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MA511-Financial Accounting And Reporting

tag 0 Download 9 Pages / 2,160 Words tag 16-11-2020


The Nikita Ltd which is a public company required to prepare general purpose financial reports, operates in a very competitive field, has been using historical cost in reporting their assets in the statement of financial position. The board of the company instructed the finance manager to use the fair value basis for the measurement of its non-financial assets (Property, plant & equipment). Some of those assets are very valuable and have in fact increased in value over the current period. In pursuing the board’s decision CEO is arguing that, as there has been no decline in fair value during the current reporting period, no depreciation should be charged on company assets as done in the past.


Assume you are the finance manager of the Nikita Ltd and write a report to the CEO.
Choose one of the company from the table listed below, access the Annual report of the selected company for the financial year 2017, and write a report incorporating the followings (1to7) while reviewing the selected annual report’s financial statements and notes to cite examples in order to strengthen your arguments.

1.Explain the nature of general purpose financial reports (GPFR) in the context of the AASB’s current SAC 1 Definition of the Reporting Entity.

2.Describe what assets constitute property, plant and equipment (PPE), and what the recognition criteria are for PPE.

3.Outline and explain the requirements of AASB 116 in relation to:
(a)The acquisition of property, plant and equipment;
(b)The measurement of property, plant and equipment subsequent to acquisition.

4.What is meant by depreciation expense, and explain whether all assets are subject to depreciation?
5.How is useful life determined, and what is meant by residual value of an asset?

6.What is fair value? Discuss whether AASB 116 set fair value as the ceiling for the carrying amount of assets and the impact of AASB 112 tax effect accounting on assets carried at fair value.

7.Discuss whether CEO’s argument is ethical when preparing the company’s financial statements in accordance with AASB101.

8.Recommendations and Conclusion
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