A new accountant has been appointed to the firm of Catherine Ltd, which is a reporting entity that prepares general purpose financial statements according to the AASB standards. This company owns a large number of depreciable assets. Upon analyzing the entity’s current depreciation policy, which is based on straight line depreciation method the accountant realized that financial statements prepared by the entity do not show the true and fair view of company’s financial position. He, with the approval of the board, implemented a new policy based on the diminishing balance method assuming that company assets would reflect the realizable value.
You are required to discuss this policy change.
In your report:
- Explain depreciable assets and describe what assets constitute property, plant and equipment in accordance with AASB 116?
- Explain the recognition criteria for property, plant and equipment.
- How does an entity choose between depreciation methods, for example, straight-line versus diminishing-balance methods in accordance with Para 60 of AASB 116?
- Explain which of the two depreciation methods provides the true and fair view of financial position and financial performance of Catherine Ltd.’s financial statements.
ountries” . Moreover, according to Freedom House, Indonesia, “the most populous Muslim country in the world, receives very high scores for both civil rights and political rights”; a certain demonstration of the compatibility of Islam with democracy in a contemporary real-world scenario. It may therefore not be as great a contributing factor in the survival of non-democratic regimes as one might have expected. A third possible explanation for the lengthy survival of a non-democratic regime could be a small winning coalition. Defined as “the sub-set of the selectorate whose support is necessary for the leader to remain in power”, the winning coalition, as shown above in Figure 3, is very important in determining whether a non-democratic regime can survive; the larger it becomes as a proportion of the selectorate, the greater the likelihood of the next most popular regime being able to take power. The size itself is mainly influenced by the type of authoritarian regime, and is particularly small in the case of monarchies, which, in the case of hereditary monarchies, only require the approval of a branch of the ruling family in order to survive. As explained by Bueno de Mesquita et al., “in autocratic systems, the winning coalition is often a small group of powerful individuals. [Thus] when a challenger emerges to the sitting leader and proposes an alternative allocation of resources, [the leader thwarts the challenge since he or she] retains a winning coalition”; the size of which is in an inverse relationship with the likelihood of successful challenge, since fewer people must be ‘bought-off’. In fact, “the Selectorate Theory (Bueno de Mesquita et al., 2005) theorises that it is the size difference between the selectorate and the winning coalition […] that is most important” in influencing the survival of non-democratic regimes. This theory has, however, received much criticism. Largely, the extent to which it is true, that having a small winning coalition is the most significant factor affecting the survival of non-democratic regimes, is dependent on how stable the regime appears to be, since “high political instability should reduce the effect of corruption, because actors have less incentive to bribe a government when it is >GET ANSWER