FACULTY OF BUSINESS AND LAW
ACFI2002 – FINANCIAL ACCOUNTING
SEMESTER 2, 2012
ASSIGNMENT 01
Student Name: Tran Thi Ngoc Hanh
Student Number: C3173300
Part I: Accounting Standard AASB138 Intangible Assets provides guidelines for accounting treatment of research and development costs for financial reporting purposes. Answer the following questions based on AASB138 and ‘Framework for the Preparation and Presentation of Financial Statements’. (85 marks)
Part I: Accounting Standard AASB138 Intangible Assets provides guidelines for accounting treatment of research and development costs for financial reporting purposes. Answer the following questions based on AASB138 and ‘Framework for the Preparation and Presentation of Financial
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Therefore, company usually have to agree on a contract to make sure that the ratio of debt to total assets be below a certain level (to protect the debt holders). Therefore, in a case that, company fails to maintain that level, they may have incentive to either inflate assets or deflate liabilities. So, in this case, manager prefers to recognise research expenditure as an asset.
iii. A company expected to realise a huge profit increase in this financial year. (15 marks) – expense
As we know that: profit = revenue – expense
Part II. The following two questions relate to heritage assets and biological assets (65 marks)
Part II. The following two questions relate to heritage assets and biological assets (65 marks)
1. Olive Twist Ltd has olive farms in Newcastle where the trees had a fair value less selling costs of $4 600 000 on 30 June 2011. During the year ended 30 June 2012, olives with an estimated market value of $300 000 were picked. The costs of picking, sorting and packing amounted to $100 000 and were paid in cash. The olives eventually sold on 2 July 2012 for $430 000.
In addition to the harvest of olives, the value of the olive trees changed over the period. The fair value less selling costs of the olive farm increased to $4 800 000 on 30 June 2012. During the reporting period ending 30 June 2012, employee expenses, fertilizers, lease expenses and other expenses amounted to $
Cost: Soybeans: $10.00 bus. /acre (Contract) Price depends on grade Tobacco: estimated to be $2.00 lbs./acre
Refer to AASB138 (54), (2015, p. 13) research expense should be expensed when it occurred. Whereas development expense could be capitalised as an intangible asset when the entity demonstrates the ability to use or sell (AASB 138 57 c 2015, p. 13). As a technology-driven business, R&D is the core competence for MYX to differentiate its products and gain sustainable profits. Hence, adjustments should be made to transfer R&D expenses to an intangible asset.
15. Hawthorn Corporation 's adjusted trial balance contained the following accounts at December 31, 2012: Retained Earnings $126,560; Common Stock $707,140; Bonds Payable $101,750; Additional Paid-in Capital $203,770; Goodwill $58,010; Accumulated Other Comprehensive Loss $153,850. Prepare the stockholders ' equity section of the balance sheet.
1. What percentage of total assets consists of purchased intangible assets, net, at July 27th, 2013? At July 28th, 2013? What type of events triggered the existence of these intangible assets?
In order to conclude on the net earnings, a trend was calculated with regards to the return on invested capital (assets). The trend, as computed from the table and graph in annexure 2, shows
In intellectual property assets and software showed its opening balance, closing balance, additions, disposals, accumulated amortization and impairment currency translation differences and net amount. Goodwill just showed the opening and closing balance and currency translation difference not any impairment loss. However, in intangible capital work in progress, it also showed other more informationabout amount transferred to software intangibles and transferred from PPE. At the end of the notes 12 of intangible assets, it provided additional information about the amortization charge that was recognized in general and administration expenses in the statement of comprehensive income (CSL annual report 2011)and impairment tests for cash generating units containing goodwill. CSL Behring and CSL Blotheraples all were CSL’s goodwill. The total intangible assets in 2011 were lower than before because of amortization in every year.
The objective of AASB 116 is to stipulate the accounting treatment for property, plant and equipment, make user can understand information about an entity’s investment in its property, plant and equipment, and the changes in entity’s investment. The main issue for property, plant and equipment in accounting are the recognition of relationship between assets, the determination of their carrying amounts, the depreciation charges and impairment losses. AASB 116 required the entity disclose it’s information of gross carrying amount, depreciation method, depreciation rate, useful lives of PPE, accumulated depreciation and reconciliation of carrying amount at beginning of the reporting period and at end of the reporting period.
Furthermore, the Key Audit Matter (KAM) of goodwill and intangible assets disclosed in Telstra Corporation Ltd annual report are recognised as core assets. In note 2.4.2, it can be seen that intangible assets has the highest deferred tax liabilities after non-current assets. This is to be expected since it is a telecommunication and technology company so the cost incurred is significant for intangible assets such as research and development, capital costs and obtained intangible assets. Therefore, this is considered highly material as the events or transactions would impact Telstra as a whole such as the industry competitiveness and not just the financial statement alone. Moreover, it is complex to evaluate the impairment of the goodwill and
If an intangible asset is not able to meet either of these criteria, it should be recognized as an expense rather than being capitalized to the statement of profit or loss when it incurs. IAS 38 therefore specifically prohibits recognizing internally generated goodwill, customer lists, publishing titles, brands, start-up costs, mastheads and training costs etc.
AASB 138 defines intangible assets as “identifiable non-monetary assets without physical substance”. Such assets include but are not limited to goodwill, trademarks, patents and research and development. AASB 138 Intangible Assets has been implemented to prescribe the accounting treatment for intangible assets that have not been specifically dealt with in any other standard. Therefore, this standard only applies to intangible assets that have not been previously dealt with. Furthermore, it can be established that this standard is an example of normative accounting theories because the standard prescribes what should be done, rather than predicts what people may do. According to AASB 138 Intangible Assets, in order for an asset to be recognised in the financial statements it must meet specific criteria. The required criterion states that the asset must be identifiable, the entity has control of the asset, future economic benefits are probable and the cost of the asset can be measured reliably.
18. Companies that expense R&D costs to the income statement rather than capitalize them on the balance sheet would have:
“Agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less costs to sell at the point of harvest. Such measurement is the cost at that date when applying IAS 2 Inventories or another applicable Standard” (IAS 41)(13).
In a more recent (June 2007) Re-Exposure Draft, the AcSB states its opinion toward the above-mentioned rules-based conditions implemented in the U.S.: "U.S. standards generally are interpreted (by the AcSB) as significantly limiting the recognition of any internally generated intangible assets .and contains an outright prohibition on the recognition of start-up and pre-operating costs"(AcSB, 2007). By employing information perspective in accounting for internally generated assets creates recognition lag and reduces reliability of financial data, due to the fact that unrealized increases in value of an enterprise through their use and development are not recognized on Balance Sheet. Users, in turn when evaluating qualitative characteristics of financial data recognize the recognition lag, and inability of projecting future prospects creates a great demand for more reliability.
The museum will strive to acquire artefacts and specimens that generally are complete and in good condition, and for which provenance is well documented regarding its history. All potential acquisitions must be thoroughly researched in regards to their provenance, including proof of ownership prior to acquisition. Acquisitions must not violate any international laws or conventions and rights of the country.
The main concern that needs to be addressed first is the identification of assets and properties, and then the actual worth of their carrying sums, what amount of depreciation is going to be charged on them and recognition of impairment losses related to them. Initial measurement of assets would be done at cost. Cost model consists the original cost of the asset minus the impairment and the depreciation. However IAS 16 has two accounting models. The other one is the Revaluation model. When an asset is measured at revaluation cost it means that is in its Fair value at the date of revaluation less any subsequent accumulated depreciation and less any subsequent accumulated impairment