Question
You have just been appointed financial controller at XYZ Ltd., a manufacturer of specialized equipment used by various manufacturers of consumer products on their own
You have just been appointed financial controller at XYZ Ltd., a manufacturer of specialized equipment used by various manufacturers of consumer products on their own production lines. Your immediate supervisor, the vice-president finance, has indicated that he will be retiring in six months and that you could be in line for his position if you do a good job managing the preparation of the year-end financial statements. He has provided you with the following comments for your consideration during the preparation of these statements:
A. We have changed our inventory costing method this year from weighted-average to FIFO. This has resulted in an increase in net income of Rs. 115,000. The new method should be identified in the accounting policy note.
B. This year we hired a director of research and development. He has not yet produced any viable products or processes, but he was a top performer at his previous company. We have capitalized the cost of his salary and benefits, as we are confident, he will soon be producing a breakthrough product for us.
Comment on the accounting treatments proposed by the vice-president finance, supporting your discussion with any relevant components from the conceptual framework.
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