ACC206 Financial Reporting Assignment 2 – Group-based Assignment January 2016 Presentation

| September 13, 2016


Financial Reporting

Assignment 2 – Group-based Assignment

January 2016 Presentation

ACC206 Assignment 2

Assignment 2 – Page 2 of 4

Group-based Assignment

The cut-off date for this assignment is 23 February 2016, 2359 hrs.


Question 1

A significant number of entities and countries around the world have adopted International Financial Reporting Standards (IFRS) as their basis for financial reporting, often regarding these as a means to improve the quality of information on corporate performance. However, while the advantages of a common set of global reporting standards are recognized, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonized reporting system is to be achieved.


(a) Examine five (5) implementation challenges faced by the International Accounting Standards Board (IASB) if there is to be a successful move to International Financial Reporting Standards.

(25 marks)

(b) Do you believe that it is appropriate that we have a single, global set of accounting standards as well as one conceptual framework that has global applicability? Describe your answer with five (5) good arguments, either for or against or both.

(15 marks)

Question 2

On 12 February 20X5 Noel Gifts purchased $440,000 (inclusive of $40,000 refundable GST) worth of raw materials to be consumed in the production process. The purchase was funded by a loan of $444,000 (inclusive of $4,000 administration fee). The loan is secured by the inventories. During February 20X5 Noel designed the corporate gifts for the customer.

ACC206 Assignment 2

SIM UNIVERSITY Assignment 2 – Page 3 of 4

Design costs included

Cost of external designer $8,400

Labour $3,600

During March 20X5, the Noel’s production team developed the manufacturing technique and made further modifications necessary to bring the inventories to the conditions specified in the agreement. The following costs were incurred in the testing phase:

Material $26,400 ($3,300 was recovered from the sale of the scrapped


Labour $12,100

Depreciation expense $5,500

During March 20X5 the entity incurred the following additional costs in manufacturing the customised corporate gifts:

Consumables $49,500

Labour $58,500

Depreciation expense $13,500


(a) Determine the cost of the inventory.

(10 marks)

(b) Explain all the possible costs that are to be excluded from inventories and to be recognised as expenses in the period in which they are incurred.

(6 marks)

(c) Some items required judgement in deciding whether they are inventories or otherwise. One such example is spare parts. Discuss whether spare parts should be classified as inventory or otherwise.

(4 marks)

Question 3

ImageTech Pte Ltd was started in 20X3 by two young technopreneurs. The company has successfully invented a new type of 3D printer and the product is selling well in the market. The company was approached by BigTech, a multinational corporation with the intention to acquire 100% of the company. The company wishes to measure the fair value of the inventory of 3D printers for the purpose of the sale. Three markets currently exist for the printers. ImageTech has transacted regularly in all three markets.

ImageTech wishes to find the fair value of their 800 new 3D printers, which are identical. The current volume and prices in the three markets are as follows:

ACC206 Assignment 2

SIM UNIVERSITY Assignment 2 – Page 4 of 4


Sales price – per 3D printer

Volume of 3D printer sold by ImageTech

Total volume of 3D printer sold in market

Transaction costs – per 3D printer

Transport cost to the market – per 3D printer

























To help with their evaluation of the acquisition, BigTech has asked ImageTech to provide them with an estimate of the fair values of their net assets under FRS 113. ImageTech wishes to value the 3D printers at $2,325 per printer as this is the highest net proceeds per printer and Japan is the largest market for ImageTech’s product. Determine if the fair value estimate complies with FRS 113. If not, determine what it should be.

(20 marks)

Question 4

Identify a company listed on the Stock Exchange of Singapore or one which you are familiar with or had easy access to the financial information. From the Annual Report of the company identified above, assess and comment on the company’s treatment of the impairment of non-financial assets.

(20 marks)


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