Discuss about the Accounting Theory and Current Issues for Sustainable Feeds Limited.
The report is intended to consider numerous accounting theory concepts along with the current issues with great focus on Sustainable Feeds Limited recognized as the BSF Ltd Company as well as its business operations present within the case study. The current case study also takes into account evaluation of the business conducts of the organization, which is publicly listed, in the Australian stock exchange. BSF Ltd has its business conducts in distinct business segments that include research completion on several sustainable feeds of aqua culture for over two years (Ball 2013).
The report has an objective in evaluation of the detailed features as well as community value addition for the research completed by the company. Moreover, the report will take into account focusing on some vital aspects that that occurs in the initial stage of research completed by BSF Ltd. In this research, exploration of some issues with prior research as well as the research include nature and variations within the research and development (R & D) regarding implemented accounting standards and regulations. Additionally, the current section will evaluate the issues for which an organization is involved in such process of R & D (Beattie 2014). The evaluation conducted in this research will also take into consideration the market value of the patents along with the process’s enumeration and supposition, the journal transactions for sustaining account of numerous entries related to research and development.
As per the Accounting Standards of (Australian Accounting Standard Board) AASB 1011, the research and process of development within an organization is identified and there is a proper accounting treatment for the same. Hence, any of such activities, which facilitates within the boundaries of the organizations are recorded in a structured manner. Therefore, the various research as well as development activities, which are commenced by Bio-Sustainable Feeds (BSF), are understood through the help of AASB 13 (Bonin 2013). This standard actually observes and structures the research and development activities of conglomerate companies. Alternatively, the concerned organization is also engaged in the business of transforming the low priced fish products into a product of high value. In order to fulfill this process the fishes with high value are dried on the plant-wet food. Such transformation process brings in certain risks which eventually affect the people and it even results in malnutrition of the same.
Furthermore, keeping in mind the well being of the poor people, the objective of the company has also been altered where the manufacturing the luxury food products is used to attain the hold over the people. As per the recent study conducted on the company, the expenses on the research and development would highly surpass the current expense of AUD160mn to reach AUD200mn (CBC News. 2016). The study, which has been conducted, is of two types namely basic and applied research. Hence, the main objective of this paper is to ascertain the knowledge behind the innovative research and development of the organization.
BSF Ltd Company is engaged in a business where its operations involve high level of research and development to identify the sustainable as well as aqua suitable fish feeds. However, the company witnessed a failure while it was carrying out its experiment on basis of plant-based fish feed. This failure has cost the company near about AUD160mn (Henderson et al. 2015).
This case study about the failure of the company also highlights various realities which the company witnessed regarding the predicaments of the aqua culture feeds. The company was mainly engaged in an activity where it transformed or in better words replaced the low priced fish feeds with high value fish. The ratio was in such a way where 10kg of inferior value fish were replaced with 1kg of luxury fish while taking into consideration the 1/3rd of dead fish. In order to implement the same, the business mainly focused on the rich people whereas worsens the risk of malnutrition for the people of poor segment of the society (Sciencenordic.com. 2016). On the contrary this action by the company is also supported calling it a step towards development and innovation.
However, this research has witnessed failure but accounting standard as per (International Accounting Standard) IAS 38 mentions that the same might help in further processing and development of the assets throughout the investigation. This research and investigation process might be an inefficient task but will be a source of knowledge for any kind of future argumentation. Although the acquisition of knowledge for the failed research could of help and even add advantage but that will surely not surpass the cost which they incurred in the failed experience.
Though the term research and development are used simultaneously but while evaluating the same through in-depth study, there are several factors which identify the difference of the research and development. As per the (Accounting for Research and Development Cost) AAS 13, research encompasses various activities, which are intended to gain an innovative knowledge, which is new to the world (Smith 2014). Hence, when any kind of activity done with an objective of studying the same is considered as an effective and efficient research which could be further improved and implemented through development process.
Moreover, generating the goods proxies rather the non-identical fish goods is considered to be the main objective of the research activities made by the organization. In addition to the same, the research investigation requires a through identification process regarding the conversion, transformation and replacement.
