Assignment Brief

BA (Hons.) International Business & Finance

Academic Year 2018-19

Module Information:
Qualification: BA (Hons.) International Business & Finance

Module Code & Title:

BAIBF 09016 Advanced Corporate Financial Reporting and Finance
Assignment Title: Individual Report

Component Weighting: 30%

Date of Issue: 04-04-2019 Due date: 11-04-2019, 4 PM

To be filled by the student:

Student ID: 4123BA17

Date of Submission:

*All work must be submitted on or before the due date. If an extension of time to submit work is required, a Mitigating Circumstance
Form must be submitted.

Has an extension been approved? Yes No

If yes, please provide the new submission date ….…/.…./……., and affix appropriate evidence.

First Marker: Second Marker:

Agreed Mark: Refer: Yes / No

Muhammed Swadiq 1
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
General Guidelines
1. A Cover page or title page – You should always attach a title page to your assignment. Use previous page
as your cover sheet and be sure to fill the details correctly.
2. This entire brief should be attached in first before you start answering.
3. All the assignments should be prepared using word processing software.
4. All the assignments should print in A4 sized paper, and make sure to only use one side printing.
5. Allow 1” margin on each side of the paper. But on the left side you will need to leave room for binding.
6. Ensure that your assignment is stapled or secured together in a binder of some sort and send the Softcopy
of your final document to assignment.bahons2016@gmail.com.
7. The submission of your work assessment should be organized and clearly structured.

Word Processing Rules

1. Use a font type that will make easy for your examiner to read. The font size should be 12 point, and should
be in the style of Times New Roman.
2. Use 1.5-line word-processing. Left justify all paragraphs.
3. Ensure that all headings are consistent in terms of size and font style.
4. Use footer function on the word processor to insert Your Student ID, Name, Subject, Module code, and Page
Number on each page. This is useful if individual sheets become detached for any reason.
5. Use word processing application spell check and grammar check function to help edit your assignment.
6. Ensure that your printer’s output is of a good quality and that you have enough ink to print your entire
assignment.

Important Points:
1. Check carefully the hand in date and the instructions given with the assignment. Late submissions will not be
accepted.
2. Ensure that you give yourself enough time to complete the assignment by the due date.
3. Don’t leave things such as printing to the last minute – excuses of this nature will not be accepted for failure
to hand in the work on time.
4. A printed version of the assignment needs to be submitted physically along with a soft copy mailed to the
email mentioned above on or before the stated deadline.
5. You must take responsibility for managing your own time effectively.
6. If you are unable to hand in your assignment on time and have valid reasons such as illness, you may apply
(in writing) for an extension.
7. Non-submission of work without valid reasons will lead to an automatic REFERRAL. You will then be asked
to complete an alternative assignment.
8. Take great care that if you use other people’s work or ideas in your assignment, you properly reference them
in your text and any bibliography; otherwise you may be guilty of plagiarism.

Muhammed Swadiq 2
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
 Statement of Originality and Student Declaration

I hereby, declare that I know what plagiarism entails, namely to use another’s work and to present it as my
own without attributing the sources in the correct way. I further understand what it means to copy another’s
work.
1. I know that plagiarism is a punishable offence because it constitutes theft.
2. I understand the plagiarism and copying policy of the University of the West of Scotland.
3. I know what the consequences will be if I plagiaries or copy another’s work in any of the
assignments for this program.
4. I declare therefore that all work presented by me for every aspect of my program, will be my own,
and where I have made use of another’s work, I will attribute the source in the correct way.
5. I acknowledge that the attachment of this document signed or not, constitutes my agreement on it.
6. I understand that my assignment will not be considered as submitted if this document is not attached
to the attached.

