ACCT3102 External Reporting - Semester 1, 2017 Page | 1 ACCT3102 EXTERNAL REPORTING CASE STUDY
This assignment information should be read in conjunction with the material provided in relation to
the lecture for Topic 6: Case Study Development and Communication. WORD LIMIT
WEIGHTING Case Study 1,000 words (excludes Appendix, Reference List, In-text tables which provide summary
calculations only)
Note: The word count must be specified on the cover page of your assignment
20% (40 marks) CONSULTATION IN RELATION TO THE CASE STUDY
To ensure consistency of information, ALL questions relating to the case study must be submitted on
the Blackboard Discussion Board Case Study Thread. Questions will be answered promptly when using
this platform. We will not be answering questions in relation to this assessment item in consult or via
email. The only exception to this will be during the Case Study Lecture. Date: 21 February 2017 ACCT3102 External Reporting - Semester 1, 2017 Page | 2 Case Study
The following business situation, which commonly arises in practice, has been presented to your firm
for advice.
Tarzan Ltd (your client) has considerable assets and is earning strong profits but has limited cash
reserves. Further, Tarzan Ltd has substantial long term borrowings. One of the conditions specified in the
loan contracts with its major lender is that Tarzan Ltd’s debt to asset ratio, defined by the lender as the
ratio of total liabilities to total assets, cannot exceed 75%. Breach of this condition triggers loan default.
Tarzan Ltd is considering a proposal from East Finance Ltd as a means of funding an expansion
opportunity. The proposal under consideration by Tarzan Ltd is the sale-and-leaseback of existing land
and building following an offer made from East Finance Ltd. The terms of the sale-and-leaseback
proposal are as follows:
On 1 July 2017, East Finance Ltd would purchase land and building from Tarzan Ltd for $12,000,000.
Tarzan Ltd would then lease back the land and building from East Finance Ltd, the terms of the contract
for the lease back of the land and building being:
Term of the lease
Annual lease payments to be paid on the 1 July
First payment due
Residual value of land at the end of the lease
Interest rate implicit in the lease
Remaining useful and economic life of Building 10 years
$1,500,000
1 July 2017
$2,439,525 (not guaranteed by Tarzan Ltd)
8%
10 years Tarzan Ltd measures land and buildings using the cost model. At the time of proposed purchase (1 July
2017), the relevant carrying amounts and fair values of the land and building are
Carrying Amount Fair Value Land $6,500,000 $8,400,000 Building $2,500,000 $3,600,000 The building will be demolished at the end of the lease term (10 years), thus the residual value under the
lease agreement is wholly attributable to the land but does not represent the estimated fair value of the
land at the end of the lease. At the end of the lease, East Finance Ltd will sell the land for redevelopment
and is certain of recovering the residual.
To assist with your analysis, Tarzan Ltd has provided you with forecast summary financial information as
at 30 June 2017. Current assets
Non-current assets (includes land and buildings)
Current liabilities
Non-current liabilities
Total equity Date: 21 February 2017 30/6/2017
480,000
14,500,000
410,000
10,675,200
3,894,800 ACCT3102 External Reporting - Semester 1, 2017 Page | 3 East Finance Ltd has indicated to the directors of Tarzan Ltd that they believe the sale-and-leaseback
arrangement would be classified as an operating lease suggesting, therefore, that the proposal would
not influence their current lending contracts. However, Tarzan Ltd has reservations regarding the
suggested classification of the transaction by East Finance Ltd and have sought advice from your
accounting firm to assist them verify how the proposal should be treated to ensure compliance with
Australian accounting regulations and in deciding if the proposal should be adopted.
