1. Paragraph 21 of AASB 136 states that if there is no reason to believe that an...
Question:
1. Paragraph 21 of AASB 136 states that “if there is no reason to believe that an asset's value in use materially exceeds its fair value less costs of disposal, the asset's fair value less costs of disposal may be used as its recoverable amount”. To what type of asset might this statement be applicable??
2. Why is it necessary to make adjustments for intragroup transactions?
3. In relation to the following case situation, discuss the choice of a functional currency.
A Malaysian operation manufactures a product using Malaysian materials and labour. Specialised equipment and senior operations staff are supplied by its Australian parent. Reimbursement invoices for these services are denominated in the Malaysian ringgit. The product is sold in the Malaysian market at a price, denominated in Malaysian ringgit, which is determined by competition with similar locally produced products. The foreign operation retains sufficient cash to meet wages and day-to-day operating costs with the remainder being remitted to the Australian parent. The receipt of dividends from the foreign operation is important to the parent’s cash management function. Long-term financing is arranged and serviced by the parent.