Case Study A

1. The meaning of registration, including shareholders’ and directors’ liabilities

Registration shall mean the following:-

• A separate legal entity with its own power;
• Liability of shareholders is limited; (Anon., n.d.)
• Liability of director for dues shall be limited to breach of duties;
• Continuous existence as going concern;
• Liability of director as guarantor/ security over assets which are personal.

2. Rules for internal management of a company

There are certain rules which are mandatory and certain are provisional/ replaceable depends on enterprise. Further, there are special rules for one director companies.

A company shall not be required to have a separate internal rules of its own. The company may harbor the advantage of the rules specified under the CorporationsAct. Thus, the company shall need a constitution if the company wants  todisplace, modify or add to the replaceable rules.

3. Company structure and setting up a new company

The drivers of small businesses shall have two options:

• Buy Shelf Companies;
• Set up a new company.

In case, the operators wishes to acquire a company instead of not going for turmoil and hardships of setting up a company. They can go for option 1.

In case the operators propose to set up a company, the following steps are involved:

• Application to ASIC for registration shall be made;
• Atleast one shareholder requirement;
• The company shall come into existence once ASIC registers a completely filled form.

The responsibility of FRC is to oversee the effectiveness of the reporting in financial statementsin terms of the financial reporting framework established.

The key functions shall include the following:

• Overseeing the setting process of accounting and auditing standards applicable for public and private sectors;
• Providing advice which are strategic in nature in relation to the audit quality conducted by auditors in Australis, and advisory to the Minister on these and related matters to the extent that they shall influence the framework for financial reporting .
• The FRC shall also monitor international accounting and auditing standards development, and uniformity and unison set of accounting and auditing standards for global use and shall promote these standards adoption.
• FRC, a statutory body, under Part 12 of the Australian Securities and Investments Commission Act 2001 (the ASIC Act).

Australian Accounting Standard adjudges AASB 3 shall apply to  a  transaction or transactions  or  other  event  which falls within the purview of  a  business  combination. The above standard shall not apply to:

a) The treatment for accounting the set-up of a joint venture/arrangement  in  the  books of accounts of  the  joint venture/arrangement itself.

b) Acquiring or purchasingof an asset or a group of assets which in legal front does not constitute a business as a whole or individually. Under such circumstance, the acquirershall try to identify and recognize  the identifiable assets individually purchased (including those assets that meet the definition of, and recognition criteria for, intangible assets in AASB 138 Intangible Assets) and liabilities assumed.

Further, the overall cost to the group shall be allocated/ distributed to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill.

c) When there is a combination of entities or businesses which are under control i.e. common (paragraphs B1–B4 provide related application guidance).

Aus2.1:Further, a   restructuring of  arrangements which are administrative in nature, as   defined   under Appendix   A   of   AASB 1004 Contributions, is outside the purview of the  Standard AASB 1004 which specifies conditions/requirements for  restructures of administrative arrangements.

Case Study B

Besides, the  requirements  of  this  Standard  shall not enroute or coverthe  acquisition  by  an entity which is of investment nature,  as  defined  inAASB10Consolidated  Financial  Statements,  of  an  investment  in  a  subsidiary  that  is  required  to  be measured at fair value through profit or loss.

The objective of this standard is applicable when a control is establish for the presentation and preparation of consolidated financial statements when an entity controls another entity.

It doesnot deal with business combination.An entity is a parent entity as it is establishing its management relationship within the company and Road ltd is fully hurt with the financial crisis and cannot payoff its liability and the management of the company is taken over by the bank so the bank is required to prepare a consolidated financial statement.

Aconsolidated financial statements shall be prepared by the parent. Itapplies to all entities, except as follows:

(a) Meeting all the following conditions consolidated financial statements a parent need not present and prepare:

(i) All its other owner are a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and all its other owners.;

(ii) Intruments are not traded in public market whether it’s a domestic or foreign market or world or international market. (Anon., 2015)

(iii) financial statements with a securities commission it did not file or other regulatory organisation for issuing any financial instruments; and

(iv) its last one or any intermediatory parent shows financial statements that are available for people use and follow with IFRSs, in which subsidiaries and all consolidation is done or are measured at market value basis through profit and loss in follow upwith this Standard.

In terms of AASB 3 , profit on bargain purchase shall be treated immediately in Profit and loss account. The relevant extract has been detailed here-in-below

“ if the acquirer is able to reassess the identity and is able to measure the assets which are identifiable of the acquiree’s or liabilities and contingent liabilities. Further, if the measurement of the cost of the business combinationi.e the amount paid to acquire,  if the acquirer’s interest in the net fair value of the items recognised in accordance with (e) of the AASB 3  exceeds the cost that has been incurred for  the combination (“excess over cost”).  Any ‘excess over cost’ remaining after that reassessment is recognised by the acquirer immediately in profit or loss; (Anon., n.d.)

No treatment for future consolidation.

Anon., 2015. Consolidated Financial Statements. [Online]
Available at: https://jade.io/j/?a=outline&id=503698
[Accessed 27 August 2018].

Anon., n.d. Business Combinations. [Online]
Available at: https://www.legislation.gov.au/Details/F2005B01399
[Accessed 27 August 2018].

Anon., n.d. Federal Register of Legislation. [Online]
Available at: https://www.legislation.gov.au/Details/C2008C00031
[Accessed 27 August 2018].