REQUIREMENTS:
You are required to individually prepare a business advice to the directors of Tarzan Ltd to address the
following:
• An explanation of how the proposal would be treated to comply with the requirements of the
appropriate Australian Accounting Standards; • An analysis of the initial impact (i.e. 1 July 2017) and first-year end impact (i.e. to 30 June 2018) of
the proposal; • Your advice on whether the proposal would assist Tarzan Ltd in meeting their objectives; and • The relevant general journal entries (using the template provided on Blackboard) for the proposal
for the period 1 July 2017 to 30 June 2018 (to be placed in the APPENDIX). The following professional writing protocols have been adopted by your firm for correspondence
with all clients:
• All client correspondence is to be single line spaced on A4 paper with 2.5cm for all margins. • Font to be used is Times New Roman font size 11. • All calculations should be rounded to the nearest whole dollar amount/percentage. • Financial (present/future value) tables, which have been provided in this document, are to be used
for all lease calculations. • Harvard referencing is to be adopted. IMPORTANT NOTES
• Ensure you use the most recent version of AASB 117 Leasing issued in August 2015. • You must cite the specific provisions from the relevant AASBs. For example: AASB 102:11 or AASB
102 para. 11. However, do not reproduce significant parts of the regulation as this would not be
appropriate when presenting your advice to a client. The focus should be on interpretation and
application of the standard, with a concise, well-structured analysis for your client with key
referencing to critical elements of the appropriate accounting standards. • A ‘Formal Report’ structure with an Executive Summary and Table of Contents is NOT required given
the brevity of the required information. • This assessment must be the sole work of the individual student and not done in collaboration with
other students. Students may discuss with one another the general principles of the Accounting
Standards; however, you may not collaborate/discuss on the specifics of the proposal or how the
Standards are relevant to the proposal. Date: 21 February 2017 ACCT3102 External Reporting - Semester 1, 2017 Page | 4 Financial Tables
Present value interest factor of $1 per period at i% for n periods, PVIF(i,n).
Period
6%
7%
8%
9%
10%
11%
12%
1
0.943
0.935
0.926
0.917
0.909
0.901
0.893
2
0.890
0.873
0.857
0.842
0.826
0.812
0.797
3
0.840
0.816
0.794
0.772
0.751
0.731
0.712
4
0.792
0.763
0.735
0.708
0.683
0.659
0.636
5
0.747
0.713
0.681
0.650
0.621
0.593
0.567
6
0.705
0.666
0.630
0.596
0.564
0.535
0.507
7
0.665
0.623
0.583
0.547
0.513
0.482
0.452
8
0.627
0.582
0.540
0.502
0.467
0.434
0.404
9
0.592
0.544
0.500
0.460
0.424
0.391
0.361
10
0.558
0.508
0.463
0.422
0.386
0.352
0.322 14%
0.877
0.769
0.675
0.592
0.519
0.456
0.400
0.351
0.308
0.270 15%
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247 Present value interest factor of an (ordinary) annuity of $1 per period at i% for n periods,
PVIFA(i,n).
