ACC5AAI : LaPort Ltd Case Study - Accounting Policy of Revenue - Accounting Assignment Help

Assignment Task :

Question 1 

LaPort Ltd is a publicly listed manufacturing company in Australia. Recently, in response to the declining  sales revenue, the company developed a new revenue recognition policy where 50 per cent of its inventory  cost would be recognised as revenue at completion of production rather than at the point of sale. As a result,  LaPort Ltd’s revenue recognition for the current year has increased by 30% compared to that of last year  where the company was under old accounting policy to recognise revenue at the point of sale of those  inventories rather than at the completion of production.  

Required: Discuss if LaPort Ltd’s new accounting policy of revenue recognition is appropriate.  

Question 2  

Spice of All Sorts (SAS) Ltd is a company registered in Australia. It controls a subsidiary company residing  in India. The subsidiary operates within India and sells its goods and purchases its raw materials in India. It is  estimated that 70% of SAS’ sales are generated by its subsidiary based in India (in Indian currency Rupees).  The remaining balance of sales is generated by their operations based in Australia. 80% of the shareholders  of SAS Ltd are based in Australia. On 1 April 2020, SAS enters into a binding agreement with an Indian  company Siri, which requires Siri to construct a spice blender machine. The machine costs Indian Rupees  $5000000 (equivalent to A$100,000). The machine is competed on 1 May 2021 and shipped FOB Melbourne  on the date. The debt is unpaid on SAS’ reporting date 30 June 2021. The spot rates at the relevant dates are: 

1 April 2020 A$1.00=Indian Rupees$50 

1 May 2021 A$1.00=Indian Rupees$45 

30 May 2021 A$1.00=Indian Rupes$46 

Required 

• Determine the functional currency of SAS Ltd. Justify your decision.

• Determine the presentation currency of SAS Ltd. Justify your decision.

• Analyse if the machinery fits in the definition of a “qualifying asset” 

• Explain how SAS should treat the exchange differences on 1 May and 30 May respectively?  

Question 3  

Great Ocean Farm operates a large scale rose farm. They sell rose buds to companies producing high quality  herbal tea. They also supply fresh rose flowers to skin care products companies.  

Required 

a. Would Great Ocean Farm’s rose plants be considered as “bearer plant” according to AASB 141  Agriculture? Explain 

b. How should Great Ocean Farm classify and account for rose plants and harvested rose buds and rose  flowers? Explain 

Question 4 

Sino-Aus Ltd (SAL) wants to invest in a futures contract. However, they are not certain what position to  take in the futures contract. Industry analysts advised them that the market is at a ‘low point’. 

Required 

a. What position would you recommend SAL to take in the futures contract? Justify your answer  

b. Would your answer be different if the market is at a ‘high point’? Explain

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