Accounting Report: Financial Statement Analysis of Hydan Co. 2017

This report presents a financial statement analysis of Hydan Co. for the year 2017. It begins with an executive summary and table of contents, followed by an introduction that outlines the scope of the report. The report delves into the journal entries, comprehensive income statement, and balance sheet. It also explores the concept of depreciation, detailing the factors influencing the useful life of assets. Additionally, the report compares and contrasts the cost and revaluation models as per IAS 16, highlighting the implications of each method. The conclusion summarizes the key findings and allows the company to choose their preferred valuation method. The report also includes a list of references.

Running head: FINANCIAL STATEMENT
Financial Statement
Name of the Student
Name of the University
Author note

1
FINANCIAL STATEMENT
Executive Summary:
The objective of this report is to prepare the financial statements of Hydan Co. for the year 2017.
The report focuses on highlighting the difference between the two valuation models (cost and
revaluation model). The purpose of depreciation, along with the factors affecting the useful life,
is also discussed in the paper.

2
FINANCIAL STATEMENT
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Part (a).........................................................................................................................................3
Part (b).........................................................................................................................................4
Part (c )........................................................................................................................................5
Part (d).......................................................................................................................................10
Part (e )......................................................................................................................................11
Conclusion.....................................................................................................................................11
References:....................................................................................................................................12

3
FINANCIAL STATEMENT
Introduction
This report aims to prepare the financial statement of Hydan Co. as on 31st December
2017 and discusses the revaluation model and cost model for recording PPE as per IAS 16.
Discussion
Part (a)
The journal entries are stated below:

4
FINANCIAL STATEMENT

5
FINANCIAL STATEMENT

6
FINANCIAL STATEMENT
Part (b)
The “comprehensive income statement” of the company is as follows:

7
FINANCIAL STATEMENT
Part (c )
The balance sheet is presented along with Notes to Financial Statements presented below:

8
FINANCIAL STATEMENT

9
FINANCIAL STATEMENT

10
FINANCIAL STATEMENT

11
FINANCIAL STATEMENT

12
FINANCIAL STATEMENT
Part (d)
The depreciation on fixed assets should be apportioned on a systematic basis over its
useful life. The main objective of charging depreciation is to meet the ‘matching principle’ of
accounting where the company tries to match the cost of with the income generated by utilizing
that asset. The factors affecting the calculation of useful life according to IAS 16 are – utilization

13
FINANCIAL STATEMENT
pattern of the asset and technological advances and the life of asset at the time of purchasing that
asset are essential for estimating the useful life. 1
Part (e )
As per IAS 16, under the cost model, the asset is recorded at cost less accumulated
depreciation, but under the revaluation model, the asset will be recorded at the revalued amount
that is fair value at the date of revaluation, and subsequent depreciation will be deducted from
the fair value. If the cost model is adopted there will be no confusion in the calculation since the
cost of the asset is readily available, but this does not provide an accurate value of the asset
because non-current asset’s market value keeps on changing. Revaluation model depicts the fair
market value of the asset and provides an accurate valuation. 2
Conclusion
However, it is to be concluded that the company can adopt any valuation method as per
their choice for recording its PPE and depreciation method accordingly.
1 m kirli, "Comparison of Depreciation Methods in" International Accounting Standard 16 Property, Plant
and Equipment" and an Application", in , , 2018.
2 m Socoliuc, "FAIR VALUE VERSUS HISTORIC COST: ADVANTAGES AND DISADVANTAGES", in , ,
2020.

14
FINANCIAL STATEMENT
References:
kirli, m, "Comparison of Depreciation Methods in" International Accounting Standard 16
Property, Plant and Equipment" and an Application.". in , , 2018.
Socoliuc, m, "FAIR VALUE VERSUS HISTORIC COST: ADVANTAGES AND
DISADVANTAGES.". in , , 2020.