ADVANCED FINANCIAL ACCOUNTING

Coursework assignment (20% of overall module mark)
In September 2010 the IASB issued The Conceptual Framework for Financial Reporting.  This
document was a joint project between the IASB and the US standard setters the FASB.  The
document issued in 2010 was a hybrid, Chapter 1 was a new version of the conceptual framework
objectives and qualitative characteristics of financial information.  Chapter 4 contained material
from the original framework document, originally published in 1989.  The plan was for the IASB and
FASB to collaborate and issue new material covering the remaining parts of the framework.
However in September 2012 the IASB discussed a proposal to restart the Conceptual Framework
project on their own, without collaborating with other standard setters and this work has been
progressing towards the expected publication of a discussion paper in the third quarter of 2014.
You are required to prepare a briefing paper for professional accountants discussing what has been
happening with the IASB Conceptual Framework.
Requirement:
Prepare a briefing document on the IASB conceptual framework.  Your briefing document should
include:
i)  A discussion of the purpose of a conceptual framework document.  (20 marks)
ii)  A discussion of why collaborative work on the conceptual framework project, between the
IASB and the FASB was suspended.  (20 marks)
iii)  Select one aspect of the matters to be covered by the 2014 discussion paper and explain the
importance of this issue.  (20 marks)
Some of the matters which might potentially be included in the 2014 discussion paper are:
?  Elements of financial statement: definitions of assets and liabilities;
?  Recognition
?  The approach to defining income and expense
?  The reporting entity
?  Going concern
?  Stewardship
?  Reliability
?  Prudence
?  Substance over form
?  The primary user of financial reporting
?  Complexity and understandability

iv)  For the issue which you have selected in section iii) outline how you would like to see it
dealt with in the final version of the conceptual framework.   (20 marks)
20 marks are available for structure, presentation and referencing.
Details about the conceptual framework project are available on the IFRS website
http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Pages/Conceptual-Framework-Summary.aspx and the current version of the conceptual framework can

also be found
on the IFRS website http://www.ifrs.org/IFRSs/Pages/IFRS.aspx (you need to register on the IFRS
website to access the conceptual framework and the IFRSs and IASs)
The word limit is 1,500 words maximum.  You will be asked to include your word count on the
coversheet when you submit your coursework.

Advanced Financial Accounting
110.309 Advanced Financial Accounting

Assignment 2: New Zealand Limited (NZL)
This email provides you with the information and instructions for Assignment 2. This assignment comprises two parts, Part A on consolidation and Part B on fair value.

Part A
You are on an internship with the Accounting Team at New Zealand Limited (NZL). As you have studied consolidations in your advanced financial accounting paper at Massey University, the Accounting Team has requested your assistance in preparing the consolidated financial statements of NZL and its subsidiaries for the year ended 31 March 2016.

New Zealand Limited (NZL) is a major trading company. It embarked on an ambitious expansion programme in 2015 including the acquisition of two other companies, North Island Limited (NIL) and South Island Limited (SIL). All three companies have financial years 1 April to 31 March

NZL partly acquiring NIL

New Zealand Limited (NZL) acquired a 60 per cent interest in North Island Limited (NIL) on 1 April 2015 for $2 million. All assets and liabilities are fairly valued in the books of NIL limited. The equity section on the balance sheet of NIL at the date of acquisition appears below:
$
Share Capital
2,000,000
Retained Earnings
600,000

2,600,000
NZL partly acquiring SIL
NZL Limited acquires a 55 per cent interest in South Island Limited (SIL) on 1 April 2015 for $1.6 million. All assets and liabilities are fairly valued in the books of SIL limited. The equity section on the balance sheet of SIL on 31 March 2015:
$
Share Capital
1,600,000
Retained Earnings
800,000

2,400,000

End of year financials

The trial balances of the three entities as at 31 March 2016 can be downloaded in a spreadsheet by clicking here.
Additional information:

Plant and equipment

1. On 1 April 2015, NZL Ltd sold plant to NIL for $15,000. The plant cost NZL $10,000 on 1 April $2014. Both companies apply a 10% p.a. straight-line method of depreciation in relation to these assets.

Inventory

2. During the current year, NZL sold inventory to NIL Ltd for $18,000 recording a profit of $2000. NIL has not resold any of these items.

3. During the current financial year, SIL Ltd sold inventory to NZL Ltd for $23,000 recording a profit of $3000. NZL has since resold half of these items.

4. During the current year NIL sold inventory to SIL Ltd for $15,000 recording a profit of $1000. SIL has resold all of these items.

Services

5. During the current financial year, NIL paid $1000 to NZL Ltd for services rendered.

Goodwill

6. Goodwill from investment in SIL has not been impaired while the goodwill from the investment in NIL had an impairment loss of 30 per cent during the current financial year.

Non-controlling interests

7. The group has adopted the policy of measuring non-controlling interest at a proportionate share of the acquiree’s identifiable net assets.
Tax Implications

8. You may ignore tax implications for the purposes of this assignment.

Instructions:

Prepare the consolidated financial statements for NZL and its controlled entities as at 31 March 2016. You have been provided with an Excel template for entering the $ amounts for the items in the consolidated financial statements. To download this Excel template click here.

Submission

Complete the Excel template and submit after renaming it as follows:
C12207077_110309Ass2_Jieyu_Liu.xlsx
Part B

You have recently been seconded to the technical department of LMNOP, a large accounting firm and asked to contribute to a newsletter for clients. The aim of ‘News Brief’, the newsletter, is to provide updates and advice on accounting standards and their application.

The partner in charge of the technical department has asked you to focus on NZ IFRS 13, which defines fair value, sets a single framework for measuring fair value, and requires disclosures about fair value measurements.

Required:

Prepare a short article for inclusion in News Brief which:

1. Discusses the differences between the various levels in the fair value hierarchy and whether values produced under all levels should be described as ‘fair values’; and

(30 marks)

2. Reviews The Warehouse Group 2015 Annual Report to illustrate the application of fair value accounting. You should identify at least five different items for which fair value has been applied and discuss the valuation approach and the input levels used for each item.

(20 marks)
Further Guidance

a) Your answer to (1) above should include at least two references other than the prescribed text and IFRS 13. Five marks are allocated for relevance, quality and correctness of your citations and reference list (News Brief uses APA-6 conventions);

b) Three marks are allocated for professional appearance, style, grammar and spelling;

c) As per the “Required” above, this is to be a short article. Part B of this assignment has a word limit of 600 words. Answers which exceed this limit may be penalised up to 20% of the marks available;

d) The marking rubric provides further guidance as to how your newsletter article will be assessed. To download the marking rubric click here.

e) Download and use the template (Word file) provided. Click here to download the template.
Submission

Please submit the completed template (Word file) after renaming it as follows:
C12207077_110309Ass2_Jieyu_Liu.xlsx