Recognition Criteria for Assets, Liabilities, Income, and Expenses

Part 1.

Evaluation on part of accountant for the assets should do based on principles as the primary criteria of recognition is satisfied. As per the definition given by the conceptual framework, measuring the cost of assets is not satisfied under the second criteria. Therefore, under the conceptual framework, photographs should not be regarded as assets.

Part 2.

AASB 137 provides that accountant needs to satisfy the definition of contingent liabilities provided by the standard (Wahlen et al. 2014). Existences of contingent liabilities are confirmed with the non-occurrence and occurrence of uncertain events that cannot be wholly controlled by entity. Disclosure of contingents’ liabilities should be disclosed in the financial statements as per the standard.

Part 3.

Considering the assessment of contingent liabilities as per AASB-137/IAS-37, the company will win the case and TDM business has been sued for negligence. In the inflow of benefits, such assets have not been recognized in the statement of financial position.

Part 4.

Plant and equipment disposal should be recognized in the financial statement as per the conceptual framework. Recognition of such amount is done by debiting the bank account and crediting the asset account. As described in paragraph 56 of AASB-116/IAS-16, such amount should be included in the depreciation expense (Kaaya 2015). The written off amount should be mentioned in the profit and loss account.

Part 5.

Donation received by TDM limited should be mentioned in the profit and loss account and mentioned as revenue. There is probability that future benefits will flow to entity as stated under condition AASB-118/IAS-18, and the economic benefits would be reliably measured.

Part 1.

a) Since the non-current assets costs are readily available from measurement, there will not be any bias in valuation (Leuz and Wysocki 2016). Depreciating the cost of airplane using the component approach would be advantageous, as deprecating plane over the period of ten years will not reflect the depreciation costs. Since, the useful lives of assets are distinguishable and various parts of components are identifiable, it is recommended to use approach of case component.

b) After the assets have been recognized, assets can be depreciated using cost model based on Para 29 of the AASB 116.Implementation of this model is less costly and easy. There is always fair value representation of assets under this model. Revaluation of this component indicates revaluing entire assets class for avoiding selective revaluation. In this case, cost model would be appropriate for recognizing the airplane cost and their components.

Accounting Treatment for Intangible Assets under AASB 138/IAS 38

c) Future benefits derived by assets should be reflected in the method of depreciation employed as per Para 60 of the AASB 116.Hence, expected benefits from assets forms the basis of selecting the depreciation method.

Aircraft body

The cost of inspecting the body of aircraft should be treated as expenses. Reason behind treating it as expense is that such cost does not increase the assets value or its life.

Engines

The cost of annual maintenance of $ 300000 should be treated as expense and expense incurred on upgrading the engine needs to be capitalized and the amount stands at $ 1 million. Capitalization of such amount is done as it will increase the value of assets.

Fittings

Costs of replacing the Seats are capitalized and repairing the seats that have been torn are treated as expense. Expenses incurred in testing of cockpit equipment are recognized as expenses. Costs incurred in repairing electrical equipment are recognized as expenses.

Food preparation equipment

Costs incurred in maintaining and repairing the preparation of food equipment should be recognized as expenses.

Aircraft body

Cost to be recognized
Particulars	Amount
Cost of body	$  3,000,000.00
Salvage Value	$   (900,000.00)
Depreciable amount	$  2,100,000.00
Depreciation	$      210,000.00
Inspection cost	$          5,000.00
Total cost recognized	$      215,000.00

Engines

Cost to be recognized
Particulars	Amount
Cost of Engine	$    4,000,000.00
Scrap	$ (1,200,000.00)
Depreciable amount	$    2,800,000.00
Depreciation	$       700,000.00
Maintenance cost	$       300,000.00
total cost recognized	$    1,000,000.00

Fittings

Cost to be recognized
Particulars	Amount
Cost of  seats	$    1,000,000.00
Depreciation	$       333,333.33
Repair of seats	$       100,000.00
Total cost for seats (A)	$       433,333.33
Cost of carpets	$          50,000.00
Depreciation	$          10,000.00
Cleaning costs	$          10,000.00
Total Costs for Carpets (B)	$          20,000.00
Equipment costs	$    1,700,000.00
Depreciation	$       170,000.00
Maintenance cost	$       150,000.00
Total Cost for Equipment (C )	$       320,000.00
Total Cost recognized	$       773,333.33

Food preparation equipment

Cost to be recognized
Particulars	Amount
Maintenance cost	$          20,000.00

Total expense:

Total expenses
Particulars	Amount
Air craft body	$       215,000.00
Engines	$    1,000,000.00
Fittings	$       773,333.00
food preparation equipment	$          20,000.00
Total	$    2,008,333.00

Part 1.

