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Finance accounting - Essay Example

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Finance accounting Table of Contents Executive Summary 3 Impact of Australian Accounting Standards 3 Reversal write-down 3 Current and non-current assets and methods of valuation 4 Current financial position of BHP Billiton 5 Importance of Reserves in BHP Billiton 6 Conclusion 7 Reference 8 Executive Summary The study shows the impact of the Australian Accounting Standard in BHP Billiton, through which the decision of write-down can be avoided as the decision of write down, is very harmful for any company as such…
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Finance accounting

Download file to see previous pages... Lastly, the reserves of the company is estimated and their modes of utilization so that the write-down of the company can be avoided. Impact of Australian Accounting Standards When the net realizable value for all of the subsequent period. Due to a certain circumstances the inventories of the company needs to be written down below the cost that no longer exists or with the evidence related to the net realizable value caused as a result of the changed economic circumstances (Walton & Aerts, 2006, p.120). This leads to the reversing of the write-down where the amount if restricted to original write-down, so much so, the new carrying amount of the company will be lower than the revised net realizable value along with its associated cost. With the selling of the inventories the carrying cost of the inventories is treated as the expense in the period in which the revenue is recognized. This result in the written down value of the inventory is considered as the cost or occurrence of losses. The concept of reversal write-down value generally occurs from the increase in the net realizable value of the concerned company; which is recognized as a fall in the amount of inventory as an expense in the period of reversal write-down occurrence (Johnston & Johnston, 2005, pp.62-63). Reversal write-down The concepts of the reversal write-down under the Australian Accounting Standards will have a great impact on the current situation of BHP Billiton’s US Shale Gas assets related to the financial statements of the company. The inventory cost of the company will reduce thus reducing the carrying cost of the Shale Gas assets to a remarkable extent. Thus the increase in the net realizable value of the company will be projected at a low rate than now. This in turn will lower the intrinsic value of the company resulting in the valuation of the company being similar to the market value of the company or lower than the market value. Hence the company will be in the condition to revive of the present condition to a certain extent (Australian Government, 2009, p.17). Current and non-current assets and methods of valuation Yes, the current and non-current assets of the company, BHP Billiton’s have been valued in the financial statements of the company. The income and the deferred tax of the company accounted under the head of other assets of the company has taken the deductible temporary differences resulting in the deferred tax of the company amounting to US$3119 million as against US$2195 million in 2010. These amounts have not been recognized due to the probable future taxable profits as the deductible temporary differences do not expire under the tax legislation. The trade receivable of the company is the considered as the impaired assets of the company. All the financial assets of the company are computed at the fair value price under the consideration of payment and receipt. The fair value method is the not a completely independent process. It is based on the results of weighted average value of the items of the company. In spite of providing a balanced figure of valuation yet its limitation the valuation of the business model still persists. However, the fair value accounting process conveys important information related to ...Download file to see next pagesRead More
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