Financial Accounting

This report provides insights into accounting standards and their application in the preparation of financial statements for West Ltd. The analysis focuses on the capitalization of expenses and its impact on the net asset position. The report recommends following the Australian Accounting Standards Board for better results.

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

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Analysis.......................................................................................................................................3
Assumptions....................................................................................................................................4
Case Study.......................................................................................................................................6
Conclusion.......................................................................................................................................7
Recommendations............................................................................................................................7
References :.....................................................................................................................................9

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Executive Summary
The purpose of this report is that, to provide the ideas about the accounting standards which will
help them in making of West Ltd.’s financial statements. The company needs to follow the
accounting policies which are beneficial and essential, and the expenses are to be classified
accordingly. The benefits which the company will receive should be justified and the expenses
should be capitalized as assets. In this analysis, the most important part is that the net asset
position of the company and how it is affected. From the case study, the analysis of the case is
solved as per Australian Accounting Standards Board138, which is related to Intangible Assets.
Therefore, it is seen that there will be help of any repair or damages if the company can increase
their revenue or sales.

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Introduction
There are various ways where the company deals with the intangible assets, as per the
AASB 138 standard there are many types of treatments which can be applicable through this
standard. The amount which can be carried away is measured through this standard and
regarding that particular asset the company has to disclose the information. Through this in the
case of Whale Ltd. the analysis of intangible assets is being done by applying various standards
(Hu, Percy and Yao 2015). If there are any expenses for repairing or any damage of Steve Irwin,
then that expenses will be borne by the company. From this case there are many analysis, which
is to be done where the expenses can be capitalized by the company. Thus, the objective of the
business activity should be done in respect to the expense which is incurred by the company in
relation to Steve Irwin (Banks, Hodgson and Russell 2018). So, it is important for the company
to follow Australian Accounting Standard Board to get better results in the financial statements
(Yao, Percy and Hu 2015).
Discussion
Analysis
The West Ltd. company mainly operates in Australia and deals with the fishing business.
For sustainable fishing, West Ltd. holds a reputed brand image in front of the society. The
company practices Tuna Fishing, as it ensures that while practicing the dolphins’ does not gets
affected, so in public’s eye it has a great image as a dolphin friendly company. In Southern
Ocean, the whalers get disrupted and the effect has been stopped, behind this the major role is
being played by the Steve Irwin, for this the public image of the company is getting better. Thus,
in case of any damage, the idea of capitalizing the expenses is recommended by the marketing

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manager that will be helpful for Steve Irwin (Steele 2015). Therefore, the reputation and the
goodwill of the company will be increased, and it will be beneficial for the company through this
desired course of action (Banks, Hodgson and Russell 2018).
Assumptions
The company will generate profit, on basis of that assumption many analysis has been
done. There should be fair and reasonable business operations in which the company ensures that
the capitalization of expenses should be ensured (Steenkamp and Steenkamp 2016). In relation to
Steve Irwin the expenses will be capitalized by the company, and benefits should be analyzed
carefully. The benefits of expenses will be linked so that in the long run the company will not
suffer. Thus form the assumption, it is seen that the company will get the capitalization benefits.
Regarding the accounting policies which the company is operating, it can be assumed that the
company is getting the capitalization expenses. During the time period, there are many expenses
which the company has done for maintaining the operations and the investment of the company.
In maintaining the goodwill of the company the expenses is done in a stable basis. The benefits
like Capitalization of Expenses as an Asset which helps in the flow of the organization should be
done on a justified basis (Banks, Hodgson and Russell 2018). Thus, one of the most important
concerns is on the effect on the net asset position which is taken by the company for the purpose
of the analysis. As per AASB 138, some of the assumptions are taken while analyzing the case
study. Therefore, the company should be well accustomed with the Australian Accounting
Standard Board and the principle & policies of this board is necessary to recognize the goodwill,
and it should be done in accordance of law and regulations (Fraser 2018).

