ACC206

Financial Reporting

Assignment 2 - Group-based Assignment

January 2016 Presentation

ACC206 Assignment 2

Assignment 2 - Page 2 of 4

Group-based Assignment

The cut-off date for this assignment is 23 February 2016, 2359 hrs.

___________________________________________________________________________

Question 1

A significant number of entities and countries around the world have adopted International Financial Reporting Standards (IFRS) as their basis for financial reporting, often regarding these as a means to improve the quality of information on corporate performance. However, while the advantages of a common set of global reporting standards are recognized, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonized reporting system is to be achieved.

Required:

(a) Examine five (5) implementation challenges faced by the International Accounting Standards Board (IASB) if there is to be a successful move to International Financial Reporting Standards.

(25 marks)

(b) Do you believe that it is appropriate that we have a single, global set of accounting standards as well as one conceptual framework that has global applicability? Describe your answer with five (5) good arguments, either for or against or both.

(15 marks)

Question 2

On 12 February 20X5 Noel Gifts purchased $440,000 (inclusive of $40,000 refundable GST) worth of raw materials to be consumed in the production process. The purchase was funded by a loan of $444,000 (inclusive of $4,000 administration fee). The loan is secured by the inventories. During February 20X5 Noel designed the corporate gifts for the customer.

ACC206 Assignment 2

SIM UNIVERSITY Assignment 2 - Page 3 of 4

Design costs included

Cost of external designer $8,400

Labour $3,600

During March 20X5, the Noel's production team developed the manufacturing technique and made further modifications necessary to bring the inventories to the conditions specified in the agreement. The following costs were incurred in the testing phase:

Material $26,400 ($3,300 was recovered from the sale of the scrapped

output)

Labour $12,100

Depreciation expense $5,500

During March 20X5 the entity incurred the following additional costs in manufacturing the customised corporate gifts:

Consumables $49,500

Labour $58,500

Depreciation expense $13,500

Required:

(a) Determine the cost of the inventory.

(10 marks)

(b) Explain all the possible costs that are to be excluded from inventories and to be recognised as expenses in the period in which they are incurred.

(6 marks)

(c) Some items required judgement in deciding whether they are inventories or otherwise. One such example is spare parts. Discuss whether spare parts should be classified as inventory or otherwise.

(4 marks)

Question 3

ImageTech Pte Ltd was started in 20X3 by two young technopreneurs. The company has successfully invented a new type of 3D printer and the product is selling well in the market. The company was approached by BigTech, a multinational corporation with the intention to acquire 100% of the company. The company wishes to measure the fair value of the inventory of 3D printers for the purpose of the sale. Three markets currently exist for the printers. ImageTech has transacted regularly in all three markets.

ImageTech wishes to find the fair value of their 800 new 3D printers, which are identical. The current volume and prices in the three markets are as follows:

ACC206 Assignment 2

SIM UNIVERSITY Assignment 2 - Page 4 of 4

Market

Sales price - per 3D printer

Volume of 3D printer sold by ImageTech

Total volume of 3D printer sold in market

Transaction costs - per 3D printer

Transport cost to the market - per 3D printer

$

Unit

Unit

$

$

Japan

3,000

3,000

30,000

375

300

USA

2,850

1,250

20,000

300

525

China

2,550

750

110,000

225

450

Required:

To help with their evaluation of the acquisition, BigTech has asked ImageTech to provide them with an estimate of the fair values of their net assets under FRS 113. ImageTech wishes to value the 3D printers at $2,325 per printer as this is the highest net proceeds per printer and Japan is the largest market for ImageTech's product. Determine if the fair value estimate complies with FRS 113. If not, determine what it should be.

(20 marks)

Question 4

Identify a company listed on the Stock Exchange of Singapore or one which you are familiar with or had easy access to the financial information. From the Annual Report of the company identified above, assess and comment on the company's treatment of the impairment of non-financial assets.

(20 marks)

---- END OF ASSIGNMENT ----

Kindly help to do for Question 1(A) and 3.

