Financial Accounting 2 Reflection

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The table also shows the additions, reclassification and disposals made by the company to its buildings and leasehold improvements, Transportation and delivery equipment, Office, furniture and fixtures, Tools, machinery and equipment, and Construction in progress. The depreciation of the properties and equipments are charged to cost of sales, cost of services and general and administrative expenses.

The useful life of each of the Group‟s property, plant and equipment is estimated based on the period over which these assets are expected to be available for use. Such estimation made by the company is based on a collective assessment of internal technical evaluation and experience with similar assets. It is important that the estimated useful life of each asset is reviewed periodically and updated so that if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the asset, the depreciation charge can be changed.

The company’s property, plant and equipment is carried at cost. The carrying value is reviewed and assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Changes in those judgments could have a significant effect on the carrying value of property, plant and equipment and the amount and timing of recorded impairment provision for any period.

As at December 31, 2015 and 2014, the management believes, based on its assessment and judgment, that there are no indications of impairment or changes in circumstances that the carrying value of its property, plant and equipment may not be recoverable.

Exploration and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal right to explore in a specific area as well as the determination of the technical feasibility and commercial viability of extracting the mineral resources. Mineral resources include minerals, oil, natural gas and similar non regenerative resources. These resources are often associated with mining corporations. And since D&L Industries Corporation is a food industry corporation, it does not have any exploration and expenditure assets. The International Financial Reporting Standards, also known as IFRS, does not provide a clear guidance for the recognition of such assets. Thus, a corporation must develop its own accounting policy for the recognition of such asset.

Wasting assets are objects of value and utility to a man produced by nature, these are natural resources which includes coal, oil, ore, precious metals. They are characterized by two features, they are physically consumed and irreplaceable. Since there is no comprehensive standard that is applicable to mining industries, corporations follow a variety of practices in accounting for their wasting assets. The cost of wasting asset can be divided into four categories, namely: Acquisition cost, Exploration cost, Development cost, and the estimated restoration cost.

Technically, depreciation refers to property, plant and equipment while depletion refers to wasting assets. Depletion is the systematic allocation of depletable amount of a wasting asset over the period the natural resource is extracted or produced. D&L Industries Corporation also does not recognize depletion over its assets since it does not have any wasting assets.

We now go to the other fund investments of the D&L Industries Corporation. Corporations usually make fund to set aside cash or other assets for specific purpose. It may be for current or noncurrent purposes. Funds for noncurrent purposes include sinking fund and insurance fund.

Sinking fund is a fund set aside for the liquidation of long term debt. It is good to invest in a sinking fun to make sure that the corporation has enough money to pay off its debt at the maturity.

The basic idea behind a sinking fund is that companies are trying to address their debt in advance. Instead of waiting for all of the securities that have been issued to mature, they are going to set aside a certain amount of money into the sinking fund each year.

As a potential investor, it is good for me to know that a company is going to be able to address all of its debt because if a company cannot afford to pay back its debt, there is chance that the money I invested in that company will also not be returned. It provides me some peace of mind to knowing that the company is not going to be dissolved anytime soon. And if a company lets its debt get out of control, it starts to become a much less attractive investment. No one will want to put their money into a company that looks like it stands the risk of becoming insolvent in the near future.

Unfortunately, the D&L Industry Corporation does not invested in any sinking funds. However, the Parent Company, its subsidiaries and entities under common control have an existing agreement to provide surety for the obligation and indebtedness incurred or may be incurred. So as a potential investor, it is not a downside for me knowing that this company does not invest in any sinking funds.

Another example of a fund set aside for noncurrent purposes is an insurance fund which is cash set aside for the purpose of meeting obligations that may arise from certain risks not insure against. Some corporations may insure the life of its officers and name itself as beneficiary. It was stated in the aggregate remuneration table of the D&L industries corporation that the company does not have any insurance fund. It did not secured insurance for its executive director, non-executive director and independent directors. It also doesn’t have any other benefits like pension plans, hospitalization plans, or car plans. As a potential investor, it is also not a big deal for me it D&L Industries Corporation does not have insurance funds for their key members because for me it will not affect the operation of the company.

The last topic I will discuss is about Investments properties. This is defined as property held by an owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both. D&L Industries Corporation is engaged mainly on the manufacture and sale of food ingredient products, aerosols, colorants, additives & engineered polymers, and oleo chemicals, resins and powder coatings. So it naturally does not have any investment property because it uses its properties more of as factories where these products are manufactured and warehouses where these products will be kept and stored.

However, as an accounting student, I recommend the D&L Industries Corporation to have investing properties as an additional part