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ACCT6001 (Company and financial reporting) S2, 2021 Assessment 2

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ACCT6001 -Company and financial reporting

Due Date: 24 September 2021, 5PM

This assignment has a 30% weighting in your overall mark for this unit and focuses on content from Topics 2 to 6. It will be marked out of 30. Your assignment submission will consist of a word document that should not exceed 2,000 words (excluding the reference list).

In the Grades and Feedback section of the Blackboard you will see you have been allocated an ASX listed company code. You must only use the company you have been allocated.

Overall the assignment consists of two (2) parts;

Part (a) – Evaluation of information provided in the annual report of your allocated company ensuring compliance with the requirements of the relevant Australian accounting standards (AASB’s) and any other relevant legislation.

Part (b) – Preparation of relevant journal entries for transactions and/or events that will impact on the 2021 financial year and provide relevant note disclosures for these transactions and/or events as they will appear in the 2021 financial statements for your company.

Instructions:

  • Access the annual report for your allocated company for the 2020 year in the Assessment folder of the MySCU unit site.
  • You should only use the figures from the annual reports provided – do not access your reports or figures from any other source.
  • Before you start analysing the financial information, undertake general background research on the company. (What does it do? Any significant events?). This background will help you contextualise your financial analysis. Reading the Chairman/Managing Director/CEO’s reports in each annual report will get you off to a good start with this.
  • Please refer to the rubric provided at the end of this document for marking guidelines and performance level guides.

Required:

Part (a)

You are the Group Accountant for the company you have been allocated (herein after the company). The Chief Financial Officer (CFO) has asked you to provide a report related to information contained below in preparation of the annual report of the company for 2021. The CFO wants to ensure that transactions are being reported accurately by your team and that they have a thorough understanding of the applicable accounting standards related to these transactions and accounts.

For this section you must refer to the requirements of the relevant Australian Accounting Standards

(AASB’s)

You should refer to the requirements of AASB 137, Provisions, Contingent Liabilities and Contingent assets as a guideline for this section.

I.        Provisions, contingent liabilities and contingent assets

  1. Explain the differences between a provision and a contingent liability.
    1. Discuss the recognition of provisions and contingent liabilities or contingent assets in the allocated company.
    1. Discuss if the information being provided in the annual report of the company regarding provisions, contingent liabilities and contingent assets is sufficient to investors.
    1. Provide at least one example each of a contingent liability and provision reported in the annual report of the company and discuss.

You should refer to the requirements of AASB 110, Events after the reporting period as a guideline for this section.

II.        Events after the reporting period

  1. Discuss what is meant by an event after the reporting period?
    1. How are events after the reporting period to be reported in the annual report of a company?
    1. Provide at least one example of an event after reporting period for disclosed in the annual report of your allocated company.

You should refer to the requirements of AASB 124, Related party disclosures as a guideline for this section.

III.        Related party disclosures

  1. What is a related party, discuss?
    1. Provide an example of a related party transaction reported in the accounts of the company and discuss.
    1. Do you think that related party disclosures are important to investors? Discuss.
    1. Evaluate and discuss whether the amount of the CEO and key personnel’s remuneration is associated with the financial performance of the company.

Part (b)

You are to use the existing financial data provided in the 2020 Annual Report of the allocated company as the base for this section.

In preparation for the 2021 Annual report of the company, the following transactions/events have occurred. The CFO has provided you with a list of these transaction/events and has asked you to provide draft journal entries or notes for these transactions/events. (all transactions/events are fictitious and are not representative of activities or persons of the company)

These are as follows;

  1. On 1 July 2020, the company purchased furniture for its offices at a cost of $120,000. $60,000 of this purchase was paid in cash and the remainder was funded via a secured loan (repayable in 5 years) with their financiers. It is estimated that the furniture will have a useful life of 6 years with no residual value. For tax purposes the furniture has a useful life of 4 years. On 30 June 2021, a valuer determined that the fair value of the furniture was $110,000. Please provide journal entries for this transaction including narrations.

You will need to include a table which shows any temporary differences in how/if you have calculated any deferred tax assets or liabilities.

Which current note numbers (using the 2020 Annual report) to the company accounts will be affected by this transaction?

  1. The company have received significant job keeper payments from the government during the 2021 financial year, for the retention of employees because of COVID-19. The government are looking at amending legislation and subsequently for companies to repay those amounts that they have received if they have not suffered a loss in profits of greater than 20% based on previous year’s results. The company has performed better than expected during this time and has suffered losses of less than 15% based on its 2020 performance. The company have received $1,500,000 in job keeper payments over the last financial year. It is not yet known whether the new legislation will be passed.

