Tuesday, May 5, 2020
Managing Disaster Contingent Liabilities - Myassignmenthelp.Com
Question: Discuss About The Managing Disaster Contingent Liabilities? Answer: Introducation We are obliged to get a response from you and we would also like to express our gratitude for getting back to us with your concern. We are extremely obliged that you have contacted us while considering us to be capable enough for helping you in your decision- making process by providing you with the best possible solutions available. Similar to our previous deals, we would try our best to satisfy your needs by providing you with the best possible solutions with respect to the issues that are detected in the accounting along with the problems faced by you, which you have mentioned in the e-mail. We shall provide you with the recommendations while keeping into consideration the Corporation Act 2001, AASB and its elucidation shall be in accordance with the problems of accounting, which are mentioned by IFRS. We consider that you are familiar with the aspect that contingent liabilities are referred to as those liabilities, which usually have probable losses that might occur in the future as a result of the happening or non- happening of a certain event or even as a result of some particular outcome. There are several real life examples that can be linked with the contingent liabilities. Some of them are research related to some of the major organizational failures that are pending till date, legal claims and the warranties provided to the clients on purchase of the products. It is necessary to show the contingent liabilities in the financial statements of the organization along with recording the amount previously estimated by the organization in its annual sheets. This amount is kept separate as a reserve for the organization to be used in situations where the company might want to prevent the situation in the future. As per the Para 123 of AASB 137, contingent liabilities can be iden tified along with the chief accountability and the major reasons for the outflow of the organizational resources such that the economy of the organization can derive benefits and can possibly solved under those accountability or responsibility. As per the Para 29, it has been identified that it is the liability of the organization to treat the responsibilities as contingent liability. The contingent liabilities have to be ascertained by the organization well in advance and cannot be determined by the organization that the liabilities shall definitely occur in the financial year. Thus, the detailed evaluation the contingent liabilities has to be a continuous process such that the organization can determine the outflow of the resources that shall enable the organization to obtain benefits for improving the organizations economy. Similarly, it is necessary to recognize the provisions that already exist within the operations such that the current responsibilities, both legal and constru ctive arising from the previous events can be accurately estimated and the required amount can be set aside for it. The basic aim for the provision is to adjust it appropriately with the current years balance, which shall enable the organization to consider the costs that is a part of that particular financial year and maintaining the status of the finances that have previously been considered such that they can be accounted in that financial year. Thus, despite the utilization of provision within the organization seems to be a type of saving in the first look, it does not imply to be a type of saving for the organization. Contingent liability is usually mentioned under the heading of income statement in the balance sheet and is located in the bracket of expenses. Additionally, the major distinguishing factor between provision and contingent liability is that the provisions are shown in the financial statements whereas, the contingent liabilities are recorded in the financial statements of the organizations under the heading of liabilities. On the other hand, in cases when the probable liabilities are expected to be high somewhere around 60 to 90 percent, the liabilities are placed under the heading of provision in the organizations financial statements. On the contrary, if the amount of liability lies between five percent to 60 percent, the liability is recorded in the financial statements as notes. In cases when the liabil ity is less than five percent, the organization becomes incapable of taking any actions regarding it. Thus, keeping into consideration the AASB 137 in the Provisions, the Contingent assets and liabilities have been mentioned as the major issue in the e-mail. In response to the issue, we can suggest that the intangible assets must be mentioned in the balance sheet. This shall help in the vital amortization and shall also help in its recognition. In this particular case, it has been identified that the organization possesses an asset that amounts to $ 800,000 as on 30th June 2018. This has been recognized in accordance with the valuation provided by the organizations directors. This indicates that the organization is required to make certain changes in its policy in accordance with the current happenings such that it becomes easier to recognize the accounting along with the costs, which are capable of being developed by an internal basis. Additionally, the intangible assets of the organization are required to have a life that shall enable the process of amortization within the duration for which the assets were used. Therefore, it is possible to realize this amount with the amortization process and it can be reported at the cost of $ 800,000, which can be further applied with the residual value of the assets. While considering the second case, it has been identified that Beachlife Ltd has entered into a sales contract with Goodsports Ltd as on 1st December 2017 and with an amount of $ 90000. On the basis of this amount, the payments were made as on 30th December 2017. At last, the equipment was delivered by the organization on 10th December 2017. As per the sales contract, Goodsports Ltd had offered a clause of maintenance for that equipment, which was applicable for the first first year after the purchase was made by the concerned company. The company had fixed the maintenance amount and the amount was a value of $ 7500. On the other hand, Goodsports Ltd was not happy with the task of maintenance, which was provided by the organization as it was liable to pay 15 percent of the price paid. This amount summed up to be $ 90000* 15 percent, which is equals to $ 13500. Thus, in the present situation, it has been identified that Beachlife Ltd is required to show an amount of $ 90000, which has been recorded under the heading of income as sales for the sale of the equipment. This was because the organization received the amount in that particular year that is 31st December 2017. auditing, the maintenance amount that summed up to be $ 7500 has to be shown as contingent liability in the balance sheet as well as in the statement of income under the heading of provision for the estimated amount. The amount of $ 13500 has to be mentioned as notes in the organizations financial statement under the heading of contingent liability because this liability is not of probable nature. In case you come across any issues or doubts related to the suggestions provided by us, please feel free to contact us by the means of telephonic call or via e- mail. Reference List Gamper, Catherine, et al. "Managing disaster-related contingent liabilities." (2017). Hendrickson, Joshua R. "Contingent liability, capital requirements, and financial reform."Cato J.34 (2014): 129. Picker, Ruth, et al.Applying international financial reporting standards. John Wiley Sons, 2016.