Thoughts On Financial Accounting Banking -Myassignmenthelp.Com

Question: Discuss About The Thoughts On Financial Accounting Banking? Answer: Introduction The main aim of this part is the determination of the classification of the expenses of Coca-Cola Amatil based on nature or function. For this purpose, the 2016 annual report of the company is considered. For the answering of this present question, it is required to obtain necessary knowledge related to the classification of the expense of the companies based on nature and faction. In the income statement developed based on the nature method, the disclosure of the expenses is done as per their nature like depreciation, transportation cost, rent related expenses, salaries, wages and others. Thus, it implies that the companies do not don any reallocation of these expenses based on their functions. This method provides simplicity in the financial statements (Scott, 2015). On the other hand, in the income statements based on function method, the disclosure of the expenses is done based on their functions like cost of goods sold, selling expenses, administrative expenses, other expenses and others. Under the function method, the expenses are still required to be disclosed by nature (Weil, Schipper Francis, 2013). From the 2016 Consolidated Income Statement of Coca-Cola Amatil, it can be observed that the reported expenses by the company are cost of goods sold, selling expenses, warehousing and distributing expresses and support services and other expenses. From this, it can be observed that Coca-Cola Amatil has just provided the headings of the expenses. The detailed name of the expenses have not been discussed. Thus, based on the above discussion, it can be concluded that Coca-Cola Amati has classified their expenses based on their functions as there is scope for further disclosure of these expenses as per their nature (ccamatil.com, 2018). The possible reasons for the different method of classification of expenses are discussed below: The main objective of the companies is to earn profits; and for this reason, it is required for the companies to observe the behavior of their business expenses. The classification of expenses based on nature or function helps the companies in profit planning (Horngren et al., 2012). One major way to increase the business profit is to establish effective control on the business expenses. Control on the business expenses helps in the reduction of expenses that helps in the increased profitability. For this reason, there is a need for the classification of expenses (May, 2013). The classification of expenses is required for the development of flexible budget of the companies. In addition, it helps in the establishment of control over the budgets. Most importantly, the classification of the expenses based on function and nature is helpful for the process of organizational decision-making process (Henderson et al., 2015). From the analysis of the 2016 Annual report of Coca-Cola Amatil, it can be observed that the company has certain issues related with the change in accounting policies. Three of these major issues are discussed below: This issue is related with the Revenue from contracts with the customers as per AASB 15. As per the summary of this aspect, the revenue is required to be recognized after satisfying the pre-set performance obligation specified under the contracts (Warren Jones, 2018). It is required for Coca-Cola Amatil to apply this accounting standard from January 1, 2018. It needs to be mentioned that this new accounting standard has some major impacts on Coca-Cola Amatil as there will be change in the recognition of some portion of the revenue by the company with the implementation of this new accounting standard (com, 2018). The next issue is related with the recognition of financial instruments of the company and the related accounting standard with this change in the recognition process is AASB 9. As per the summary of this standard, Coca-Cola Amatil is to follow some new requirements for the recognition of expected credit losses (Bazley et al., 2013). The date of the application of this standard is January 1, 2018 and this standard will have some major impact on the accounting procedures of the company. Coca-Cola Amatil will be required to change the basis for the determination of allowances for the doubtable receivables and then, the company needs to do the recognition of potential credit losses in their cash assets (com, 2018). The next issue is related with the lease accounting of the Coca-Cola Amatil and the related accounting standard for this change is AASB 16. As per the summary of this accounting standard, the company is required to do the recognition of operating leases in their balance sheet and the company is required to implement this standard from January 1, 2019 (Bushman, 2014). The adoption of this standard will have some impact on the accounting of Coca-Cola Amatil related to operating leases as it will become obligatory for the company to report the whole amount of operating lease liability in their balance sheet to provide transparency in the whole accounting process (com, 2018). From the 2016 Annual Report of Coca-Cola Amatil, it can be observed that the company has reported about their property, plant and equipment in their financial statements. It needs to be mentioned that the company follows certain accounting standards for the accounting treatment of property, plant and equipment. Coca-Cola Amatil report property, plant and equipment at the cost value after the deduction of depreciation and impairment. As per 2016 Annual Report, the cost of freehold and leasehold land is $227.6 million; the cost of freehold and leasehold buildings is $527.1 million; the cost of plant and equipment is $3,463.9 million; and the cost of property, plant and equipment under construction is $209.0 million for the year 2016 (com, 2018). The 2016 Annual Report of Coca-Cola Amatil has also segregated the amount of depreciation among all these aspects. The amount of depreciation expenses for freehold and leasehold buildings is $20 million; for plant and equipment is $221.2 million. The total amount of depreciation is $241.2 million (com, 2018). As per the 2016 Annual Report of Coca-Cola Amatil, it can be observed that the company has certain depreciation period for two aspects. According to the annual report, the depreciation period for freehold and leasehold buildings is 20 to 50 years. After that, the depreciation period for plant and equipment is 3 to 15 years (com, 2018). From the annual report of Coca-Cola Amatil, it can be observed that for the depreciation of property, plant and equipment other than freehold land, the company has adopted straight-line method of depreciation (com, 2018). It needs to be mentioned that the company has adopted the technique for fair value method for the revaluation of their property, plant and equipment (com, 2018). In the business organizations, impairment of the assets happens when the market value of the assets is less than the carrying value of the assets in the balance sheet (Bevis, 2013). The property, plant and equipment of Coca-Cola Amatil are subject to the impairment testing when there is an indication of impairment. Coca-Cola Amatil recognizes impairment loss when the carrying amount of property, plant and equipment is more than the recoverable amount of them; and it is defines as the greater of the assets fair value less their cost value or the value in use. It can be seen that Coca-Cola Amatil has reported as $1077.4 million for the year 2016 and $ 1129.7 million for the year 2015 (com, 2018). References Annual Report 2016. (2018).Ccamatil.com. Retrieved 4 February 2018, from https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2017/CCA181-Annual-Report-2016-low-resolution.ashx Bazley, M., Hancock, P., Fisher, C., Lovell, A., Berk, J., DeMarzo, P., ... DeMarzo, P. (2013). Financial Accounting: An Integrated.Thomson Pty Ltd, South Melbourne. Bevis, H. W. (2013).Corporate Financial Accounting in a Competitive Economy (RLE Accounting). Routledge. Bushman, R. M. (2014). Thoughts on financial accounting and the banking industry.Journal of Accounting and Economics,58(2-3), 384-395. Henderson, S., Peirson, G., Herbohn, K., Howieson, B. (2015).Issues in financial accounting. Pearson Higher Education AU. Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R. (2012).Financial accounting. Pearson Higher Education AU. May, G. O. (2013).Financial accounting. Read Books Ltd. Scott, W. R. (2015).Financial accounting theory(Vol. 2, No. 0, p. 0). Prentice Hall. Warren, C. S., Jones, J. (2018).Corporate financial accounting. Cengage Learning. Weil, R. L., Schipper, K., Francis, J. (2013).Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.