PART A (25 marks)
(Maximum 1500 Words)
The City of Ballarat*
The monetary valuation, if any, of an Australian icon the Eureka Flag for financial reporting purposes became, for an episode in its history, the focus and attention for the custodian of the flag.
The City of Ballarat (the City) in the state of Victoria is the custodian of the original Eureka
Flag the symbol of the Eureka rebellion (an uprising by goldminers that took place in Ballarat on 3 December 1854). The flag has acquired iconic status within Australia. In preparing its financial statements for the year ending 30 June 2000, the City sought to place,
for the first time, a monetary value on the Eureka Flag for financial reporting purposes as was believed to be necessary at the time. According to the head of the Ballarat Fine Art Gallery, theres not been a Eureka Flag on the market (Danaher, 2000), thus there was no reference point for any financial valuation.
Notwithstanding, the City arrived at a financial valuation of precisely $10 million that was
reported in the local press (The Ballarat Courier). It was pointed out that this valuation was
credible because another great Australian icon, the admired and prized mounted hide of
Phar Lap, on exhibition at Museum Victoria, Melbourne, had previously been valued at $10
million for financial reporting purposes (Danaher, 2000). Hence, at that time, the sum of $10
million had become an acceptable measure of the monetary value of an Australian icon.
The Mayor of the City of Ballarat, however, acknowledged that the true value of the flag
could never be recorded in dollars and that it was priceless (Danaher, 2000).
In spite of the $10 million financial valuation, the Eureka Flag was not recognised as an asset
in the statement of financial position of the City as at 30 June 2000. This treatment was
justified in the notes to the financial statements for the year ended 30 June 2000, at Note 1(d), entitled Recognition of non-current assets, as follows:
Whilst Council has control over the Eureka Flag, it has not been included in the financial statements as uncertainty exists as to the appropriateness of its carrying value. This is due to the unique nature of this asset and the absence of a market value
The external auditor of the City was satisfied with this treatment and did not issue a qualified audit opinion in auditing the accounts for the financial year ending 30 June 2000.
*Adapted from Carnegie (2005)
REQUIREMENTS
After considering the following potential issues in this case:
· Heritage assets
· Non-current assets
· Asset definition
· Asset recognition
· Public sector accounting
Prepare a report of no more than 1500 words, addressed to the Chief Executive Officer of the City of Ballarat, discussing whether you believe the treatment of the Eureka Flag, as outlined about, is appropriate. Justify your views by reference to any relevant accounting theories and pronouncements.
PART B (20 marks)
(Maximum 1000 Words)
Measurement is arguably the most important concept in the discipline of accounting, since without measurement; there would be no need for accounting. The second most important concept is historical cost because it provides a critical evidentiary perspective to the discipline of accounting. This also means that for financial reporting purposes, historical cost helps to ensure reliability and credibility of the financial statements.
REQUIREMENTS
You are required to critically evaluate the above statements. Your answer should include a comparative analysis of the significant measurement models in accounting. As a minimum, this should encompass a detailed discussion of historical cost accounting (outlining the advantages and disadvantages of the cost model), and at least six(6) alternative measurement models that have been adopted in current accounting standards.
PART C (15 marks)
(Maximum 750 Words)
Assume that you have been appointed as a consultant to Intellec-Morph Design Limited (IMDL), a successful firm in the computer software business, to develop a management compensation scheme that will motivate managers to maximize the value of the firm for shareholders. You are permitted to construct individual agreements for the senior executives of IMDL.
REQUIREMENTS
You are required to write a brief report to the firms remuneration committee covering
the following issues:
1. How (and why) individual remuneration packages of executives can be structured to motivate managers to maximize equity value?
2. The extent to which different forms of compensation can be structured to suit the individual attributes/characteristics of managers
3. The various mechanisms that might be employed to monitor the performance of managers and thus provide assurances to the IMDL committee that incentive schemes are working.
4. The potential forms of ex-post opportunistic behaviour that managers may still engage in despite the existence of performance contracts?
Your report must include explanations of relevant theories which might support the basis of your conclusions/recommendations.
FORMAT REQUIREMENTS
It should be a formal essay report. This assignment should be supported by AASB STANDARDS. This is athinkingassignmentand what is expected is thepersonal viewsofindividual students based on research and the evidence that has been sourced. Further, an assignment which presents more quotes than constructive analysis and argument may also be heavily penalised. What is critical in this assignment is that students have fully understood the requirements and have actually answered the questions, for example if asked whether a position or view is justified, you must answer by stating yes/no, agree/disagree, or some other similar response depending on the requirements of the question. Discussion should be followed by logical development of argument supporting the answer given. Anexecutive summaryof approximately200 wordsis recommended forPart A, B and C separately. The Executive Summary is NOT INCLUDED IN THE WORD LIMIT of each Part.The EXECUTIVE SUMMARY should briefly provide information on the scope of the question, (ie., your understanding of the requirements), your research approach and the methods used (ie., what methods and procedures were engaged to source your
information and to reach your conclusions), and a very brief summary of the outcomes of your work (usually, what position you have taken or conclusion you have reached and why).