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Financial Reporting Assignment - (Doc)

   

Added on  2020-05-16

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Running head: FINANCIAL REPORTINGFinancial ReportingName of the Student:Name of the UniversityAuthor Note

1FINANCIAL REPORTINGTable of ContentsAnswer to Question 1......................................................................................................................2Requirement 1..............................................................................................................................2Requirement 2..............................................................................................................................2Requirement 3..............................................................................................................................3Answer to Question 2:.....................................................................................................................4Requirement a:.............................................................................................................................4Requirement b:.............................................................................................................................5Answer to Question 3......................................................................................................................6Answer to Question 4:.....................................................................................................................7Requirement 1:.............................................................................................................................7Requirement 2:.............................................................................................................................7Requirement 3:.............................................................................................................................7Requirement 4:.............................................................................................................................8Requirement 5:.............................................................................................................................8Requirement 6:.............................................................................................................................8Requirement 7:.............................................................................................................................9References and Bibliography.........................................................................................................10

2FINANCIAL REPORTINGAnswer to Question 1Requirement 1The issue that has been presented in the question is that the term fair value is used indifferent ways, which makes it difficult for the users of the financial statements to understand.The different ways in which this particular term can be utilized has been listed down as follows:The term ‘fair value’ is utilized for the purpose of accountingThe fair market value as commonly used in the ATO’s definition of market valueThe term is also used by the courts The Australian Accounting Standards Board has taken enough initiative in regards to thisparticular issue. The particular standard that has been established by the Board is AASB 13.AASB 13 aims to define the particular concept of fair valuation. This will help the users of thefinancial statements to understand and evaluate the financial position of the company (Lockwood2015). The AASB 13 defines fair value as the price that an entity would get while selling aparticular asset or would pay in order to transfer a particular liability in the form of an orderlytransaction between the market participants at the measurement date. This particular standardfurther sets up the framework for carrying out the measurement of the fair value. Moreover, itlists down the required disclosures that should be produced in the annual report of the companyin regards to the fair value measurements (Abbott and Tan‐Kantor 2017).Requirement 2The shares that have been mentioned in the question will be valued at $0.70 cents asmentioned in AASB 13. This is because the accounting standard AASB 13 mentions that the fair

3FINANCIAL REPORTINGvalue of an asset or liability is the value that has been paid or received for selling or transferringa particular asset in the principal market at the measurement date in regards to the presentconditions in the market. The present conditions in the market help in the estimation of the exitprice irrespective of the fact that the price has been directly observable or has been estimated bythe utilization of any other valuation technique (Hu, Percy and Yao 2015).However, the Australian Accounting Standards Board further defines the valuationtechnique of the shares in AASB 2. AASB 2 states that in case of a share based settlementtransaction the concerned entity shall value the shares on the basis of the market price at themeasurement date. However, if the market price is not available then the entity may undertake aparticular valuation technique in regards to fair valuation of the shares. Therefore, the valuationof the shares depends on the transactions incurred (Loyeung and Matolcsy 2015).The market should understand the reasons for valuing the shares on the basis of exit pricebecause the transfer of the ownership of the shares will also result in the transfer of the riskassociated with such financial instruments (Loyeung and Matolcsy 2015).Requirement 3The particular accounting standard that has been established by the AustralianAccounting Standards Board in regards to the preparation of the financial statements and theannual report of a listed organization is AASB 101. This particular accounting standard aims toprovide the guidelines in which the annual report of a company has to be prepared. It also statesthe mandatory information that should be present in the financial report of an entity in the formof accounting disclosures or other associated format. Thus, it is not possible for a listed entity tomake the choice in regards to the result that produces the lowest negative information and the

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