School of Business and Management

Department of Accounting

ACC704: Framework of Accounting & Reporting II

Assignment 1 Please give brief answers to all the questions below

1. The Conceptual Framework outlines among other issues, the qualitative characteristics of
financial statements, recognition and measurement of financial statements.
(i) Explain four (4) main qualitative characteristics of financial information (4 marks)

(ii) Explain four (4) bases of measuring assets and liabilities subsequent to their initial
recognition (4 marks)

2. Define equity and explain why the Conceptual Framework does not prescribe any
recognition criteria for equity. (5 marks)

3. Selby Ltd is a local construction company. The regulation in the construction industry
requires employers to provide protective clothing. The company failed to do that. A
plumber got injured during the course of employment and the plumber has sued the
company for the injury he suffered. The lawyers of Selby Ltd have prepared to defend the
company in the lawsuit. They have estimated that the company would have to make a
compensation of $50 000 to cover the injured party’s costs. A court decision is likely to
be made at least in a year’s time.
Required
What aspects of the conceptual framework might help you in determining appropriate
accounting treatment of this situation? (5 marks)
4. Brady Bank Ltd places a non-cancellable order for a new automated teller machine with
one of the commercial ATM manufacturers at a fixed price with delivery in 24 months
and payment in full to be made on delivery.
Required
Under The Conceptual Framework advise whether Brady Bank Ltd should recognise any
asset or liability at the time it places the order. (5 marks)
5. The following statement was made in the 2003 annual report of Westpac:
“Westpac’s aim is to manage its business in a way that produces positive outcomes for all
stakeholders and maximizes economic, social and environmental value simultaneously.
In doing so, Westpac accepts that the responsibilities flowing from this go beyond both
the strict legal obligations and just the financial bottom line”

Do you think that the simultaneous maximization of economic, social and environmental
value is an achievable goal? Give reasons for your answer. (5 marks)

6. The chapter on Social and Environmental Reporting has identified a range of

stakeholders that managers should consider when determining sustainability performance
and reporting. Determine how managers should engage with five (5) of these
stakeholders and document what sustainability issues they would likely discuss during
this engagement process. Give examples from Solomon Islands and the South Pacific
Region. (10 marks)