HA2032 Corporate and Financial Accounting Assignment Help

 Topic: Corporate Takeover Decision Making and the Effects on Consolidation

1. Explain the legislative requirements in company formation and how to account for equity, capital and distributions;

2. Explain the methods of raising company funds, that is, using share capital or debt, and how to account for each;

3. Demonstrate the ability to prepare consolidated financial statements and how the data is collected, adjusted and interpreted.

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Introduction

The paper is a great insight about the accounting standards which are laid by the Australian accounting professionals in connection with the accounting treatment to be made in the financial transactions and the books of accounts to represent the annual report. It deals with explaining the paper on the insight about various standards like AASB 3: Business Combinations, AASB 128: Investments in Associates and Joint Ventures, AASB 10: Consolidated Financial Statements, AASB 127 Consolidated and Separate Financial Statements and the AASB 101 Presentation of Financial Statements. The paper provides a technical and a practical perspective about the standards and applying them into real life.

Part A Response

To understand the case first, it is essential to understand the three accounting standards which are as follows: -

AASB 3: Business Combinations this standard is established within the scope of IFRS 3, and it clearly explains that the how the accounting and the disclosures should be made, on the more it explains in detail how the same must be accepted and computed in the financial statements and represented in the financial reports. Further, this segment ensures that the identification is done correctly for all the acquirer as well as the acquire. In simple words it improves the concept of relevance, reliability and the aspect of comparison which helps in better performance of the transactions.

AASB 128: Investments in Associates and Joint Ventures:-It actually helps in explaining the investments are done correctly and are eligible, on the more it explains in detail as to how the accounting and estimation of the equity must be done so that the true and correct value can be reflected and provided in the books of accounts. Further, these accounting standards clearly explain the dominance and the holding process. It provides in detail the voting rights influence and control structure. Thus, in nutshell, it provides the equity value and the holder analysis in detail(AASB, 2018).

AASB 10: Consolidated Financial Statements:- This standard explains the prospect of group accounting and reporting as well as the individual accounting and books. It ensures that the book does not over floats the profits and loss and neither it under floats the profit and loss (AASB, 2018). On the more, it takes into account the individual transactions and clubs them as one single company. On the more, AASB helps in defining the control element as well as explaining and identifying the concept of holding an organisation as well as the subsidiary organisation.

In the given situation to choose between the two conditions which being that to either "purchase/acquisition for FAB Ltd or involves firstly to acquires the significant influence of the organisation. Understanding the various concepts and the collaboration of all the above three stated accounting standards it is evident that the significant influence in a condition where the books are not merged either than the concept of a subsidiary and the consolidation. In case of the presence of the significant influence the company records the detail in concept to the related party transactions. Benefits of having a significance influence is that the company does not have to acquire the complete shares nor bear it debts or losses as a matter of fact the company does not have to share the goodwill or the profits of the main organisation. However, it can still manage the operations and ensure that the working is done as according to the control and the planning process stated by the JKY LTD. Further, it helps in explaining a dominant rule which being ensuring that the FAB ltd follows each and every policywhether being related to the financial parameters and the other being the operating policy. Further, the significant influence does not include the burden of the associate accounting or the investment accounting. Further, the equity analysis need not be done nor does the valuation has to be done on such transactions. The other part is that the burden and the cost, as well as the time of acquisition, is reduced. The other aspect is that the significant influence can help in achieving the control over the organisation as well as an authority over direction by ensuring that that the JKY ltd has more than twenty percent or more share over the company financial and the operations. Hence, it is better if the company opts for the director decision which say to attain a significant influence rather than the taking an equity acquisition.

Part B Response

According, to the stated the AASB 127 Consolidated and Separate Financial Statements and AASB 10Consolidated Financial Statements intra group transactions can be claimed as the transactions which happen within the groups which may create debtors, creditors, inventory fluctuation sale and purchase or any other transactions which may happen within the group that may be create internal losses or internal profit and actually does not affect the profits and balances on real sense. They are basically termed as entries which are formulated on the basis of mere books reflection and balances and are primarily in nature of nominal nature. The same are termed as the intercompany transactions as well and governed by the standards of AASB 127.

The AASB 127 also explains that how the same must be accounted for and recorded in the books of accounts which can be explained as below:-

The main objective in connection with the intercompany transactions is to ensure that the unwanted transactions are eliminated or removed from the business transactions. Majorly, there are three main types of transactions which are the intercompany debts, intercompany revenue and expense and the last one is intercompany stock ownership.

In terms with debt, it means the eliminating the unnecessary income expenses or the interest expenses or any other borrowing or intercompany loans and various borrowing transactions.

In terms with intercompany revenue and expense it means about the sales, purchase transactions or the element of the cost of goods sold or the various financial transactions which effects the results with the revenue as well as the expense in the income statement.

In terms with the stock ownership it primarily, means the inter group transactions pertaining to investments and equity investments made between the intra groups, the other aspect is the retained earning which can be in terms with the profits and reserve transfer(AASB ,2015).

In connection with the specific transactions like sale and purchase of the goods within intra group, it deals with two element one being the inventory transfer and the other creating unrealized profits and losses (AASB ,2015). In terms with the standard stated by the professional in the board it is evident that the profits which arise from the sale of such transactions are unrealized and fictious and it does not incur to have actual value and therefore, by subtracting them will lead to a position of providing a null status to the books of accounts.
On the other hand, the providing services to the parent entity is a form of income earned and at the other hand the paying off for such services received is an expense to the parent entity. While consolidating the accounts it will lead to a process of creating a profit or losses which are again not real and are nominal and therefore, the only solution is to eliminate such transactions to provide accurate and fair results.