Period
6%
7%
8%
9%
10%
11%
12%
13%
14%
1
0.943
0.935
0.926
0.917
0.909
0.901
0.893
0.885
0.877
2
1.833
1.808
1.783
1.759
1.736
1.713
1.690
1.668
1.647
3
2.673
2.624
2.577
2.531
2.487
2.444
2.402
2.361
2.322
4
3.465
3.387
3.312
3.240
3.170
3.102
3.037
2.974
2.914
5
4.212
4.100
3.993
3.890
3.791
3.696
3.605
3.517
3.433
6
4.917
4.767
4.623
4.486
4.355
4.231
4.111
3.998
3.889
7
5.582
5.389
5.206
5.033
4.868
4.712
4.564
4.423
4.288
8
6.210
5.971
5.747
5.535
5.335
5.146
4.968
4.799
4.639
9
6.802
6.515
6.247
5.995
5.759
5.537
5.328
5.132
4.946
10
7.360
7.024
6.710
6.418
6.145
5.889
5.650
5.426
5.216 15%
0.870
1.626
2.283
2.855
3.352
3.784
4.160
4.487
4.772
5.019 Future value interest factor of $1 per period at i% for n periods, FVIF(i,n).
Period
1%
2%
3%
4%
5%
6%
7%
1
1.010
1.020
1.030
1.040
1.050
1.060
1.070
2
1.020
1.040
1.061
1.082
1.103
1.124
1.145
3
1.030
1.061
1.093
1.125
1.158
1.191
1.225
4
1.041
1.082
1.126
1.170
1.216
1.262
1.311
5
1.051
1.104
1.159
1.217
1.276
1.338
1.403
6
1.062
1.126
1.194
1.265
1.340
1.419
1.501
7
1.072
1.149
1.230
1.316
1.407
1.504
1.606
8
1.083
1.172
1.267
1.369
1.477
1.594
1.718
9
1.094
1.195
1.305
1.423
1.551
1.689
1.838
10
1.105
1.219
1.344
1.480
1.629
1.791
1.967 10%
1.100
1.210
1.331
1.464
1.611
1.772
1.949
2.144
2.358
2.594 Date: 21 February 2017 13%
0.885
0.783
0.693
0.613
0.543
0.480
0.425
0.376
0.333
0.295 8%
1.080
1.166
1.260
1.360
1.469
1.587
1.714
1.851
1.999
2.159 9%
1.090
1.188
1.295
1.412
1.539
1.677
1.828
1.993
2.172
2.367 ACCT3102 External Reporting - Semester 1, 2017 Page | 5 Marking Criteria and Rubric
Marks are allocated on the following criteria:
Section
LG 3: Be creative analytical thinkers
Identification
Problem is identified and discussed
within relevant context
Analysis
Problem is analysed with integration
of relevant research and data Explanation
Identifying Tarzan’s objectives and how it could
achieve these objectives. Determine, using the appropriate accounting
standard and accounting principles, the required
accounting treatment for the proposal including the
provision of AASB references and calculations.
Consideration & Conclusion
Provision of a complete analysis of initial (1 July
Consequences are considered,
2017) to first year-end (30 June 2018) implications of
discussed, and conclusion reached.
the proposal on the objectives demonstrated with
full calculations in table format.
Recommendation
Determination of a recommendation based on
Solutions are proposed and justified
evidence provided.
LG 1: Be knowledgeable within field of accounting
Knowledge
Provision of accurate and complete general journal
Journal Entries
entries (including narrations) for the proposal for the
period 1 July 2017 to 30 June 2018.
LG2: Have professional and effective writing skills
Structure
The structure and presentation of the case and
Written work is logically sequenced
suitability for needs of a client (professional
with sound paragraph structure, clear audience). Includes compliance with formatting
and easy to read
instructions.
Professionalism
Writing is free of spelling and grammatical errors.
Writing is free of spelling and
grammatical errors.
Research and Referencing
Referencing is evident and accurate.
Written work demonstrates the
student’s ability to do independent
research and is appropriately
referenced.
Total
A detailed breakdown of each task section is provided on page 6 and 7. Date: 21 February 2017 Marks
5
5 5 5 5 5 5
5 40 ACCT3102 External Reporting - Semester 1, 2017 Task Mark Identification
Problem is identified and
discussed within relevant
context 5 Analysis
Problem is analysed with
integration of relevant
research and data 5 Consideration &
Conclusion
Consequences are
considered, discussed, and
conclusion reached. 5 Recommendation
Solutions are proposed and
justified 5 Date: 21 February 2017 Outstanding
5
You clearly and correctly
identified Tarzan’s key
objectives, supporting these
with a relevant discussion
on how they can be
achieved.
Evidence of rigorous
research of the relevant
accounting standards,
demonstrated by correct
identification with all
calculations correct and
integration of all/most of
the correct references to
the relevant sections of the
accounting standard.
Conclusion/s clearly
demonstrated with all
correct calculations carried
forward from decision in
previous sections and
includes initial and year-end
impacts.
Proposed solutions are
comprehensively justified;
they have relevance to the
problems with links to the
objectives. Highly relevant
and correct
recommendation drawn,
with all relevant
assumptions, data and
evidence considered,
including quantified
objectives for each
proposal. Page | 6 ACCT3102: Case Study Marking Rubric Very Good
4
You identified Tarzan’s key
objectives, but only partially
discussed how these can be
achieved. Meets Expectations
3
You identified Tarzan’s key
objectives; but have not
provided a coherent
explanation regarding how
these can be achieved. Evidence of rigorous
research of the relevant
accounting standards,
demonstrated by correct
identification with all/most
calculations correct, may
lacks integration for the
decision from all/most of
the correct references to
the relevant sections of the
accounting standard.
Conclusion/s clearly
demonstrated with mostly
correct calculations carried
forward from decision in
previous sections and
includes initial and year-end
impacts.
Proposed solutions are well
justified; they relate to the
problem with links to the
objectives. Correct
recommendation drawn,
with useful assumptions,
data and evidence
considered, including
quantified objectives for
each proposal. May have
some minor exclusions. Evidence of sound research
of the relevant accounting
standards undertaken in
addressing key issues,
demonstrated by partially
correct identification with
most calculations correct
and/or some of the correct
references to the relevant
sections of the accounting
standard.
