Fiji National University

College of Business, Hospitality and Tourism Studies

School of Accounting

ACC702 International Corporate Reporting

Trimester III, 2016

Group Assignment
Weighting: 10% of total assessment for this unit.

Note

You are required to work in group of three four students.

It is your responsibility to arrange your own team meetings and organize allocation of tasks
and workload between team members.
The assignment should be word processed and compiled, including the names and ID
numbers of the group members. No changes will be accepted once the assignment is
handed in.
The Assignment is due before 6.00pm on 9th November 2016. Any assignment handed
after this time would be considered late. Late Submission: Assignments submitted late
will be penalized at the rate of 10% of the total marks per day.

Answer all questions.

Students are encouraged to refer to recommended text and supplementary text.

Plagiarism and Dishonest Practice Regulation

Plagiarism and dishonest practices are serious offences for which offenders shall be penalized. Students
must read the relevant section of UASR to understand the various types of cases defined as dishonest
practices in academic work and to also know the penalties associated with these kinds of practices.

Total marks for this assignment is 60, each question is worth 5 marks. The marks scored will be
converted to 10% towards your coursework. All questions are compulsory.

1. ABC Asset Inc. owns a freely transferable taxi operator's license, which it acquired on January 1,20X5, at
an initial cost of $10,000. The useful life of the license is five years (based on the date it is valid for). The
entity uses the straight-line method to amortize the intangible. Such licenses are frequently traded either
between existing operators or with aspiring operators. At the balance sheet date, on December 31, 20X6,
due to a government-permitted increase in fixed taxi fares, the traded values of such a license was
$12,000. The accumulated amortization on December 31, 20X6, amounted to $4,000.
Required: What journal entries are required at December 31, 20X6, to reflect the increase/decrease in
carrying value (cost or revalued amount less accumulated depreciation) on the revaluation of the operating
license based on the traded values of similar license? Also, what would be the resultant carrying value of
the intangible asset after the revaluation?

2. XYZ Limited has recently obtained some patents considered useful in its manufacture of mens shoes.
The patents consist of:
Patent XC456, acquired from a leather manufacturing firm for $425000.
Patent CU254, obtained as part of a bundle of assets acquired from the conglomerate U- Beauty
Fashions.
XYZ Ltd is also in the process of preparing an application for a patent for a new process of softening
leather. It has spent a number of years refining this process. The accountant for XYZ Ltd is unsure how to
account for patents under IFRSs. He has asked you to prepare a detailed report for him on the principles of
how to account for patent, using the examples above to illustrate the appropriate accountant procedures.
Required: Prepare a report for XYZ Ltd.s accountant.

3 Provide an argument in support of the accounting requirement that research is to be written off as
incurred. Do you think this requirement is overly conservative?

4.. On 1st June 2016, Big Ltd acquired the following assets and liabilities of Small Ltd:
Carrying Amount

Fair Value

Land

$310000

$340000

Plant( cost $400000)

280000

295000

Inventory

80000

85000

Cash

15000

15000

Account payable

(20000)

(20000)

Loans

(80000)

(80000)

In exchange for these assets and liabilities, Big Ltd issued 100000 shares that has been issued for $1.20
per shares but at 1 June 2016 had a fair value of $6.10 per share.
Required:
i)

Prepare the acquisition analysis

ii)

Prepare the journal entries in the records of Big Ltd to account for the acquisition of the assets and
liabilities of Small Ltd.

iii)

Prepare the journal entries assuming that the fair value of the shares was $7.50 per share.

5. Silver Ltd has acquired a major manufacturing division from Fern Ltd. The accountant, Ms. Anna, has
shown the board of directors of Silver Ltd the financial information regarding the acquisition. Ms. Anna
calculated a residual amount of $45000 to be reported as goodwill in the accounts. The directors are not
sure whether they want to record goodwill on Silver Ltds statement of financial position. Some directors are
not sure what goodwill is or why the company has bought it. Other directors even query whether goodwill is
an asset, with some being concerned with future effects on the statement of profit or loss and other
comprehensive income.
Required: Prepare a report for Ms. Anna to present to the directors to help them understand the nature of
goodwill and how to account for it.

6) An entity operates an oil platform in the sea. The entity has provided the amount of $10 million for the
financial costs of the restoration of the seabed, which is the present value of such costs. The entity has
received an offer to buy the oil platform for $16 million, and the disposal costs would be $2 million. The
value-in-use of the oil platform is approximately $24 million before the restoration costs. The carrying value
of the oil platform is $20 million.
Required: Is the value of the oil platform impaired?

7) An entity has an oil platform in the sea. The entity has to decommission the platform at the end of its
useful life, and a provision was set up at the commencement of production. The carrying value of the
provision is $8 million. The entity has received an offer of $20 million (selling costs $1 million) for the rights
to the oil platform, which reflects the fact that the owners have to decommission it at the end of its useful

life. The value-in-use of the oil platform is $26 million ignoring the decommissioning costs. The current
carrying value of the oil platform is $28 million.
Required: Determine whether the value of the oil platform is impaired?

8. An entity has two cash-generating units, X and Y. There is no goodwill within the units' carrying values.
The carrying values are X $10 million and Y $15 million. The entity has an office building that has not been
included in the above values and can be allocated to the units on the basis of their carrying values. The
office building has a carrying value of $5 million. The recoverable amounts are based on value-in-use of $9
million for X and $19 million for Y.
Required Determine whether the carrying values of X and Y are impaired?

9. Some employers will pay out employees for any unused sick leave entitlements if they leave the
organization, whereas in other organizations employees forfeit this entitlement when they leave.
Required: Explain how these different types of sick leave entitlements are treated for accounting purpose.

10. IAS 19 Employee Benefits was issued in February 1998. Amongst other things, the standard deals with
the treatment of post-employment benefits such as pensions and other retirement benefits. Postemployment benefits are classified as either defined contribution or defined benefit plans.
Required: Describe the relevant features and required accounting treatment of defined contribution and
defined benefit plans under IAS 19.

11. The board of directors of ABC Ltd met in June 2016 and decided to close down a branch of the
companys operations when the lease expired in the following February. The chief financial officer advised
that termination benefits of $2.0 million are likely to be paid. Should the company recognize a liability for
termination benefits in its financial statements for the year ended June 2016? Justify your judgment with
reference to the requirements of IAS 19.

12. What are the arguments for and against the use of fair value as the measurement basis for biological
assets and agricultural produce? Why do you think the IASB settled on requiring fair value?

The End