In terms with computing the non-controlling interest or where the company does not have a share in terms with consolidated entries according to the accounting standard, such entries and their net results must be accounted in the books of account. Mainly because, they deal with the actual profits or losses on the overall basis. In such cases the Non-controlling interest percentage is computed in terms with such inter group transactions and the same is accordingly added or subtracted from there balances to provide net results. On the overall basis the Non-controlling interest organisation will be affected from such transactions and thus providing the accurate and true results to be reflected in the books of accounts and for overall basis for internal parties as well as for the external parties.

Part C Response

The problem ensures to provide two an explanation between two main accounting standards which are stated as below which being the AASB 127 Consolidated and Separate Financial Statements and the other one being the AASB 101 explained as the Presentation of Financial Statements.

AASB explains as to how crucial and important it is to correctly and accurately represent the financial statements as well as the books of accounts. On the more, it provides a correct insight to the management and as well as the external parties to understand the position of the organisation.

In connection with the AASB 127 the professional has expressed as to how the various transactions a dealing must be accounted and treated in order to ensure the statements are correct. Further, the AASB 127 bifurcates the aspect into two main element one being the controlling interest organizations and the other being the non-controlling interest party. The first party defines those organizations which hold a substantial level of the importance in the business and its decisions whether being in context to the financial transactions or the operational transactions. On the other hand, the Non-controlling Interest are those parties which provide a substantial backing on account with the financial standing and support. This bifurcation or division of the interest holds the basis of the accounting of the transactions and its treatment in connection to such statements.

On the other hand, the AASB 101 displays the presentation and the disclosures of the financial statements. Its clear states that a systematic and organized manner which in the financial position of the company must be represents the statements in a general-purpose manner. Further, it presents the records in such a standards and prescribed manner which is accessible to all and understood on the universal platform(AASB ,2015). On the more, it is crucial that it follows and manages the standard set structure and a level of designated requirements which ensure that the details expressed in the report are globally accepted and also understood in a correct and in a manner and with same understanding across organisation, industry sectors as well as the across borders. This standard helps in explaining in a simple manner a process through which material misstatements and the non-material are disclosed and explained in the books of the accounts. Further, the best part of this is that the statements also helps in providing solutions and ways through which any in correct action can corrected and reflected in a correct manner in the books of accounts. Thus, the disclosures ensure that the accounting are done in coordination and in connection with the various business transactions which have directly or indirectly impact the financials and have a monetary impact on the books of accounts.

Considering the case details JKY Ltd requires that the NCI disclosure requirement must be separate in terms with equity analysis and also the allocation of the comprehensive profit. Further, the financial accountant clearly states that the assets are recorded in the historic costs and the same to ensure that the financial statements are stated correctly stated following process must be undergone.

According to the accounting standards it is necessary that the assets are recorded at there fair market value in order to ensure there correct and actual valuation in market as on the closing date of all the respective fiscal year of the ending of the annual report. To rectify the same an appropriate disclosure, need to be made in the notes of the financial statements. To account for the same the revaluation of the assets needs to done and the same is reflected on the balance sheet as well as the revaluation of the results are made to be reflected in the revaluation reserves(AASB ,2015). Thus, in case firstly the assets need to be revalued at a market value or the fair value of the assets and not at an historic cost to ensure that the items are recorded correctly and provide true and fair value in the books of the accounts. The other is ensuring the necessary revaluation done on the assets are dully recorded in the annual reports and with appropriate justification.

In connection with a with an NCI disclosure requirement as a separate item in the consolidation process. According, to the AASB 127 consolidations of the entries are computed and calculated in a correct and an appropriate manner. This ensures that the common and the intra group transactions must be eliminated so that the losses and the profits are not misleading. On the similar position the NCI are those equity holders which do have a portion in terms with a consolidation of the books. Hence, in case of any intra group transactions their share cannot be eliminated whether being on a positive run or a negative run. Therefore, as per the AASB 101 and having the records being fair disclosures separate requirement becomes essential. Further, the separate disclosers help in identifying the post transactions as well as the pre transactions, where the transactions help in identifying and bifurcating the revenue nature and the other being the capital nature(AASB ,2015). Further, on the division of such basis the real status of the financials can be achieved. The other effect is that the hold and the equity prospects and control is correctly and effectively stated and expressed, which further, provides a better standing on the clear analysis of the equity grouping of the JKF limited. The other aspect is that the NCI disclosures are equally important as it provides the external party and excellent preview of the holding the organisation have in terms of subsidiary patterns, holding patterns. It also helps in providing a glance of future possibility for the share holding pattern(AASB ,2015). Thus, through this accounting standard, the JKF Ltd can understand how to rectify there wrong doing actions and at the same time disclose them correctly in the financial statements.

Conclusion

Thus, the paper provides a great detail and an analytical perspective about the accounting standards which are required to be followed by the Australian organisation as well as the related parties to ensures that the financial statements and the picture presented are true and fair. On the more, the paper ensures that the accounting standards provides a balance between the both elements which being the practical perspective as well as the theoretical perspective. Thus, it sums up all the aspects on nutshell, to provide an overall review of all the Australian Accounting Standards of Boards.

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