Financial Reporting: Provisions, Contingencies, Leased Items and Valuation Methods

Running head: FINANCIAL REPORTING
Financial Reporting
Name of the Student:
Name of the University:
Author’s Note:
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1FINANCIAL REPORTING
Table of Contents
Introduction:....................................................................................................................................2
1. Provisions and contingencies:......................................................................................................2
2. Recognition criteria and measurement issues:.............................................................................4
3. Arguments for and against the record of contingency in the financial report:............................4
4. Details of the leased items recorded or disclosed by Barra Resources Limited:.........................5
5. Classification and presentation requirements pertinent to leased items:.....................................7
6. Hypothetical situation for reclassifying a leased item:................................................................8
7. Valuation method of non-current asset:.......................................................................................9
8. Alternative valuation method for the non-current asset:...........................................................11
Conclusion:....................................................................................................................................12
References:....................................................................................................................................13

2FINANCIAL REPORTING
Introduction:
The essay focuses on highlighting the issues to be identified after careful assessment of
Barra Resources Limited in order to determine whether the accounting statements are prepared in
compliance with the prevailing standards so that the overall reliability could be identified. The
latest annual report of the organisation is dissected to shed light on the important aspects
discussed in the paper. Thus, the aim of this paper is to provide a thorough insight and
assessment of the various accounting statements prepared on the part of Barra Resources
Limited.
1. Provisions and contingencies:
The contingencies that are disclosed in the accounting statements of the corporate entities
are segregated into different elements. In this regard, Abbott et al. (2016) cited that some assets
and liabilities are reported under contingencies that are yet to be accounted, as emergency
situation led to their occurrence. The main items that are considered under contingencies in an
organisation include guarantees, commitments related to capital expenditure, contingent
liabilities and others. Guarantees are defined as those financial contracts, which are realised as
liabilities in the characteristics of finance at the time of issuing the financial guarantee.
Commitments related to capital expenditure are the expenses where the parent organisation needs
to enter into agreements for the fully owned subsidiaries related to acquisition of fixed assets
such as plant, property and equipment. However, these two items are not mentioned in the annual
report of Barra Resources Limited in 2017.

3FINANCIAL REPORTING
The only contingency mentioned in the annual report of the organisation is contingent
liabilities, which have direct association with the terminated contract. As per the latest annual
report of the organisation, no contingent liability has been recognised in 2017.
For provisions, the significant items that are recognised in the annual report of Barra
Resources Limited in 2017 include rehabilitation expenses and long service leave provision.
These are realised at the time the organisation has a current obligation due to a past event, the
likelihood of future compromise of economic benefits and reliable measurement of the provision
amount is possible. The provision amount that is reported in 2017 is $130,793 in contrast to
$111,635 in 2016.