Topic- Australian Accounting Standard AnalysisQuestion 1:One of the directors of Crane Ltd has...

Question

Topic- Australian Accounting Standard Analysis
Question 1:
One of the directors of Crane Ltd has proposed that the company adopt the revaluation model for fixed assets. Some of these assets are hard to obtain and certain items have increased in value in the current period, however it is difficult to know what their fair value is. The director is arguing that fair value will improve the 'look' of the company's statement of financial position, and may eliminate the need for depreciation.Required:1. Summarise the requirements of AASB 1 16 in relation to directly attributable costs of property, plant and equipment assets.2. Prepare a report to the board on whether it should adopt the director's proposal.
Question 2
Snapper Ltd holds a trademark that is well known within consumer circles and has enabled the company to be a market leader in its area. The trademark has been held by the company for 9 years. The legal life of the trademark is 5 years, but is renewable by the company at little cost to it.Required:1. Summarise the requirements of AASB 138 with reference to acquisition and revaluation of intangible assets.2. Discuss how the company should determine the useful life of the trademark with the reference to AASB 138, noting in particular what form of evidence it should collect to justify its selection of useful life.3. Analyse the impact of amortisation expense of trademarks on profitability ratios of Snapper Ltd.
Question 3
Todd Ltd acquires Nail Ltd, effective 1 March 2022. At the date of acquisition, Todd Ltd intends to close a division of Nail Ltd. As at the date of acquisition, management has developed and the board has approved the main features of the restructuring plan and , based on available information, best estimates of the costs have been made. As at the date of acquisition, a public announcement of Todd Ltd's intentions has been made and relevant parties have been informed of the planned closure. Within a week of the acquisition being affected, management commences the process of informing unions, lessons, institutional investors and other key shareholders of the broad characteristics of its restructuring program. A detailed plan for the restructuring is developed within 3 months and implemented soon thereafter.Required:1. Summarise the accounting for restructuring provisions with reference to AASB137.2. Should Todd Ltd create a provision for restructuring as part of its acquisition accounting entries? Explain your answer. How would your answer change if all the circumstances are the same as those above except that Todd :td decided that, instead of closing a division of Nail Ltd, it would close down one of its own facilities?

Ayushi · Accepted Answer

8
Australian Accounting Standard Analysis
Contents
Question 1:	3
Question 2:	4
Question 3:	6
References:	8
Question 1:
Requirements:
It has been stated in the Para 6 of AASB 116 that property, plant and equipment can be described as tangible assets which are required in the business of any organization for the purpose of production of the goods and services and at the same time also includes supplying those products as well as services, these assets can also be used for the purpose renting out to others and for the use in the administrative tasks too. And these assets are expected to be used for a period of more than one financial period.
As per Para 7 of AASB 116, the recognition criteria relating to these assets have been laid out. These assets which are property plant and equipment are to be recognized as the assets of the organization only if the following conditions are satisfied:
· There is a major probability that the economic benefits which are expected from the asset in the future will be available only to the organization
· And a reliable measurement of the cost related to the asset can be done.
Report:
As per AASB 116 any change occurring in the value of the asset because f the usage that is done from the asset in a particular period of time is measured using the depreciation. It does not include any changes that are happening in the value of asset due to changes the values of the asset due to market changes. Through depreciation only the use that has been done of the asset is measured. The changes that occur in the fair value of an asset cannot be replaced by the consumption that is done of the benefits of the assets as these two are entirely different concepts (AASB 116 - LGAM Knowledge Base, 2022). Therefore by adopting the method of revaluation, the need for depreciation will not be eliminated. 
In order to do an analysis of the financial statements there is a need for depreciation in every organization for the purpose of presenting the true and fairness of the value relating to the asset. If revaluation model is chosen by any organization then it becomes necessary to do revaluation a regular basis which implies that the carrying value of the asset reflecting in the books should be similar to its fair value.
The application of the model of revaluation is not done to a single asset instead it’s done to a class of asset that fall under the same category; following points should be taken care of while doing revaluation:
· Fair value should be used for all the classes of the assets.
· If fair value cannot be determined than cost model should be chosen for such assets.

Topic- Australian Accounting Standard Analysis Question 1: One of the directors of Crane Ltd has proposed that the company adopt the revaluation model for fixed assets. Some of these assets are hard...

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