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It's not unusual for one company to buy another company in orderto obtain technology that the acquired company has developed or isin the process of developing.

Required: Explain the accounting treatment of purchasedtechnology.

At least 350 words

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Keith Leannon
Keith LeannonLv2
28 Sep 2019

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Generally accepted accounting principles should be appliedconsistently from period to period. However, changes within acompany as well as changes in the external economic environment,may force a company to change an accounting method. The specificreporting requirements when a company changes from one generallyaccepted inventory method to another depend on the methodsinvolved. (chapter 9)

Required: Explain the accounting treatment for a change ininventory method (1) not involving LIFO, (b) from the LIFO method,and (c) to the LIFO method. Explain the logic underlying thosetreatments. Also, describe how disclosure requirements are designedto address the departure from consistency and comparability ofchanges in accounting principle.

You are the auditor of Browning, Inc., a manufacturer of plastic products. In reviewing the balance sheet of the company, you notice several receivables from the officers of the company. You report your findings to the president of the company and inform him that these receivables will be considered related party transactions for purposes of financial accounting and reporting. The president seems somewhat annoyed by your comments and asks you to explain what you mean by "related party" transactions and how the financial statements will be affected by these transactions. Prepare a brief response to the president's question.

The response should be at least 350 words.

Company name: ikeGPS Group Ltd

Discussion

Profitability

Introduce why it is important to assessprofitability

Outline the basic ratios used to assess profitability, andprovide an analysis of your selected company’sprofitability

Refer to the appendix where you have calculated or obtainedthe relevant profitability ratios, and your graph.

You could show the graph in the main body of the reportrather than the appendix if you like – however, if you have thegraph in the main body, you do need to discuss it!

Briefly comment on the trends shown by the ratios, and inthe graph

Conclude as to whether or not this company isprofitable

300 – 350 WORDS

Liquidity

Introduce why it is important to assess liquidity

Outline the basic ratios used to assess liquidity, andprovide an analysis of your company’s liquidity position relativeto the previous year

Refer to the appendix where you have calculated or obtainedthe relevant liquidity ratios

Conclude as to whether or not this company is demonstratinggood liquidity

300 – 350 WORDS

Financial Structure

Introduce why it is important to assess financial structure(or gearing)

Outline the basic ratios used to assess financial structure,and provide an analysis of your company’s financial structurerelative to the previous year

Refer to the appendix where you have calculated or obtainedthe relevant financial structure ratios

Conclude as to whether or not the company shows a strongfinancial structure

300 – 350 WORDS

Future plans and Investor informationFuturePlansDiscuss what plans the company has announced to thepublic, and how these have impacted on the share price. Thisinformation can be found from a variety of sources:

Annual report

NZX company research

Newspaper article (preferably recent articles)

Investor Information

Introduce why it is important to assess investorinformation

Outline the basic ratios used to assess investorinformation, and provide an analysis of the trends shown in ‘shareprice performance’ graph

Refer to the appendix where you have calculated or obtainedthe relevant ratios, plus graph

Alternatively, the graph can be displayed in the main bodyof the report

Conclude as to whether or not this company would be a goodinvestment

You must include a discussion on income vs growth

300 – 350 WORDS

Conclusions & Recommendation

Pull together the main points made from each part of thediscussion

Conclusion should not have any new information

Make a recommendation to the prospective investor

You can recommend to buy shares, or not to buy shares in thecompany being investigated

Recommendation must clearly flow from the discussion andconclusions

200 – 250 WORDS

(Use NZX website, from its financial profile, we could get thischart for 4 years.)

Annual report from NZX website, is used to analysis thiscompany.

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