a provision on warranties which was equal to 5% of the value of sales
made by the business. However, there has been an increase in the warranty costs of the business
and also a hike in sales return for the products offered by the business. This has resulted in the
change of estimate of provision from 5% to 8% which can be considered as a change in
accounting estimate.
The provisions of Paragraph 34 of AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors” that changes are needed for an accounting estimate when
there is a change in the prevailing situation under which the estimate was developed or the same
may occur due to some new developments (Aasb.gov.au. 2019). As per paragraph “Paragraph
36 of AASB 108”, in case of change in accounting estimate than the company needs to recognise
the change prospectively in the financial statements from the date changes were made.
Therefore, in the case of Superstore ltd, the management of the company needs to make
necessary adjustments to the financial accounts for the period of 2017/18 and also for future
periods as well.
Situation 2
As per the case which is provides, two major debtors of Superstore Ltd has filed for
bankruptcy in July 2018. The amount which is due from such debtors is around $ 420,000 and

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FINANCIAL ACCOUNTING
the management of the company portrays a provision of doubtful debts for $ 40,000. This
situation of filing for bankruptcy was filed after the reporting period. This also puts some doubts
on the recoverability of the receivables of the business.
As per the provisions which is provided in “AASB 110 Events after Reporting Date”,
events which takes place after reporting period are classified as adjusting and non-adjusting
events (Aasb.gov.au. 2019). Adjusting events are those events whose occurrence evidence would
be present at the reporting date, While Non-adjusting events are those events whose occurrence
is not probable or estimated at the reporting date. The case which is provided shows that the
nature of the event could be estimated on reporting date and thus the same is a adjusting event
which needs to be recorded in the financial statements. Therefore, the management of the
company needs to make necessary changes in the financial records.
Situation 3
The situation which is presented in this case falls under the events occurring after
reporting date, especially the changes in tax rate. As per AASB 110, events which occur after
reporting date are classified as adjusting and non-adjusting events. Adjusting events are those
events whose occurrence evidence would be present at the reporting date, While Non-adjusting
events are those events whose occurrence is not probable or estimated at the reporting date. The
case shows an instance of non-adjusting events since it is not probable that the tax rate would
change after reporting dare.
Situation 4
The situation which is stated can be related with identification of errors in prior year
adjustments in terms of record of repair expenses under asset along with charges of depreciation