Carduus plc is preparing its financial statements for the year ended 30 September 20X5 and a number of issues need to be resolved. LO9 Accounts receivable at 30 September 20X5 total £69 million. Included in this balance is a debt owed by Pardew Ltd for £3 million. Pardew Ltd is now in administration. Not included in the balance are a number of debts by Greek customers totalling £7 million that have been factored for cash by a financial institution (in other words, Carduus plc sold the debts to the financial institution). The factoring contract gives the financial institution recourse to Carduus plc in the event of the customers defaulting.

Carduus plc has entered into an arrangement to lease a fleet of delivery vehicles over a number of years through a leasing company which would have legal title to the vehicles. The purchase price of the vehicles would be £20 million, and the lease payments over the contract life total £24 million.

Carduus plc has undertaken a programme of staff training and incurred costs of £4 million in the year in relation to this. The Human Resources Director has asked if these can be capitalised and depreciated over the next 5 years.

Carduus plc is currently being sued by a customer for the supply of faulty products in the year ended 30 September 20X5. The customer is claiming damages of between £5 million and £7 million. Carduus is disputing the claim and is seeking legal advice.

Carduus plc has acquired a company with brand names valued at £75 million. The brand manager for Carduus plc states that this now brings the company’s total brand values up to £500 million, and that this amount should be reflected in the statement of financial position. A hostile take-over bid for Carduus plc has been rumoured and the inclusion of this amount would be seen as a deterrent to a low priced bid.
In emergency discussions at Carduus plc’s board meeting in response to the take-over rumours, it was suggested that the statement of financial position undervalued the company and the market price of shares did not fully reflect this. This was due partly to the brands discussed above but also because of other factors such as employee expertise, customer loyalty and market position and that this goodwill asset should be valued and included in the financial statements.
Required:
Using the elements’ definitions and recognition criteria set out in the IASB’s Conceptual Framework, discuss how each of the above issues impact on the financial statements of Carduus plc. Where appropriate include in your answer the monetary values which would be accounted for.