ACC206 Financial Reporting Assignment 2 - Group-based Assignment January 2016 Presentation ACC206 Assignment 2 Assignment 2 - Page 2 of 4 Group-based Assignment The cut-off date for this assignment is 23 February 2016, 2359 hrs. ___________________________________________________________________________ Question 1 A significant number of entities and countries around the world have adopted International Financial Reporting Standards (IFRS) as their basis for financial reporting, often regarding these as a means to improve the quality of information on corporate performance. However, while the advantages of a common set of global reporting standards are recognized, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonized reporting system is to be achieved. Required: (a) Examine five (5) implementation challenges faced by the International Accounting Standards Board (IASB) if there is to be a successful move to International Financial Reporting Standards. (25 marks) (b) Do you believe that it is appropriate that we have a single, global set of accounting standards as well as one conceptual framework that has global applicability? Describe your answer with five (5) good arguments, either for or against or both. (15 marks) Question 2 On 12 February 20X5 Noel Gifts purchased $440,000 (inclusive of $40,000 refundable GST) worth of raw materials to be consumed in the production process. The purchase was funded by a loan of $444,000 (inclusive of $4,000 administration fee). The loan is secured by the inventories. During February 20X5 Noel designed the corporate gifts for the customer. ACC206 Assignment 2 SIM UNIVERSITY Assignment 2 - Page 3 of 4 Design costs included Cost of external designer $8,400 Labour $3,600 During March 20X5, the Noel's production team developed the manufacturing technique and made further modifications necessary to bring the inventories to the conditions specified in the agreement. The following costs were incurred in the testing phase: Material $26,400 ($3,300 was recovered from the sale of the scrapped output) Labour $12,100 Depreciation expense $5,500 During March 20X5 the entity incurred the following additional costs in manufacturing the customised corporate gifts: Consumables $49,500 Labour $58,500 Depreciation expense $13,500 Required: (a) Determine the cost of the inventory. (10 marks) (b) Explain all the possible costs that are to be excluded from inventories and to be recognised as expenses in the period in which they are incurred. (6 marks) (c) Some items required judgement in deciding whether they are inventories or otherwise. One such example is spare parts. Discuss whether spare parts should be classified as inventory or otherwise. (4 marks) Question 3 ImageTech Pte Ltd was started in 20X3 by two young technopreneurs. The company has successfully invented a new type of 3D printer and the product is selling well in the market. The company was approached by BigTech, a multinational corporation with the intention to acquire 100% of the company. The company wishes to measure the fair value of the inventory of 3D printers for the purpose of the sale. Three markets currently exist for the printers. ImageTech has transacted regularly in all three markets. ImageTech wishes to find the fair value of their 800 new 3D printers, which are identical. The current volume and prices in the three markets are as follows: ACC206 Assignment 2 SIM UNIVERSITY Assignment 2 - Page 4 of 4 Market Sales price - per 3D printer Volume of 3D printer sold by ImageTech Total volume of 3D printer sold in market Transaction costs - per 3D printer Transport cost to the market - per 3D printer $ Unit Unit $ $ Japan 3,000 3,000 30,000 375 300 USA 2,850 1,250 20,000 300 525 China 2,550 750 110,000 225 450 Required: To help with their evaluation of the acquisition, BigTech has asked ImageTech to provide them with an estimate of the fair values of their net assets under FRS 113. ImageTech wishes to value the 3D printers at $2,325 per printer as this is the highest net proceeds per printer and Japan is the largest market for ImageTech's product. Determine if the fair value estimate complies with FRS 113. If not, determine what it should be. (20 marks) Question 4 Identify a company listed on the Stock Exchange of Singapore or one which you are familiar with or had easy access to the financial information. From the Annual Report of the company identified above, assess and comment on the company's treatment of the impairment of non-financial assets. (20 marks) ---- END OF ASSIGNMENT ---- Question 1 A significant number of entities and countries around the world have adopted International Financial Reporting Standards (IFRS) as their basis for financial reporting, often regarding these as a means to improve the quality of information on corporate performance. However, while the advantages of a common set of global reporting standards are recognized, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonized reporting system is to be achieved. Required: (a) Examine five (5) implementation