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Numerous Accounting Issues
Adelaide, South Australia.
6th January 2016
Anderson & Johnson Pty Ltd
Suite 2516, Level 30, Plaza Building
185 Charles Street
Adelaide SA 5000
Cc: Financial Controller, Margaret Mitchell
Ref: Numerous Accounting Issues
Thank you for your email. It’s good to know that your company has just moved from being a small proprietary company to a large one. I am writing this email with regard to numerous accounting issues raised by the board of directors of your company. I have worked on the concerns raised and have drafted a response addressing the key issues of each problem:
Issue One: AASB 138 Recognition of intangible assets
Firstly, by thinking that recognition of the internally generated good will is not a good idea, the Financial Controller, Margaret Mitchell, is right. As you mentioned the goodwill has been generated from having a Board of Directors which is seen as having integrity and vision, and discovery of commercially viable new mine sites following directors decisions to invest about $ 8.25 million in mines exploration.
AASB 138 48-50 requires that the internally generated goodwill not to be recognized as an asset by the company. AASB 138 (48) states that any internally goodwill should not be recognized, and AASB 138 (49) gives the reason for this requirement as resulting from the nature of goodwill where it is not an identifiable resource. As such it would be advisable for the company not to recognize the goodwill instead in can be noted in the financial report notes. However, if the company decides to recognize the goodwill, it should be recognized using the revaluation model if the cost of the good will can be measured …………………………