(i)The IASB has published a new version of the Conceptual Framework (2018), reintroducing the concept of ‘stewardship’ and new approach to recognition and measurement of elements in the financial statements.

Requirements:

a. Discuss what is meant by good stewardship of a company and why this principle is important to the investors?   4 marks
b. Discuss the recognition of an asset or a liability by reference to the qualitative characteristics and explain whether an item with low probability can be recognised in the financial statement? 5 marks
c. Explain the three measurements of current value according to the 2018 Conceptual Framework.  6 marks

(ii) You are the newly appointed financial controller of Harry plc. Harry is about to purchase shares in Liam, which will give it a controlling interest, and the finance director has just called you to say ‘When the acquisition goes through, you need to minimise the fair value adjustments so that the post-acquisition profits are maximised’. He has also stated that a large bonus will be payable after the acquisition, dependent on the profits earned by Liam in the twelve months after the acquisition. The finance director has made it clear that if the profit targets are not achieved by Liam, you will lose your job.

Requirement:
Advise the financial controller of the correct accounting treatment of the investment in Liam, and any ethical issues arising from the scenario. 10 marks