While reviewing the AAS 13, paragraph 8, the processes of the business which are engaged in development generally needs to evaluate their processes. Moreover, such processes also encompasses various other procedure such as designing the product, testing the sample products so that it can distinct itself and claim itself to be innovative with implementation of upgraded technology. Furthermore, the developmental process encompasses the main factor which is operations of the business through implementation of strategic plan. Hence, the research and development process mainly makes the manufacturing process more feasible as well as economical (Bonin 2013).
Therefore, the process of research involves in-depth exploration as well as evaluation of the plans. This is the notion, which defines the relation of research with that of development within the operational process of the business organization. This on the other hand also increases the expectancy of the achievement of technical as well as scientific goals. It also increases the effectiveness of the functionality and provides with superior product and services.
The research and development are well formulated in accounting standard AAS13’s subsection within paragraph 14. It stated various rules for recording and showing the research and development works with the financials. It has been quite an important task and should not be left unaccounted. Generally, the research and development process includes money matters and most of them in the section of expenses. Hence, this was to be charged to the income statement in proper manner in order to identify fair value of profit or loss from the operations.
Furthermore, in consideration of the same, the concerned organization takes all the necessary steps in order to record the same. It is so because any of the deferred cost can actually tamper with the genuine figures and any kind of anticipation regarding the same could also be devoid of the truth in the future years (Dyckman and Zeff 2015). Hence, any kind of expenses, which are related to the research and development process, needs to be amortised or impaired throughout to align it with the current expenditure or paybacks.
Therefore, any of the cost in context to research and development, which were postponed in the previous years, are now investigated and identified frequently. This will actually bring the differences, where the criteria might remain unfulfilled and the profit or loss for a specific period shows a fair and unadulterated value. Hence, amortising the expenses in context to the research and development actually incorporates and aligns it with current statements and direct it to gain fair value of returns. Moreover, expenses regarding the research for product purchasing are also considered and are added to the overall expenses for research and development (Bonin 2013). In addition to the same, it also incorporates the capital, which is employed behind the research and development activities. Hence, in a nutshell, it considers all the expenses regarding the research and development and incorporates it into the calculation in the financials.
“Computations indicating the present value of the patent
“Present Value (PV) of Patent:
PV of cash flow from first year:
“(PV of 100+PV annuity of 800) of 8% = $778,463,000”
PV of cash flow from Second year:
“PV of 100 for 10 yrs 8% =$671,008,000”
Investigation of the principles supported in discovering a fact regarding fair value, which signifies that, anticipated worth of ample assets as well as the liabilities of any specific financial assertions of the concern. Moreover, there is an existence of a fundamental assertion which clarifies high quality measurement of fair value is efficient. Accounting standard of “AASB 13” signifies entire rationalization of a fair value account (Van Mourik and Walton 2013). Additionally, there exist different theories in accounting that can describe a fair value’s enumeration aspect as a specific price that can be achieved or marketing of an asset indicated in case of selling or in attempt to transfer a specific liability in a logical manner. This technique is enforced among various market partners, which remains in the course of enumeration.
Transactions for the Year 2013
“Dr. R&D exp 260,000,000
Cr. Cash or A/P 260,000,000
Dr. Cash or A/P $500,000,000
Cr. R&D exp. $100,000,000
Cr. Unearned grant revenue $400,000,000”
Transactions for the Year 2014
“Dr. R&D exp. 100,000,000
Cr. Cash or A/p $ 100,000,000
Dr. Unearned grant revenue 100,000,000
Cr. Research grant revenue 100,000,000”
Transactions for the Year 2015
“R&D expenses $ 100,000,000
Cr. Cash or A/p $100,000,000
Dr. Unearned grant revenue 100,000,000
Cr. Research grant revenue 100,000,000”
Transactions for the Year 2016
“R&D expenses $ 60,000,000
Cr. Cash or A/p $60,000,000
Dr. Unearned grant revenue 60,000,000
Cr. Research grant revenue 60,000,000”
About accounting, the directives stated within the accounting standard of “AASB 120” which also deals with the “IAS 20” accounting considerations, the accounting treatments presented by the government can be ascertained (Sarker et al. 2016). Concerning set of accounting rules mentioned within accounting standard, the government grants can be documented to be profit or loss in a procedural manner over the course in which the concerns related with business signifies the expenses as the allied expenditures.