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Communications
According to the AASB 138, it is stated that the intangible asset can be recognized as per
the following conditions:
 The assets of the company which has an economic benefit in the future will be entitled
directly to the company through the definition of an asset and its criteria of
recognizing(Russell 2017).
 The objective which is expected for the future economic benefits should be defined for a
time period and there are various reasons and assumptions which are used for the support
of the company (Bond, Govendir and Wells 2016). It is necessary for the company to
follow the accounting policies, because there are several judgments and assumptions
which is crucial and should be done by following the Australian Accounting Standard
Board.
 The company should easily measure the cost and the expenses which is incurred by the
entity through adding, replacing some part of or by servicing it. This is the requirement
at the time when cost incurred at an initial stage
If the company has to maintain profitability and higher amount of sales, with regards to
Steve Irwin the company has to build an environmental reputation and publicity through
which the goodwill will be there among the public. In outreaching the consumers the
company should have a strong brand image, through this the company’s sales will be
increased in a positive manner. From the other point of view, the benefit which the company
is getting in form of capitalization expenses which incurs the cost during the course of
operations is to be considered (Malone, Tarca and Wee 2016). The benefits which the
company is getting in the period of time should be set specific and the amount of the sum

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should be defined specifically to the company. The benefit which the company is getting
from the Steve Irwin is dependent on the assets longevity or the time where the company is
using at the time of process of operations.
Calculations
The expenses of the company are treated in a capitalized structure as stated by Steve
Irwin and there will be an increase of the net asset position for the company. It is important for
the company to have the future economic benefits. The expenses which are incurred by the
company, in regards to Steve Irwin the amount should be capitalized by the company and the
resultants benefits should be analyzed carefully (Weaven, Frazer and Blue 2017). Thus, the
company is getting associated from the expenses that would results in benefits attributable to the
company directly over a period of time. Thus, it is assumed that the capitalization benefit that the
company is getting is for the same. Therefore, the main thing which is seen that the expenses
which is incurred by the company, will be used in term of building brand image that will be also
help in the goodwill of the company. From a report it is seen that on 30th April, 2013 the net
brand value was €11,444,000, and on 30th June, 2014 the net brand value was €12,718,000.
Therefore, the brand image is improved that will help the company in getting the increased
operations and the revenue for the company in the period of time (Cheung and Lau 2016).
From the intangible assets, there is a future economic benefit which includes the sale of
the products or cost savings, it includes revenue and it results from the use of asset by entity. A
degree of certainty is included in the flow of the future economic benefits; thus the assets are
used on the basis of evidence, for giving a better evidence for that period of time. Regarding the
case, it is seen that there is involvement of entity and the business.

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Case Study
In this case, the benefits which West Ltd. is getting is analyzed, it is seen that the
relevant costs which is incurred by the company, that is the costs of repairing the damage which
is related to Steve Irwin, that cost can be measures by the company(Su and Wells 2018). As the
marketing manager of the company is not very much related to accounting and has a thorough
knowledge in the field of marketing, the cost incurred through him is not much relevant as it can
be through a proper knowledge and understanding of accounting, its principles and standards.
There are also some of the non-monetary benefits which the company is receiving is also
recorded. The various non-monetary benefit of the company West Ltd. is like brand value and its
goodwill that has established a good image in the minds of the consumer and hence, benefitted in
this particular case. If there is any expense in the company related to damage, then in the balance
sheet of the company it will be recorded as monetary investment (Steve Irwin Banks, Hodgson
and Russell 2018). It is important for the company to apply the rules and regulations of AASB
138 and to record the expenses and the purpose under AASB. The company should capitalize the
expenses as per the AASB 138, and from the depreciation of capitalized expenses some portion
of capitalized expenses is deducted, in which for the purpose of the repairing any damage this
expense will be required by the company. Regarding the impact of the profitability, Steve Irwin
states that a certain amount will be kept aside from the profit, so that it will be kept as a part of
capital expenses and the company can further use it in a given case (Bodle et al., 2018). The plan
of the marketing manager is to keep a certain amount as backup to find a way in a difficult or a
loss making situation to cope with that accordingly.

