Financial Reporting: Impairment Charges and Accounting Treatments

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

1FINANCIAL REPORTING
Executive Summary
The aim of the project is to study about the various aspect of financial accounting and the
recording of transactions in the financial statements of the company. The impairment charges,
recognition, and measurement of the assets are some of the common factors discussed in the
assignment. The impairments charges and inappropriate accounting treatments relating to the
BHP Billiton Company has been taken into account. The relevant accounting treatment relating
to the impairment loss of Fayetteville Operation has been discussed in the assignment.

2FINANCIAL REPORTING
Table of Contents
Part A...............................................................................................................................................3
In Response to Question 1...............................................................................................................3
In Response to Question 2...............................................................................................................4
In Response to Question 3...............................................................................................................5
Part B...............................................................................................................................................6
In Response to Question 4...............................................................................................................6
In Response to Question 5...............................................................................................................9
Reference.......................................................................................................................................11

3FINANCIAL REPORTING
Part A
In Response to Question 1
The recognition and measurement for the acquisition of the US Fayetteville Oil and Gas shale
according to the AASB. The relevant AASB for the acquisition of the company is the AASB 3
that states that the company can undergo. The BHP Billiton Company had acquired the U S
Fayetteville Oil and Gas Shale on March 11 classifying the same investment as a business
combination. The recognition principle for such kind of principle should be based on the date of
acquisition the BHP Billiton Company should recognize the assets of the target company
separately from the goodwill of the company (Russell 2017). The identifiable assets acquired
during the acquisition process should qualify to become a part of the assets and liabilities of the
companies must meet certain terms and conditions as presented by the Framework for
Preparation and Presentation of Financial Data and Reports. To qualify as per the standard
guideless and conditions the assets and liabilities of the target companies must be in possession
with the acquiring or the target company and should not generate with results of any other
transactions. The BHP Billiton Company or the acquiring company should account for the target
company’s assets by the standard rules and guidelines. There should be no double counting of
recognizing assets of the company, which the acquire has already taken into account. For
example, Goodwill and other Intangible assets of the company should not be considered by the
BHP Billiton Company if the same is not recognized by the acquire company in there balance
sheet (Tran and Zhu 2017). The transaction could result in the creation of goodwill between the
two companies but the same should be acquired and recorded as per the Australian Accounting