company accounting ch1 tut working
AYB340 COMPANY ACCOUNTING
TOPIC 1 - SOLUTIONS TO TUTORIAL QUESTIONS
CASE STUDIES
Case Study 1 - Accounting Policies
The board of directors has resolved to change the accounting policy for treatment of advertising expenditure. Previously, advertising expenditure has been expensed as incurred. Following extensive market research, the board has taken the view that benefits from advertising expenditure in the form of product awareness and increased sales will be received by the company over a 3-year period following the expenditure. Due to a recent fire and water damage to the company’s accounting records, details of advertising expenditure in prior years have been destroyed.
Required:
The board of directors has approached you for advice regarding the disclosures, if any, which are required for this change in accounting policy.
As the change in accounting policy was voluntary, the provisions of paragraph 29 of AASB 108 are applicable as follows: the nature of the change the reasons that applying the new accounting policy provides reliable and more relevant information to the extent practicable, the amount of the adjustment for the current and previous periods to each financial statement line item affected and, if applicable, the basic and diluted earnings per share the amount of the adjustment relating to periods prior to those presented to the extent practicable if retrospective application is impracticable, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy was applied.
To comply with paragraph 29, the change in accounting policy note may be worded as follows (other variations are possible):
The board of directors has resolved to change the accounting policy for treatment of advertising expenditure. Previously, advertising expenditure had been expensed as incurred. However, following extensive market research, the board has taken the view that
TOPIC 1 - SOLUTIONS TO TUTORIAL QUESTIONS
CASE STUDIES
Case Study 1 - Accounting Policies
The board of directors has resolved to change the accounting policy for treatment of advertising expenditure. Previously, advertising expenditure has been expensed as incurred. Following extensive market research, the board has taken the view that benefits from advertising expenditure in the form of product awareness and increased sales will be received by the company over a 3-year period following the expenditure. Due to a recent fire and water damage to the company’s accounting records, details of advertising expenditure in prior years have been destroyed.
Required:
The board of directors has approached you for advice regarding the disclosures, if any, which are required for this change in accounting policy.
As the change in accounting policy was voluntary, the provisions of paragraph 29 of AASB 108 are applicable as follows: the nature of the change the reasons that applying the new accounting policy provides reliable and more relevant information to the extent practicable, the amount of the adjustment for the current and previous periods to each financial statement line item affected and, if applicable, the basic and diluted earnings per share the amount of the adjustment relating to periods prior to those presented to the extent practicable if retrospective application is impracticable, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy was applied.
To comply with paragraph 29, the change in accounting policy note may be worded as follows (other variations are possible):
The board of directors has resolved to change the accounting policy for treatment of advertising expenditure. Previously, advertising expenditure had been expensed as incurred. However, following extensive market research, the board has taken the view that