The study aims to explain the various perspectives of implementation of AASB conceptual framework “AASB 101 Presentation of Financial Statements” and “AASB 102 Inventory”. To understand the implementation of these standards we have chosen “Coca Cola Amatil Limited”. The main reporting segmentation has been divided into four parts. The first part has evaluated the measurement of the inventory in accordance with relevant accounting standard. The second part of the study have identified the inventory system applied in the company and evaluated the advantage of the company based on the chosen inventory system. The third section has also discussed the costing method applied by the company and state the rationale on choosing the preferred costing method. The final part of the report has discussed the estimated impact on the different type the costing system which estimated with the various costing methods as per the financial statements.
Evaluating the measurement of inventory accounting standard
“Coca Cola Amatil Limited” follows the preparation of the financial statement as per “AASB and the Corporations Act 2001”. AASB inventory is accounted as per “AASB 102” which is incorporated “IAS 2 Inventories”. The main objective of this standard is related to the accounting for the issues which considers the inventories as the cost to be recognised as an asset and carried forward as per the related revenues (Haun et al. 2014). This standard also provides the guidance as per the determination of the cost which are associated to the recognition of the expenses including the write down to the net releasable value (Ccamatil.com 2018).
Identification of the inventory system applied in the chosen company along with benefits
The company recognises the inventories which are stated at the lower of cost including the fixed and variable factory overheads where applicable along with the net realisable value. In addition to this, the cost is determined with the various type the factors which are seen to be associated to the first in first out method, average or standard which is most applicable as per the transactions of the company. In addition to this, the net realisable value has been considered with the various factors associated to selling price which takes place in the ordinary “course less completion and selling expenses”. Additionally, the cost of inventories comprises of the transfers taken from the equity as per the gains or the losses on inventory purchases qualifying as per cash flow hedges (Levant and McCurdy 2017).
The main benefit of the recognition of the inventory by the company as per this measure has been conducive with the consideration of only net realisable values, therefore it considers the all aspects of raw material and finished goods inventory.
Determining the costing method adopted by the company and rationale for the same
The several inferences from the study has been seen to be based on consideration which are seen to be associated to activity-based costing. The company effectively incorporates this costing system and estimate the impact of the various types of the costing method as per fair value consideration as per cost centre (Rajan, Datar and Horngren 2015). “Coca Cola Amatil Limited” uses the FIFO method for the inventories which is a more conservative approach and conducive for following a more conservative approach with the determination of the cost of goods sold. The FIFO method is seen to be evident with the consideration of the various types of factors conducive for the taking into account the receivables inventories less current trade and payables. In addition to this, some of the other consideration of the FIFO is observed by the company which has included plant and equipment and intangibles before accounting for other items (HUANG 2017).
Estimating the impact of different costing methods on the financial statement of the company
The main effect of the various types of the costing method on the financial statement of the company needs to be considered as per the changes in the accounting for the inventory of the company. The advantages of FIFO method will ensure that the flow of cost is accounted as per the physical flow of the goods (Ellul et al. 2014). The estimate of the balance sheet as per the FIFO method along with ABC will ensure inventory is considered as per the market value. The advantages of the LIFO will lead to slightly better accounting as per the sales revenue and COGS. In case the company considers the traditional approach then it will have to main a single channel cost driver (Taleb, Gibson and Hovey 2015). This will lead to several types of limitation which are seen to be based on the non-consideration for the cost drivers. This will also lead to several problems in the future which are considered with maintain a single overhead for the various cost drivers. It main not be able to depict the appropriate accounting for COGS and the accounting for this may show a decreased value (Horngren 2014).
The various information identified in the report has been able to show that in terms of the accounting standard it has prepared its financial report with AASB standards and Corporation Act 2001. It has been further discerned that in terms of the various type the rationale accounting the inventories has been considered with the first in first out method, average or standard which is most applicable as per the transactions of the company.
Ccamatil.com. (2018). [online] Available at: https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-Report-2017.ashx [Accessed 27 May 2018].
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