1.The concept of fair value is described as the price that would be received by the person if he goes to the open market and sells his asset. Or the amount that he would have to pay in case, he transfers a liability on to another in an apt manner between the different market participants at any specified date. The following are the 4 key elements of the concept:
The following are the conditions that have to considered for the purposes of valuing a non financial asset:
For the fair value of these non-financial assets, the valuation of that asset is at the price at which the perspective market participant holds that asset and in case, there is no such market participant, then a different valuation technique is used (ACCA global, 2018).
In the case given, the above technique should be followed when calculating the fair value of that asset.
2.As per AAS 116, which deals with the depreciation of the assets, depreciation is recognised on assets when it is quiet probable that the future economic benefits would flow in to the entity in the near future as result of those assets. These assets possess some cost or any such other value that is capable of being measured reliably. A company could accept the non-recognition of these assets or liabilities that could arise from the agreements that are equally proportionately to be underperformed. The amount of the deprecation must be allocated on some systematic basis over the useful life of the asset. The depreciation charged on the asset should reflect the pattern on some future economic benefit of that asset. The allocation of the amount of depreciation on any asset must be recognised as an expense, excluding that amount which forms the part of the carrying value of another asset. When allocating the depreciation expense, the expected physical wear and tear and obsolesce and the legal or such other limits on the use of that asset (AASB, 2018).
As per the relevant standard on accounting, as and when the asset is put to use, the same shall be entitled for depreciation. In the given case, though the machinery was not used in the eye of the company or the management due to strike or not, but still as per the requirements as have been laid down under the Accounting Standard, an asset shall be eligible of depreciation f the same has been put to use or if the same is being used by the company to flow in the future economic benefits. Hence, in the given case, the asset or the machinery or the manufacturing plants under consideration shall be depreciated even if these were not used for few of the days (Legislation, 2018).
The fact whether the manufacturing plant was used for a few days or months is not relevant. The fact still remains that the plant was ready for being used or in fact, was being used by the company. And so, the manufacturing plant is eligible for depreciation. Hence, we do not agree with the statement of the accountant wherein he states that the depreciation shall not be charged on the asset.
3.The identification of the expenses pertaining with research and development is an important activity. In case, these expenses are not shown in the financial statements, then the financial statements shown would be distorted (AASB, 2018). The nature of these activities could never be identified since these are all of the developmental activities but even then, these are very important (AASB, 2018). The examples of the research and development costs include the research which aims at the discovery of some new knowledge that the company did not possess earlier, searching in the applications for some new research findings or some other knowledge, formulation and the designing of the new and an improved products of possess of the different alternatives and testing in the search of the products and processing in of the alternatives (AASB, 2018).
A patent shall be recognised in the financial statements only when it is quiet probable that some future economic benefits entail to the company and when the asset possess some cost or some value that is capable of being measured reliably(AASB, 2018). The term probable means that the chance of the economic benefits are more likely than not (AASB, 2018). When there is an expenditure that is not considered to be probable, but there is assurance that the economic benefits flows in to the entity, then that asset would not qualify in for recognition as patent (AASB, 2018). This would not apply when the management was misguided when it came to economic benefits for the company (AASB, 2018). In respect of its implication, on the basis of the evidence which is available, the degree of certainty is very much required for the satisfaction of the recognition of the criteria as an asset that does not exist (AASB, 2018).. If an asset fails the test of future economic benefits for the company, then that asset would not be qualified as such (AASB, 2018).
The economic flows to the entity should be capable of being measured reliably (AASB, 2018).
A patent shall be recorded in the financial statements when there is a probability that future cash flows would accrue in to the entity (AASB, 2018). But in the stated case, the company does not want to report the research and development expense in the financial statements which is alright (AASB, 2018). But this could be reported as patent only when the company hopes to get some future economic benefits from this asset (AASB, 2018).
4.As per para 4.24–4.39, BC4.4–BC4.22 and BC4.45–BC4.81 of the Accounting standard, an obligation or something that is derived in from the actions of the company by the established pattern of the past practices, when there are published policies or a sufficiently specific current statements and as the result of which the company has some valid expectation on the part of the others.
A contingent liability is the possible obligation which arises from the events that have occurred in the past and whose existence by the occurrence or the n-occurrence of one of more of the future events are somewhat not certain but these are not recognised since it is not quiet probable that the economic benefits that flows in to the entity would be required to settle in the obligation. Also, it would be termed as the contingent liability when the same is not capable of being measured reliably (AASB, 2018). A liability is something which has a present obligation of the company which arises in from the past events and the same is required to be settled of which there is an expectation of outflow of the resources of the company entailing from the economic benefits.
A provision is something which is a liability of an uncertain timing or amount (IAS plus, 2018).
The following are the desired classifications:
References
Aasb.gov.au. (2018). Accounting for Research and Development Costs. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AAS13_3-83.pdf [Accessed 9 Sep. 2018].
Aasb.gov.au. (2018). Definition and Recognition of the Elements of Financial Statements. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/SAC4_3-95.pdf [Accessed 9 Sep. 2018].
Aasb.gov.au. (2018). Depreciation. [online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AAS04_8-97.pdf [Accessed 9 Sep. 2018].
Aasb.gov.au. (2018). Fair Value Measurement. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB13_08-15.pdf [Accessed 9 Sep. 2018].
Aasb.gov.au. (2018). Provisions, Contingent Liabilities and Contingent Assets. [online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB137_07-04_COMPjun14_04-14.pdf [Accessed 9 Sep. 2018].
Cpaaustralia.com.au. (2018). IFRS 13 FAIR VALUE MEASUREMENT. [online] Available at: https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/ifrs-factsheets/factsheet-ifrs13-fair-value-measurement.pdf?la=en [Accessed 9 Sep. 2018].
https://www.accaglobal.com, A. (2018). How to measure fair value | ACCA Global. [online] Accaglobal.com. Available at: https://www.accaglobal.com/in/en/member/discover/cpd-articles/corporate-reporting/measure-value.html [Accessed 9 Sep. 2018].
Iasplus.com. (2018). IAS 37 — Provisions, Contingent Liabilities and Contingent Assets. [online] Available at: https://www.iasplus.com/en/standards/ias/ias37 [Accessed 9 Sep. 2018].
Legislation.gov.au. (2018). AASB 116 – Property, Plant and Equipment – August 2015. [online] Available at: https://www.legislation.gov.au/Details/F2017C00296 [Accessed 9 Sep. 2018].
Legislation.gov.au. (2018). AASB 116 – Property, Plant and Equipment – August 2015. [online] Available at: https://www.legislation.gov.au/Details/F2017C00296 [Accessed 9 Sep. 2018].
Legislation.gov.au. (2018). AASB 116 – Property, Plant and Equipment – August 2015. [online] Available at: https://www.legislation.gov.au/Details/F2017C00296 [Accessed 9 Sep. 2018]
We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.
Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.
Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.
Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.
Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.
Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.
We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.
Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.
You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.
Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.
Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.
You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.
You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.
Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.
We create perfect papers according to the guidelines.
We seamlessly edit out errors from your papers.
We thoroughly read your final draft to identify errors.
Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!
Dedication. Quality. Commitment. Punctuality
Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.
We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.
We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.
We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.
We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.