Financial reporting

Financial reporting

Financial Accounting
& Reporting 1
Assignment
Trimester 3, 2014
VALUE: 25% of OVERALL ASSESSMENT
DUE DATE: Friday, 30 January 2015 (11.59pm)
SUBMISSION: The assignment will need to be submitted electronically through the student
portal – use the link under “Assessments overview and submission” to submit the information
(The portal will close at 11.59pm AEST – Students in Adelaide and Brisbane please note to
adjust for the time difference accordingly).
Learning Outcome 4: Develop information gathering (research) and communication strategies
(letter writing) to enable the provision of professional advice to a client.
Background to case study: You are a graduate accountant working for Candy Floss and
Associates a public accounting firm situated at 77 666 Queens Street, Melbourne. The
Manager, of your firm, John Jameson has asked you to follow up on an email sent by a client,
namely;
1. Handy Halides, the managing director of Halides Ltd – his email has raised a number of
issues regarding his company, and your manager would like you to research the issues and
draft a response in the form of a letter – see information in Case Study Details below.
Maximum Length is 1250 words (excluding any calculations)
Part A: Technical Component (15%) – This mark covers the technical content of your advice
and the explanation on each of the issues, the calculations and the sources used.
Part B: Communication Skills – Letter Writing and Questioning Skills (10%) – This mark
covers the generic skills of business letter writing; layout, clear meaning, structure and
organisation, appropriate tone and grammar, spelling and punctuation.
The assignment is designed to test the following skills:
1. Your knowledge and your ability to research the issues and then apply the information
appropriately using judgement
2. Your communication skills – business letter writing.
Please make sure you follow the guidelines noted in your subject outline especially those
relating to presentation of written work, late policy and academic integrity.
You should also familiarise yourself with the assessment marking rubric (attached) to guide you
in how you can score marks.
INDIVIDUAL CASE STUDY: Halides Ltd – (15% technical)
Re: Year End Accounting Issues
From: Handy Halides [handy.halides@halides.com.au]
Sent: Monday, 15 December 2014 at 8.30am
To: john.jameson@candyfloss.com.au
Cc: Peter Johns[peter.johns@halides.com.au]
Attachment: Issues Raised by the Board
Dear John,
Thanks for your letter suggesting we meet to plan the accounting work for the year ending 30
June 2015.
As discussed with you, the board of directors has raised a number of issues in relation to the
financial statements and I have noted them below for your response. Some of the directors
are concerned about these issues as the company has just become a public company (from 1
October 2014) with a view to being listed on the ASX (with effect from 1 July 2016, hopefully),
and they think this changes matters.
To assist us in our decision making process could you please make sure that any relevant
sources such as the AASBs, Corporations Act, reference books, journal articles, and/or
websites are referenced so that the accounting team here could check them out when
evaluating your answer. If you could kindly copy the newly appointed Financial Controller,
Peter Johns in on your response he could start the review process.
I will be overseas on annual leave until the end of January and look forward to hearing from
you by the time I get back. I do not expect to have much of a problem as such as I am sure
that all we need to do is to prepare the financial statements in the same way as we did last
year that is for the year ended at 30 June 2014. That’s correct isn’t it?
Best wishes and regards
Handy Halides
Managing Director,
Halides Ltd
Suite 55123, Level 42, Arcade Building
16 256 Giles Street
Docklands Victoria 3008
Kaplan Business School is part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86
098 181 947 is a registered higher education provider CRICOS Provider Codes SA/QLD 02426B, NSW 02913J and VIC 02887F
ACCM4200/3TRIMESTER2014/MIR
-2-
INDIVIDUAL CASE STUDY: Halides Ltd – (15% technical)
ATTACHMENT
Halides Ltd: Issues raised by the Board of Directors
Issue 1:
When finalising the financial statements for the year ended 30 June 2014 two significant errors
were made and there is debate as to whether we should simply adjust the financial statements in
the current year or change last year’s financial statements as well. The IT system of the company
was installed 3 years ago at a cost of approximately $3.5 million and was estimated to last 10
years. However the latest technology advancements indicate that this was a very optimistic
estimate and that the maximum life span of this equipment will probably be not more than 6 years
in total with little or no residual value. It was also discovered in August 2014 that a machine worth
$2.2 million purchased in January 2014 was erroneously written off to repairs and maintenance
instead of being capitalised.
Deberella the marketing director thinks we should just adjust this year’s figures to account for these
problems but Peter indicated that it was slightly more complicated than that. Could you please give
us some advice on this?
Issue 2:
A number of employees who work on our strategic management team have been with us for a
number of years – at least 12 of them have been with us since the company commenced
operations in 2006. In accordance with the Employee Bargaining Agreement (EBA) all employees
are entitled to long service leave of 13 weeks if they remain in service for 10 years. They are also
entitled to pro rata long service leave after 6 years of service.
Our usual practice is to show the long service leave expense in the income statement when the
employee actually takes leave and is paid. Of course we maintain a memorandum record of the
number of days each employee is entitled to. Peter has indicated to us that he thinks we should
consider treating this expense in a different manner, which seems complicated. The directors are
wondering why we should complicate a very simple way of calculating long service leave – why not
“stick with” recognising the expense when we pay for it? What do you think we should do and why?
Issue 3:
Peter, the new financial controller, has also informed the board that the company will need to present
a statement of cash flows with the financial statements in addition to those statements already being
presented, which really attracted a lot of attention. Some of the directors thought it was a waste of
time to present this statement as it was merely a summarised cash book. Others were of the opinion
that it could be useful but didn’t quite know how they would use it. The structure of the statement of
cash flows also came into question with one of the directors suggesting that we merely needed to “get
a printout” of the cash account and attach it. Another said that we couldn’t just do that as we needed
to show “operating, instigating and financing” cash flows in the statement. Could you please clarify
this matter for us?

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