Aasb Framework Case
Submit a report to the GWA's finance director, Mrs Goela, explaining how GWA should account for the expenditure of $12 million, as planned, on new software systems for enhanced group-wide information management. Mrs Goela has asked for your advice on whether it is acceptable accounting practice for the company to carry for¬ward the expenditure of $12 million to a future accounting period rather than expensing it in the current year. Mrs Goela also wants to know if the AASB Framework can override any specific Accounting Standard.
Introduction:
The finance director of GWA, Mrs Goela, has requested a report on the expenditure of $12 million on new software system for enhanced group-wide information management for all of GWA’s business units. …show more content…
Under the AASB Framework, an asset is defined as:
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
• The key features are that:
• The benefits must be controlled by the …show more content…
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter.
Is it acceptable accounting practice for the company to carry forward the expenditure of $12 million to a future accounting period rather than expensing it in the current year?
Firstly, GWA International Ltd’s expenditure of $12 million for the upgrade of business software is an intangible asset. According to AASB 138 an Intangible Asset is an identifiable non-monetary asset without physical substance.
The recognition of an intangible asset shall be recognised as an expense when it is incurred unless:
a) It forms part of the cost of an intangible asset that meets the recognition criteria; or
b) The item is acquired in a business combination and cannot be recognised as an intangible asset. If this is the case, the expenditure (included in the cost of the business combination) shall form part of the amount attributed to goodwill at the acquisition
Introduction:
The finance director of GWA, Mrs Goela, has requested a report on the expenditure of $12 million on new software system for enhanced group-wide information management for all of GWA’s business units. …show more content…
Under the AASB Framework, an asset is defined as:
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
• The key features are that:
• The benefits must be controlled by the …show more content…
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter.
Is it acceptable accounting practice for the company to carry forward the expenditure of $12 million to a future accounting period rather than expensing it in the current year?
Firstly, GWA International Ltd’s expenditure of $12 million for the upgrade of business software is an intangible asset. According to AASB 138 an Intangible Asset is an identifiable non-monetary asset without physical substance.
The recognition of an intangible asset shall be recognised as an expense when it is incurred unless:
a) It forms part of the cost of an intangible asset that meets the recognition criteria; or
b) The item is acquired in a business combination and cannot be recognised as an intangible asset. If this is the case, the expenditure (included in the cost of the business combination) shall form part of the amount attributed to goodwill at the acquisition