challenges faced by the International Accounting Standards Board (IASB) if there is to be a successful move to International Financial Reporting Standards. (25 marks) First, the US is the biggest business sector and it is important for IASC standards to be harmonised with those predominant there. Even when there is just a slight difference, the US accounting body regards them as a major contrast, so as to demonstrate that their models are the best. Second, accounting measures have been developed in various nations under various legitimate, financial, social and social situations. Therefore there exists such differing qualities in accounting guidelines among the nations through the globe. On the off chance that joining is to be accomplished, it is first important to arrive at an agreement as to the focal target of financial reporting. Third, the nature of quality financial reporting relies on upon the nature of accounting guidelines and also the adequacy of the procedure by which those principles are actualized. Sufficient management and different backings are important to guarantee appropriate usage of standard. Execution of accounting principles is not a simple task. Notwithstanding meeting, there is no affirmation that they will be actualized with same measure of power in each purview. Last, merging of accounting standards with global methodology will unavoidably bring up the issues of standards versus principles. IASB benchmarks are standards based. Consequently the nations that have rules-based gauges are relied upon to encounter extensive trouble in harmonization of their standards with IFRS Question three Question 3 ImageTech Pte Ltd was started in 20X3 by two young technopreneurs. The company has successfully invented a new type of 3D printer and the product is selling well in the market. The company was approached by BigTech, a multinational corporation with the intention to acquire 100% of the company. The company wishes to measure the fair value of the inventory of 3D printers for the purpose of the sale. Three markets currently exist for the printers. ImageTech has transacted regularly in all three markets. ImageTech wishes to find the fair value of their 800 new 3D printers, which are identical. The current volume and prices in the three markets are as follows: ACC206 Assignment 2 SIM UNIVERSITY Assignment 2 - Page 4 of 4 Market Sales price - per 3D printer Volume of 3D printer sold by ImageTech Total volume of 3D printer sold in market Transaction costs - per 3D printer Transport cost to the market - per 3D printer $ Unit Unit $ $ Japan 3,000 3,000 30,000 375 300 USA 2,850 1,250 20,000 300 525 China 2,550 750 110,000 225 450 Required: To help with their evaluation of the acquisition, BigTech has asked ImageTech to provide them with an estimate of the fair values of their net assets under FRS 113. ImageTech wishes to value the 3D printers at $2,325 per printer as this is the highest net proceeds per printer and Japan is the largest market for ImageTech's product. Determine if the fair value estimate complies with FRS 113. If not, determine what it should be. Analysis Sales price japan 3000 USA 2850 china 2550 Volume sold by imagetech 3000 1250 750 Total volume sold in the market 30000 20000 110000 Transaction costs 375 300 225 Transport costs 300 525 450 Total (Any figure should input here?) The fair value estimate does not comply with FRS 113. it should be: 30000x3000-(675x3000) =6975000 - The total is incorrect. It should be 87975000. 2850x1250-(825x1250) =2531250 2550x750-(675x750) =1406250 Total=$10,912,500 Average=3,637,500 Fair price=3637500/1500=$2425 Explanations Fair value estimates should always be obtained from the market and if the information is not available, fair value is estimated using valuation techniques An entity uses valuation te chniques appropriate in the circum stances and for which sufficie nt data are available to measure fair value, m aximising the use of re levant ob ervable inputs and minimis ing the use of unobse rvable inputs s An entity uses valuation te chniques appropriate in the circum stances and for which sufficie nt data are available to measure fair value, m aximising the use of re levant ob ervable inputs and minimis ing the use of unobse rvable inputs s Under FRS an entity should always use valuation techniques that are appropriate in the circumstances and also for which sufficient data is available to measure fair value, maximizing mostly on the use of relevant observable inputs and depending less on the use of unobservable inputs There are several methods that can be used to estimate the fair market value and among them is the cost approach that basically computes the costs of doing transactions in various markets so as to get the net fair value that can be used in all the markets From the observation I have used the cost approach Sorry.it was an error, I have done the correction 1500 has been used because it is the average of the total units sold in japan which is the largest market - Are you able to show the working to 1500