Question 1 60 Marks
It is argued that culture (Wong, 2004) and non-compliance with IFRSs (Ali, 2005) are two major barriers to
harmonize accounting standards globally.
Ali, M. J. 2005. A synthesis of empirical research on international accounting harmonization ad
compliance with International Financial Reporting Standards. Journal of Accounting Literature, 24, 1-
Wong, P. 2004. Challenges and success in implementing international standards: Achieving
convergence to IFRSs and ISAs. International Federation of Accountant (Available at:
(a) Briefly discuss the above statement in the Introduction section. (5 Marks).
(b) Do you agree that culture can be a barrier to harmonize accounting standards
throughout the world? Discuss with examples and provide your own comments. (15
(c) Do you think that the compliance with IFRS is essential to harmonize accounting
standards globally? What are the reasons for noncompliance with IFRS? Discuss with
examples. (15 Marks).
(d) Do you think harmonization of accounting standards is possible? Justify your answer.
(e) Summarise the above questions (a-d) in the Conclusion section. (5 Marks).
(f) Provide references (at least 10 articles/sources) in the end of the assignment and use
those articles in your writing with references. (5 marks).
Note 1: Professional marks (5 marks) will be awarded for format, clarity and expression. The
report should include Introduction, Discussion Conclusion and List of references. Parts (b), (c),
and (d) of question 1 need to be provided under the discussion section. It is expected that
students should use at least ten articles in writing their assignments.
Note 2: You will be able to obtain electronic copies of articles by visiting La Trobe University
Question 2 30 Marks
Penguin Ltd began operations on 1 July 2019. One year after operations, the entity presents its
first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2020.
However, the statements were prepared for internal purposes but income tax calculations were
ignored. Accounting profit before income tax for the year 30 June 2020 of Penguin Ltd
amounted to $2,720,000, including the following revenue and expenses.
Depreciation expense – Plant and Machinery 201,000
Depreciation expense – Equipment 232,000
Depreciation expense – Furnitures and Fixtures 50,000
Rent of premises 74,000
Other expenses 198,000
Administrative expenses 529,200
Entertainment costs 44,000
Long service leave 252,000
Warranty expenses 151,200
Cost of sales 6,450,000
Assets and Liabilities disclosed in the Statement of Financial Position for the year ended
30 June 2020
Cash/ Bank 102,000
Accounts Receivables (net) 378,000
Prepaid insurance 51,900
Plants & Machinery – cost 2,010,000
Less – Accumulated depreciation 201,000
Equipment- cost 1,160,000
Less – Accumulated depreciation 232,000
Furnitures and fixtures- cost 600,000
Less – Accumulated depreciation 50,000
Total assets 6,589,700
Accounts payables 403,200
Rent payable 50,000
Provision for warranty expenses 100,800
Provision for long service leave 88,200
Loan payable 1,008,000
Total liabilities 1,650,200
Net assets 4,939,500
▪ The Plants & Machinery are depreciated over 10 years for accounting purposes, but
over 8 years for taxation purposes. The useful life of computers is 4 years for the tax
purposes and 5 years for accounting purposes. Therefore, there is a temporary
difference between accounting and taxation depreciation for Plant & Machinery, and
▪ All administration, wages and other expenses incurred have been paid as at yearend.
▪ Penguin Ltd has some land which cost $1,470,000 and which has been re-valued to
its fair value of $2,268,000.
▪ Entertainment expenses and depreciation of furniture and fixtures are not allowed
as deductions for income tax.
▪ The amount of $163,800 long service leave expense has been paid.
▪ Insurance was initially prepaid to the amount of $190,500. Actual amounts paid are
allowed as a tax deduction.
▪ Amounts received from sales, including those on credit terms, are taxed at the time
of the sale is made.
▪ Warranty expenses were accrued and, at the year-end, actual payments were made
of $50,400. Deductions for tax purposes are only available when the amounts are
paid and not as they accrued.
▪ The tax rate is 30 per cent.
(i) Compute the Taxable Income or Loss. (using excel spreadsheet). 12 Marks
(ii) Prepare the Taxation Worksheet on the next page in accordance with AASB 112
Income Taxes. (using excel spreadsheet). 10.5 Marks
(iii) Prepare the applicable Journal Entries at 30 June 2020 to account for tax using
the Balance Sheet Method. 7.5 Marks
Note: Copy the excel spreadsheets and paste on the word document.
Question 3 10 Marks
IFRS 3 Business Combinations states that when an acquirer obtains control of a business (e.g. an acquisition
or merger) such business combinations are accounted for using the ‘acquisition method’, which generally
requires assets acquired and liabilities required to be measured at their fair values at the acquisition date
(IAS Plus, 2020).
Critically justify why does an acquirer need to use fair value measurement methods with regard to IFRS 3?
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