Corporate and Financial Accounting Report - HA2032

This report provides a comprehensive analysis of corporate and financial accounting, focusing on the Australian context and the application of accounting standards. Part 1 of the report delves into accounting standard setting, regulation, and disclosure, specifically examining the role of the Australian Accounting Standards Board (AASB) and the concept of a reporting entity. Part 2 concentrates on business combinations, analyzing the annual reports of Australian Dairy Nutritionals Group and Angel Seafood Holdings. The analysis includes the number of business combinations, fair value of consideration, components of acquisition costs, fair value of net identifiable assets, recognized and carrying values of assets and liabilities, and the calculation and factors influencing goodwill or bargain purchase gains. Furthermore, the report offers a comparative analysis of the two companies' disclosures related to business combinations and the impact of these combinations on their financial statements. The report concludes with a summary of the key findings and a list of references.

Corporate and
financial accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Accounting standard setting....................................................................................................1
2. Reporting entity.......................................................................................................................2
PART 2............................................................................................................................................3
1. Number of business combinations in the company report.......................................................3
2. The fair value of the paid consideration..................................................................................3
3.The components of acquisition costs........................................................................................3
4. The fair value of net identifiable assets acquired....................................................................4
5. Recognised value of each class of assets, liabilities and contingent liabilities........................4
6. Carrying value of each of the assets, liabilities and contingent liabilities...............................5
7. Value of goodwill or gain in the bargain purchase which is being recorded..........................6
8. Factors that are contributing to the recognition of goodwill or gain on bargain purchase......7
9. The amount of goodwill as percentage of total consideration paid.........................................7
10. Amount of identifiable intangible assets as the percentage of total consideration paid........8
11. Comparative analysis on the two company’s disclosure on business combination...............9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Corporate accounting could be defined as the accounting which is mainly focused with
preparation of final accounts of all the companies so that they can analyse the results of them to
determine the performance of business. On the other hand, financial accounting is the process of
generating the financial statements so that the current situation of business could be determined
and strategic decision to make improvement in the performance could be formed (Bepari and
Mollik, 2017). There are two different parts of this report first one is focused with accounting
standard setting, regulation and disclosure. Second part is based upon business combination or
acquisition analysis. Two organisations that are selected for completing the part B are Australian
Dairy Nutritionals Group and Angel Seafood Holding. Both the entities are operating under food
and beverage industry of Australia. This part of the report will cover different topics that will be
analysed form the annual report of the entity. These are business combinations, fair value
consideration, recognised and carrying value of identifiable assets, value of goodwill or gain,
factors contributing to the recognition of these two elements, amount paid for total consumption
etc. Apart from this, amount paid for identifiable intangible assets and comparative analysis of
both the companies are also covered in this assignment.
PART 1
1. Accounting standard setting
The Australian Government Agency which is involved in development and maintenance
of financial reporting standards is known as Australian Accounting Standards Board. All the
rules and regulations that are developed by it are applicable to all the business entities that are
part of Australian Economy whether these are public or private. All the standards that are
formulated by the board are equivalents to the IFRS which are international financial reporting
standards. The main responsibility of the board to develop, maintain and issue all the accounting
standards for the company law of Australia (Bodle, Cybinski and Monem, 2016). The board is
taking part in the global standard setting process by analysing all the IFRS and making sure that
all the accounting standards in Australia are formulated by paying attention towards all of them.
All the IFRS are mainly formulated by International Accounting Standards Board. All the
countries that are member of IASB does not require to follow the IFRS because all the standards
that are followed by them are focused with IFRS. There are various countries that are not using
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IFRS which are US, China, Macao, Niger, Bolivia etc. All these nations are having their own
accounting standards. There are 90 countries that are using IFRS for the reporting of detailed
financial information.
2. Reporting entity
There are various types of companies that are operating business in Australia. Description
of all of them is as follows:
Small proprietary company: In order to be the small proprietary company, the business
is required to quality two tests. First one of the gross operating revenues for the year should be
less than 25 million dollars. Second area which is required to be qualified by the business is
related to value of consolidated gross assets. If it is less than 12.5 million dollars than only the
business will be considered as the small proprietary. Apart from this, it is also very important to
have less than 50 employees for a firm which is small in size. If a company will be qualified as
the small proprietary company then it will not be required to generate the final accounts if these
are not directed by ASIC or the shareholders. Apart from this, there is no specific regulation for
such business regarding the audit compliance (da Costa Junior, 2019).
