Financial Reporting: Recognition and Measurement of Assets and Impairment Charges

Running head: FINANCIAL REPORTING
Financial Reporting
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Name of the University:
Authors Note:

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FINANCIAL REPORTING
Executive Summary
The main intention of the current report is to analyse diverse facets of financial accounting
and system of documentation of business transactions particularly in the financial
declarations of the firm. In this study, charges for impairment, measurement along with
recognition of firm’s assets can be considered to be common factors illustrated in the report
under deliberation. Also, charges for firm’s impairment and unsuitable treatments of
accounting related to the firm BHP Billiton are considered in the current report. The pertinent
treatment for accounting related to loss of impairment of particularly Fayetteville Operation
has been elucidated comprehensively in the report.

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FINANCIAL REPORTING
Part A
Solution to Task 1
The recognition as well as measurement regarding acquirement of the “US Fayetteville Oil
and Gas shale” can be analysed as per directives as well as decree of standards proposed
AASB. As suggested by Chen et al. (2017), pertinent standards declared by Australia
Accounting Standards Board-AASB for firm acquirement is AASB 3. The current report
refers to the operations of the firm BHP Billiton. In essence, BHP Billiton had purchased the
“Fayetteville Oil and Gas Shale” particularly on 11th March categorising investment as
particularly business combination. Essentially, principle of recognition for this type of
principle needs to be founded on acquisition date of the firm BHP Billiton Company. BHP
Billiton RH has the need to identify the assets/resources of the target firm individually from
goodwill of the firm (Errunza and Ta 2015). Besides this, identifiable assets acquired during
procedure of acquirement must meet the criteria so as to become a part of firm’s
assets/liabilities of the firms must satisfy certain specific terms as well as conditions as
reflected by structure for preparation as well as presentation of pecuniary data and accounts.
For the purpose of qualifying according to the standard directives and situations, it is
important that firm’s assets as well as liabilities of target firms need to be in control of
acquiring else the target firm (Chang and Yen 2015). This need not create outcomes of any
business transactions. Also, the firm BHP Billiton else wise acquiring enterprise must take
account of assets of target firm by means of model set of laws and directives. Furthermore,
there needs not be double counting in the process of identifying resources/assets of the firm.
This needs to be such that acquirement has considered this previously. For instance, goodwill
as well as other intangible assets of the business firm need not be taken into account by the
firm BHP Billiton in case if the same is not detected by the acquire firm in balance sheet

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FINANCIAL REPORTING
(Gackstatter and Möller 2016). Particularly, business transaction can direct the way towards
generation of goodwill between two different enterprises but these need to be acquired and at
the same time documented according to standards prescribed by AASB-Australian
Accounting Standard Boards. In essence, accounting standard boards also provide course of
action of identifying operating assets as well as liabilities of business concerns.
Principle of measurement as per standards of AASB 3 mentions that the firm BHP can
enumerate net identifiable assets along with liabilities of the firm according to fair value of
assets/liabilities of the firm at the date of acquirement of assets. In essence, it is
recommended by standards of accounting that the firm BHP Company have the need to
compute assets/resources of acquiring firm at fair value otherwise liquidated value of firm’s
assets. In addition to this, the business concern utilizes measurement basis undertaken by
BHP Company for the purpose of business combination the purchase method earlier until the
year 2009. Particularly, the purchase technique engages recognizing net assets/resources of
the target firm (Dickinson et al. 2016). Again, the business combination for particularly the
financial year was documented by appropriate implementation of an acquirement mechanism
of accounting, firm’s net identifiable assets/liabilities are documented at fair value at
acquirement date.
Solution to Task 2
Analysis of enumeration of the enterprise Fayetteville Oil and Gas Corporations was carried
out by acquirement mechanism by the enterprise BHP Company. Essentially, net assets
possessed by the target enterprise need to be valued at market price for the current period.
Thereafter, there can be a re-examination of balance sheet of target firm. In addition to this,
fair value ascertained of the target firm can then act as the foundation for current market of
the acquiring firm plus target price (Chen et al. 2009). In addition to this, the firm BHP