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Conclusion
In the due course of time period, for maintaining the operations and the investment of the
company, the capitalization has to be done for various expenses. Then, the goodwill of the
company can be maintained. As per the AASB standards, in relation to the expenses it was found
feasible because the expenses which have to be done by the company will help in getting the
future economic benefits. The benefits which the company is getting can be of monetary and
non-monetary, non-monetary benefits include goodwill of the company, and by increasing the
operations and sales. However, from the case study it is assumed that in respect to company
operations there will be an increase in the net asset position and the revenue for the company in
defined period of time. Thus, in relation to the expenses of the assets it can be considered that it
has to be done in a proper way for the purpose of consideration in terms of benefits in defined
period of time. In accordance to AASB 138, it is seen that all the problems can be solved by
using Accounting Standards. As there is increased revenue or sales of the company, the damages
will be taken into consideration of West Ltd.
Recommendations
From the above discussion, it can be recommended that West Ltd. can be use cost benefit
analysis for the expenses that will help in order to increase the operations. The objectivity and
basis for classification and recording the expense are done in compatibility of the policies of the
company with AASB. It is also important for the company that the policies and activities are
carried on by the company as well it is consistent with the Australian Accounting Standard
Board and the company policy for achieving the desired level of business sustainability and
growth.

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References :
Banks, L., Hodgson, A. and Russell, M., 2018. The location of comprehensive income reporting–
does it pass the financial analyst revision test?. Accounting Research Journal, 31(4), pp.531-550.
Bodle, K., Brimble, M., Weaven, S., Frazer, L. and Blue, L., 2018. Critical success factors in
managing sustainable Indigenous businesses in Australia. Pacific Accounting Review, 30(1),
pp.35-51.
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairment decisions by
Australian firms and whether this was impacted by AASB 136.
Cheung, E. and Lau, J., 2016. Readability of Notes to the Financial Statements and the Adoption
of IFRS. Australian Accounting Review, 26(2), pp.162-176.
Fraser, J., 2018. Alternative assets insights: Budget announcements thin capitalisation. Taxation
in Australia, 53(2), p.90.
Garg, M., 2017. Analysis of Hidden Value and Value Relevance of Financial Statements Pre-and
Post-IFRS Adoption. Journal of Modern Accounting and Auditing, 13(2), pp.51-74.
Hu, F., Percy, M. and Yao, D., 2015. Asset revaluations and earnings management: Evidence
from Australian companies. Corporate Ownership and Control, 13(1), pp.930-939.
Malone, L., Tarca, A. and Wee, M., 2016. IFRS non‐GAAP earnings disclosures and fair value
measurement. Accounting & Finance, 56(1), pp.59-97.
Russell, M., 2017. Management incentives to recognise intangible assets. Accounting & Finance,
57, pp.211-234.

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Steele, N., 2015. Accounting: Get the numbers right. Company Director, 31(5), p.41.
Steenkamp, N. and Steenkamp, S., 2016. AASB 138: catalyst for managerial decisions reducing
R&D spending?. Journal of Financial Reporting and Accounting, 14(1), pp.116-130.
Su, W.H. and Wells, P., 2018. Acquisition premiums and the recognition of identifiable
intangible assets in business combinations pre-and post-IFRS adoption. Accounting Research
Journal, 31(2), pp.135-156.
Tran, A. and Zhu, Y.H., 2017. The impact of adopting IFRS on corporate ETR and book-tax
income gap. Austl. Tax F., 32, p.757.
Weaven, S., Frazer, L. and Blue, L., 2017. Critical success factors in managing sustainable
indigenous businesses in Australia.
Yao, D.F.T., Percy, M. and Hu, F., 2015. Fair value accounting for non-current assets and audit
fees: Evidence from Australian companies. Journal of Contemporary Accounting & Economics,
11(1), pp.31-45.