(b) The presence of qualitative characteristics in the financial reporting helps in ensuring the fact that the financial information of the companies is presented faithfully to the potential investors and other users. Apart from stating the property, plant and equipment in historical cost, AusCann Group has the option to state them under Fair Value Measurement (Schwarzbichler, Steiner & Turnheim, 2018). The adoption of fair value measurement puts the obligation on AusCann Group for capturing the change in the value of this non-current asset over time. In addition, it will be a major requirement for AusCann Group to involve in the process of revaluation of this non-current asset for capturing the changes (Hodder, Hopkins & Schipper, 2014).
(b) It can be observed that AusCann Group has complied with the guiding principles of AASB 138 Intangible Assets in order to fulfill the disclosure requirements of intangible assets. By complying with the disclosure requirements of AASB 138, the company has provided the details about the recognition and measurement process of their business intangible assets (Ji & Lu, 2014). At the same time, the company has provided the information related to the impairment of these intangible assets. It needs to be mentioned that AusCann Group also provides the information related to the amortization and impairment of intangible assets of their business. In the presence of all these compliances, it can be said that AusCann Group has fully complied with the principles and standards of AusCann Group for intangible assets (Yao, Percy & Hu, 2015).
The 2017 Annual Report of AusCann Group shows the presence of a contingency situation around the entrance of AusCann Group in a non-binding head of agreement with privately-owned California-based company, Caziwell Inc. / Aunt Zelda’s Group for getting the access to company’s product range and brand in the market of Australia and New Zealand (asx.com.au, 2018).
(b) The above discussion includes the presence of a contingent liability in AusCann Group under which AusCann Group has the obligation to pay 5% of their sales revenue from the products of Aunt Zelda to Aunt Zelda. This situation will become a contingent liability for AusCann Group when they will fail in providing this 5% fees.
It is the obligation on AusCann Group to provide the 5% fees and it indicates that it is an obligation on the company for paying this. Thus, instead of contingent liabilities, AusCann Group should consider this as liability (Hutchens & Rego, 2013).
(b) As per the 2017 Annual Report of AusCann Group, the company is going to comply with the revised standards of AASB 16 Leases for the classification and presentation of the leases. Under this regulation, it is needed for the lessees for the recognition of lease assets and liabilities for all the leases with the time of more than 12 months unless they are low in value (Joubert, Garvie & Parle, 2017). In addition, the lessees are required to measure right-of-use assets same as other financial assets and the lease liabilities as the other liabilities. For this reason, they are needed to report these lease assets and liabilities in the balance sheet of the companies. According to this revised regulation, it is needed for the business organizations to use present value basis for the initial measurement of the lease assets and liabilities. Apart from this, the enhanced lease disclosure under this standard will to the effective disclosure of the lessor’s risk exposure. Apart from this, it is needed for the consolidated business entity for the recognition of the right-of-use assets and liability for any kind of leases (Xu, Davidson & Cheong, 2017).
(b) It can be seen from the above discussion related to the analysis of 2017 Annual Report of AusCann Group that the company has reported two types of sources of revenue in this business and one of them is Interest Revenue of Revenue from Interest (Weil, Schipper & Francis, 2013). It needs to be mentioned that the management of AusCann Group has used certain technique for the measurement of the revenue from this source. According to the 2017 Annual Report of AusCann Group, the company has recognized their revenue on an accrual basis. In this context, it needs to be mentioned that the business organizations use to report the revenue in the income statement when they are earned under the accrual basis of accounting. In addition, under the accrual basis of accounting, the business organizations are needed to match their business expenses with the related revenue at the time of their occurrence or when cash is paid to them (Demski, 2013).
References
AusCann Group Holdings Ltd. (2018). Financial Report for the Year Ended 30 June 2017. Retrieved 15 September 2018, from https:// www.asx.com.au/asxpdf/20170929/pdf/43ms3qz1kzclzd.pdf
AusCann. (2018). What we do. Retrieved 15 September 2018, from https://www.auscann.com.au/about-us/what-we-do.html
Demski, J. (2013). Managerial uses of accounting information. Springer Science & Business Media.
Hodder, L., Hopkins, P., & Schipper, K. (2014). Fair value measurement in financial reporting. Foundations and Trends® in Accounting, 8(3-4), 143-270.
Hutchens, M., & Rego, S. (2013). Tax risk and the cost of equity capital. Available at SSRN.
Ji, X. D., & Lu, W. (2014). The value relevance and reliability of intangible assets: Evidence from Australia before and after adopting IFRS. Asian Review of Accounting, 22(3), 182-216.
Joubert, M., Garvie, L., & Parle, G. (2017). Implications of the New Accounting Standard for Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. Journal of New Business Ideas & Trends, 15(2).
Nobes, C. (2014). International classification of financial reporting. Routledge.
Schwarzbichler, M., Steiner, C., & Turnheim, D. (2018). Fair Value Measurement. In Financial Steering (pp. 431-440). Springer, Cham.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.
Xu, W., Davidson, R. A., & Cheong, C. S. (2017). Converting financial statements: operating to capitalised leases. Pacific Accounting Review, 29(1), 34-54.
Yao, D. F. T., Percy, M., & Hu, F. (2015). Fair value accounting for non-current assets and audit fees: Evidence from Australian companies. Journal of Contemporary Accounting & Economics, 11(1), 31-45.
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