Financial Reporting and Acquisition Analysis:-
Financial reporting can be described as the disclosure of the summary of financial activities of an organization for a certain period along with proper notes and explanation regarding the preparation of the reporting.
Acquisition analysis is the calculation process of goodwill, earned by any entity, from the acquisition of another entity.
The various accounting standard boards and governments have developed many guidelines for proper financial reporting. Different accounting standard boards have provided proper instructions for the acquisition analysis process also.
AASB Financial reporting guidelines
The AASB 101 and IAS 1 are significant for the various types of the financial reporting. In case the paragraphs are added to this standard prefix of, “Aus” is provided. The AASB 101 is shown with the presentation of the statement of the changes in the equity and the net assets and other types of the capital arising from the different sources of the capital transactions. The IPSAS 1 accounts for the extraordinary items. The objective of the presentation of the AASB objectives prescribes about the presentation of the reports about the general purpose financial reports. This is done on order to ensure the compatibility with both the entity’s of financial reports for the previous methods. The Aus.1.1 is applicable for the preparation of financial reports, which are as per the standards of part 2M.3 of the corporation Act 2001. It further states the reports which are in accordance with the general purpose of the financial reporting (Palmer 2013).
The Aus 1.2 is applicable to those standards, which are stated in the beginning of the financial reports prepared on or after 1st January 2005. The Aus1.3 is not seen to be applicable for the periods in the beginning of the same period as mentioned. Aus 1.4 are applicable to the financial reports where the information is obtained application of the materials, which are in accordance with the AASB 1031. The Aus 1.5 is seen to be efficient in terms of the AASB 1001 policies, which states about the notification given from “Commonwealth of the Australia Gazette No. S 130”. It has been seen the AASB 1014 is set to extinguish the debt as per notified in the commonwealth of the “Australia Gazette No S 478” Some of the other financial, reporting standards is related to the financial reporting as AASB as per “Financial Report Presentation and Disclosures as notified in the Commonwealth of Australia Gazette No S 485”. The AASB 1040 statement is also responsible for mentioning of the different types of the statement and which are clearly mentioned as per the AASB guidelines (Henderson et al. 2015).
The major component of the financial reporting includes the preparation of the statement of the cash flow, balance sheet, profit and loss account and trial balance. Journal entries are critical for a sound financial reporting. This shows that it is required for the making of the entries as per individual transaction. The next step in the financial reporting includes stating of the necessary entries in the ledger entries from the respective journal entries. In all the journal entries it is also important to provided the various types of then footnotes which clearly states about the necessary reasons for the entries made into the journal. The financial reporting is also done based on the preparation of then cash flow statement. This statement is shows the cash and the cash equivalents. The cash flow statement enables the investors to understand the different types of the operations of the company. The main types of the operation of the company includes the various type of the cash flows of the company and is further included in the different. The cash flow statement is further responsible for providing the various types sources of finance as per the cash flows statement is prepared as per the AASB standards, which clearly show the different types of the transactions. The financial statement also provides the various types of the balances of the assets and the liabilities in the balance sheet statement. The presentation of the profit and loss is associated with providing of all the necessary details of the income and losses generated by the company. The income statement is further known to provide the summary of then expenses and the revenues, which are being generated from the different types of the sources such as the direct and the indirect sources.
The main goal of the presentation of the financial done as per the AASB standard is to show the various types of the fairness in the accounting and reporting of the data as per the rules and guidelines shown on the financial rules given by the AASB standards. This is clearly demonstrated by the financial as per the and the guidelines of the various types of the section and the subsections as per given by the AASB guidelines. The different types of financial reporting are also based as per the updating then entries as doer the adjustment that is to be made in the day-to-day transactions. The main criteria for the changing of the transaction are based on making of changes in the initial level (Birt, Rankin, and Song 2013).
