Individual Assignment: Accounting Issues in Business Acquisition

This project addresses accounting issues that arise during business acquisitions, from the perspective of a graduate accountant working for Power Ltd. The assignment focuses on resolving issues related to financial information, recognizing assets and liabilities at fair value, and the application of AASB standards. The presentation covers three key issues raised by the company's directors: adjusting consolidated financial statements at fair value (AASB 13), considering equity accounts during asset revaluation, and the treatment of equity accounts for an indefinite period. The solution explains the principles of fair value measurement, the role of equity accounts in financial representation, and the application of the acquisition method in accounting. References to academic research are also included. The student summarized their findings in a video presentation and a memo.

ACCOUNTING
ISSUES

Introduction
This presentation tells about the
accounting issues which could arise at
the time of business acquisition.

Explanation for accounting issues
To resolve issues related with financial
information and recognising assets and
liabilities at fair value here is the
explanations.

Issue 1
First issue raised by board of directors
of Power ltd is related with adjusting
consolidated financial statements at fair
value. According to AASB standard 13
all assets and liabilities are required to
be measured at fair value. It is a market
based valuation and not entity based
measurement

There are several principle that helps the
acquirer in recognising acquired assets
and liabilities of acquire. It also states
that classification of financial assets and
liabilities are measured at fair value.
Continue

Issue 2
Another issue raised by your directors
is related with consideration of equity
accounts while revaluing assets. They
also have doubts about recognition of
liabilities by using equity accounts such
as income. Equity accounts refer to
financial representation of business
ownership.

Revaluation refers to an adjustment that
is to be made for recording current
market value of assets. According to
AASB 10 which is concerned with
consolidated financial statements, at the
time of purchase fixed assets are
recorded at their cost price. It is
common that market value of assets
changes over the time.
Continue

Issue 3
Last issue identified by directors of
Power limited is related with existence
of equity accounts for indefinite period.
Merging of two business entities is a
best option for growth of business.

As per the appropriate law related with
acquisition there are several methods
related with accounting after
acquisition. When a company acquires
another company then acquirer entitled
to record transactions as per acquisition
method.
Continue

Stocks and equity accounts are revalue
at fair value in order to record it at as
per current market rate. If there are
some reserves in previous company
then the acquirer identifies such
reserves.

References
Abdel-Khalik, A.R., 2019. How enron used
accounting for prepaid commodity swaps to delay
bankruptcy for one decade: The shadowy
relationships with big banks. Journal of
Accounting, Auditing & Finance. 34(2). pp.309-
328.
Baker, R. and Wick, S., 2019. A narrative on
integrating research and theory into undergraduate
accounting curriculum. Meditari Accountancy
Research. 27(2). pp.325-344.

Thank you