Accounting

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By summing up, it is concluded that the consolidation practices used by Wesfarmers, Qantas and BPH are in accordance with AASB10. Due to change in accounting standard of consolidation, for some companies, it would require lot of time and effort to implement it. However, by the look of annual reports of all the three companies it is concluded that they have strictly followed the standards mentioned by AASB.

Part 2:

“Financial capital maintenance ensures that profit and distributions of profit for an entity, including a group, do not derive from the mere act of acquiring another entity’s assets or acquiring an equitable interest in that other entity’s net assets.”

*Discuss the concept of capital maintenance

*Compare cost vs New Conslodation method AASB10

*Conceptual problems in applying standards

IASB defined the cost method of accounting as the technique of accounting for an investment where an investment is noted at cost. In this technique, the investor identifies the receipts from the investment just to the degree that the investor receives appropriations from the retained earnings of investee rising after the acquirement date. Appropriations got in overabundance of such profits are viewed as a recovery of the investment and are also perceived as a diminishment of the cost of investment (IAS 27 2003: para. 4). This method follows the principle that the parent’s investment in a subsidiary establishes the attainment of certain percentage of subsidiary’s equity at the date of acquisition. This principle causes IASB’s consolidation procedure of eradicating the

parent’s investment in the subsidiary against the parent’s share of equity of the subsidiary (Knapp 2013). This principle also triggers the application of the acquisition method in consolidation accounting. Also, the cost method is consistent with substance over form as the a dividend receive from pre-acquisition profit is a partial refund of the actual investment rather than its return.

In contrast to that, the new accounting

NICOLETA, CG, & MUNTEANU, V 2014, 'THE CONCEPTUAL FOUNDATIONS REGARDING THE PREPARATION AND PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS', Economics, Management & Financial Markets, vol. 9, no. 4, pp. 175-183.