MGT401 Financial Accounting GDB No.2 Fall Semester 2012 Due date 15th Nov, 2012

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MGT401 Financial Accounting GDB No.2 Fall Semester 2012 Due date 15th Nov, 2012




Topic to be tested: Marks:2

Reporting of Property, Plant & Equipment

Learning objectives:

To learn about the correct reporting of Plant asset as per IAS-16
To learn about the reasons/importance of reporting the plant asset as per IAS-16

Discussion Question:

A company purchased a Plant costing to Rs. 10 million in the year 2010. Due to some effect of abnormal wear and tear, its value had fallen and it was estimated and reported at Rs. 7 million in the year 2011. Recently, the account manager of the company has a sudden inspection of the books of accounts and found this incorrect treatment of adjustment and reporting of plant’s value. The account manager immediately called a meeting with the accountant and advised him to treat this issue as per IAS-16 (Property, Plant & Equipment).



Required:

What guidance the account manager should give to the accountant for the correct reporting of the plant‘s value as per IAS-16 and why said correction is necessary. Support your answer with logical arguments.