University Company Accounting Assignment ACCT20073, Term 2, 2019

This assignment solution addresses key concepts in company accounting, including financial statements, fair value, and relevant standards like IFRS 13 and AASB 13. The solution explains the importance of fair value in asset valuation, considering market participant information and expected cash flows. It also discusses depreciation methods, emphasizing the use of historical cost and the rationale behind choosing cost models over fair value models. Furthermore, the assignment covers impairment tests, detailing the process of comparing cash inflows and outflows to determine the cash generating unit (CGU) of a business. The solution provides insights into how CGUs are identified and how impairment losses are calculated based on the difference between fair value and recoverable amounts. The assignment also includes a case study analysis on determining cash flow and CGU for a company.

Running head: Company Accounting
Company Accounting
Name of the Student
Name of the University
Author Note

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Company Accounting
Table of Contents
Question No 1............................................................................................................................2
1A)..........................................................................................................................................2
1B)..........................................................................................................................................2
1C)..........................................................................................................................................2
Question No 2............................................................................................................................3
Question No 3............................................................................................................................3
3A)..........................................................................................................................................3
3B)..........................................................................................................................................4
3C)..........................................................................................................................................4

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Company Accounting
Question No 1
1A)
Financial Statement should be made while keeping in mind all the norms and
regulation so each company should follow the same and the details of all the information can
bae available in IFRS 13 as it shows proper policy which company should follow in financial
statement. It also shows the amount of information company should disclosed in their
financial statement. Each company should value its asset on fair value, as this value show
proper position of company. It shows how much the company can obtained from the sale of
asset and also the payment in regards of liability of company. Fair value should be taken into
consideration with other factor and also the details of market participant in the company.
1B)
AASB 22 show that market participants should be include in the calculation of fair
market value of company financial statement. The expected cash flow and discounting rate
should also will give affect in the calculation of fair market value of asset and liabilities.
Company should also take the risk associated with the financial statement and it should also
take the rational behaviour of market participant in fair value technique of financial
statement.
1C)
Company should always value its asset and liability from the market value as per
IFRS 13 and AASB 13. Company should able to do proper market research in regards of
market value, but if it unable to find the same than it should take recent price of the asset and
liability. Market participant should be taken into consideration in market price and if
company is not able to have any information than it should able to take proper assumption as
per knowledge and should disclose the same in company financial statement.

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Company Accounting
Question No 2
Depreciation is the wear and tear of asset. Each company should depreciate their asset
so that it can know the real value of its asset. Historical Cost should be used in order to
deprecate the asset and not any other cost model should be used by the company. Expenses
should not be taken into consideration while calculating the cost of asset as this is will only
increase the overall cost of asset so it should be eliminated from the same. Company which
follow historical cost should not inflated the expense rate as depreciation rate.
Cost model are usually simple way to value the asset in compare to fair value model,
as in fair value model there is more amount of complexity so as per managers of company is
consider they took cost model over fair model in regards of value of asset. Cost model also
benefit the company as it takes into consideration the sunk cost which is not taken into
consideration by fair value model. Fair value model takes into consideration the change so
time value in asset which is not practically possible by the company so this also make the
managers to go for cost model over fair model.
Question No 3
3A)
Each company do impairment test and it is done by the comparison of cash inflow and
cash outflow related to some object. Cash flow of the company can help them to know the
Cash Generating Unit of business. Cash Generating Unit always have an independent
principle as it is not similar to any other unit, but by the use of single unit cash flow company
will not able to know the cash generating unit of the business. As per the value of cost of
impairment of loss is consider it can be calculated from the difference of fair value of asset
and recoverable of asset. As per the future cash flow is consider so the information should be

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Company Accounting
taken from different financial budget and forecasting report, as this will give all the detailed
information to the company.
3B)
The independency of cash flow is known by the company from the help of Cash
Generating Unit as it should the independency of company cashflow in business. The case
study which is given show that each driver has its own route to reach the destination, so this
will help the company to know the cash generating unit easily from the given information.
The company for the information cash generating unit it should take into consider of the bus,
specific route and the driver to know the cash generating unit.
3C)
As per the case study it is very difficult to know the cash flow of each bus as it cannot
calculated but only it can calculate net cash flow from each route as it is easily for the
company so it can calculate the cash generating unit.