Rhubarb Metal Manufacturers Ltd - Existence of Future Economic Benefits - Accounting and Finance Assignment Help

Assignment Task:

Question 1:
Download the accounting conceptual framework using the above web address and answer the following questions:
a) The previous version of the conceptual framework (2014) contained, as one criteria of the definition of an asset, the “existence of future economic benefits”. The updated version (2019) has altered this slightly by indicating a resource need only have the “potential to produce economic benefits”. Explain this distinction. Also, explain in your own words why you think the regulators changed this definition?

b) Bonn Ltd entered into the following transactions and events during 2019.
i) Entered into a contract with Rhubarb Metal Manufacturers Ltd to purchase capital equipment at a cost of $5 million. Bonn paid a 5% deposit.
ii) Bonn has a regular program of maintaining its plant and equipment. In order to provide for this program, it has established a ‘provision for plant maintenance’ account, which the company shows with liabilities in the statement of financial position.
iii) Bonn has non-participating, cumulative, redeemable preferences shares on issue. These are shown as a component of equity. However, the accountant believes that the preference shares meet the definition of liabilities.
iv) As a result of its expansion program, the company applied for a government grant of $2 million as part of the government’s employment enhancement program. During 2019 it was informed that it had been awarded the grant to be paid during the 2020 reporting period.

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