As a graduate accountant, you work for the public accounting firm, Capitol Accountants. One of your clients, West Ltd, is a leading company in the sale of frozen and canned fish produce. These products are sold under two brand names. Fish caught in southern Australian waters are sold under the brand ‘Antarctic Fresh’ (independently valued at $1 million), which is the brand the company developed itself when it commenced operations and is still used today. Fish caught in the northern oceans are sold under the brand name ‘Tropical Taste’, the brand developed by Fishy Tales Ltd (valued at $800,000). West Ltd acquired all the assets and liabilities of Fishy Tales a number of years ago when it took over that company’s operations. West Ltd has always marketed itself as operating in an environmentally responsible manner, and is an advocate of sustainable fishing. The public regards it as a dolphin-friendly company as a result of its previous campaigns to ensure dolphins are not affected by tuna fishing. As such, West Ltd incurs large amounts of expenditure on marketing to continue building its brands. In the 2015 financial year alone, West Ltd incurred $500,000 in marketing costs. West Ltd is looking for information about whether they can capitalise rather than expense these marketing costs. While the partners have been able to communicate with West Ltd about these issues, they have asked you to prepare a background report to address the following: 1. In your own words but need reference compare and contrast the accounting treatment for Intangible Assets, specifically internally generated intangible assets both prior to, and after, the adoption of International Financial Reporting Standards (IFRS). In your comparison, include examples of the generic set of journal entries (no dollar amounts) that would be used to account for such costs under the old and new accounting treatments. 2. Analyse the reasons why, and the impact of, the change in accounting treatment for internally generated intangible assets, such as brands. Refer to at least eight (8) pertinent references from researchers/professional organisations/credible media in this area of accounting to demonstrate the debate whether “to capitalise or not to capitalise” internally generated intangible assets. In your professional opinion, do you think that these changes were necessary to preserve the quality of information in Australian financial reports? Use examples of ‘real world’ companies to support your argument to West Ltd. The partners require that the report is written in third person and is presented in simple language and in an easy-to-read format
The report is to have a maximum word length of 1,100 words, excluding the executive summary, appendices, and reference list. The report will consist of a cover page, which shows the title of the report and the author, a table of contents, a half-page executive summary, the report itself, a page of references, and any appendices. It is required to be prepared in 1.5 line spacing, using a Times New Roman 12 point font, with 2cm margins on all sides. You are required to cite at least eight (8) current sources, which should include items from the following categories: academic literature, media, and websites. Since the partners want to ensure their excellent reputation is maintained, it is critical that the sources used are reliable, reputable, and relevant, cited in an accurate manner, and properly referenced using the APA 6th method.
You can start your search on Google Scholar for these articles. If the full text is not available through Google Scholar, you can use the library catalogue to access it as Griffith has subscriptions to most Accounting journals. Some journals you may find useful are Australian Accounting Review and Abacus
Financial media, e.g. Business Review Weekly, The Financial Review