Question 1
You are an investor seeking an investment opportunity. You have obtained the financial statements of two separate, independent companies, each from a different country. You notice that there are some accounting differences between the two sets of financial statements, and are having some trouble comparing between the two.
Required (approximately 400 words):
In light of the above, list and briefly discuss four benefits of international standardisation of accounting standards.
Question 2
You are presented with the following information for two independent situations.
(a) Spring Brangus Stud Pty Ltd is a private company operated solely by Phil Spring. Phil is also a shareholder of the company, along with his cousin, Robert Tyler. Phil and Robert started the company three years ago. Robert is not involved in the day to day running of the business, but handles the monthly book work. The company is very successful and currently only has one liability, a loan of $3 million to the ANZ Bank for a 10 year business loan. The gross sales revenue for the financial year ending 30 June 2012 was $1 million. The gross value of assets at 30 June 2012 was $8 million.
(b) Grams Health Services Ltd provides medical services to the general public, with a particular focus on indigenous clients. The company is limited by guarantee and has no shareholders. It has been operating for over 30 years and currently has 43 full-time employees. The gross sales revenue for the financial year ending 30 June 2012 was $17 million. The carrying value of assets at 30 June 2012 was $10 million and the accumulated depreciation was $3 million. The company does not currently have any liabilities apart from employee leave entitlements.
Required (approximately 800 words - 400 each scenario):
For each of the independent situations identified above, consider and conclude whether the entity is a reporting entity and whether it is required by the Corporations Act 2001 to prepare general purpose financial statements.
Question 3
You are a graduate accountant employed by Murray Certified Practising Accountants. One of your clients, Sandy Herold, has enquired as to why you have not included the employees of her company as assets in the financial statements for the year ended 30 June 2012.
Required (approximately 400 words):
Use the AASB Framework's definition and recognition criteria of assets to explain to Sandy why you have excluded employees from the financial statements.
Question 4
You have just been employed as an accounting lecturer. In your first class, your students ask you the following questions.
(a) Who has to comply with accounting standards? How is this determined?
(b) Where can I find accounting standards?
(c) What is the primary objective of General Purpose Financial Reports?
(d) What are the qualities that make financial statements ‘useful'?
Required (approximately 400 words):
Answer each of the questions identified above, ensuring that you refer to the Conceptual Framework of Accounting in your answers.