DAM561 - Applied Accounting and Budgeting: Financial Statements

This assignment solution addresses key aspects of accounting and budgeting in the context of ABC Company Ltd, focusing on compliance with the Public Finance Act 1989 and New Zealand Generally Accepted Accounting Practice (NZ GAAP), including Public Sector Tier 1 PBE Accounting Standards. It delves into the preparation and presentation of general-purpose financial statements as per NZ IFRS, emphasizing the importance of comparability, relevance, and reliability in financial reporting. The solution further explores inventory accounting, adhering to NZ IAS 2, with guidance on cost evaluation, measurement, and the treatment of purchase and conversion costs. The assignment highlights the necessity of disclosing important accounting policies, assumptions, and uncertainties, along with information on capital management and financial instrument classification, all aimed at presenting a true and fair view of the organization's financial performance and position.

Accounting and Budgeting

Question 2
a)
ABC Company Ltd has to prepare its financial statements as per the conditions and terms of
the Public Finance Act 1989 and complying with New Zealand generally accepted accounting
practice and Treasury Instructions (Treasury, 2018). The accounting policies are being
selected and implemented in such a manner that ensures that the results of financial
information fulfil the concepts of reliability and relevance. The financial statements also
need to be prepared as per the Public Sector Tier 1 PBE Accounting Standards. The standards
are being relied on the International Public Sector Accounting Standards.
b)
ABC Company Ltd has to prepare and present the general purpose of the financial statements
as per the NZ IFRS. The standard explains the basis for the preparation of financial
statements for ensuring comparability with the previous period financial statements of an
organization with the financial statements of other organizations (Xrb, 2007). The financial
statements should present the financial performance financial position of the organization. It
should provide information and data about the financial performance, cash flows and the
financial position of the organization which is useful to many users for making the economic
decisions. The financial statements should provide information about the liabilities, assets,
equity, expenses, income, cash flows and distribution and contribution by owners. Thus, the
financial statements should consist of a statement of financial position, statement of changes
in equity, statement of profit or loss, statement of cash flows and notes for an accounting
period. The organization should present each material class separately of similar items
(Phylaktis, 2014). The items of dissimilar function or nature can be presented separately
when they are immaterial. The organization should not offset liabilities and assets or
expenses and income unless permitted or required by an NZ IFRS.
The financial statements should present true and fair financial performance, cash flows and
financial position of an organization. The organization has to make an evaluation of the
ability for continuing as the going concern of the organization while preparing the financial
statements (Holton, 2012). The organization should disclose important accounting policies
consisting of measurement basis used during the preparation of the financial statements and
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other important accounting policies that are useful for understanding the financial statements.
The information should be disclosed that are made on future assumptions and other
uncertainties into the financial statements. The users should be able to assess the objectives,
processes and policies for managing the capital by the organization (Pilbeam, 2013). The
financial instruments should be classified as the equity instruments which also need to be
disclosed in an appropriate manner. Other disclosures consist of the notes which need to be
provided under the financial statements. Financial statements need to be prepared as per the
generally accepted accounting standard in New Zealand.
c)
ABC Company Ltd has to follow the NZ IAS 2 for carrying out the accounting processes for
the inventories. The main problem in inventories accounting is that the cost amount is to be
recognized as the asset and till the related revenues are determined, it is carried forward. The
standard provides direction for the evaluation of cost (Xrb, 2004). Inventories should be
measured at the net realisable value and lower of cost. The inventories cost of the items
which are not interchangeable usually and products or services segregated and produced for
particular projects should be allocated with the use of specific identification of the individual
costs. The purchase cost of inventories consists of import duties, purchase price, handling,
transport and other costs. The conversion cost consists of costs related directly to the
production units. The measurement cost can be used as per the convenience such as retail
method or standard cost.
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References
Holton, R. (2012). Global finance (12th ed.). Abingdon, Oxon: Routledge.
Phylaktis, K. (2014). Finance (4th ed.). New Zealand: Elsevier Science.
Pilbeam, K. (2013). International finance (8th ed.). Basingstoke: Palgrave Macmillan.
Treasury. (2018). Accounting Policies. Retrieved from
https://treasury.govt.nz/sites/default/files/2018-04/nzifrs-accountpolicies-14dec17.pdf
Xrb. (2004). NZ accounting standards board. Retrieved from
https://www.xrb.govt.nz/dmsdocument/2375
Xrb. (2007). NZ accounting standards board. Retrieved from
https://www.xrb.govt.nz/dmsdocument/772
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