Ethics And Governance In Depreciation Policy

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Added on 2020-02-19

Ethics And Governance In Depreciation Policy

Added on 2020-02-19

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ETHICS AND GOVERNANCE IN DEPRECIATION POLICY Student Name Student ID

Ethics And Governance In Depreciation Policy_1

EXECUTIVE SUMMARY:The accounting policies play a very important role in the presentation of the financial statementsof the company. The main aim of this report is to analyze the different methods of calculation ofdepreciation and how the financial statements are presented when the change has been made inthe method of calculating the depreciation during the year under concern. The second major aimthat has been shown in the report is the importance of the accounting standard and how thecompany complies with the provisions of the accounting standards even after changing themethod of depreciation. With this aim the report has been framed and prepared with differentheadings. 2

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ContentsEXECUTIVE SUMMARY:................................................................................................................................2INTRODUCTION:..........................................................................................................................................4MEANING OF DEPRECIATION AND ITS USES................................................................................................4ETHICS AND GIVERNANCE - CHANGING DEPRECIATION..............................................................................5Stakeholders:...........................................................................................................................................5Ethical Issues:..........................................................................................................................................5Objective of the Company Met by Change in Method............................................................................6Marion’s Action Compliance....................................................................................................................6DECISION ANALYSIS – DEPRECIATION OF MACHINERY................................................................................7Depreciation Schedules...........................................................................................................................7Advantages and Disadvantages of Each depreciation Method................................................................8BUY OR LEASE..........................................................................................................................................8ANALYSIS - WEFARMERS...........................................................................................................................10Reporting of Property Plant and Equipment..........................................................................................10Composition of Property Plant and Equipment.....................................................................................10Methods of Depreciation Used..............................................................................................................10Rates of Depreciation or Useful Life of an Asset....................................................................................10Amount of Depreciation for Current and Previous Year........................................................................10Purchases and Treatment of Borrowing Costs.......................................................................................10CONCLUSION.............................................................................................................................................11REFERENCES..............................................................................................................................................113

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INTRODUCTION:The financial statements are prepared in accordance with the conceptual framework ofaccounting embedded with the accounting standards and the generally accepted accountingprinciples. In the given case study, emphasis has been placed on depreciation part of theaccounting. In the first case, the change in the method of depreciation from Straight Line Methodto Sum of year digit method has been discussed with compliance to the Australian AccountingStandard 116. In the second case, the depreciation has been calculated with different methodsand the advantages and the disadvantages of each depreciation method have been provided. Inthe third case, the consolidated financial statements of the Wesfarmers Company has beenanalysed in regard to the depreciation if the valuation of the property, plant and equipment. Thereport is then ended up with the conclusion and recommendation. MEANING OF DEPRECIATION AND ITS USESThe term depreciation is referred to as the amount set aside from the value of the asset regularlyevery year on account of the normal loss, wear and tear of the assets of the company. Thedepreciation is the non cash item and is charged to the Statement of Income.Its major use is that the company will be able to match the cost of the assets with the benefits thatthe company has derived from the asset over the period of time. Apart from this matchingconcept, the company will be able to report the value of the assets in the true and fair manner.The third use of the depreciation is that it helps the company in saving the tax component as the4

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Ethics And Governance In Depreciation Policy