Financial Reporting Disclosure 2022

Running head: FINANCIAL REPORTING AND DISCLOSURE
Financial Reporting and Disclosure
Name of the Student
Name of the University
Author’s Note

FINANCIAL REPORTING AND DISCLOSURE1
Table of Contents
Answer to question 1.......................................................................................................................2
Part 1............................................................................................................................................2
Explaining the circumstances under which goodwill are recognised and subsequent write off
occurs...........................................................................................................................................2
Part 2............................................................................................................................................5
Explaining a significant goodwill to write off and signal a ‘flawed investment strategy’..........5
Answer to question 2.......................................................................................................................7
Proposal accounted for accounting standards..............................................................................8
Disclosure of financial statement based on accounting standard..............................................10
Answer to question 3.....................................................................................................................14
Part 1..........................................................................................................................................14
Outlining the requirement of IAS 12 and these requirement differ from deferred tax assets
from tax loss..............................................................................................................................14
Part 2..........................................................................................................................................16
Discussing deferred tax assets from employee benefits liabilities that has been recognised....16
Tax loss recognised as deferred tax assets.................................................................................16
References......................................................................................................................................18

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Answer to question 1
Part 1
Explaining the circumstances under which goodwill are recognised and subsequent write
off occurs
Goodwill is a type of intangible assets that cannot be seen or touched and in terms of
accounting, it is the type of assets which only gets transferred from one company to another
company. At the time of acquiring one company by another company, the concept of goodwill
comes significantly at the time of fair market value that are higher than the net assets of the
company (Šapkauskienė & Leitonienė, 2014). It consist of elements that makes up the intangible
assets for which it comprises the reputation of the company that are directly based on clients or
the customers. The identity of the brand is also highlighted by the assistance of goodwill which
is directly associated with workforce that are talented in nature along with proprietary
technology. It is totally based on the valuation of the assets that are available within the company
along with other income that are deemed to be assets in the company. Under the position of
Globally Accepted Accounting Principles and IFRS standards, this particular intangible assets
has an indefinite life which can only be transferred from one company to another company
(Jarva, 2014). Goodwill needs not to be amortised as it helps the company to increase their total
amount of revenue and sales that are performed by the firm.
The goodwill are required to be evaluated for the impairment purpose only that might be
chosen by the companies for amortizing the goodwill over the period of a decade or a period of
ten years. Goodwill is shown in the assets site of the balance sheet under the head of intangible
assets (Knauer & Wöhrmann, 2016). In addition to this, accounting goodwill is totally different

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from economic goodwill that are required to be categorized at the time of purchasing another
company. The referring to the intangible assets which includes the intangible assets that are
already included in the financial statement of the company. The entry for the goodwill appears in
the listing of the assets of the firm that mainly highlights the balance sheet of the firm after
pointing out the recognition of the assets that comes into existence (Avallone & Quagli, 2015).
The goodwill that is economic within an intangible assets requires certain brand equity along
with superior customer’s relation. It assist in proving the competitive advantage to the company
that are struggling in the targeted market along with considering it both marketplace as well as in
financial statement of the business.
The existence of the intangible assets includes the indication or the estimation for the
value which are going to be used for measuring the return of the company along with returning
of the asset ratio. The net tangible assets is exceptionally high that interference with the
profitable income of the company that puts into existence of substantial intangible assets of the
goodwill of the company (Li & Sloan, 2017). The contributable intangible assets is borne out to
be in fact that are required to be recognised for providing the significant edge in the competitors
by the favourable design along with the reputation of the company by considering the relation
with customers service that are basically outstanding in nature. There are certain circumstances
on which the goodwill are recognised for overvaluation of firms for acquiring new business
(Wen & Moehrle, 2016). The figure that has been mentioned in the question mainly shows the
returns of cumulative stocks of eBay. The cumulative stock of eBay is mainly against the S & P
500 from the year 2003. It has been mentioned that the company has acquired the internet phone
company known as Skype for around $ 2.6 million.

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The main cause for this particular behaviour is the amount of incentives that is earned by
the manager that has been overvalued by the firms for acquiring of the business. The exploitation
in the process of overpricing for the appointed shareholders includes the benefits for justifying
the total amount of intangible assets that is present in the company (Abuaddous, Hanefah &
Laili, 2014). The prolonged overpricing of the shares is required to be maintained for the growth
that would be utilised in the firm. The goodwill that are required to be maintained as it includes
the importance of the business that flows in the investment strategy of the business. The amount
of goodwill is required to be written off by signifying the returns of the stock that are cumulative
in nature. Certain journal entries are required to be passed in which the asset account and
goodwill account is required to be debited and liabilities account and cash account is required to
be debited (Caruso, Ferrari & Pisano, 2016). The fair value of the goodwill generally differs
from the books value of the goodwill as the fair value of the accounts receivable is lower than the
overall amount of book value for the accounts that are uncountable in nature.
The fair value of the inventory is mainly lower than the book value for which is due to
the obsolesce of the assets in the company. As per the viewpoint of Sherrill (2016), the fair value
of PPE would be higher than the book value for the depreciation that would be declined with the
overall amount of fair value. The financial modelling for the mergers and the acquisition that
mainly accurately reflects the overall value of goodwill that are required to be accurate. The
book value of the assets is included in the balance sheet of the company that are directly
associated with the fair value of the assets (André, Filip & Paugam, 2016). The accounting
treatment for the goodwill with the introduction of the standard that is IFRS 3 business
combination which follows the post implementation process along with reviewing the converge
IFRS 3. The International Accounting Standard Board have the projects that would be included

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with goodwill and intangible assets that are mainly recognised in the business combination in a
certain fiscal year (Jordan & Clark, 2015). The focusing on the goodwill includes the effective
management of the intangible assets that are required to be initiated with the combination of the
business.
Part 2
Explaining a significant goodwill to write off and signal a ‘flawed investment strategy’
The goodwill is required to be write off that is associated with the recorded with the
company that is purchased with another company in a particular accounting year. As mentioned
by Majid (2015), the fair value of the identified intangible assets has been assumed that are
required to be amortized by the recorded amount in the goodwill. IASNB stands in the unveiled
position that takes forward and records the progress that is cost effective in nature. The
consideration of the goodwill recognises separately that includes reliable measurement of the
internally generally intangible assets (Cheng, Peterson & Sherrill, 2017). The reliable
measurement is difficult in creating the paradoxical problem that would be consistent with IAS
38, intangible assets that would be inconsistent in the overall procedure of accounting for the
intangible assets that are identifiable in nature. The changes in the IASB is making a strong
arguments that makes certain changes in the IFRS 3 in respect to the assets that are intangible in
nature. The requirements of the intangible assets in the business combination is required to be
amended for the acknowledgement of recognising the goodwill (Chen, Krishnan & Sami, 2014).
The subsequent accounting for the goodwill reflects the consumption of the resources that are
acquired over the specific period of time.