- Discuss Intangible and Tangible Fixed Assets and their relevant regulations.
International Financial Accounting
Individual assignment
(a) Discuss why people would use creative accounting in Financial Statements and what methods would they incorporate. (10marks)
(b) Critically evaluate the above statement using examples and extracts from the International Accounting Standards to illustrate your argument, as well as discussing the International Accounting Standard’s global use. (23marks)
PART B
Richlypoor Ltd has carried on business as a clothing retailer for 5 years operating from a number of stores under short-term annual rental leases. The income statements and the balance sheets for the three years ended 31 March 2014 were as follows:
Income statement for the years ended 31 March
2012 2013 2014
Revenue 841 991 925
Cost of sales (555) (655) (598)
Gross profit 286 336 327
Administrative expenses (86) (101) (103)
Selling expenses (87) (99) (102)
Depreciation (14) (16) (18)
99 120 104
Other income 16 26 29
Finance cost (8) (8) (9)
Bad debts (3) (6) (4)
Finance income from credit sales 1 3 3
Profit before tax 105 135 123
Tax expense (26) (34) (31)
Profit for the period 79 101 92
Balance sheets as at 31 March
2012 2013 2014
Intangible Fixed Assets 37 42 50
Tangible Fixed Assets 175 204 214
Inventory 235 308 292
Receivables 103 139 168
Cash 54 53 44
Total Assets 604 746 768
Share capital 80 80 80
Reserves 219 220 212
299 300 292
Long-term loans 75 173 184
Trade payables 55 71 71
Liability to the bank:
short-term loans 75 97 91
overdraft 100 105 130
Total Liabilities 604 746 768
(a) Calculate the financial ratios for each of the categories Revenue, Profitability, Liquidity, Efficiency, Gearing and Investment. (9marks)
(b) Discuss the purpose of each category of financial ratios and the Company’s performance for the years 2012 to 2014. (15marks)
(c) Calculate net cash flows from operations using the indirect method and discuss the results in terms of the liquidity of the company to support a larger overdraft or a long term loan. (10marks)
Total (34marks)
PART C
Discuss Intangible Fixed Assets and Tangible Fixed Assets using the appropriate International Accounting Standards, incorporating the relevant regulations with the use of examples and extracts where appropriate.
(33 Marks)
Grand Total (100 marks/100%)
The University policy on cheating collusion and plagiarism will be applied to this piece of work.
The learning outcomes for this module assessed by this piece of work are
Knowledge
1. Critically evaluate International Accounting Standards and discuss creative accounting methods.
2. Calculate financial ratios and the indirect cash flow statement and discuss the results
3. Discuss Intangible and Tangible Fixed Assets and their relevant regulations.
Skills
4. Applied the key international financial accounting concepts and methodologies incorporating calculations, examples and extracts.
