Financial Accounting for Companies

Financial Accounting for Companies

Question 1)

i) Accounting treatment of research and development cost

Entities that meet the criteria for discrepancy treatment and dispensation in agreement with the structure for disparity treatment for entities must be relevant with the New Zealand corresponding to the (IFRS) International financial reporting standards reporting regime of the year 2005(Ball, 2006). According to this regime every company operating in New Zealand are allowed to show the research and development cost incurred by them as expense during the period the cost are incurred

In addition to this, if an organization affect this recognition then it is not obligatory for the organization to meet the terms of paragraph 57 of the New Zealand equivalent international accounting standard(Kieso et al, 2010). Moreover, in agreement with this new standard and NZ IFRS 3 (as revised in 2008), a purchaser be acquainted with at the date of acquisition, that is viewed independently from the concept of goodwill, acquire intangible despite of the fact this Intangible Assets has previously been acquainted by the acquire much before the amalgamation of the business(Lye et al, 2005). These in simple words mean that the purchaser accepts his assets distinctly from the goodwill as in accordance with the R&D venture of the purchase it this venture implied under the concept of the Intangible Assets in following circumstances.

a) In conjunction with the prevailing research or development scheme purchased discretely or in grouping of business and is considered an Intangible Assets. b) In addition to this, the cost of research and development is beard by the company soon after the acquirement of particular scheme then the entity must account the research and development expense under the guidelines provided in paragraph 54-62

In addition to this, implementing on the standards set under the paragraph 54-62 clearly indicates that almost succeeding expenditure under the prevailing process of research or development scheme that was either hold distinctly or during the amalgamation of business and is considered as an Intangible Assets. Thus, under these circumstances the cost of research and development is accounted as (Marsden & Prevost, 2005):

a) is viewed under the expense head if it is incurred by the entity of research expenditure.

b) similarly comes under the expense head if incurred for development purpose, and this cost does not fulfill the terms and condition for consideration as Intangible Assets.

ii)

Debit

Credit

Aug-11

Survey expense

20000

Account payable

20000

Feb-12

Travelling expenses

30000

Account payable

30000

Apr-12

COGS (testing)

25000

COGS (second round research)

15000

Income Summary

40000

Jun-12

Cost of production

2500000

Inventory

2500000

Jun-12

Accounts Receivable

8000000

 

Sales

 

8000000

Question 1b)

i) Accounting for Goodwill

Intangible assets of the company are viewed as the strong assert to prospect reimbursement that do not comprises of any substantial or financial personification that could help company in generating savings in cost(Oyelere et al, 2003). On the other hand, goodwill of the company can be documented as an indescribable asset only in condition that if the goodwill during the process of amalgamation of business. Goodwill that is generate internally in the organization could not be capitalized in current section of the balance sheet, and primarily because it cannot be expressed, moreover, it is ...