ACC510 : Financial Reporting - Accounting Assignment

Internal Code - MAS3799

Accounting Assignment

Questions - 1. TDM Ltd is a manufacturing business at Mudjimba on the Sunshine Coast. You are the accountant for the company and the following items/issues relate to the financial year ending 30 th June, 2016:

• Photographs of the company’s founders and original buildings, which are of great sentimental and historical value only.
•  TDM Ltd is being sued for negligence by Zero Ltd and the legal advice is that it is likely the company will lose the case in court.
• TDM Ltd is being sued for negligence by Badger Ltd and the legal advice is that it is likely the company will win the case in court.
• Obsolete plant and equipment is now (as at 30 June 2016) retired from use by the company.
•  TDM Ltd has received a donation of $20,000.

Required: Explain how TDM Ltd should account for each of the above items. You must justify your answer by reference to the AASB Conceptual Framework’s definitions and recognition criteria for assets, liabilities, income and/or expenses as applicable. You must also state which General Ledger accounts are to be debited and credited. 2. In the discussion by Upton (2001, 71) regarding the lives of intangible assets it is noted that the formula for Coca-Cola has grown more valuable over time, not less, and that Sir David Tweedie, former chairman of the IASB, jokes that the brand name of his favourite Scotch whisky is older than the United States of America — and, in Sir David’s view, the formula for Scotch whisky has contributed more to the sum of human happiness. Required: Outline the accounting treatment for brands under AASB 138/IAS 38, and discuss the difficulties for standard setters in allowing the recognition of all brands and formulas on statements of financial position. 3.Provisions are recognised as a liability in the statement of financial position whereas contingent liabilities are not recognised in the financial statements but disclosed in the notes to financial statements. Paragraph 12 of AASB 137/IAS 37 Provisions, Contingent Liabilities and Contingent Assets states that ‘in a general sense, all provisions are contingent because they are uncertain in timing or amount’. Required: 1. Discuss possible reasons as to why provisions are recognised in the financial statements whilst contingentn liabilities are not. 2. Determine whether the following items would be classified and recoded as liabilities or not (provide a brief explanation for your decision): a. Provision for long-service- leave; b. Dividends payable; c. Preference shares.