Provide a possible note to the accounts for this event identifying and applying the appropriate accounting standard that is relevant.

What is the current note number used by the company for events such as these in their 2020 Annual report?

III.      The company has revised its current supplier contracts for the upcoming financial year 2021. One area that has been renegotiated is in IT maintenance and support services for the head office of the case company. After several bids from several suppliers, the company has chosen to use the company Complete IT services Pty Ltd for the upcoming financial year for all of its IT maintenance and support needs. The contract for these services is estimated to cost the case company $750,000. The Chairman of the Board of your allocated case company owns a significant share (65%) of Complete IT Services Pty Ltd.

Does this transaction need to be disclosed in the accounts of the company, discuss? If so, provide a note that could be used in the upcoming annual report (2021) for this event.

MARKING CRITERIAEXCELLENTVERY GOODGOODSATISFACTORYPOOR
      
Quality and relevance of the analysis of financial statements (Part A) (15 marks)Accurately and comprehensively interprets all elements of the financial statements required. Correctly identifies relevant AASB’s and drawing on relevant theory accurately applies these to the case company. Accurately weaves relevant company context into explanations. Uses and explains relevant technical terms. (14 to 15 marks)Accurately and comprehensively interprets nearly all elements of the financial statements required. Correctly identifies relevant AASB’s and drawing on relevant theory mostly applies these to the case company. Weaves relevant company context into explanations. Uses and explains most relevant technical terms. (12 to 13 marks)Accurately and comprehensively interprets most elements of the financial statements required. Correctly identifies relevant AASB’s and drawing on relevant theory applies some of these to the case company. Incorporates some relevant company context into explanations. Uses and explains some relevant technical terms. (10 to 11 marks)Accurately and comprehensively interprets most elements of the financial statements required. Correctly identifies relevant AASB’s and drawing on relevant theory applies some of these to the case company. Context and theory are limited or incorrect. Uses and explains some relevant technical terms. (7 to 9 marks)While an explanation of technical terms may have been attempted there is little or no accurate interpretation of the elements of the financial statements. Context, theory, correct use of AASB’s and explanations are limited, incorrect or absent. (0 to 6 marks).
Accurate calculation of relevant journal entries for allocated company and interpretation of events. (Part B) (10 marks)Correct input data used. Workings and all final calculated journal entries and table are correct. Accurately and comprehensively provides a note to the accounts that is applicable to the relevant accounting standards and event. Accurately identifies applicable note to the 2020 Annual Report (9 to 10 marks)One error in input data used. Workings and all final calculated journal entries and table are correct. Mostly accurately and comprehensively provides a note to the accounts that is applicable to the relevant accounting standards and event. Accurately identifies applicable note to the 2020 Annual Report (8 marks)Mostly correct input data used. Workings and all final calculated journal entries and table are mostly correct. Somewhat accurately and comprehensively provides a note to the accounts that is applicable to the relevant accounting standards and event. Accurately identifies applicable note to the 2020 Annual Report (7 marks)Some correct input data used Workings and all final calculated journal entries and table are somewhat correct. Provides a note to the accounts that is applicable to an accounting standard and event however not comprehensive and accurate. Accurately identifies applicable note to the 2020 Annual Report (5 to 6 marks)Incorrect input data used Workings and all final calculated journal entries are incorrect. No table provided for any temporary differences. Provides a note to the accounts that is applicable to an accounting standard and event however not comprehensive and accurate. Does not identify applicable note to the 2020 Annual Report (0 to 4 marks)
Presentation, sources and written expression (5 marks)Overall presentation is well organised and looks professional. All data sources and other references are provided where needed in appropriate format and detail. Use of language makes meaning consistently clear. There are no or very few grammar, syntax and spelling errors. (5 marks)Overall presentation is mostly well-organised and professional. All necessary data sources and other references are provided, mostly in appropriate positions, format and detail. Use of language makes meaning consistently clear. There are very few grammar, syntax and spelling errors. (4 marks)Overall presentation is mostly well-organised and neat. All necessary data sources and other references are provided, mostly in appropriate positions, format and detail. Use of language mostly makes meaning clear. There may be several grammar, syntax and spelling errors. (3.5 marks)Overall presentation is fairly neat and organised. Not all necessary data sources are provided or most are not in appropriate positions, format and detail. Use of language mostly makes meaning clear. There are several grammar, syntax and spelling errors. (2.5 marks)Overall presentation is generally unprofessional. Not all necessary data sources are provided or most are not in appropriate positions, format and detail. Use of language often makes meaning unclear. There may be many grammar, syntax and spelling errors. (0 to 2 marks)

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