Large proprietary company: All the businesses that are willing to be the large
proprietary company are required to quality the specific criteria for the same purpose. First one is
related to the revenues that should be at least 50 million dollars and more than it. The value of
consolidated fixed assets of the enterprise is required to be at least 25 million dollar or more than
it. A business will be the large proprietary company if the number of employees of it will be
more than 100. Accounting to Australian Accounting Standard Board it is very important for a
business if it will be qualified as large proprietary company to prepare and lodge all the financial
statements and director’s report for all the financial years. Apart from this, it is also very
important for the company to audit all its accounts on yearly basis.
Reporting entity: A business entity in which it is very important to expect that all the
users of final accounts are dependent on the general finance purpose account to analyse the
actual financial performance and position of the business is known as reporting entity. All the
financial statements that are used by them are required to be analysed by them so that they can
use the finance related information for formulating decision in future. If a business will be
qualified as the reporting entity then it will be very important for it to make sure that all the
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Australian Accounting Standards are complied by it. If the entity will not be able to follow all of
them then it may result in legal actions against the business (d'Arcy and Tarca, 2018).
PART 2
1. Number of business combinations in the company report
From the annual report of Australian Dairy Nutritionals Group it has been analysed that
the number of business combinations within the company report is 2 as it is acquired 100% of
the issued capital of Flahey’s Nutritionals and acquired Camperdown Dairy Company Pty Ltdx
(Annual report of Australian Dairy Nutritional Group, 2019).
The company report of Angel Seafood Holdings is reflecting that no business
combination was recorded in the report for year 2019 because no company or business was
acquired by the entity. The actual business combination of it is 2 because it is having two
subsidiaries. These are Angel Oysers Australia Pty Ltd and Angel Seafood Infrastructure Pty
Ltd.
2. The fair value of the paid consideration
The company report of Australian Dairy Nutritionals Group is reflecting that the fair
value for the Flahey’s Nutritionals was 345260 and for Camperdown Dairy Company Pty Ltd the
fair value is 6974236 which is the total value of net tangible assets.
The annual report of Angel Seafood Holdings is reflecting that there is no fair value of
business combinations for the entity because no entity was acquired by it in year 2019 and due to
this no fair value was there for the paid consideration (Annual report of Angel Seafood Holdings,
2019).
3.The components of acquisition costs
The company report of Australian Dairy Nutritionals Group is showing different
components for the acquisition cost. All of them are required to be focused while planning to
acquire the company. All the components are as follows:
Current assets: These are the total assets that are used for the purpose of making short
term payments within the period of 12 months. It is one of the components of the acquisition cost
of Flahey’s Nutritionals. The value of other current assets in the cost is 20260.
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Intangible assets: All the assets that could to touched are known as intangible assets.
Goodwill is one of such types of assets. It is the main element which has contributed the higher
percentage in the value of the acquisition cost. Total intangible assets for the cost are 322140.
Property, plant and equipment: These are the fixed assets that are used by the
businesses for the purpose of carrying out all the operations in systematic manner. The value of it
in the cost is around 2860 (Handley, Evans and Wright, 2019).
The components in the acquisition cost of Camperdown Dairy Company Pty Ltd are
goodwill, recipes, formulations ad patents, product development etc. The values of them are
6616396, 336220 and 21623 respectively.
There are no specific components of acquisition cost for Angel Seafood Company
because of no acquisition during the year 2019.
4. The fair value of net identifiable assets acquired
On the basis of annual report of Australian Dairy Nutritionals Group it has been analysed
that the fair value of net identifiable assets acquired for Flahey’s Nutritionals is around 345260.
This value id reflecting the net identifiable assets acquired and the liabilities assumed but no
liabilities is added to the value of them so it is the final value. The value of net identifiable assets
for Camperdown Dairy Company Pty Ltd is 357843 because rest of the value of intangible assets
was allocated to the goodwill.
There is no fair value of the net identifiable assets acquired for Angel Seafood Holdings
because the organisation has not acquired any company during the year (He, Evans and He,
2016).
5. Recognised value of each class of assets, liabilities and contingent liabilities
There are various types of assets and liabilities that are bought by the entities while
acquiring a company. The recognised value for all the assets, liabilities and contingent liabilities
for both the entities that are acquired by Australian Dairy Nutritionals Group is as follows:
Recognised value for Flahey’s Nutritionals
Components Value
Cash 400000
Completion price adjustment 129740
Stapled securities 75000
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Performance consideration 750000
Other current assets 20260
Intangible assets 322140
Property, plant and equipment 2860
Recognised value for Camperdown Dairy Company Pty Ltd
Components Value
Current assets (inventory) 995718
Prepayments 165474
Bonds and deposits 50942
Dairy live stock 4928422
The above tables are providing information about the cost of all the assets, liabilities and
contingent liabilities that are used while deciding the acquisition cost.
