Assessment Task 2 — Written Assessment Part B
This assessment item relates to the following unit learning outcomes:
Question 120 marks
Christchurch Ltd is a large Australian retail company. The management of Christchurch Ltd are currently evaluating a number of investments that could be made by the company in the near future. These investments are:
The management of Christchurch Ltd has asked you, as one of the company’s accountants, to prepare a memorandum to be distributed to the company’s shareholders that explains the accounting requirements for each of these investments. You are also asked to make any necessary references to the relevant accounting standards. An example of the memorandum format is included at the end of this assignment.
Word limit: approximately 800 words.
Question 25 marks
The latest versions of Australian accounting standards issued by the AASB are available on the AASB website: http://www.aasb.gov.au/Pronouncements/Current-standards.aspx.
Review the current accounting standards on the AASB website and select two accounting standards that are not examined in this unit and which you consider might be important for you to have some knowledge about in your future role as a professional accountant.
Word limit: approximately 200 words.
You do not need to include a title page or a table of contents.
Use the question numbers to indicate which question you are answering. You do not need to include the question as part of your answer.
You should number all of the pages and include your name and student number (as either a Header or a Footer) on each page.
You should use a consistent font throughout your assignment. Suggested fonts include Calibri or Arial.
Your assignment should include references (both in-text and in a reference list) that conforms to the American Psychological Association (APA) style.
However, you can adopt a simplified approach to the in-text referencing of accounting standards. Your first reference (within a question) to an accounting standard should be in full. For example, ‘according to paragraph 27 of AASB 101 Presentation of Financial Statements (Australian Accounting Standards Board [AASB], 2015), financial statements should be prepared using …’.
Subsequent references to this accounting standard can be abbreviated. For example, ‘it is a requirement of paragraph 36 of AASB 101 that …’.
The reference list nomenclature depends on whether you obtained the accounting standard directly from the AASB web site or from the ACCT19062 Intermediate Financial Accounting Moodle website.
Australian Accounting Standards Board (AASB). (2015). AASB 101 Presentation of Financial statements.
Australian Accounting Standards Board (AASB). (2015). AASB 101 Presentation of Financial statements. Retrieved from CQUniversity e-courses, ACCT19062 Intermediate Financial Accounting, http://moodle.cqu.edu.au
Question One requires you to write a Memorandum. An example of a Memorandum, which you can use as a template, is shown on the following page.
DATE:1 June 2018
TO:Students in Advanced Financial Accounting
SUBJECT:Format for a Memorandum
A Memorandum is a formal written document that, as in this example, is headed at the top by
MEMORANDUM in bold and centered. Below this are: (1) the date in full; (2) the person to whom the Memo is addressed; (3) the name of the person sending the Memo; and (4) a subject line that indicates the subject matter.
The body of the Memorandum begins with an introduction that identifies the subject and provides an overview of the contents. The length of the introduction should be no more than one paragraph but it depends on the needs of the reader: how much do they already know about the subject? This is followed by the discussion which moves through the points to be made in a logical order. At the end is a conclusion that reinforces and reiterates the main points made in the discussion.
The body of the Memorandum consists of a series of paragraphs that begin flush with the left-hand margin. One-and-a-half line spacing should be used and paragraphs should be separated by a space. A Memorandum does not contain a salutation (for example, ‘Dear Rebecca’) or a complimentary close (for example, ‘Yours Sincerely’ or ‘Regards’). Headings can be used to organise the material but these should not be overused. Headings should, as the example above indicates, be in bold so that they clearly stand out.
|to:||the management, Christchurch Ltd.|
|from:||Name of the Student|
|date:||7 september 2018|
|subject:||AASb Standards and accounting requirements for investment alternatives|
This memo is in reference to the potential investments that the management of Christchurch Ltd. is planning to involve in future. The memo explains the accounting requirements for each of the potential investment options along with their relevant accounting standards as per AASB.
The Australian Accounting Standards Board (AASB) is an Australian Government agency that develops and maintains financial reporting standards applicable to entities in the private and public sectors of the Australian economy.
As we know that the management has 4 potential options to invest in future. Let us examine each of them and their accounting requirements individually to understand which one is the best suited for the organization.
As we know that Greymouth Ltd. has been a successful company in the past 5 years Not just revenue and profits, but dividend payout ratio of the company has also been increasing in past few years, and is expected to increase in future as well.
According to AASB 134 - Presentation of Financial Statements, it is required by standards that the management has to disclose every relevant transaction involved in buying of shares. The method of buying the shares- either put or call, the offer price of buying the shares, the actual buying price as on the date of transaction, date of redemption and any other information which is material and required to be known to the users of financial statements.
According to paragraph 12 and 27 of AASB 134 - Presentation of Financial Statements (Australian Accounting Standards Board [AASB], issued 2015, operative Jan, 2018), it is required by standards that the management has to disclose every relevant transaction involved in buying of shares. The method of buying the shares- either put or call, the offer price of buying the shares, the actual buying price as on the date of transaction, date of redemption and any other information which is material and required to be known to the users of financial statements.
In addition to this, as per the principle of contingency, the management should forecast the anticipated costs and revenues related to both of these projects to make required provisions for any future contingencies.
As per paragraphs 11 and 12, as on the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in Wellington Ltd. As per para 9, the date on which the acquirer obtains control of the company is generally the date on which the acquirer legally transfers the consideration, acquires the assets and assumes the liabilities of Wellington Ltd. —the closing date. However, the acquirer might obtain control on a date that is either earlier or later than the closing date.
Apsrt from this, the management also needs to recognise and measure a liability (or asset, if any) related to the Wellington’s employee benefit arrangements in accordance with AASB 119 Employee Benefits. Further, the management will record acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received. However, the costs to issue debt or equity securities shall be recognized in accordance with AASB 132 and AASB 9.
As per AASB 10- Consolidated Financial Statements and AASB 12- Disclosure of Interests in Other Entities, once the company decides to invest and get the ownership of majority of equity in Hastings Ltd. , it has to be treated as an associate firm and the financial statement of Hastings need to be disclosed along with the Churchchrist financials.
Name of the student
The accounting standards that have not been examined in the unit but I consider them important to understand and implement in future as an accountant are-