Case Study: Financial Accounting Processes - ACCT6003, Week 9

This case study, prepared for ACCT6003 Financial Accounting Processes, delves into the accounting treatment of non-current assets, shares, and debentures. It addresses key concepts such as impairment and asset revaluation, comparing and contrasting the cost and fair value models. The solution examines the differences between impairment and revaluation, highlighting the application of AASB 136 and AASB 13, along with the accounting implications of each. The assignment includes a discussion on the revaluation of assets and the recognition of impairment losses. The provided solution offers a comprehensive understanding of financial accounting principles applied to real-world scenarios, providing students with valuable insights into the application of accounting standards and practices.

Running head: FINANCIAL ACCOUNTING
Financial Accounting:
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ACCOUNTING
Table of Contents
Part B:.........................................................................................................................................2
Issue 1:...................................................................................................................................2
Issue 2:...................................................................................................................................2
References:.................................................................................................................................3

2FINANCIAL ACCOUNTING
Part B:
Issue 1:
Revaluation of assets requires valuation of noncurrent assets at its fair value and to
increase or decrease the value of assets in the books of accounts. On the other hand,
impairment of assets means more or less the same as revaluation of assets. There is a very
small difference between these two terms. As per the accounting standard AASB 136, an
entity is required to recognise the impairment loss if the carrying amount is higher than the
recoverable amount of assets. Hence, impairment of assets talks about only recognition of
loss. On the other hand, the revaluation may increase or decrease the value of assets.
Revaluation of assets can be applied for individual noncurrent assets, but the impairment can
be applied for a cash generating unit as a whole and then the loss is allocated.
Issue 2:
Cost model of accounting recognises all the noncurrent assets at its historical costs.
Whereas, the fair value model of accounting requires noncurrent assets to be measured and
reported at its fair value in the financial statement. If the assets are measured at fair value
then, there might be revaluation loss of gain which will be reflected in the income statement
as well as in the balance sheet of the company. AASB 13 talks about the fair value
measurement of assets and requires restating the value of assets at its fair value. Hence, if the
fair value model is followed then there might be a huge loss in the year, and profitability
might be decreased.

3FINANCIAL ACCOUNTING
References:
Aasb.gov.au.(2020). Retrieved 19 April 2020, from
https://www.aasb.gov.au/admin/file/content102/c3/AASB136_07-04_ERDRjun10_07-
09.pdf
Aasb.gov.au. (2020). Retrieved 19 April 2020, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf