Accounting Theory And Current Issues For Performing Research

Nature and value to society of the research being done by BSF Ltd

Describe about the Accounting Theory and Current Issues for Performing Research.

Development research industry has been doing well in the recent past and many firms have since joined the R&D industry (JUCKER & ROUCHOTA1998). Bio-sustainable Feeds (BSF) is one of the firms in the industry performing research in Australia in sector aqua food production and has been in the industry for decades. The company has been listed among others in the Australian stock exchange market. The company operation has been under criticisms by the environmentalists who view its operations negative. Based on the accounting and business arguments as well as theories all companies has got patent right to their products (KING,2006). Therefore a company must be also responsible for their products. Bio-sustainable industry produced a plant based aqua culture food products which never yield better results as per the expectations and ended up losing huge sum of money in the process. The scope of this paper investigates accounting theories in relation to the current issues such as BSF Ltd. The paper exploits the current issues in relation to accounting theory in application to Bio-sustainable fish feed.

Nature and value to society of the research being done by BSF Ltd

The kind of research being conducted by the company is a developmental research. It is an R&D research project which aims at improving food production in Australia as a whole if it succeeds.  The aqua feed research is an experimental based research which requires a lot of experimentation to ensure its success (BERMAN 2009).  BSF LTD research can also be seen as an applied research in which a party such as agencies and society must benefit from. It involves risks due to the fact that it is both field and experimental as well. The research being done by the company is of a great to the society in several ways. Even though a lot capital is invested into the research, its fruits will help eradicate the world hunger in future. BSF Ltd has tried their best trying to provide continuous fish supply into the markets reducing the rate of hunger (KIESO, WEYGANDT & WARFIELD 2010). BSF ltd current research is to the public rescue since it involves recycling of waste products in the creation of a better and fast growing fish. The research indicates that most of the ingredients required for such fish feed are waste products. The company intends to use bacteria in their manufacturing which may not be too much burden to the society. Wood chips are waste products, the use of woodchips is cheaper to acquire and readily available and has no biological effects on the consumers who are members of society. Another raw material for the production is a recycled methane gas which does not require much capital (COLLINGS, S. (2015). Production of these fish feed is safer to environment as many of the raw materials are environmental pollutants. Sugar residue, methane and wood chips are waste products of which their use helps in elimination of pollutants in the environment leading to elimination of infections as well.

Problems with the early research done by BSF Ltd.

Production of aqua feed according to BSF ltd in such away has got a positive impact to members of the society. The kind fish kept with such kind of feed has its omega oil intact and matures faster compared to the normal. The faster growth of fish will result in increased food supply to the society reducing hunger levels in Australia in future. Success of this research will result into a bridge of the gap between the poor and the rich as witnessed in the previous farming method where only the rich could afford fish. The society values this research since it has resulted into prevention of human quality food waste.  Conversion of human food product into fish meal was a great challenge to Australian society and resulted to malnutrition and starvation as quality human food was used to grow luxurious fish which majority could not afford. Biotechnological aqua feed production will lead to expansion of fish farming in the society (PRICEWATERHOUSECOOPERS LLP 2013). Increase in fish farms means creation of employment which factor to growth and development in a given society. The research is substantial to the society as it facilitates its development as well as boosting its economy.

Problems with the early research done by BSF Ltd.

The $360 million AUD research investment performed by Bio-sustainable Feeds (BSF) Ltd has got a lot of drawbacks to the company itself, economy and Australian society (JARNAGIN 2008). The research was not conducted with the consideration of human, survival mechanism of various types of and finally the economic status of individual citizen. The shift from fish meal for other fish to planted produce was too expensive compared to bacteria production of aqua feed. Planted ingredients such as canola, corn, soya-bean, sunflower and other farm products were expensive compared to bacteria production which majors in recycling of waste products (RIAHI-BELKAOUI 2005). The company spent a lot in the purchases of raw materials without speculation of what may happen in future. The research never considered a deeper study on the diet of various types of fish which ended up dead resulting into a huge collapse of money (RIAHI-BELKAOUI 2005).  BFS Ltd industry never considered the consequences of farm based fish feed to species of fish and to human nutrition as revealed by Jillian Fry, director of CLF’s Public Health and Sustainable Aquaculture Project and a faculty member at the Johns Hopkins. Farm produced fish acquire omega 3 fatty acid from other products especially fish oil.  The research produced expensive small fish which were only affordable for the rich. In any case where only a given part of a population can afford a product, market becomes limited due reduced demand. Such scenario leads to imbalanced equilibrium in the supply and demand as well as unstable economy. Another problem with BSF research is the   failure to consider the importance of the raw materials to the third party and human nutrition (EVANS 2003). Most of the farm products used in manufacturing of aqua feed is basic and human high quality food crops. This kind of fish farming led to human starvation since their basic foods were being converted into fish meal. In consideration of human nutrition the end fish products from this shift were of low quality and could lead to health issues and complications.

Nature, accounting and comparison between general research and R&D

Development is an application of already conducted research on a particular field. For instance, BFS company venturing into aqua meal production is application of developmental research. Development utilizes the research finding and outcome to come up with a specific end product as seen in the case of BSF ltd (REDDY 2004). The nature of development involves use of specific raw material in the line of production, specific systems and finally clearly identified methods. Development is a sub branch of a general research which deals with the generation of a more indispensable understanding and deigns important in manufacturing of the model. On the other hand research is defined as an indefinite investigation. It targets a more general field in comparison to development which is more specific. For instance if BSF Ltd was a general research facility it could have conducted a more broad research rather than plant based, fish based and bacteria based fish feed. Research works on a broad perspective while development only applies to the last part and on a specific finding (PANDIKUMAR 2007). General research requires large amount of money while development is specific thus specific budget. The accounting in general research differs from that of development since only expenses are accounted. All company assets are not expenses as seen in development. Accounting in R&D is the consideration of expenses and revenues over a given period of time (BONIN 2001). The cost allocated for development should match expenses and revenues. All assets purchased in development are expensed. This capitalization of assets in the development is considered as an expense since they are meant to generate income in future. Development expenditures are formed with the expectation of future profits and products of measurement. Development has a lot of benefits and advantages compared to general research and has attracted several investors in recent past (VONORTAS, 1991). General research is road and requires a lot of funding which has got no sure benefit in return. Investors enjoy tax breaks in which tax are often deductible but some are not deductible. General development research such as market research and assessment research are not subject to taxation making many investors to get into development research. Development allow s more cost effective investment thus increasing the profit margin. In terms of financing R&D enjoy the benefits of funding from other parties like established companies. Such companies enjoy qualified employees since many of graduates tend to join these companies (PORWAL 2001).  The above reasons make several firms to R&D industry to enjoy the benefits and exploit the available economies of scale.

Fair market value patent assumptions and calculations

Fair market value patent assumptions and calculations

Development based research companies like BFS ltd have patent for their products. Calculation of the patent value according to GAAP involves appropriate assumptions to come up with the fair values (WALLACE & SCHRODER 1997). In the case of Bio-sustainable, the company received a lot of grants from Australian government research sector (Commonwealth Scientific and Industrial Research Organization (CSIRO) the company agrees to spend the money in two years and the addition (THOMPSON 2010). The assumption based on the calculations of the patent value under combination of discounted cash flow and real option method. The method assumes that a sole biotechnology firm has ten years (KITT 2016). Since BSF ltd is among the biotech industry the sum of total year applies and addition two years of agreement. (10yers +2yrs= 12 years). The DCF market value* (1+factor %) = patent fair value indication. The value lies two methods as shown.  The NVP = $ 700000000 *(1+8.0) = $630000000. Therefore fair patent value =Preliminary DCF value × (1 + factor %) = Patent fair market value indication

BSF journal entries for BSF LTD.

Cash disbursement journal

BSF Ltd. Raw materials and other facilities has cost BSF Ltd. $160 million

date	particulars	Debit	credit
2013	facility	$160000000

Expected to use a cost another $200 million AUD in development costs to bring it to market. BSF

Year	Particulars	Debit	credit
2013	transport	$200000000

Cash receipts journal

BSF Ltd. received a $500 million AUD grant from the Commonwealth Scientific and Industrial Research Organization (CSIRO, Federal Government of Australia)

Year	Particulars	Debit	Credit
2013	(CSIRO		$500000000

In consideration of $500 million AUD grant from the Commonwealth Scientific and Industrial Research Organization (CSIRO, Federal Government of Australia) the right place is the credit since the company is to refund back the money (ANDERSON & ANDERSON 2012). All the liabilities such the grant is debited since it is the companies’ responsibility to refund back the money to the owners after the purpose is met (ROSTEN 2013). In the research and development a third party such as the agencies are beneficiaries thus any funding from them is a liability to the research company such as BSF Ltd.

Management asserted in a prospectus of patent value

Bio-sustainable Feed has the got the patent right to access to the bacteria since they had operated a food company before. The company had early operated aquaculture feed for the last period before venturing into the new technology where bacteria is used as a raw material for product (RIDLER 2001). The assertion is true since the patent rights allow R&D companies to utilize complementary resources to bring their final idea into the market (RIDLER 2001). Therefore BSF ltd is permitted to access bacteria from the previous company.

Conclusion

A lot of issues and theories have been discussed in relation to the current. Research and development has been among the current issues discussed within the context of the paper. Development has become an issue in accounting sector has to be looked keenly to ensure that the sector is perfectly developed. The fair patent right is also an issue the company management should consider in relation to what has been discussed below. 

References

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