Accounting Theory: Comparative Analysis of Financial Reporting

Verified

Added on  2021/06/17

|4
|518
|51
Report
AI Summary
This report provides an analysis of accounting theory, specifically focusing on the financial reporting practices of two companies: Australian Dairy Farm and Capilano Honey Limited. The report examines the application of accounting standards, such as AASB 116, and the treatment of Plant, Property, and Equipment (PPE). It discusses key aspects like cost, accumulated depreciation, impairment losses, and fair value models. The analysis includes the valuation methods, depreciation methods, and the role of directors in ensuring the recoverable amount of assets. References to relevant accounting literature, including works by Scott (2015) and Gaffikin & Aitken (2014), are incorporated to support the analysis. The report also highlights the differences in accounting treatments between the two companies, especially concerning the valuation of land and buildings versus plant and equipment.
tabler-icon-diamond-filled.svg

Contribute Materials

Your contribution can guide someone’s learning journey. Share your documents today.
Document Page
Running head: ACCOUNTING THEORY
Accounting Theory
University Name
Student Name
Authors’ Note
tabler-icon-diamond-filled.svg

Secure Best Marks with AI Grader

Need help grading? Try our AI Grader for instant feedback on your assignments.
Document Page
2
ACCOUNTING THEORY
Solution
Australian Dairy Farm
As per the annual report of the firm, Plant, Property and Equipment is registered to be
$25973270 in 2017 and $26,271,715 in 2016.
Analysis of accounting Policies used by the firm reveals the fact that each class of plant,
property and equipment is necessarily carried out at cost or else as suggested, relatively less,
where appropriate, accumulated depreciation as well as impairment loss. In particular, it can
be said that plant as well as equipment are mentioned at cost less accumulated depreciation as
well as any accumulated depreciation and impairment losses (Scott, 2015). Fundamentally,
the carrying amount of particularly plant, property as well as equipment is analysed yearly by
directors in order to make certain that it is not over and above recoverable amount. As such,
recoverable value of necessarily plant, property as well as equipment is more than the
approximated recoverable amount. In this case, the carrying amount also gets written down
instantaneously to the approximated recoverable amount. In addition to this, impairment
losses also get identified in case of profit (Scott, 2015). Again, the amount that is depreciable
of different fixed assets counting plant, property as well as equipment is necessarily
depreciated on a straight line basis.
Capilano Honey Limited
Analysis of annual report of the firm reflects the fact that land as well as buildings is
necessarily valued at fair value (that is essentially the particular amount for which the specific
asset might perhaps be exchanged mainly between knowledgeable parties). In this case, the
plant as well as property is enumerated on the basis of cost less accumulated depreciation as
well as losses of impairment (Scott, 2015). In this case as well, the carrying amount is
Document Page
3
ACCOUNTING THEORY
analysed annually by firm’s directors to make certain that it is not over and above recoverable
amount from the assets. Plant, property as well as equipment for this firm is registered to be $
21,236,371 in 2017 and $ 21,499,578 in 2016. The accounting standard AASB 116 is
applicable for this specific item and principal issues in specifically accounting for PPE are
include recognition of specific assets, ascertainment of the carrying amounts. charges for
depreciation as well as impairment losses. The measurement in terms of fair value model can
be considered for changes in profit/loss (Gaffikin & Aitken, 2014).
Document Page
4
ACCOUNTING THEORY
References
Gaffikin, M., & Aitken, M. (Eds.). (2014). The Development of Accounting Theory (RLE
Accounting): Significant Contributors to Accounting Thought in the 20th Century.
Routledge.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
chevron_up_icon
1 out of 4
circle_padding
hide_on_mobile
zoom_out_icon
logo.png

Your All-in-One AI-Powered Toolkit for Academic Success.

Available 24*7 on WhatsApp / Email

[object Object]