Financial Accounting Report Addressing Beachlife Limited Issues

This report, prepared by Magenta and Associates, addresses the financial accounting issues faced by Beachlife Limited. The report focuses on problems related to a patent infringement case and warranty expenses. It provides detailed guidance on utilizing AASB standards, specifically AASB 137 for contingency liability and AASB 118 for revenue recognition, to accurately represent the company's financial position in its annual report. The report outlines the measures needed to record potential losses from the patent case, including a table of probabilities and potential loss amounts, and explains how to account for warranty expenses and recognize sales in the current fiscal year. It emphasizes the importance of complying with AASB standards to ensure the accuracy and transparency of the financial statements. The report concludes with a summary of the solutions and a commitment to providing further assistance to Beachlife Limited.

Financial Accounting
Name of the Student:
Name of the University:
Authors Note:

1
15 January 2018
Christopher Sampson
718 Geelong Street,
Melbourne, VIC 3000
15 January 2018
Christopher Sampson
Managing Director, Beachlife Ltd
Level 7, 927 William Street,
Brisbane QLD-4000
Dear Christopher Sampson
Relevant email was transmitted on 13 November 2017, which indicated the problems faced
by Beachlife Limited in forming their annual report. The email sent to Magenta and
Associates mainly addressed the accounting issues faced by the management of Beachlife
Limited. Nevertheless, in response to the email the following letter is being outlined, which
directs all the relevant problems and accounting issues faced by the organization. The
measures and standards needed for comprehending the accounting issues adequately
discussed in the letter, which could allow the board to correctly prepare its financial report.
On behalf of Magenta and Associates I wholeheartedly thank you for providing us with an
opportunity to help with your accounting issues. Rest assured the measures and adjustment
that is needed for nullifying the accounting issue are adequately depicted in the letter.
Furthermore, adequate references and sources are provided with the advice that is given for
contemplating the accounting issue.
Beachlife Limited is a public limited company, who needs to follow all the relevant AASB
standard and regulations laid in Corporation Act 2001. The clauses and sections need to be
maintained by the organization while preparing the annual report, as it might help in
depicting their actual financial position. Regulations such as section 292, section 296, and
section 334 are mainly used in drafting the annual report (Aasb.gov.au 2018). Organizations
use the detected regulations to formulate their annual report according to the standard
maintained by the AASB and IAS. Lastly, it could be said that the advice provided in
Beachlife Limited is compliant with AASB standard, which could allow the organization to
complete their annual report. The measures are provided for issues regarding the warranty
expense and future loss that will be incurred by the organization.
Identifying the overall measures needed to solve the accounting issue regarding
infringement claim:

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15 January 2018
Christopher Sampson
The first accounting issue addressed in the email was regarding problems relating to patent
case, where the company needs to pay compensation to the accuser. However, the problems
in recording of loss that will be incurred by the company due to the infringement patent act is
adequately solved. Beachlife Limited could use contingency liability in their annual report to
record the overall loss, which will incur in immediate future. The measure taken with
contingency liability section is mainly addressed in AASB 137 paragraph 10 (Aasb.gov.au
2018). The treatment of contingency liability mentioned under paragraph 10 addressed that
any kind of loss, which will incur in future due to past actions needs to be recorded in
contingency liability section. This section directly addresses the accounting issue of recording
any kind of future losses incurred by the organization in future. The contingency liability
section mainly comes under balance sheet section of the organization under the liability
section. Therefore, the board could use the contingency liability section mentioned in AASB
137 for addressing the accounting issue faced by Beachlife limited (Adhariani, Sciulli and
Clift 2017).
Particulars Value Probability
1st chance $ 50,000,000 60%
2nd chance $ 30,000,000 40%
3rd chance $ 87,000,000 30%
The above table mainly identifies the overall probability and chance of loss
occurrence from the court ruling against Beachlife limited. There are 3 probabilities with
different percentage, where the company could incur loss. The highest probability is 60%,
where the company will incur loss of $ 50,000,000, which needs to be listed in the
contingency liability section. The other probability is also an option, where the company
could incur different amounts of loss. However, the highest chance of probability occurrence
needs to be taken into consideration, as there is highest likelihood the loss, which might incur
by the organisation (Ball, Tyler and Wells 2015). In addition, the contingency liability section
of Beachlife limited should include $ 50,000,000 for the probable loss, which might incur
from infringement patent case.
Consequently, the board of Beachlife limited could utilise the information related to AASB
137 paragraph 10 for addressing their accounting issue. This could eventually help in
formulating the correct annual report, which represents actual financial position of the
organisation. For any further queries on contingency liability section and related standard
please feel free to contact Magenta and Associates. Therefore, the board could utilise
contingency liability section of AASB and increase their liability section in balance sheet by
$ 50,000,000.
Identifying the measures used in solving the issue regarding warranty and sale record:
The second issue that is faced by the organization is problems related to warranty expenses
and record of sales in the current fiscal year. The main issue is regarding listing of warranty

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15 January 2018
Christopher Sampson
expense in the annual report, which is needed to be provided by the company in the current
fiscal year and extends to next fiscal year. Relevant provision needs to be conducted by the
company to depict their actual financial position in the annual report. According to AASB
137, the expenses that will be conducted in future by the actions taken in past needs to be
enlisted under contingency liability section. Moreover, under AASB 137 Paragraph 14(a), the
overall expenses that needs to be conducted by the company in near future must be enlisted
under contingency liability section of the balance sheet (Aasb.gov.au 2018). Furthermore, the
board could utilize the measure conducted by AASB for enlisting he warranty expense that
needs to be incurred by the company (Hudson 2016). The problems related to recoding of
sales in annual report also needs to be addressed, where AASB 118 paragraph 9 could be
utilized. According to AASB 118 paragraph 9, companies need to recognize their sales
conducted during the fiscal year in the annual report (Aasb. Gov. au 2018). The happening of
sales conducted in December 2017 needs to be immortalized in the current financial year,
which could assist in drafting actual financial position of Beachlife limited. The relevant
revenue recognition method is mainly enlisted in AASB 118 paragraph 9, which directly help
in stating the actual financial position of the organization. In addition, AASB 118 also states
that credit sales are entered during the occurrence regardless of the actual payment conducted
by the customer (Jones 2017).
Hence, the board of Beachlife limited could enlist the sales figure of $180,000 in the revenue
section under the provision of AASB 118 paragraph 9. On the other hand, the contingency
liability section of the company under the provision of AASB 137 paragraph 14 (a) could
allow the expenses of $15,000 as warranty expense in their yearly report. These above
depicted measures for the accounting issue could eventually allow Beachlife limited to
accurately develop the yearly report and portray their real financial situation.
All the relevant information is divulged in the missive, which could permit the board of
Beachlife limited to solve the accounting issue faced in preparing their yearly report. The
standards presented by Magenta and Associates adequately comply with all the AASB
standard and is accepted by accounting board. The board could utilise the information for
nullifying the accounting issues and present accurate financial position in their annual report.
Hence, all the accounting issues listed the email sent on 13 November 2017 is adequately
addressed. I also guarantee you that any kind of further details needed by the board of
Beachlife limited can be provided by Magenta and Associates. We are looking forward for
future communication between our administration.
Regards
Lisa Magenta
Manager
Magenta and Associates
718 Geelong Street,
Melbourne, VIC 3000

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15 January 2018
Christopher Sampson
Reference and Bibliography:
AASB, C.A.S., 2014. Business Combinations. Disclosure, 66, p.77.
Aasb.gov.au. (2018). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPoct10_01-11.pdf
[Accessed 16 Jan. 2018].
Aasb.gov.au. (2018). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB118_07-04_COMPoct10_01-11.pdf
[Accessed 16 Jan. 2018].
Adhariani, D., Sciulli, N. and Clift, R., 2017. Quantitative Optimisation Model, Results and
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Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Hudson, M., 2016. No setting off unfair preferences. Australian Restructuring Insolvency &
Turnaround Association Journal, 28(3), p.34.
Jones, D., 2017. Tax and accounting income-Worlds apart?. Taxation in Australia, 52(1),
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