Question 1 Reporting Environment and Conceptual Framework

Required:

Hunter Ltd is a public company listed on the ASX. Hunters accounts are prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). Hunter Ltd applies accrual accounting, uses a perpetual inventory system and measures assets on a historical cost basis, except for investment properties held by associates and certain financial instruments which have been measured at fair value.

A.) Explain how Hunter Ltd should account for the following items, justifying your answers by reference to the revised Conceptual Frameworks definitions and recognition criteria. Provide a journal entry if appropriate. a) Sold items to a customer for $50,000, which cost Hunter Ltd $30,000. The customer was issued an invoice for $50,000 on the date of sale with 30-day payment terms.

B.) Hunter Ltd licenses subscription access to software that it has developed at a cost of $1 000 per month. Customers are able to cancel their subscriptions at any time. A new customer paid $12 000 for a full years access.

C.) Hunter Ltds CEO has a friend (Emily) who owns a company, Cole Ltd. Hunter Ltd owes Cole Ltd $10,000 and because Emily won the lottery, she has written to Hunter Ltd stating that in appreciation of Hunter Ltds long term support, Hunter Ltd no longer needs to repay the debt.

D.) Hunter Ltd wants to support its local community. The local community group is organizing a fundraiser and seeking donations from the public. Hunter Ltd meets with the group and agrees to match donations dollar for dollar. It puts out a press release which is reported in the local newspaper along with a photo of the CEO and the chair of the community group. Hunter Ltd cannot know for sure how much money will be donated by the public. In past years donations have ranged from $40 000 to $50 000.

Question 2 Fair Value Measurement

Handy Ltd holds a non-financial asset that is traded in three different active markets, Market A, Market B, and Market C. All markets are accessible and Handy Ltd transacts in all three markets. The valuation premise for the asset is on a stand-alone basis.

Debo Ltd owns an identical non-financial asset and only trades in Market C, as it cannot access Markets A and B. The valuation premise for the asset is on a stand-alone basis.

Relevant information about these markets is as follows:

	Market A	Market B	Market C
Annual Market Volume ( units)	60 000	24 000	12 000
Market Price (per unit)	$150 000	$146 000	$156 000
Transactions coss	6 000	6 000	8 000
Costs to transport to market	2 000	4 000	4 000

Required:

A) Determine the fair value of the asset per unit for Handy Ltd. Show all calculations and briefly explain your answer with reference to AASB 13 where appropriate.

B) Determine the fair value of the asset per unit for Debo Ltd. Show all calculations and briefly explain your answer with reference to AASB 13 where appropriate.

C.) Is it incorrect if two independent entities determine a different fair value for an identical non-financial asset?