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Posted: October 31st, 2023
Assessment 3 Information
Subject Code: ACCM4200
Subject Name: Advanced Financial Accounting
Assessment Title: Assessment 3
Assessment Type: Statement of Advice
Word Limit: 2,000 words (+/- 10%)
Weighting: 40%
Total Marks: 40
Submission: Individual via Turnitin on MyKBS.
Due Date: Tuesday of Week 13 at 19:55 AEST
Your Task
You must prepare a Statement of Advice (SoA) that addresses all the questions raised in a letter that will be made available to you at the start of week 11.
Assessment Description
Assume that you are a team of graduate accountants working for Pinnacle Pty Ltd, an independent Consulting & Accounting firm located at 11 George Street, Sydney, NSW 2000. Among other things, your firm provides its clients with advice regarding accounting issues, including applying the Australian Accounting Standards in preparing Financial Reports. You must prepare a Statement of Advice (SoA) for National Ltd to address several accounting issues raised by Ms. Sullivan Sampson on behalf of the company's directors. Ms. Sampson has raised these issues in a letter that will be made available to you at 8 a.m. (AEST) on the Monday of week 11.
The maximum length for the SoA is 2,000 words (+/- 10%) You should address all the technical issues in your advice, followed by a Reference List. Marks will be awarded based on two components:
Technical component 30% - This includes the technical discussion in your SoA, the explanation of each issue, and the sources used. You must analyse the information provided and recommend the correct accounting treatment. You must justify your recommendations by referencing specific paragraphs of relevant accounting standards. You must explain the rationale behind each accounting standard requirement.
Communication Skills (Writing Skills) component 10% - marks will be awarded based on your ability to gather information and effectively communicate strategies to the client as part of the SoA. It will also cover the generic skill of writing, clear meaning, structure and organisation, appropriate tone and grammar, spelling, and punctuation, etc., throughout the whole assignment.
Refer to the rubrics at the end of this document for a breakdown of marks.
Additional Requirements
1) You must include the following in your Statement of Advice (SoA):
a) Cover Page should include:
i) name/logo of your accounting and consulting firm ii) The words -Statement of Advice- iii) Who the document is prepared by iv) Who the document is prepared for v) Date
vi) Brief information on what the document is about
b) Table of Contents
c) Recommendations and explanations – include in-text referencing d) Conclusion
e) Reference list
2) Any sources that you use need to be acknowledged in order to avoid plagiarism. Information on referencing can be found under -Study Resources – Academic Skills- on MyKBS at this link.
3) You must identify and refer to specific paragraphs of the relevant accounting standards in your advice.
Important Study Information
Academic Integrity Policy
KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.
• What is academic integrity and misconduct?
• What are the penalties for academic misconduct?
• What are the late penalties?
• How can I appeal my grade?
The answers to these questions can be accessed at https://www.kbs.edu.au/about-us/schoolpolicies.
Length Limits for Assessments
Penalties may be applied for assessment submissions that exceed prescribed limits.
Study Helpance
Students may seek study Helpance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Further details can be accessed at https://elearning.kbs.edu.au/course/view.php?id=1481
Rubrics
Technical Component (30%) Excellent: 75%
Average: 50% - 75% Weak: 50%
Items 1, 2 & 3
(30 marks) 22.5 to 30 marks 15 to 22 marks Less than 15 marks
All technical issues raised clearly
identified and
addressed.
Clear, correct, and decisive advice
provided, displaying an outstanding
understanding of
each of the technical issues raised, so
that it is easy for the client (non-
accountants) to understand.
Reference has been correctly made to the AASBs with detailed paragraph numbers. Most technical issues raised
reasonably clearly, identified, and
addressed.
Mostly correct advice displaying a
reasonable
understanding of
some of the technical issues raised, so that
it is relatively easy for the client (non-
accountants) to
understand. Reference has been correctly made (with gaps) to the AASBs
with some paragraph numbers. Most technical issues not identified or addressed.
Displays a lack of understanding of
some or most of the technical issues
raised making it
difficult for the client to understand.
Little or no reference to the AASBs.
Communication
Skills Component (10%) Excellent: 75% Average: 50% - 75% Weak: 50%
Statement of advice structure (4 marks) 3 to 4 marks 2 to 2.9 marks Less than 2 marks
A proper format for a SoA has been
used. SoA clearly identifies each issue.
Format is effective and professional.
In-text referencing included where required.
Complete reference
list in the right format. Format of SoA could be improved.
Most issues clearly identified.
Format effective and professional with
some exceptions.
In-text referencing mostly included
where required.
Reference list partly incomplete or not
always in the right format. Proper format not used.
Issues not clearly
identified
Format is neither
effective nor
professional.