Conclusion/s demonstrated
with mostly correct
calculations carried forward
from decision in previous
sections and includes either
initial or year-end impacts.
Some useful solutions
proposed, though not all of
these are clearly linked to
the objectives and/or
justified. Correct
recommendation, with
minor errors in
consideration and use of
assumptions, data and/or
evidence. Decision given
based on part of the
objectives. Below Expectation
2
You have partly identified
Tarzan’s key objective/s,
and have provided a
coherent explanation
regarding how these can be
achieved.
Limited evidence of
research of the relevant
accounting standards
undertaken in addressing
key issues, demonstrated
by partially correct
identification, with relevant
supporting calculations. Analysis demonstrated but
with major calculation
errors and/or inconsistent
with decision in previous
section and may not include
either initial or year-end
impacts.
Though not always relevant
or justified, some proposed
solution/s have been made.
Incorrect recommendation
due to major errors in
consideration of
assumptions, data and/or
evidence. Qualitative
decision given based on
part of the objectives. Well Below Expectation
1
You have not identified
Tarzan’s key objectives
and/or how these are to be
achieved.
Inappropriate and/or
insufficient references used
demonstrated by incorrect
identification with
supporting calculations and
few correct references to
relevant sections of the
accounting standards
Insufficient analysis of
relevant accounting
standard requirements.
Analysis not demonstrated
with calculations incorrect. Proposed solutions and
justification for these are
inappropriate and/or
missing and/or not linked to
the objectives. Incorrect or
absent recommendation
with little if any reference
to relevant assumptions,
data and evidence. ACCT3102 External Reporting - Semester 1, 2017
Task Mark Page | 7 Outstanding
5
At least 85% of the journals
are correct. Very Good
4
At least 75% of the journals
are correct. Meets Expectations
3
At least 50% of the journals
are correct. Below Expectation
2
Less than 50% of the
journals are correct. Well Below Expectation
1
Less than 30% of the
journals are correct. Report is adequately
structured, though it
occasionally lacks a
degree of professionalism
(such as minor formatting
errors and/or
inappropriate use of
headings). Provision of
information is mostly
suitable for the needs of
the client. May have
some non-compliance
with word limits and/or
formatting instructions.
Writing style sometimes
lacks the clarity of
expression but meaning is
still apparent.
Grammar, spelling and/or
punctuation reflect mostly
minor, with the occasional
major, errors. Report is adequately
structured in part, though
it lacks a degree of
professionalism and/or
lacks consideration
regarding provision of
information suitable for
the needs of a client.
There is some noncompliance with word
limits and formatting
instructions. Writing style
often lacks clarity of
expression, which
impacts on the
readability of your work. Presentation and lack of
structure detracts from
the professionalism of
the report. Very little
concern regarding
provision of information
suitable for the needs of
a client. Compliance with
word limits and
formatting instructions
has been ignored. Writing
style is not suited to the
set task. There are some serious
grammar, spelling and/or
punctuation errors which
impact on the readability of
some parts of the report.
Some attempt at
referencing but details are
missing and/or references
overlooked. Grammar, punctuation
and/or spelling is extremely
poor, significantly impacting
on the readability of the
report.
Referencing is absent
and/or unsystematic. Knowledge
Accuracy of journal entries 5 Structure
Written work is logically
sequenced with sound
paragraph structure, clear
and easy to read 5 Report is very well
structured. Presented in a
very professional manner
targeted towards
communication with the
client with very good use of
tables. Full compliance with
word limits and formatting
instructions. Fluent writing
style with expression highly
suited to set task. Report is well structured
with the occasional minor
formatting error.
Presented in a
professional manner
targeted towards
communication with the
client. Compliance with
word limits and
formatting instructions.
Mostly fluent writing
style with expression
appropriate to set task. Professionalism
Writing is free of spelling
and grammatical errors. 5 Grammar, spelling and
punctuation are accurate. Grammar, spelling and
punctuation are mostly
accurate with only minor
errors evident. Research and Referencing
Written work demonstrates
the student’s ability to do
independent research and
is appropriately referenced.
TOTAL 5 Referencing is complete and
accurate. Referencing is mostly
complete and accurate. Date: 21 February 2017 40 Referencing is usually
accurate/complete, with
the occasional minor
oversight.

 

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