There is no recognised value for the assets, liabilities and contingent liabilities for Angel
Seafood Holdings as the entity has not acquired any of the company during the completion of the
year 2019. It shows that there will any type of huge payment which will be paid by the entity to
another business which could be bought by it (Íslands, 2018).
6. Carrying value of each of the assets, liabilities and contingent liabilities
The carrying value of all the assets, liabilities and contingent liabilities of all the entities
that are acquired by Australian Dairy Nutritionals Group. All of them are as follows:
Carrying value for Flahey’s Nutritionals:
Components Value
Cash 400000
Completion price adjustment 129740
Stapled securities 75000
Performance consideration 750000
Other current assets 20260
Intangible assets 322140
Property, plant and equipment 2860
Carrying value for Camperdown Dairy Company Pty Ltd:
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Components Value
Brucknell No1 4172733
Brucknell No 2 4133816
Ignatios 0
Brucknell No 3 2290333
Missens Road 1520110
Drumborg 5200361
Depot & old geelong Road 272974
Yarringa 4904598
There is no carrying value for the assets and liabilities of Angel Seafood Holdings as
mentioned above that the organisation has not acquired any new entity during the year 2019. The
business combinations of it were the subsidiaries of it. No new business combination was
recorded in the report in previous year (Kabir and Rahman, 2016).
7. Value of goodwill or gain in the bargain purchase which is being recorded
Goodwill is one of the key factors that motivates a business entity to buy a new business.
If the firm which is being acquired by a company is not having goodwill then the decision of
acquisition along with the purchase consideration may get affected. While planning to acquire a
new business entity the buying company analyses that the new business will be able to enhance
the value of it with the help of good of it. When it is analysed that the good will not high then the
value of total acquisition cost may get decreased. The business with high goodwill will demand
higher values at the time of acquisition. There are two different entities that were acquired by
Australian Dairy Nutritionals Group in year 2019 (Kabir, Su and Rahman, 2020). The value of
goodwill in the bargain purchase which is recorded in the annual report of the company for both
the companies that were acquired by it is as follows:
Value of goodwill for Flahey’s Nutritionals:
Particulars Value
Intangible assets (Goodwill) 322140
Value of goodwill for Camperdown Dairy Company Pty Ltd
Particulars Value
Goodwill at cost 6616393
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There is no specific information is provided in the annual report of Angel Seafood
Holdings. It shows that there is no consideration paid by the entity for goodwill in the bargain
purchase which is being recorded in the books.
8. Factors that are contributing to the recognition of goodwill or gain on bargain purchase
Goodwill is one of the key factors which is focused while deciding the value of
acquisition. If the businesses will not be able to analyse the actual value of it then it may result in
decreased or very high value of purchase consideration. All the factors that are contributing in
the recognition of the goodwill of Flahey’s Nutritionals and Camperdown Dairy Company Pty
Ltd which were acquired by Australian Dairy Nutritionals Group are as follows:
 Reputation of the company: It is the main factor that contributes in the recognition of
the value of the goodwill of the company. If the reputation of the enterprise will be high
then it may result in higher purchase consideration.
 Total intangible assets: It is also a factor that contributes in the recognition of goodwill.
While planning to decide the cost of acquisition it will be very important to analyse the
tangible assets as it will help to determine actual value of goodwill.
 Customer base: When the customer base of an organisation will be very strong then its
goodwill will be very high. It can help to analyse or recognise the value of goodwill.
All the above described factors are considered by the organisations while recognising the
value of goodwill. These are also focused by Australian Dairy Nutritionals Group while
determining the goodwill’s value of Flahey’s Nutritionals and Camperdown Dairy Company Pty
Ltd.
There are no factors were focused by Angel Seafood Holdings to analyse or recognise the
value of goodwill because no business was bought by it during the year 2019 (Li, 2019).
9. The amount of goodwill as percentage of total consideration paid
Australian Dairy Nutritionals Group acquired two companies in year 2019 so the analysis
of goodwill as percentage of total consideration paid is as follows:
The amount of goodwill as percentage of total consideration paid for Flahey’s
Nutritionals:
Goodwill = 322140
Purchase consideration = 1095260
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Percentage = 322140 / 1095260 * 100
= 29.41%
The amount of goodwill as percentage of total consideration paid Camperdown
Dairy Company Pty Ltd:
Goodwill = 6616393
Purchase consideration = 6974236
Percentage = 6616393 / 6974236 * 100
= 94.86%
There is no specific percentage for the goodwill as total consideration paid for Angel
Seafood Holdings because the entity has not purchased or acquired any other business sin year
2019.