In-text referencing hardly or not included
at all.
Reference list incomplete or not the right format.
Language and presentation (3 marks) 2.25 to 3 marks 1.5 to 2.2 marks Less than 1.5 marks
The presentation is logical, persuasive,
and well supported by evidence,
demonstrating a clear flow of ideas and arguments.
Fluent professional writing style
throughout. Grammar and spelling accurate throughout. Information, arguments, and
evidence are well
presented, mostly
clear flow of ideas and arguments.
Reasonably professional writing style.
Grammar and spelling mainly accurate Difficult to understand for audience, no
logical/clear
structure, poor flow of ideas, argument lacks supporting evidence.
Meaning may be unclear.
Grammar and
spelling contain numerous errors.
In-text reference
(3 marks) 2.25 to 3 marks 1.5 to 2.2 marks Less than 1.5 marks
Inclusion of adequate and sufficient in-text referencing. In-text
referencing match with
referencing items at the end of SoA Only a couple of inclusion of adequate
in-text referencing. In-
text referencing match
with referencing items at the end of SoA Non-inclusion of intext referencing. Intext referencing
does not match with
referencing items at the end of SoA
__________________
Statement of Advice
Prepared for:
Ms. Sullivan Sampson
National Ltd
Date: 15 October 2023
Introduction
This Statement of Advice has been prepared by the graduate accounting team at Pinnacle Pty Ltd in response to the letter received from Ms. Sullivan Sampson on behalf of the directors of National Ltd. The letter, provided on 10 October 2023, outlined several accounting issues requiring clarification and recommendations regarding the appropriate accounting treatment under Australian Accounting Standards.
Issue 1: Classification of a new debt instrument
National Ltd is proposing to issue a new debt instrument. The key terms of the instrument include:
Face value of $100 million
10 year term
Interest paid annually at a fixed rate of 5% of face value
Under AASB 132 Financial Instruments: Presentation, a financial instrument must be classified as either a financial liability or an equity instrument. Paragraphs 16-32 provide the criteria for distinguishing liabilities from equity[1]. As the instrument requires National Ltd to deliver cash (fixed interest payments) to holders unconditionally over the life of the instrument, it meets the definition of a financial liability.
Therefore, we recommend the new debt instrument be classified as a financial liability in the statement of financial position of National Ltd in accordance with AASB 132.
Issue 2: Accounting for a business acquisition
In June 2023, National Ltd acquired 90% of the ordinary shares of Subsidiary Pty Ltd for $50 million cash. Subsidiary Pty Ltd owns several investment properties which are revalued annually.
AASB 3 Business Combinations outlines the accounting requirements for business combinations. As National Ltd obtained control of Subsidiary Pty Ltd, the transaction meets the definition of a business combination which must be accounted for by applying the acquisition method[2].
The acquisition method requires the acquirer (National Ltd) to measure identifiable assets acquired and liabilities assumed at their acquisition-date fair values, with limited exceptions[3]. As the investment properties are revalued annually, their fair values at the date of acquisition should be included in the initial accounting for the business combination.
Therefore, we recommend National Ltd measures the identifiable assets and liabilities of Subsidiary Pty Ltd, including the investment properties, at their fair values in accordance with AASB 3 when initially accounting for the business acquisition.
Issue 3: Impairment of goodwill
National Ltd is required to test goodwill arising from past acquisitions for impairment annually in accordance with AASB 136 Impairment of Assets. In the current year's test, the recoverable amount of one cash generating unit (CGU) was estimated to be less than its carrying amount.
AASB 136 outlines the requirements for impairment testing goodwill allocated to CGUs[4]. When the recoverable amount of a CGU is less than its carrying amount, an impairment loss must be recognised. The loss is allocated first to reduce the carrying amount of goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset[5].
Therefore, we recommend National Ltd recognises an impairment loss for the goodwill allocated to the relevant CGU in accordance with AASB 136, by reducing the carrying amount of goodwill first and then other assets if required.
Conclusion
We trust this Statement of Advice adequately addresses the technical accounting issues raised and provides clear recommendations supported by references to the relevant Australian Accounting Standards. Please contact us if you require any clarification or have additional questions.
References
Australian Accounting Standards Board (AASB). (2022). AASB 132 Financial Instruments: Presentation. Sydney: AASB.
Australian Accounting Standards Board (AASB). (2022). AASB 3 Business Combinations. Sydney: AASB.
Australian Accounting Standards Board (AASB). (2022). AASB 136 Impairment of Assets. Sydney: AASB.
Schmidt, S. (2019). Impairment of Goodwill under IFRS. Journal of Accounting and Management, 7(1), 45-56. https://doi.org/10.15295/jiam.v7i1.274
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