Accounting for client Case Study Solution
Depreciation Policy
According to IAS-16 Property Plant and Equipment, an entity is required to disclose the following items relating to the depreciation of assets.
The method use to depreciate the asset
The depreciation rates or useful lives of the assets.
The gross carrying amount and accumulated depreciation.
Maturity Dates of Major Liabilities
According to IFRS 9 Financial Instruments, an entity should disclose the maturity dates of the long and short term liabilities along with this,it should also disclose the interest born eby these debts and principle amount of these debts.
Potential Liability due to pending Litigation
According to IAS 37- Provision, Contingent Assets, and Contingent Liabilities, an entity is required to disclose the events which incurred the liability. Along with this,it should also disclose the possibility of the potential liability and the amount which has to be paid if the liability is incurred and the method which is used to determine this liability.
F.The company’s cash has fallen from $240,000 to $78000 and this is a decrease of approximately 67.5% and a decrease of $162000 till December.If company spends cash or has expenditure of this amount each year, then the company is likely to be insolvent in the near future as the expenses of $162000 can be met in the next year assuming that the cash does not increase.However, if the cash decreases it will also lead to a decrease in the current ratio and the working capital of the company. The decrease would further lead to the company’s working capital cycle being increased in days and the company will need to arrange finance for its day to day operations and if it cannot arrange the required finance then this would lead to liquidity problems in the company.Consequently, it would lead to company’s going concern assumption being invalid and will hence lead to the liquidation of the company.
G.Patty Driver is the shareholder of the company.He is directly associated with the company, therefore, there is an ethical risk that to earn personal benefits such as dividend and capital appreciation,he may change the financial statement of the company. Therefore, on the ethical ground, the company should hire an independent person to maintain the accounting records of the company..................
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