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FINANCIAL ACCOUNTING Coursework 2010-11. Word count limit: 1350-1450 words. Issue date:13 December 2010 Submission date: 18 January 2011
Introduction to the assignment: This assignment consists of four “mini case studies”. A formal report is not required however your assignment should be word processed and professionally written. References should be presented as an appendix to your assignment and will not form part of the word count. Responses which include a repetition of the assignment case study details will receive no marks.
The Assignment: Scenario: You are employed as a graduate trainee accountant by Midge Plc. You are currently involved in the process of finalising the financial statements of Midge Plc for the year end 30 September 2010. Your manager, who is not yet a qualified accountant, has asked you to deal with the four, following issues. Important: Present your response having regard to International Financial Reporting Standards or the IASB “Framework” document. Do not refer to UK domestic accounting standards (FRS or SSAP). Task 1. Your manager has asked you to write a response to an email she has received from the chief executive of Midge Plc raising some points concerning the company year end financial statements. The chief executive is keen to present this year’s annual financial statements in a simpler way and to avoid technicalities wherever possible. He is proposing to include a number of definitions of key financial terms as an appendix to the financial statements. The email refers to a definition of the non-current assets of Midge Plc as “….physical items which cost a lot of money, owned by the company and which will last longer than one year”… Respond to this statement by drafting the text of an email reply to HYPERLINK "mailto:chiefexec@midgeplc.IT.com" chiefexec@midgeplc.IT.com which explains the defects in this proposed definition. You are not required to write an alternative definition. NB: do not try to email to this address!! Task 2. Midge Plc spent £350,000 on training costs for its staff during the year ended 30 September 2010. This expenditure is analysed as follows:
£
Training staff to use new computer controlled manufacturing machinery brought into use during July 2010 50,000
General staff training courses aimed at increasing efficiency and producing cost savings over the next five years. 300,000
350,000
Task 2 continued: The financial director of Midge Plc has proposed that all of this expenditure should be treated as an intangible asset in the statement of financial position at 30 September 2010. The statement of comprehensive income for the year ended 30 September 2010 should include an amortisation charge of 50% (£35,000) of one years amortisation (£70,000, straight line basis) based on the assumption that on average the courses were completed six months prior to 30 September 2010. The draft net profit before taxation of Midge Plc for the year ended 30 September 2010 is £1.8million. Analyse this statement and formulate a written response for inclusion in a report to the chief executive. You should: Analyse the situation described. Research the regulatory background for this type of expenditure. Discuss the acceptability of the proposed accounting treatment in the case study. Present your conclusions regarding an acceptable alternative accounting treatment, if you consider the proposed method unsuitable. Task 3. The draft financial statements of Midge Plc for the year ended 30 September 2010 show the following results:
Indicator %
Increase in profit after taxation 80%
Increase in basic earnings per share 5%
The financial director of Midge Plc is concerned that these key indicators appear to give a confused message regarding the company’s financial performance. Midge issued new share capital during the year ended 30 September 2010 and acquired other subsidiary companies in order to increase the scale of its operations. You are required to draft an explanatory note for the financial director which will explain the possible reasons for the wide difference between these performance indicators.
Task 4. Midge Plc is considering further investments and is looking, in particular, at two other companies, Wren Plc and Dee Plc. The latest summary statements of financial position for both of these companies are shown below (both as at 30 September 2010):
All £’000 Wren Plc Dee Plc
Total assets less current liabilities 2,000 2,000
Long term borrowing (200) (1,000)
Net assets 1,800 1,000
Share capital 1,200 400
Reserves 600 600
Total equity 1,800 1,000
Neither company changed its capital structure in 2009 or 2010. The summary statements of comprehensive income for both companies for the last two financial years (2009 and 2010) show the following results:
All £’000 Wren Plc Dee Plc
2009 2010 2009 2010
Profit before interest 200 160 200 160
Interest 20 20 100 100
Profit after interest 180 140 100 60
Taxation 54 42 30 18
Profit after taxation 126 98 70 42
Midge Plc has sufficient surplus funds to acquire only one of these companies, not both. Required: draft a brief summary outlining the financial position and performance of both companies based only upon the above available information with a conclusion indicating which company would appear to offer the “best” potential as an investment. Calculate suitable accounting ratios and also state the further information which is required to make an informed investment decision. Any assumptions made should be clearly stated.
写作重点，请仔细回答每个小问题 Assignment guide task 1 Analyse the suggested definition quoted in the Chief Executive’s suggestion against the definition of assets included in the IASB “framework” document. Make sure you deal with all aspects of the IASB definition. Make sure you cover all types of non current assets. Illustrate your response with a few examples. task 2. You will need to analyse the two items of expense separately. (training course for the machine and the general training). Consider if the expense could be treated as an asset, what conditions need to be met? Research specific http://www.ukassignment.org/azcourseworkdx/2012/0320/19340.html accounting standards (IAS 16 and IAS 38). Read the guidance notes in the assignment task carefully. task 3. Consider the nature and purpose of both performance measures. What does profit after tax tell the user, what is the purpose of the EPS statistic? Consider what may be included in profit, both trading and non trading profits. Think about the effect of accounting policies. Think about the impact of changes in capital on EPS. task 4. Think about the other information needed to make an informed decision. Focus on the differences between the capital structure of the two companies. There is no need to calculate lots of ratios as there are no details of the asset/liability structures of each company. Only suitable and relevant ratios are needed. Weightings: Tasks 1, 2 and 3 20% each. Task 4 40% 寫作要求： 1.請注意task 4 占40％ 2. 不需要複寫題目內容，直接回答問題 3. 結構清晰 4. 請務必按照Assignment guide中的要求和重點回答每個task的問題！！
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