ACCT3321 : Financial Accounting: Theory and Practice - Accounting and Finance Assignment Help

Assignment Task:

Task:

Background to the assignment

Hate it or love it, Bitcoin and other cryptocurrencies have had a surprisingly significant impact on the world of finance and accounting! Please see the headline on CNBC on 8 February 2021 below: Source: https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html There is ongoing debate about the accounting treatment of cryptocurrencies in both academia (Raiborn & Sivitanides, 2015; Tan & Low, 2017; Yermack, 2015) and industry (PWC, 2017). There have been calls for the International Accounting Standards Board (IASB) (AASB, 2016) and the Financial Accounting Standards Board (FASB) (Thompson Reuters, 2017) to provide guidance. This assignment focuses on the “biggest and best known digital currency” (AASB, 2016, p. 6) – Bitcoin. There are many ways in which companies may use Bitcoin and depending on the use, the accounting treatment may differ. These uses include the following.

1. Companies may invest in Bitcoin (short-term, long-term, speculative, as a hedge).

2. Companies may receive and make payments in Bitcoin (e.g. Tesla, Microsoft, Whole Foods, PWC Asia-Pacific started accepting bitcoin as payment for advisory services in 2017 (Business Insider Australia, 2017) )

3. Companies may mine Bitcoin (such as Slush Pool (Cryptocompare, 2018))

4. Companies may be investment companies, investing client money in Bitcoin.

REQUIRED: Part 1 and Part 2 (100 marks) Part 1: Short Report (90 marks) (max 1000 words) You are a recent UWA Accounting graduate working for a second tier business services firm, called AssetPlus, in Australia. A medium sized client, Tesling Ltd, has approached your firm for advice regarding their Bitcoin transactions. They manufacture machinery and now accept Bitcoin as payment. They plan to hold onto the Bitcoin received for the medium term (3-5 years).

Required: Your manager has asked you to draft a short report for Tesling Ltd covering the following:

I. A synthesis of current opinions on which accounting standard(s) may be relevant and how to account for this particular type of Bitcoin transaction of Tesling Ltd by key players. Key players should include KPMG, Deloitte, EY, PWC; IASB, AASB, FASB; Findex, BDO, Grant Thornton, Pitcher Partners, RSM etc. where relevant.(50%)

II. A concluding opinion for Tesling Ltd advising them of the relevant accounting standard to apply and the journal entries required

a) at the date of sale where Bitcoin is received,

b) at the subsequent year-ends and

c) when the Bitcoin is sold for Australian dollars in the future. Please use illustrative, made-up numbers. (30%)

III. Briefly comment on the likely impact of these journals on Telsing Ltd’s “earnings” number and balance sheet in the period covered in item II above. (10%)

IV. Briefly advise Tesling Ltd of the risks and benefits involved with accepting Bitcoin payment and holding onto the Bitcoin in the medium term. (10%) Part 2: Email (10 marks) (max 200 words) You have an uncle who is an English teacher (without formal accounting background). He has asked you (your family’s star accounting student) to explain what “blockchain” is and its possible uses/applications.

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