Question 140 Marks

According to the IFRS foundation, more than 140 countries have adopted the International Financial Reporting Standards (IFRS) (IFRS Foundation, 2021). Silva et al. (2021, p. 345) state that, "Existing research has concluded that accounting quality is influenced not only by the quality of accounting standards, but also by enforcement systems. Therefore, enforcement is one of the key factors for ensuring International Financial Reporting Standards' (IFRS) compliance and achieving accounting quality."

References:

IFRS Foundation. (2021). Who we are. (Available at: https://www.ifrs.org/about-us/who-we-are/).

Silva, A., Jorge, S. & Rodrigues, L. L. (2021). Enforcement and accounting quality in the context of IFRS: is there a gap in the literature? International Journal of Accounting & Information Management, Vol. 29, No. 3, pp. 345-367.

Required:

(a)Briefly discuss the above statement, and structure of Question 1 in the Introduction section. (5 Marks)

(b) What are the reasons of adopting IASB's standards IFRS by more than 140 countries throughout the world? (10 Marks)

(c) Why do you think that the enforcement of IFRS is important to improve the compliance of IFRS and the financial reporting quality? How do you think that the enforcement of IFRS can be implemented in a country which has adopted IFRS to harmonise accounting standards globally?

(15 Marks)

(d) Summarise the above questions (a-c) in the Conclusion section and provide your own remarks.

(5 Marks)

(f) Provide references (at least 6 articles/sources) in the end of the assignment and cite those articles in your writing with references in the text.(2 marks)

Note 1: Professional marks (3 marks) will be awarded for the format, clarity and expression. The report should include Introduction, Discussion, Conclusion and List of references. Parts (b) and (c) of question 1 need to be provided under the discussion section.(3 marks)

Note 2: You will be able to obtain electronic copies of articles by visiting La Trobe University Library website.

Question 210 Marks

"AASB 138 prescribes that internally generated goodwill is not required to be recognised as an asset."

Required:

Discuss this statement with examples.

Question 350 Marks

Essendon Ltd commences operations on 1 July 2020. One year after the commencement of its operations (30 June 2021) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2021. The statements are prepared before considering taxation. The following information is available.

Essendon Ltd

Statement of Comprehensive Income

for the year ended 30 June 2021

$

$

Gross Profit

2,500,000

Expenses:

Administrative expenses

294,000

Salaries

414,000

Provision for doubtful debts

70,000

Long service leave

140,000

Warranty expenses

85,000

Depreciation expense on equipment

224,000

Insurance

90,000

1,317,000

Accounting profit for the year

1,183,000

Essendon Ltd

Assets and Liabilities as disclosed in the Statement of Financial Position

for the year ended 30 June 2021

$

$

Assets

Cash at bank

74,000

Inventory

280,000

Receivables (net)

210,000

Prepaid insurance

20,000

Equipment - cost

1,120,000

Less accumulated depreciation-equipment

224,000

896,000

Land

1,260,000

Total assets

2,740,000

Liabilities

Payables

230,000

Provision for warranty expenses

60,000

Loan payable

560,000

Provision for long service leave

56,000

Total liabilities

906,000

Net assets

1,834,000

0ther information:

• Essendon Ltd has some land which cost $840,000 and land has been revalued to its fair value of $1,260,000.
• Amounts received from sales, including those on credit terms, are taxed at the time of the sale is made.
• The equipment is depreciated over 5 years for accounting purposes, but over 4 years for taxation purposes.
• Warranty expenses were accrued $85,000 and, at the year-end, actual payments of $25,000 had been made (leaving of accrued balance of $60,000). Deductions for tax purposes are only available when the amounts are paid and not as they accrued.
• All administration and salaries expenses incurred have been paid as at year-end.
• The amount of $84,000 long service leave expense has been paid.
• Insurance was initially prepaid to the amount of $110,000. At the year-end, the unused component of the prepaid insurance amounted to $20,000. Actual amounts paid are allowed as a tax deduction.
• The tax rate is 30 per cent.

Required:

(i)Compute the taxable income or loss. (using excel spreadsheet). 11 Marks

(ii)Complete the Taxation Worksheet on the next page in accordance with AASB 112 Income Taxes. (using excel spreadsheet).32 Marks

(iii)Prepare the applicable journal entries at 30 June 2020 to account for tax using the balance sheet method. 7 Marks

Note: Copy the excel spreadsheets and paste on the word document.

Essendon Ltd

Taxation Worksheet as at 30 June 2021

Item

Carrying amount

$

Tax Base

$

Deductable

Temporary Difference

$

Taxable Temporary Difference

$

Tax Expense

$

Revaluation Surplus

$

Tax Payable

$

Assets

Cash at bank

Receivables (net)

Prepaid insurance

Inventory

Plant - net

Land

Liabilities

Payables

Provision for long service leave

Provision for warranty

Loan payable

Net assets

Temporary difference for year

Loss carried forward

Movement for the period

Tax effected at 30%

Taxable income

Income tax adjustment