Introduction

As the external financial advisor, I have been assigned to assess the appropriateness of the
accounting treatment of the 3 main issues for May Day LTD. These include of the following
notes freehold building, intangible assets and fire damage. Along this report I will comply with
the requirements of the of IFRS and IAS principles. The accounting policies, rules and
conventions must be followed by an entity that is presenting the financial statements. The
changes like a change in the accounting estimate is an adjustment of the carrying amount of asset
of a liability, like in this case the carrying amount of building has been adjusted three times. The
changes must be done according to the standards provided by the international Financial
Reporting Standards. The changes of all values of the assets must only be reflected when they
are material.

Note 1
The adjustments the carrying amount of the financial asset is outlined in the
IAS 39, which states that the difference between the carrying value and the
revised amount must be recorded using the revised cash flows that is
discounted at the original effective date, the adjustment is recognised as a
profit or loss to the company. According to IAS 1, an entity shall disclose the
information about the assumptions made in the future and the source f the
new estimation must also be stated. The assumptions that the revaluation
can have in the future of the asset that have significant risks must be stated
within the financial year. In case of dealing with liabilities, the carrying
charge must be recorded at the end of the financial period and the nature of
the revaluation be reported too.
A freehold property is a property that is intended for use for the basis of the
company activities. On the other hand, an investment property is the
property such that when completed, it may have a rental potential. The
freehold property must be depreciated in accordance with the companies Act
and the provisions of FRS 15. This does not negate the need for
depreciation, the company must adopt the depreciation policy. The valuation
must be done by a qualified valuer or have an internal valuer that would
provide the valuation appropriately as valued by an external valuer. Since
the property in the note is an investment property, it must be included in the
balance sheet. Since the asset was revalued at $3000,00, the assets will be
adjusted by the difference as at January 2019, this means that the company
will undergo a depreciation expense of $150 annually as opposed to $90
annually. This means that the cumulative depreciation will increase by $60.
Since there has been no additions nor disposals during the year, the
company will report the asset as described.
The assumption made during disclosure of value of a statement are very
significant according to IAS 1. This information must be included in the
financial statements which means that users will understand the effects of
 the uncertainty. This disclosure is an example of the information that is
provided by the companies in accordance to the provisions of the paragraph
129 of IAS 1.ss

Note 2

The note can be classified according t the provisions of IAS 38- Goods required
for promotional activities. The goods can be treated in two ways; treating them
as an expense or capitalizing them and viewing them as an investment. In this
analysis, the second treatment has been used. According to IAS 38.69, The
expenditure on promotional activities should be expensed when it is incurred.
This means that a business entity must expense the promotional goods when
the goods are acquired and not when the goods are distributed to the clients.
According to IAS 38.BC46B, the promotional activities should be treated as
expenses as they generate benefits just like other expenses in the company
expenditure on developing customer relationships. IAS also prohibits the
capitalization of the internally generated customer relationships this means
that any good that is acquired for the purpose of promotion cannot be
capitaluised.
The first Item is the note 2 is the selling expenses that was incurred in
development, the company spent $400,000 on the development, this will be
treated as an advertising expense. This amount could be split to include Brand
Awareness expense of $100,000. Another expense $500,000 was spent on the
research and development hence will be recorded in the income statement as
an expense. Since the new system would reduce the costs by 20%, the
reduction of costs will be treated as an income and the value is $60,000, this
should be reflected in the journal as an income. Since the income is projected
for the next 10 years, the unearned income will be reflected in the journal, the
current year will have earned income of $6000, while the other unearned
income will be $54000 and be registered in the general journal.
Another expense in note 3 is the licensing expenses which cost the company
$250,000 which will last for 8 years. The prepaid licensing is in this
transaction, the amount $31,250 will be used every year. The prepaid licensing
will therefore be the difference, which is $168,750.
Note 3
According to IAS 37 has provided detailed procedure on sale, dismantling of
dispensing the losses as a result of a disaster. For all natural dissasters, the
recovery from the tragedy msut be recognised, the future operating expenses
or losses from a disaster are recognised during the period and not treated as
immediate expenses. The insurance recoveries are recognised when
determined, like in the case, the company had determined that the insurance
company will repay the the losses and treated it as receivables. It is also upon
the entity to consider if they need to disclose any more information about the
disaster,
During a natural disaster, should there be any form of compensation, the value
will be restored by the company, the asset must therefore be written off and
the receivables recorded as accrued receivables. The inventory will therefore
will be credited by $100,000 while the accounts receivables will be credited by
$500,000.
At the end of the year, the unaccounted for assets worth $2400,000 must be
debited in the inventory account, since there is a possibilty of recovering the
inventory from fire damages, it should be included in the ending inventory.s