Accounting task

Accounting task.

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Task

This assessment task consists of five (5) questions. A total of 80 marks are allocated to the questions below, which will then be converted to a mark out of 15%.

All workings, when appropriate, must be shown to substantiate your answers.

Question 1 [15 marks]

Financial statement disclosures

One of the projects that the International Accounting Standards Board (IASB) is currently undertaking is the Disclosure Initiative project, with the aim of improving communication in financial reports.

The IASB has identified three main concerns about disclosures in financial statements, namely: there is not enough relevant information in the notes, there is irrelevant information in the notes, and there is ineffective communication of the information provided.

The IASB released a discussion paper in March 2017, DP 2017/1 ‘Disclosure Initiative – Principles of Disclosure’ and is currently seeking feedback on the disclosure issues identified and on the Board’s preliminary views on how to address them.

You are an investor who, for years, has struggled to work through and understand all of the note disclosures when analysing and comparing the financial reports of companies that you are considering investing in.

You are currently considering investing in either CBA or NAB. After reviewing and comparing the note disclosures provided in their 2017 annual reports, you plan to make a submission in response to the IASB’s discussion paper. In your submission, you plan to provide feedback in response to ‘Section 2 – Principles of Effective Communication’ of the discussion paper, given the difficulties that you have faced due to ineffective communication in financial reports.

Accounting task.

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In section 2 of the Discussion Paper, the IASB has proposed that a set of principles of effective communication be developed. The seven principles identified in the Discussion Paper are that information in the financial reports should be:

• Entity specific;
• Clear and simple;
• Organised to highlight important matters;
• Linked to related information;
• Free from unnecessary duplication;
• Comparable; and
• In an appropriate format.

Required:

Download and the Discussion Paper DP 2017/1 ‘Disclosure Initiative – Principles of Disclosure’ (copy available in the ‘Resources’ folder on Interact).

Download the 2017 annual reports for CBA and NAB. Review and compare the notes that form part of each entity’s financial reports (copy available in the ‘Resources’ folder on Interact).

Prepare a letter to the IASB. In your letter:

• Discuss which of the seven principles of effective communication you feel are lacking the most in the note disclosures contained in the 2017 financial reports of CBA and NAB (and hence which principles you think that the IASB needs to put the most work into, in order to improve communication in financial reports).
• Suggest two specific changes that you think will make the biggest improvement to the effectiveness of note disclosures for investors like yourself, given the issues discussed above.
  

  Accounting task.

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(Word limit: 1200 words)

Question 2 [16 marks]

Accounting for share issues

On 1 February 2017, Beach Supplies Ltd was registered and issued a prospectus inviting applications for 2,000,000 shares, at an issue price of $3.50, payable as follows:

$1.00 on application
$1.50 on allotment (payment due within 1 month of allotment)
$0.60 on first call
$0.40 on final call

The issue is underwritten at a commission of $30,000.

By 28 February 2017, applications had been received for 1,900,000 shares. On 3 March, shares are allotted, and the underwriter forwarded the application and allotment money due on the 100,000 shares less their commission. All remaining allotment money is received by 3 April. Legal costs re company formation are $5,000 and are paid on 5 April. Share issue costs of $3,000 are also paid on the same date.

Accounting task.

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The first call is made on 10 April 2017, with money due by 10 May 2017. The final call is made on 15 May 2017, with money due by 15 June 2017. All money owing in relation to the two calls is received by the due dates except for the holders of 40,000 shares who did not pay either call, and the holder of another 10,000 shares who did not pay the second call. On 20 June 2017, as provided in the company’s constitution, the directors forfeited these 50,000 shares.

On 25 June 2017, the forfeited shares are reissued as fully paid for a consideration of $3.10 per share. Costs of forfeiture and reissue amounted to $10,000, and are paid. The constitution allows for the refund of any balance in the forfeited shares account after reissue to former shareholders, so refunds were made on 30 June 2017.

Accounting task.

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Required:

Prepare the journal entries to record the transactions of Beach Supplies Ltd up to and including that which took place on 30 June 2017. Show all relevant dates, narrations and workings.

By admin in Essays on May 12, 2018