AASB Acquisition Policy
The acquisition policy as per the AASB is mainly based on the asset acquisition on the bargain price and goodwill acquisition. The acquisition policy is based on the value of goodwill is based on the excess price over the actual price of the acquisition. The analysis of the different types of the acquisition policy is based on the various types of the constraint of the analysis on the financial data. Based on the bargain price of acquisition in case where the company is unable to maintain a sufficient amount of liquid cash the acquisition amount is paid in the basis of the reduced a amount which may be due to the reason that the company was unable to maintain ten sufficient amount of the goodwill. This type of the maintenance of the goodwill amount is ideal in a situation where the company is on the verge of earning losses or the then company is unable, to maintain a sufficient amount for among two for purpose of the maintenance of the cash other cash equivalents. This is ideal, for those companies, which are having lower amount of the assets, and then the bargain price acquisition is most applicable, procedure for the settlement the acquisition amount. The various types of the other aspects of the company is seen on the basis of the different of procedures which clearly stated about the lower profit maintaining aspect of the company (Kang and Gray 2013).
According to AASB (2016), the other types of the constraint of the acquisition policy are based on the acquisition through the goodwill amount. The acquisition through the goodwill amount is based on that acquisition strategy where the excess amount of the goodwill is paid to the company, which is being acquired for because of the excess availability of the liquid cash and the better availability of the finances to the company. This method of the acquisition is ideal when the company is having a very sound financial, position in the market and the most appropriate method to settle the acquisition and the merger policies of the company is based on the charging of the acquisition amount based on the goodwill amount. Then better is the position of market in the industry the higher the amount of the goodwill, which needs to be paid to the company for the purpose of the settlement of the acquisition amount. This particular method is applicable to those Australian companies which are having high process assets and known for improved customer service in the industry. In terms of the companies is known to maintain a higher amount of customer reputation through the higher amount of the balance of the company is applicable to earn a higher amount of the goodwill. The acquisition policy based on the goodwill of the company is most applicable, for those companies, which are on top of the list in the ASX index. The goodwill method also shows that companies are used to be using the good use of the brand image of the company, which is directly related to then higher payment of then goodwill amount of the company. Hence, it has be understood that higher is the value of the current assets of the company and the company in the market higher will be the value of the companies goodwill amount and the higher will be the amount of the acquisition amount which needs to be paid to the company who wants to acquire (AASB 2015).
According to Su and Wells (2015), the analysis of the both the methods of then of the acquisition policy clearly shows that the bargain price of the goodwill policy is based on the reduced amount of the of the goodwill amount. The company pays this while on the other hand the acquisition policy based on then goodwill method is most applicable in situations where the companies are observed be paying a higher amount of then bidding price for the purpose for the acquisition. Hence, the analysis of the various types of the method of acquired policy clearly shown on method is based on the undervalue of the share and another value of the goodwill calculation is based in the situation where the price paid for the merger. This price is usually greater than the asking rate due to the brand reputation of the company and the reputation in the market (AASB 2015).
As per the above calculation, the value of acquisition, provided by Lisa Ltd. is lesser than the Net Fair Value of Kam Ltd. As the result, Lisa Ltd. has enjoyed profit on the acquisition, which can be considered as negative goodwill or gain on bargain purchase. Therefore, no entries are required for Business Combination Valuation Reserve.
Notes to the Statement of Profit & Loss and Comprehensive Income:-
Samoa Limited is a for-profit company, which is based on and operated in Australia. The Statement of Profit & Loss and Other Comprehensive Income has been prepared on the financial transactions over 52-week period ended on 30th June, 2016.
The directors of the company have given the authorization to issue the statement.
Statement of Compliance:
The statement is a common purpose financial report, which is prepared in accordance with the Australian Accounting Standard Board and complies with other requirements of Australian law.
Other Operating Revenue
Significant Accounting Policies:
Revenue is realized and recorded at the fair value, which is “received or receivable” on the basis that it fulfills the recognition criteria, as discussed below:
“Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and it can be measured realibly”.Finance Cost:
“Finance costs are recognized as an expense, when it is incurred or attributed to major projects with substantial development and construction phases”.
Income Tax Expense:
“Income Tax expenses are based on the current tax, payable to tax authorities at the specified tax rate and tax laws”.
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