Corporate Accounting and Reporting Financial Performance

Question: Discuss about theCorporate Accounting and Reportingfor Financial Performance. Answer: Introduction The objective of accounting is to collect and report on the financial information pertaining to the cash flows, financial performance and position of an entity. The present report undertakes to explain the application and relevance of AASB 10 and AASB 101 of Australian Accounting through practical illustrations. Part I: AASB 10 The primary purpose of AASB 10 Consolidated Financial Statements is to set out principles and guidelines to facilitate the preparation and presentation of consolidated financial reports when one or more sub-businesses are controlled by an organisation (AASB, 2011). This standard gives a novel and extended guidance on recognising whether or not control exists in a company, and hence whether it requires consolidation. The mandates of AASB 10 are based on principles and entail exercising judgment (Crowe Horwath, 2011). At 1 July 2016 Net fair value of identifiable assets and liabilities = ($100000+$50000+$10000) equity + =$10000 (1-30%) inventory+ =$10000 (1-30%) plant + 90000 (1-30%) patent -15000 (1-30%) legal claim = $226 500 Consideration transferred =$88 000 Capital reserve =$138 500 Worksheet entries Entries Dr. Cr. 1. Inventory Dr 10000 Deferred tax liability Cr 3000 Business combination valuation reserve Cr 7000 2. Patent Dr 90000 Deferred tax liability Cr 27000 Business combination valuation reserve Cr 63000 3. Accumulated depreciation - equipment Dr 20000 Equipment Cr 10000 Deferred tax liability Cr 3000 Business combination valuation reserve Cr 7000 4. Deferred tax liability Dr 4500 Legal claim Dr 10500 Legal claim Cr. 15000 5. Business combination valuation reserve Dr 138500 Capital Reserve Cr. 138500 Pre-acquisition Entries Entries Dr. Cr. Retained earnings Dr. 10000 Share capital Dr. 100000 General reserve Dr. 50000 Shares in Kam Ltd. Cr. 88000 Business combination valuation reserve Cr. 72000 Worksheet Entries at 30 June 2017 Entries Dr. Cr. Business combination valuation entries 1. Cost of sales Dr. 10000 Income tax expense Cr 3000 Business combination valuation reserve Cr 7000 2. Patent Dr 90000 Deferred tax liability Cr 27000 Business combination valuation reserve Cr 63000 3. Accumulated depreciation - equipment Dr. 20000 Equipment Cr 10000 Deferred tax liability Cr 3000 Business combination valuation reserve Cr 7000 4. Depreciation expense Dr. 5000 Accumulated depreciation Cr (1/2 x $10 000) 5000 5. Business combination valuation reserve Dr. 138500 Capital reserve Cr. 138500 Pre-acquisition entries The pre-acquisition entries are affected by: -transfer from business combination valuation reserve Entries Dr. Cr. 1. Retained earnings Dr. 10000 Share capital Dr. 100000 General reserve Dr. 50000 Shares in Kam Ltd. Cr. 88000 Business combination valuation reserve Cr. 72000 *Alternative BCVR entry for Equipment Accumulated depreciation - equipment Dr. 20000 Equipment Cr 20000 Equipment Dr. 10000 Deferred tax liability Cr 3000 Business combination valuation reserve Cr 70000 Assumptions: Assets value is presumed to be before depreciation as on 1.1.2006. It is presumed that Lisa Ltd. profit margin is 10%. Statement of Affairs An Abstract of Consolidated Balance Sheet of Lisa Ltd. as at 30 June 2016 Notes Amount of $ ASSETS Financial Assets Cash and cash equivalents - Trade and other receivables - Total financial assets - Non-Financial Assets Land and buildings - Property, plant and equipment - Fixtures Fittings 45,000 Intangibles 90,000 Other - Total non-financial assets 1,37,000 Total Assets 1,37,000 LIABILITIES Non-Current Liabilities Long Term Loan - Other - Total - Current Liabilities Provisions Employee provisions - Other 15,000 Total provisions 15,000 Net Assets 15 000 EQUITY Reserves 122,000 Total Equity 1,37,500 Part II: AASB 101 This Standard lays down the grounds for presenting the financial statements thereby ensuring their comparability both with the companys financial statements of earlier accounting periods as well as with the financial statements belonging to other businesses (Berrington and Bhandari, 2011). It prescribes the complete requisites for presenting the financial statements, minimum disclosures of their content, and principles guiding their structure (AASB Standard, 2015). Profit Loss Account: Statement of Profit or Loss and Other Comprehensive Income Note In $'000s Income Sales 50,00,000 Expenses Cost of Sales 35,00,000 Expenses Marketing Cost 66,000 Administrative Cost 99,000 Distribution Cost 2,00,000 Finance Cost 1,00,000 Profit before Income Tax 10,35,000 Income Tax 3,10,500 Profit for the year after tax 7,24,500 Profit distributed as Dividend 10,000 Profit retained by the company 7,14,500 Total other comprehensive Income 0 Comprehensive profit for the year 7,14,500 Conclusion The prescribed ways of reporting financial statements have been learnt from the above examples. References AASB Standard. 2015. Preparation of Financial Statements. [pdf]. Available through: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf. [Accessed on 15th September 2016]. AASB. 2011. Consolidated Financial Statement. [pdf]. Available through: https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf. [Accessed on 15th September 2016]. Berrington, M. and Bhandari, V., 2011. Pinnacle Financial Statements. IFRS System. Crowe Horwath. 2011. AASB 10, 11 and 12 - How Will They Affect You? [Online]. Available through: https://www.crowehorwath.net/uploadedfiles/au/insights/insights-assets/a_issue%20of%20aasb%2010%2011%20and%2012_sept11_final.pdf. [Accessed on 15th September 2016].