10. Amount of identifiable intangible assets as the percentage of total consideration paid
During the year 2019 Australian Dairy Nutritionals Group acquired two companies
therefore the assessment of identifiable intangible assets as the percentage of total consideration
paid is as follows:
The amount of identifiable as percentage of total consideration paid for Flahey’s
Nutritionals:
Identifiable intangible assets = 345260
Purchase consideration = 1095260
Percentage = 345260 / 1095260 * 100
= 31.52%
The amount of identifiable intangible assets as percentage of total consideration
paid Camperdown Dairy Company Pty Ltd
Identifiable intangible assets = 357843
Purchase consideration = 6974236
Percentage = 357843 / 6974236
= 5.13
There is no calculation is performed for Angel Seafood Holdings because the
organisation had not acquired any firm in year 2019 (Pallarés Sanchidrián, Pérez García and
Gonzalo-Angulo, 2015).
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11. Comparative analysis on the two company’s disclosure on business combination
On the basis of details that are generated from the annual reports of Australian Dairy
Nutritional Group and Angel Seafood Holdings it has been determined that the first company is
disclosing the information regarding business combination in systematic manner. Another entity
is not able to disclose the detailed information of business combination as it had not acquired any
entity during year 2019 (Su and Wells, 2018).
CONCLUSION
From the above project report it has been concluded that corporate and financial
accounting are two different forms of accounting that are required to be focused by all the
businesses. If the business entities will pay attention towards all of them then it can help to
evaluate that the business is reflecting actual information in the books or not. Additionally, if an
Australian entity has acquired another company then it is very important for it to make sure that
it is able to follow the AASB 3 which is related to business combination.
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REFERENCES
Books and Journals:
Bepari, M. K. and Mollik, A. T., 2017. Regime change in the accounting for
goodwill. International Journal of Accounting & Information Management.
Bodle, K. A., Cybinski, P. J. and Monem, R., 2016. Effect of IFRS adoption on financial
reporting quality. Accounting Research Journal.
da Costa Junior, J. V., 2019. Planejamento tributário via BCUCC: Outros Resultados
Abrangentes como via indireta do goodwill interno. Revista de Contabilidade e
Organizações. 13. pp.e164429-e164429.
d'Arcy, A. and Tarca, A., 2018. Reviewing IFRS goodwill accounting research: Implementation
effects and cross-country differences. The International Journal of Accounting. 53(3).
pp.203-226.
Handley, K., Evans, E. and Wright, S., 2019. Understanding participation in accounting
standard‐setting: the case of AASB ED 192 Revised Differential Reporting
Framework. Accounting & Finance.
He, L., Evans, E. and He, R., 2016. The impact of AASB 8 operating segments on analysts’
earnings forecasts: Australian evidence. Australian Accounting Review. 26(4). pp.330-
340.
Íslands, H., 2018. Good Will (Doctoral dissertation).
Kabir, H. and Rahman, A., 2016. The role of corporate governance in accounting discretion
under IFRS: Goodwill impairment in Australia. Journal of Contemporary Accounting &
Economics. 12(3). pp.290-308.
Kabir, H., Su, L. and Rahman, A., 2020. Firm life cycle and the disclosure of estimates and
judgments in goodwill impairment tests: Evidence from Australia. Journal of
Contemporary Accounting & Economics. p.100207.
Li, C., 2019. Analysis of annual report of Meridian Energy Limited for 2018. The Frontiers of
Society, Science and Technology. 1(4).
Pallarés Sanchidrián, J., Pérez García, J. and Gonzalo-Angulo, J. A., 2015. Relevance of
goodwill impairment: the case of European banking (2005–2015). Journal of Banking
Regulation. pp.1-15.
Su, W. H. and Wells, P., 2018. Acquisition premiums and the recognition of identifiable
intangible assets in business combinations pre-and post-IFRS adoption. Accounting
Research Journal.
Online
Annual report of Angel Seafood Holdings. 2019. [Online]. Available through:
<https://angelseafood.com.au/wp-content/uploads/2019/10/Angel-Seafood-Holdings-
FY2019-Annual-Report.pdf>
Annual report of Australian Dairy Nutritional Group. 2019. [Online]. Available through:
< http://adfl.com.au/wp-content/uploads/2019/09/20190830_AHF-FY2019-Annual-
Report.pdf>
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