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International Financial Reporting Doc

   

Added on  2020-09-03

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International financialreporting

Table of ContentsINTRODUCTION...........................................................................................................................1QUESTION 1...................................................................................................................................1(I) Evaluation of property, plant and equipment related standard..............................................1(II) Calculation of book value and depreciation.........................................................................2QUESTION 2...................................................................................................................................4(I) Evaluation of IAS 37..............................................................................................................4(II) Accounting of various cases.................................................................................................6CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTIONIn any organisation there are various financial aspects in respect of which reporting isrequired to be made. For this purpose various international accounting standards have been madewhich are required to be followed and complied with (Van Greuning, Scott and Terblanche,2011). There are many such provisions that are specified which provides guidance so that correcttreatment can be given to all the transactions made in business. In this report two such standardswill be discussed which are related to plant and equipment that is IAS 16 and another is IAS 37under which provisions, contingent assets and liabilities are taken into consideration. So forproper functioning an understanding in relation to them can be obtained from below presentedreport.QUESTION 1(I) Evaluation of property, plant and equipment related standard.IAS 16 is the standard which has been formulated in respect of property and plant. Themain objective of this is to specify the manner in which accounting treatment shall be made ofvarious plants. The main issues which are faced and are dealt with in this standard includes assetrecognition, valuation, depreciation and impairment to be considered for them. This will be applied for all the assets but those which are governed by some other rulessuch as biological assets, mineral resources and others will not be included under this (Doupnikand Perera, 2011). The recognition criteria that shall be met specifies that it shall be ensured thatfuture benefits will be derived from it and also it can be measured. If these conditions arefulfilled then the respective asset shall be recognised and recorded in books. In this all the costshall be taken into consideration at the time they are incurred. All the cost which are made infuture for the replacement purpose will also be included in the calculation of carrying amount.The recording shall be done on cost at initial stage. In this all the amounts which are spend tobring the asset at stage of utilisation shall be included. There are two methods which can be usedfor valuation after the initial recognition and they are cost and revaluation model. In case of cost model value determined by deducting depreciation from cost will beconsidered as carrying amount. Whereas in revaluation model the amount obtained afterdeduction of depreciation from revalued value shall be used. Depreciation shall be calculated on1

the basis of useful life of asset which means that whole cost shall be distributed among life andthen that shall be charged on yearly basis. According to this standard it is required that impairment test shall be conducted at regularinterval as by this it is identified that whether assets are mentioned at correct value or not. It shallbe ensured that recognised value shall not be more than the recoverable value (Nobes, 2014). Sotest will be carried out and is any excess is determined then that shall be treated as impairmentloss and shall be charged in that year. There are various situation under which asset will have to be removed from financialstatements and that includes sale of asset or withdrawal of it from use or when it is identified thatthere will be no future benefits which will be derived from it. In respect of all the plants and properties which are held by business, it is required thatcertain disclosures shall be made which have been mentioned in following standard. Under thisthe carrying amount, method of depreciation used, life of asset and any other importantinformation shall be provided with. In case of revaluation, date on which it is made, revaluedamount, previous value and any loss or profit made by this shall be disclosed in financialreporting.(II) Calculation of book value and depreciation.In LC there are four ships which are owned by them and the method which is used bythem for calculation of value is cost less depreciation. But now revaluation is carried out inrespect of them and so it wants to know the manner in which further valuation shall be carriedout. For this purpose there are various methods that can be used and of which an understandinghas been obtained above. For that various figures are required to be identified which includesrevalued amount, life which is remaining. So with the help of all of then calculation of carryingamount and depreciation can be made. So the same is provided below:1.Valuation by deduction of depreciation from historical cost.Under this method carrying amount is calculated by deducting accumulated depreciation fromthe historical cost. Here this cost means the value for which asset has been acquired and at whichrecording was made at initial stage. The depreciation is charged by company at rate of 5 percentand so this will be used to ascertain it in respect of current year. Calculation of book value and depreciation amountParticulars ABCD2

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