Student’s Signature: …………………………… Date:04/07/2019

Muhammed Swadiq 3
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
TASK 1

1 Explain the purpose and circumstances of using the fair values in preparing the
consolidated financial statements (10 Marks) – 1000 words

TASK 2

2. Discuss the relationship between cost of capital and business value. (5 Marks) – 500
words

Word Limit –1500 words

Muhammed Swadiq 4
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
Task 1

According to IAS 27 "Consolidated and distinct fiscal statements", consolidated fiscal

statements are the economic statements of a cluster obtainable as individuals of a lone
financially viable entity.Consolidated economic statements pass on to the economic
statements which escort to the subsidiaries of the property companionship its summative
accounting figure. Putting an alternative way, consolidated monetary statements bottle be
addressed as the mutual monetary statements of a father business and its
subsidiaries.The consolidated economic statements facilitate you to establish the broad
health of an full cluster of companies as compared to a company’s standalone position.
This is for the reason that these economic statements bestow an aggregated peek at the
economic place of a ballet company and its subsidiaries.

Fair value accounting

Fair value accounting is a economic coverage approach, besides famous as the “markto-
market” accounting practice, under in general customary accounting ethics (GAAP). by
means of adequate set great store by accounting, companies determine and show up the
charge of a few assets and liabilities on the beginning of their genuine or estimated
nondiscriminatory sell prices. Changes in asset or liability morals over time produce
unrealized gains or losses for the assets apprehended and liabilities outstanding,
mounting or plummeting clear income, as surge as justice in the sense of balance sheet.

Fair value Accounting Pros and Cons

The fair value accounting method allows for the measurement and exposure of liabilities
and assets on their estimated or authentic quite good bazaar price. for the reason that
nearby are changes to asset liability over time, nearby be able to be unrealized gains or
losses in assets that are held. This approach of accounting know how to avoid to quantify
and chart individuals gains.
Muhammed Swadiq 5
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
The Pros of Fair Value Accounting
1. It provides an accurate valuation.
This approach of accounting helps to offer further correctness once it comes to
undercurrent valuations from assets and liabilities. The stream sell prices consent
to persons or businesses to see closely someplace they stand.

2. It provides a measurement of valid income.

There is less of an opportunity to manipulate accounting numbers by means of the
decent survey approach. As a substitute of via the deal of assets to put on gains
or losses, the estimate changes are purely tracked based on the genuine or
estimated value.

3. It is the most agreed upon standard of accounting. Instead of the historical

cost value that isn’t always accurate after a long period of time, fair value
accounting accurately tracks all types of assets, from equipment to buildings to
even land.

4. It provides a method of survival in a

difficult economy.
In the historical method, the same value goes of an asset goes on the budget line
every year. Fair value accounting allows for asset reductions within that market so
that a business can have a fighting chance.

The Cons of Fair Value Accounting

1.It can create large swings of value that happen several times during the year.

Muhammed Swadiq 6
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
There are selected businesses that do not assistance from this manner of accounting at
all. These businesses typically say assets that swing in help in obese amounts regularly
throughout the year.
2.Misery typically loves company. If one business is seeing a reduction in net income
thanks to asset losses, then this trend . typically creates a domino effect throughout a
region or an industry. Downward valuations are contagious and often trigger selling that
is unnecessary because of the volatility of the market.

3.It reduces investor satisfaction.

Some investors don’t always observe that a corporation is by means of the open-minded
worth make contact with to accounting. This creates saver displeasure for the reason that
the deficit of amount in the lattice earnings becomes an revenue demise for the investors
as well.

4. It loses the historical perspective.

Although current accounting is important to measure, there must also be a general sense
of what has happened historically for accuracy in tracking results. Because assets may
have a down year and reduce net profits, it can artificially lower the successes that a
business may have had. The fair value accounting pros and cons show that for the most
part, businesses can have a transparent and accurate method of tracking profit and loss.
As long as investors are kept in the loop and know what is going on, the benefits will
typically outweigh the risks in this matter.

Fair values in consolidated financial statements

Muhammed Swadiq 7
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
To guarantee that an exact figure is calculated for goodwill:
• The concern remunerated for a subsidiary requisite be accounted for at circus
value. Not every one consequence is for cash; other non-cash fundamentals (such as
communicate exchanges) be required to be valued appropriately.
• The subsidiary's restricted assets and liabilities acquired be obliged to be
accounted for at their fair-minded morals in tidy to design out the discrepancy between
their significance and the quantity remunerated for them.

