Reference no: EM132636160

Purpose: Evaluation of students knowledge of relevant accounting standards and critical and problem-solving skills. Students are required to prepare a research report which evaluates their interpretation of accounting standards in a group that will allowed them to further develop their team-working and problem-solving skills.

Topic: Australian accounting standards analysis.

Task Details: Students are required to attempt the following questions. Question 1

Recently Sea Eagle Ltd experienced a strike that affected a number of its operating plants. The group accountant of Sea Eagle Ltd indicated that it was not appropriate to report depreciation expense during this period as the equipment was not used during the strike. She stated that during the strike the equipment did not depreciate and an inappropriate matching of costs and revenues would result if depreciation were charged. She based her position on the following points.

1. It is inappropriate to charge the period with costs for which there are no related revenues arising from production.

2. The basic factor of depreciation in this instance is wear and tear, and because the equipment was idle, no wear and tear occurred.

Required

1. Summarise the requirements of AASB 116 in relation to depreciation of property, plant and equipment assets.

2. You are a part of the auditing team that analyses the accounts of Sea Eagle Ltd. Write a report to your supervisor in relation to the views of the group accountant of Sea Eagle Ltd.