Question 1
There are four sources of external financial reporting regulations in Australia.
Required:
a) Briefly discuss the objectives and functions of each of these sources.
b) In your opinion, is it necessary to have all four of these sources? Justify your answer by discussing the purpose of each source of regulation. If you believe it is not necessary to have these sources, which source(s) do you think can be abolished, and why?
Question 2
Barmunda Pty Ltd harvests lavender and produces personal care products (for example, body wash, soap, hand cream, and powder) and home fragrances (for example, linen spray, and room freshener).
The company also does embroidery on merchandise (for example, on sleepwear and towels) and sells these products.
You have been given the following information about Barmunda Pty Ltd:
• Sales for the financial year ending 30 June 2011 was:
Personal care products $10 000 000
Merchandise $ 5 600 000
Home fragrances $ 4 700 000
• Barmunda Pty Ltd employs fifty-five (55) permanent staff, twenty (20) who have been employed by Barmunda Pty Ltd since it commence operations in1995 and fifteen (15) who have been employed by Barmunda Pty Ltd for more than ten years.
• Barmunda Pty Ltd had the following assets and liabilities as at 30 June 2011.
Historical cost of property, plant and equipment (PPE) $11 000 000
Accumulated depreciation of PPE $ 3 000 000
Other non-current assets $ 1 000 000
Current assets $ 4 000 000
Total liabilities $ 7 770 000
Required:
a) Advise the Management Committee of Barmunda Pty Ltd as to whether the company would be considered a reporting entity in accordance with SAC 1 ‘Definition of the Reporting Entity'. Justify your answer by discussing (a) the definition of a reporting entity and (b) discussing each of the three criteria above separately.
b) What will be the implications for Barmunda Pty Ltd if it is considered to be a reporting entity?