The recognition as well as the documentation of numerous government grants encompassing profit or loss is deemed to be not complied with specific accrual accounting supposition mentioned within “AASB 101 Presentation of Financial Statements”. In addition, the system regarding which the grant of the government might be taken into account as not persuading the total accounting manner that can be accepted dependent on grant (Rust et al. 2011). Moreover, all the government grants becomes receivable reimbursement for offering rapid financial sustenance to the business rather than any related expenditures that can be attained in profits or loss at a predefined time.
Execution of control on an intangible asset generally signifies a manner to the upcoming economic benefits conception. Moreover, the business capacity to address the upcoming economic reimbursement from a specific intangible asset may take place of an assorted legal organization that is effectively treated as vital in consideration to the legal provisions. However, enough control on the assets those are intangible can facilitate assistance in the development technique in fundamental technical association that can help in assisting the advantages of acquisition in later stages (Dyckman and Zeff 2015).
In addition, these benefits can be achieved from numerous legal entities intended to ensure privacy. Concerning “AASB 138 paragraph 13 -16”, an entity needs being recognizable with the capacity and employee proficiency that can in future lead to increase in the economic benefits in the upcoming years (Hassard and Pym 2012). However, in a situation where there is a lack of assorted impact, which is law-based, BSF Ltd Company might safeguard the profits in the upcoming years through establishing several techniques.
Conclusion
The report intended to centre on considering numerous concepts of accounting theory in addition to the current concerns having a great focus on the Sustainable Feeds Limited simply considered as the BSF Ltd Company and the operations of its business resented in the case study. It was clarified that the case study on BSF Ltd Company ‘s business organizations revealed that the company is involved in increased research and development actions as per direction offer the revelation of sustainable feeds of aqua cultural feeds.
Another case also explains the issues dealt by the company due to the failure of business conducted by on the plant-based feed for fish. Additionally, investigating the principles supported in recognizing the fact based on fair value that signifies towards that anticipated worth of several assets as well as the liabilities of a specific financial assertions of the concerns. However, a basic assumption is existent that indicates high quality measurement of fair value is effective.
Reference List
Ball, R., 2013. Accounting informs investors and earnings management is rife: Two questionable beliefs. Accounting Horizons, 27(4), pp.847-853.
Beattie, V., 2014. Accounting narratives and the narrative turn in accounting research: Issues, theory, methodology, methods and a research framework. The British Accounting Review, 46(2), pp.111-134.
Bonin, H., 2013. Generational accounting: theory and application. Springer Science & Business Media.
CBC News., 2016. ‘Greener’ fish farming could lead to unhealthier seafood. [online] Available at: https://www.cbc.ca/news/technology/aquaculture-feed-1.3262922 [Accessed 27 Sep. 2016].
Dyckman, T.R. and Zeff, S.A., 2015. Accounting Research: Past, Present, and Future. Abacus, 51(4), pp.511-524.
Hassard, J. and Pym, D. eds., 2012. The theory and philosophy of organizations: critical issues and new perspectives. Routledge.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Rust, M.B., Barrows, F.T., Hardy, R.W., Lazur, A., Naughten, K. and Silverstein, J., 2011. The future of aquafeeds. NOAA/USDA Alternative Feeds Initiative.
Sarker, P.K., Kapuscinski, A.R., Lanois, A.J., Livesey, E.D., Bernhard, K.P. and Coley, M.L., 2016. Towards Sustainable Aquafeeds: Complete Substitution of Fish Oil with Marine Microalga Schizochytrium sp. Improves Growth and Fatty Acid Deposition in Juvenile Nile Tilapia (Oreochromis niloticus). PloS one, 11(6), p.e0156684.
Sciencenordic.com., 2016. Fish feed-research may help reduce world hunger. [online] Available at: https://sciencenordic.com/fish-feed-research-may-help-reduce-world-hunger [Accessed 27 Sep. 2016].
Smith, M., 2014. Research methods in accounting. Sage.
Van Mourik, C. and Walton, P., 2013. The Routledge Companion to Accounting, Reporting and Regulation. Routledge.
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