Many accounting academics argue that the current financial accounting and reporting framework is inadequate to deal with sustainable development as espoused by the Brundtland Commission. Critically evaluate this view.

Many accounting academics argue that the current financial accounting and
reporting framework is inadequate to deal with sustainable development as
espoused by the Brundtland Commission. Critically evaluate this view.

 

Question 4 (Total: 25 marks)
(a) On 1 April 2012, Jaya Berhad increased the operating capacity of its
manufacturing plant. However, due to lack of liquid funds it was unable to buy
outright the required machinery for the expansion. The cost of the machinery was
RM350,000. Jaya Berhad entered into an agreement to lease the machinery from
the supplier. The lease required four annual payments in advance of RM100,000
commencing 1 April 2012. The machinery had a useful life of four years and was
to be scrapped at the end of this period.
The Finance Director was of the opinion that the lease agreement would improve
the company’s return on capital compared with an outright purchase of the
machine. The implicit rate of interest in the lease is 10%.
Required:
(i) Critically discuss the validity of the Finance Director’s opinion and explain how
MFRS 117 would ensure that this lease is faithfully represented in the financial
statements of Jaya Berhad.
(5 marks)
(ii) Prepare the extracts of Jaya Berhad’s income statement and statement of financial
position for the year ended 30 September 2012 assuming the lease is :
a. an operating lease (3 marks)
b. a finance lease (4 marks)
AND
Sunway University Business School Sample ACC3054 Final Examination
6
(b) Madoff Bhd borrows funds generally and uses them to finance the development of
housing projects. On 1 July 2011, the carrying amount of the qualifying asset,
including borrowing costs capitalised previously is nil. Expenditures incurred for
the construction of the qualifying asset during 2011 and 2012 are as follows:
RM million
1 September 2011 40
1 February 2012 60
The capitalisation rate for interest on general borrowings is 6.5%.
Required:
i. Explain what is meant by a ‘qualifying asset’ and determine the carrying
amount of the qualifying asset as at 30 June 2012.
(5 marks)
AND
(c) Many accounting academics argue that the current financial accounting and
reporting framework is inadequate to deal with sustainable development as
espoused by the Brundtland Commission. Critically evaluate this view.
(8 marks)


 

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