Accounting Standards & Regulations - Essay Example

Introduction This paper is basically discussing the activities of BrisConnections Company which had the task of constructing the M7 toll road (Airport link) in Brisbane. The paper expounds on how the company faced financial crisis during the construction of the road. The paper also looks into how the company used different method to recover the impaired asset. Future Tolling Rights This is a situation whereby, after the government or a confirmed company builds roads and bridges; invites tenders to give an operation and management contract for a given period of time at a fee.

The operation-and-management’s company main duty is to maintain the bridges and roads by collecting toll on behalf of the government. This was the case with BrisConnections Company which was the toll operator of Brisbane’s $ 4.8 billion Airport link toll road (Janda, 2013) Toll is the sum of money paid for the right to use roads, highways and bridges. The fee can be different for different types of vehicles; the fee for heavy vehicles is not the same as that charged on light vehicles. The money used is used in maintaining the roads as the government tries to recover the amount of money used in the construction of the roads and bridges.

The future tolling rights in the balance sheet of BrisConnections, which exist in the category of intangible assets, can be defined as the amount of money the Company is expecting to collect from the road constructed (BrisConnections, 2012). BrisConnections Company was collecting the money as a source of tax and to facilitate the financing of infrastructure development. Tolling of roads users provides one of the most appropriate means of recovering some or even the total sum of money, which can be used by the government or a confirmed company to invest in building new highway infrastructure or bridges.

Tolling is mostly practiced for major projects that can lead to a significant increase in revenue collected; this is because the revenue collected is used in developing more infrastructures. Tolling also will be implemented by any government only if there are clear net benefits for the users of the new or improved facility; this makes the users feel their money is well spent (Ministry of Transport, 2003). The legal requirement of Future tolling rights is that, public consultations are necessary in cases where new tolls are in consideration.

The government enacts this by making sure that all affected communities are informed about the tolling process. The other legal requirement is that the public will have the same rights of access to tolled roads as non-tolled roads. The reason why future tolling rights asset satisfies the definition of assets from the AASB frame work is because in business, we have some assets called accounts receivables. Account receivables are the amount of money a company is expecting to receive from debtor’s .

This means that the BrisConnections can treat future tolling rights as account receivables; this is because the toll is due, and the road users are the debtors to the BrisConnections Company (Poole and Bochers, 1978). Intangible assets are simply treated as general assets in accounting, this so because they can be treated as accounts receivables when being entered in the balance sheet of a company. All future payments to be received by BrisConnections should be treated as a general asset (Iron Side, 2013).

After completion of the completion of Thiess Infrastructure, Trust and John Holland Infrastructure Trust BrisConnections is expected to have subscribed for $ 100, 000,000 of stapled units at $ 3.3933 per stapled unit. This subscription is expected in the first 24 months after completion of the project. The amount is discounted to present value ($146, 920747), and reflected in equity which corresponds to receivable (intangible asset). Impaired asset is the one which its cash generating unit exceed its recoverable amount.

Such asset will be written down to its recoverable sum (Beveridge, 2013). To estimate the value in use, a company’s discount estimated cash flow to their present value through the use of a discount rate which reflects the current market assessment of the time value of money and the risks directed to the asset. The above process is the best for the BrisConnections to use to determine the recoverable amount (Bartholomeusz, 2013). The impaired analysis of BrisConnections have one assumption that the percentages changes provided would make the company realize an excess value (Carlin, 2008).

This is good news concerning the impaired asset; this assumption means that the impaired asset is recoverable. The analysis is a booster to the BrisConnections; this is because it is proofing that within the recoverable asset (spent cash) can be recovered a good amount within a period of 36 months. Conclusion BrisConnections is a company with the mandate of being operating Brisbane’s $48 billion Airport Link toll road, the project has been discovered as a dead parrot. This is due to BrisConnections failure to recover its impaired recoverable assets; an issue that made some banks which supported BrisConnections Company to withdraw from supporting the Company which seemed to be operating at a loss.

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couriermail.com.au/news/queensland/demise-of-brisconnections-casts-doubt-on-the-future-of-private-investment-in-roads/story-e6freoof-1226581503944 [accessed 19/10/2013] Janda, M., 2013, “BrisConnectionsdrivenintoreceivership”, ABC News, 20thFebruary, 2013, [Online] Available at http://www.abc.net.au/news/2013-02-19/brisconnections-appoints-receivers/4527976 [accessed18/10/2013] Ministry of Transport, 2003. Guidelines for Tolling: British Columbia, April 2003, [Online] Available at http://www.th.gov.bc.ca/Publications/reports_and_studies/tolling/index.

htm, [Accessed on 19/ 10/ 2013] Poole, L. and Bochers, M., 1978, Accounts payable and Accounts Receivable, Berkeley, Calif: A, Osborne.