Depreciation
Cost of assets 245000
Depreciation (245000-35000/7) 30000
= 215000
Date
Particulars
Amount
30-June-2013
Balance of machine at 2012
215000
30000
Balance at 2013
185000
30-June-2014
Balance at end of 2014
155000
30-June -2015
Balance at 2014
Balance at end of 2015
125000
30-June-2016
Balance at 2015
Balance at end of 2016
95000
Journal Entries
Particular
Debit
Credit
Machinery A/c Dr
Depreciation a/c Dr
To Cisco Ltd
Narration
(Being machine valued at fair value)
30-June-2015
Machinery A/c Dr 95000
Depreciation a/c Dr30000
To Cisco Ltd 125000
Measurement of recoverable amount
=Fair value-cost to sell-value in use
= 104000-600-98000
= 5400
There will be no impairment of assets in this scenraio where in accordance with AASB 136 impairment of assets the the recoverable amount is less than the carrying amount of 95000.
Cisco Ltd should comply with the framework of AASB 108 which deals in ensuring the changes in estimates in the accounts. The depreciation method currently used by an entity is Straight line method if changes to WDV are required to fulfill this standard requirements.
30 June 2011
320000
To cash a/c
30-June-2012
40000
To machinery a/c
30 June 2014
Depreciation expense a/c Dr
To accumulated depreciation a/c
Journal Entries for Impairment Losses
Impairment loss a/c Dr
90000
In 2015, recoverable amount is higher than carrying figure so there is no journal entry has been made.
In 2014, carrying amount is $200000, whereas recoverable amount implies for $110000. Hence, carrying amount is higher than recoverable cost which shows the loss of $90000.
Carrying cost – recoverable amount
$200000 – $110000 = $90000
In balance sheet, revaluate amount of plant and equipment is recorded by business entity after doing final reversal.
International Accounting standards have high level of importance which ensures high level transparency and standardization in the financial statements. Hence, final accounts which are prepared according to IFRS are highly reliable in nature and thereby helps stakeholders in making decisions (Florou, Kosi and Pope, 2017). However, technical knowledge is highly required among the individuals or accounting personnel to deal with the aspects of International Accounting Standards such as IAS 12 and 26 etc. In this, accounting personnel must have ability to recognize deferred tax assets and liabilities. Moreover, assets, revenue received in advance, other liabilities, unrecognized items; consolidated financial statements are the main bases of taxation (Warren, 2016). By taking into consideration all such bases accounting personnel can assess or determine the tax liability. In addition to this, in IAS 12 contains rules regarding the measurement of deferred tax. Along with this, tax rate are also varied from one year to another. In this, accounting personnel is required to update with changing rules and policies. Through this, finance manager and accounting personnel would become able to determine suitable tax liability.
In addition to this, IAS 26 serves information about retirement plans which can be distinguished into two types such as defined benefit and contribution plan. Hence, it clearly presents information about the recording, measurement and disclosure of information regarding the retirement benefit plans. Hence, for effective presentation accounting personnel must have knowledge regarding the rules and regulations which are related to it (Bond, Govendir and Wells, 2016). Thus, by considering all such aspects it can be said that technical and conceptual knowledge is highly required for dealing with the standards more effectively and efficiently. Moreover, reporting and measurement aspect of pension plan is highly differing from one standard to another (McPhail, Macdonald and Ferguson, 2016). For instance: UK GAAP has different rules in relation to treatment on pension benefits in against to IAS. Hence, conceptual understanding and knowledge is highly required for dealing with the amount of retirement benefits and deferred tax amount.
There are several key issues which are associated with financial reporting enumerated below:
Books and Journals
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136. Accounting & Finance.
Florou, A., Kosi, U. and Pope, P.F., 2017. Are international accounting standards more credit relevant than domestic standards?. Accounting and Business Research. 47(1). pp.1-29.
McPhail, K., Macdonald, K. and Ferguson, J., 2016. Should the international accounting standards board have responsibility for human rights?. Accounting, Auditing & Accountability Journal. 29(4). pp.594-616.
Warren, C. M., 2016. The impact of International Accounting Standards Board (IASB)/International Financial Reporting Standard 16 (IFRS 16). Property Management. 34(3).
just share your requirements and get customized solutions on time
offer valid for limited time only*
someone in is bought