Financial Accounting& Reporting 1 Assignment

Financial Accounting& Reporting 1 Assignment

Ref: Numerous Accounting Issues

Thank you for your email. It’s good to know that your company has just moved from being a small proprietary company to a large one. I am writing this email with regard to numerous accounting issues raised by the board of directors of your company. I have worked on the concerns raised and have drafted a response addressing the key issues of each problem:

Issue One: AASB 138 Recognition of intangible assets

Firstly, by thinking that recognition of the internally generated good will is not a good idea, the Financial Controller, Margaret Mitchell, is right.  As you mentioned the goodwill has been generated from having a Board of Directors which is seen as having integrity and vision, and discovery of commercially viable new mine sites following directors decisions to invest about $ 8.25 million in mines exploration.

AASB 138 48-50 requires that the internally generated goodwill not to be recognized as an asset by the company. AASB 138 (48) states that any internally goodwill should not be recognized, and AASB 138 (49) gives the reason for this requirement as resulting from the nature of goodwill where it is not an identifiable resource. As such it would be advisable for the company not to recognize the goodwill instead in can be noted in the financial report notes. However, if the company decides to recognize the goodwill, it should be recognized using the revaluation model if the cost of the good will can be measured reliably and if it is probable there will be future flows to the entity from the asset (IAS 38) (Cheung et al., 2008). In the revaluation model, the company shall carry the goodwill in its revalued amount after first recognition being fair value at the reevaluation date less any accumulated amortization during the revaluation date. The fair value of the goodwill will be determined in reference to the active market.

Issue Two: entitled to long service leave

I agree with the financial controller that you need to consider treating this expense in a different manner. The AASB 119, requires all………………….