University Financial Accounting Assignment: Expense & Asset Analysis

This assignment solution focuses on advanced financial accounting principles, specifically addressing the recognition criteria for expenses and assets in accordance with AASB 6. The document outlines the conditions under which exploration and evaluation assets are recognized, referencing the relevant paragraphs within AASB 6. Furthermore, it compares and contrasts the definitions and recognition criteria outlined in AASB 6 with those presented in the conceptual framework, highlighting key differences in asset definition and reporting. The assignment includes references to academic sources that support the analysis of accounting standards and frameworks. This comprehensive analysis provides a clear understanding of the intricacies involved in financial accounting practices, offering valuable insights for students studying advanced accounting concepts.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced financial accounting
Name of the student
Name of the university
Student ID
Author note

1ADVANCED FINANCIAL ACCOUNTING
Contents
Part A...............................................................................................................................................2
Recognition criteria of expenses and assets in accordance with AASB 6...................................2
Difference with the definition and recognition criteria as per conceptual framework................3
Reference.........................................................................................................................................4

2ADVANCED FINANCIAL ACCOUNTING
Part A
Recognition criteria of expenses and assets in accordance with AASB 6
As defined in AASB 6, the exploration and evaluation assets as per exploration and
evaluation expenses recognized as the asset in compliance with the accounting policy of the
entity (Aasb.gov.au, 2019).
As per Para Aus7.1 of AASB 6, accounting policy of an entity with regard to the
treatment of exploration and evaluation expenses shall be in compliance with the below
mentioned requirements. Further, for each of the interest, the expenses carried out in exploration
for as well as evaluating the mineral resources shall be –
 Fully or partially capitalized and shall be recognized as the exploration and the evaluation
asset if the requirement of Para 7.2, as mentioned below is satisfied (Aasb.gov.au, 2019).
 Expensed as and when incurred
Further, the entity shall separately take this decision for each of the interest area.
As per Para Aus7.2, the exploration and the evaluation asset must be reported only with
regard to the interest area if the below mentioned conditions are satisfied –
 Rights to the tenure of interest area are present (Aasb.gov.au, 2019).
 One of the below mentioned conditions at least shall be met –
I. Evaluation and exploration activities in interest area at the closing of reporting period
have not reached at the level that permits the reasonable assessment for existence or

3ADVANCED FINANCIAL ACCOUNTING
otherwise of the reserves those are recoverable economically and considerable operations
in and active or in association with the interest area are continuing
II. Evaluation and exploration expenses are projected to be recouped through the successful
exploitation and development of the interest area or alternatively by the sale (Zhou, Birt
& Rankin, 2015).
Difference with the definition and recognition criteria as per conceptual framework
As per the conceptual framework, asset is defined as the present economic resource that
is controlled by the entity owing to the past events. As per Para 89 of conceptual framework
asset is reported under the balance sheet while it is apparent that future economic advantages
from the asset will be inflow for the entity and the value or cost of the asset can be reliably
measured. Further, the asset is reported when the expenses carried out for which the same is
considered as improbable that the economic benefit will be inflow for the entity beyond the
current accounting period. Rather, such transaction resulting into recognition of the expenses in
the income statement (Aasb.gov.au, 2019).
Hence, there are differences in the definition of asset as per AASB 6 and as per
conceptual framework. As per AASB asset is recognized as per the entity’s accounting policy
whereas as per conceptual framework asset is defined as the present economic resource that is
controlled by the entity owing to the past events. As per AASB 6 asset is recognized only for the
area of interest whereas as per conceptual framework the asset is reported when it is apparent
that future economic advantages from the asset will be inflow for the entity and the value or cost
of the asset can be reliably measured (Xie, 2015).

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Reference
Zhou, T., Birt, J., & Rankin, M. (2015). The value relevance of exploration and evaluation
expenditures. Accounting Research Journal, 28(3), 228-250.
Xie, Y. (2015). Confusion over accounting conservatism: A critical review. Australian
Accounting Review, 25(2), 204-216.
Aasb.gov.au. (2019). Retrieved 22 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB6_12-04_COMPjan15_07-
15.pdf
Aasb.gov.au. (2019). Retrieved 22 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07-
14.pdf