The notes to the financial statements say that plant and equipment is held under the ‘cost model’. However, property which is owner occupied is revalued annually to fair value. Changes in fair value are sometimes reported in profit or loss but usually in ‘other comprehensive income’. Please explain how all these treatments comply with relevant reporting standards. The manager director also added “I wonder how the revaluation model can affect the information relevancy and reliability”. “When I looked at the note detailing the intangible assets we include in our consolidated statement of financial position, I noticed that several brand names associated with subsidiaries we acquired recently were included in this figure. Therefore, I also expected to see a figure for the Alpha brand name included within intangible assets. There doesn’t appear to be any amount for the Alpha brand name included within intangible assets and I don’t understand why. The Alpha brand name has been developed within Alpha for a number of years and is well regarded by our customers. Surely, it’s a mistake not to include it as well? In other word, I wonder whether the non-inclusion of the Alpha brand would affect the usefulness of the financial information?”. Required: Provide answers to the queries raised. You should justify your answers with reference to relevant IFRS Standards and academic literature.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2. Consider yourself the financial controller of Alpha. The managing director, who is not an accountant, has recently attended a seminar and has raised the following questions for you concerning issues discussed at the seminar:

The notes to the financial statements say that plant and equipment is held under the ‘cost model’. However, property which is owner occupied is revalued annually to fair value. Changes in fair value are sometimes reported in profit or loss but usually in ‘other comprehensive income’. Please explain how all these treatments comply with relevant reporting standards. The manager director also added “I wonder how the revaluation model can affect the information relevancy and reliability”.

“When I looked at the note detailing the intangible assets we include in our consolidated statement of financial position, I noticed that several brand names associated with subsidiaries we acquired recently were included in this figure. Therefore, I also expected to see a figure for the Alpha brand name included within intangible assets. There doesn’t appear to be any amount for the Alpha brand name included within intangible assets and I don’t understand why. The Alpha brand name has been developed within Alpha for a number of years and is well regarded by our customers. Surely, it’s a mistake not to include it as well? In other word, I wonder whether the non-inclusion of the Alpha brand would affect the usefulness of the financial information?”.

Required:

Provide answers to the queries raised. You should justify your answers with reference to relevant IFRS Standards and academic literature.

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