The have to to bank account on a quite good respect foundation reflects the truth that the
announcement of economic place repeatedly principles stuff (mainly non-current assets)
at their historic detriment minus depreciation. This might average the reserve significance
of assets (or transport value) is greatly distinct to their flow marketplace values,
exceptionally in the set of circumstances of assets that attend to to realize in value, such
as come to rest and buildings.

The subsidiary's express assets and liabilities are incorporated in the

consolidated balance sheet at their fair value for the following reasons.
•Consolidated financial statement are primed from the perspective of the group, pretty
than from the perspectives of the particularized companies. The tome morals of the
subsidiary's assets and liabilities are in principal irrelevant, as the consolidated financial
records essential expose their expense to the assembly (i.e. to the parent), not their
unique price to the subsidiary. The price tag to the grouping is their fair to middling survey
at the engagement of acquisition.
• Purchased friendliness is the differentiation between the amount of an acquired
article and the collect of the fine morals of that entity's certain assets and liabilities. If
exposition morals are not used, the price of favor will be meaningless.

Muhammed Swadiq 8
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
Task 2

What Is Cost of Capital?

Cost of capital refers to the oppurtunity cost of building a specialized investment. It is the
regard of send that may possibly obtain been earned by putting the consistent change
into a atypical investment with on a par risk. Thus, the detriment of money is the fee of
restore mandatory to convince the patron to bake a prearranged investment. Cost of
capital is the obligatory revenue needed to churn out a funds budgeting project, such as
shop a new factory, worthwhile. as analysts and investors chat about the expenditure of
capital, they typically standard the one-sided be around of a firm's loss of debt and charge
of fair play blended together.

The cost of capital metric is used by companies internally to judge whether a capital
project is worth the expenditure of resources, and by investors who use it to determine
whether an investment is worth the risk compared to the return. The cost of capital
depends on the mode of financing used. It refers to the cost of equity if the business is
financed solely through equity, or to the cost of debt if it is financed solely through debt.
The cost of capital metric is used by companies internally to judge whether a capital
project is worth the expenditure of resources, and by investors who use it to determine
whether an investment is worth the risk compared to the return. The cost of capital
depends on the mode of financing used. It refers to the cost of equity if the business is
financed solely through equity, or to the cost of debt if it is financed solely through debt.

Key points

Muhammed Swadiq 9
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
• Cost of resources typically encompasses the expense of in cooperation impartiality
and debt, prejudiced according to the company's chosen or obtainable first city structure,
acknowledged as the weighted-average loss of headquarters (WACC).
• Cost of center represents the homecoming a troupe desires in direct to procure on
a hub project, such as purchasing new tools or constructing a new building.

• A company's investment decisions for new projects must continually create a

arrival that exceeds the firm's fee of the resources second-hand to finance the project—
otherwise, the envisage will not make a put back for investors.

What is Business Valuation?

Business valuation is the broad-spectrum deal with of decisive the profitable rate of a total
multinational or companionship unit. concern judgment bottle be second-hand to resolve
the pale amount of a affair for a diversity of reasons, as well as garage sale value,
establishing partner ownership, taxation, and smooth detach proceedings. Owners will
frequently aim to proficient sphere evaluators for an objective costing of the price of the
business.

Key Points

Muhammed Swadiq 10
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016
• Business evaluation is the all-purpose practice of influential the financially viable
charge of a totality concern or business unit.
• Business estimation tin be second-hand to control the impartial assess of a firm for a
range of reasons, as well as auction value, establishing partner ownership, taxation,
and still split proceedings.
• Several methods of valuing a topic exist, such as looking at its promote cap, pay
envelope multipliers, or hardback value, amongst others.

BIBLIOGRAPHY

• https://www.investopedia.com/terms/c/costofcapital.asp
• https://smallbusiness.chron.com/advantages-disadvantages-fair-value-accounting20577.html

Muhammed Swadiq 11
4123BA17
Advanced Corporate Financial Reporting and Finance
BAIBF09016