According to Para 10 of the AASB 138, intangible assets are regarded as the non-monetary assets that are not distinguishable as physical substance. Brand of Coca Cola falls within the purview of intangible assets.

Hence, the treatment of brand in terms of accounting is done in agreement with AASB 138. In the event that there is probability concerning the flow of future economic benefits to the entity is quite possible, then as per Para 21, such intangible assets are recognized. Moreover, if the amounts of intangible assets are possible to reliably measure, then there should be recording of intangible assets. Furthermore, as per Para 24 of the AASB 138, cost should be the basis of preliminary measurement of intangible costs. Nonetheless, as per Para 24 of the AASB 138, the brand name that has been generated internally should not be recognized in the statement of financial position of entity (Hunton et al.  2015). It is required to amortize the brand name in the event if it has not been assumed that operative life of name of brand would be indefinite.

Part 2.

It is stated by AASB 138 that name of brand should not be recognized if it is generated internally. This is so because recognition of formulas and brand name is not possible as per this standard. The cost cannot be determined in the event of internally generated names of brand as the cost is incurred for producing the brand name. One of the main problematic issues for accounting bodies is to allow the formulas and brand names to be recognized in the financial statements.

Provisions and Contingent Liabilities under AASB 137/IAS 37

Part 1.

Liabilities is regarded as obligation in the current time that has been arise due to some past events occurred in organization on account of borrowing loans  and financing its operations as per Para 10 of the AASB 137 (Council 2014).Outflow of resources of organization will be required for the settlement of obligations. Such liabilities that arise in inappropriate time and are of uncertain amount are recognized as provisions. In contrary to this, contingent liabilities of organization are dependent upon future events that are not under the control of entity. Present or current obligations are sometimes treated as contingent liabilities and this is so because resource outflow would be required for settling the obligations and sometime it becomes difficult toreliably measure the amount. On the analysis of definitions, obligations of organization are represented as provisions and it is certainly possible that resources will be required for settlement of obligations. Contrary to this, if it is not possible to reliably measure the current obligations or if the organisation does not have current obligations, then in that event the amount of contingent liabilities are not recorded in the financial statements.

Part 2.

a) The current obligation of company for long service leave is regarded as the provisions. For settling the long service leave obligations, there would be requirement of economic benefits that will be embodies in outflow of resources. It is possible to make the estimation of amount required for settlement to measure it reliably. Hence, based on above analysis and discussion, provisions made for long service lave will not be treated as liability rather it will be treated as provisions.

b) Liabilities of any organization is regarded as the current obligations according to Para 10 of the AASB 138 (Nobes 2014). Economic benefit that is embodied in the liability is essential for settling it in the event of paying dividend as current requirement. Hence, the amount of dividend that is to be paid should be identified as liability.

c) Preference share capital represents the stock of company using which the dividends are paid prior to common shareholders. It is indicated as the current obligation and settlement of this particular obligation need resources incorporating economic benefits. Hence, Preference share capital is identified as liability.

Reference List:

Jorissen, A., Britton, A., van Mourik, C., Hoogendoorn, M. and Alexander, D., 2017. International Financial Reporting and Analysis.

KAAYA, I.D., 2015. The Impact of International Financial Reporting Standards (IFRS) on Earnings Management: A Review of Empirical Evidence. Journal of Finance, 3(3), pp.57-65.

Lang, M. and Stice-Lawrence, L., 2015. Textual analysis and international financial reporting: Large sample evidence. Journal of Accounting and Economics, 60(2), pp.110-135.

Council, F.R., 2014. True and fair.

Hunton, J.E., Libby, R. and Mazza, C., 2015. Retraction: Financial Reporting Transparency and Earnings Management. The Accounting Review, 90(4), pp.1711-1711.

Research, 54(2), pp.525-622.

Nobes, C., 2014. International Classification of Financial Reporting 3e. Routledge.

Leuz, C. and Wysocki, P.D., 2016. The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting

Schrand, C.M., Armstrong, C.S., Taylor, D.J., Verrecchia, R.E., Wagenhofer, A., Casey, R.J., Gao, F., Kirschenheiter, M.T., Li, S., Pandit, S. and Hribar, P., 2016. Journal of Financial Reporting A Publication of the Financial Accounting and Reporting Section of the American Accounting Association.

Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.