PART A A related party transaction is defined as ‘a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged’ (AASB 124)....

PART A

A related party transaction is defined as ‘a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged’ (AASB 124). Transacting with related parties potentially creates certain risks for various stakeholders. Because of such risks, organisations are required to make extensive related party disclosures. The relevant accounting standard for related party transactions is AASB 124 Related Party Disclosures.

Previously, AASB 124 Related Party Disclosures required additional disclosures that were not included in the IFRS standard, IAS 24 – such as disclosures of qualifications and positions held by key management personnel (KMP) and information by individual on equity holdings, loans and other transactions. The AASB decided that these disclosures were more of a corporate governance nature and therefore would be more appropriately dealt with by the Corporations Act as Section 300 A of the Act contains a number of disclosure requirements regarding related parties. As a result, some KMP disclosures have been moved from the notes to the financial statements to the remuneration report. These changes apply to annual reporting periods starting on or after 1 July 2013.

Required:

1. Download the most recent annual report of BHP Group Limited (Hint: you can find it at BHP’s website). Review the note to the financial statements, entitled “related party transactions” and Section 3 “Remuneration Report”. How many pages are dedicated to these related party disclosures? (1 mark)

2. What would be the costs and benefits of disclosing such extensive information about related party transactions? Discuss the potential costs and benefits of disclosing detailed related party transactions from the company’s perspective. MAX: 500 words (4 marks)

(NOTE: you don’t need to quantify any of costs and benefits discussed here.)

PART B

NUSTAR Ltd, retailing business for telescopes, commenced operations on 1 July, 2019 by issuing XXXXXXXXXX $2.00 shares, payable in full on application. There were no share issue costs.

For the year ending 30 June 2021, the company recorded the following aggregate transactions:

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2021:

• Inventory was measured at the lower of cost and net realisable value.
• Buildings, warehouses and equipment were measured at cost. The benefits were expected to be received evenly over the useful life of the asset. The residual values are negligible.
• Trading securities are equity investments that are held for the purpose of selling and short-term profit taking.
• Additional shares were issued and fully paid on the following dates during the XXXXXXXXXXfinancial year:

1 Jan 2021: XXXXXXXXXXordinary shares issued/fully paid @ $2.00

1 April 2021: XXXXXXXXXXordinary shares issued/fully paid @ $2.00

· A cash dividend of $ XXXXXXXXXXcents per share) was declared and paid during the 2021 financial year.

• $ XXXXXXXXXXof bank loans are repayable within 1 year. The remaining amount is payable in full at the end of 2030. The loans are secured over the land.
• $ XXXXXXXXXXof other loans are repayable within 1 year. The remaining amount is payable in full at the end of 2024.
• The provision for employee benefits includes $20 000 payable within 1 year.
• The warranty provision is in respect of a 12-month warranty given on certain goods sold.

· The following assets were carried at cost:

• Land was revalued upward by $5 000 to $ XXXXXXXXXXassume zero income tax for this transaction). There had been no previously recognised reserve for revaluation surplus. The valuation was conducted by the registered valuer, The Invaluable Pty Ltd.

· NUSTAR Ltd transferred $10 000 out of retained earnings into general reserve.

· Summarised account balances are provided below:

· Summarised account balances for the equity section at the end of the prior financial year (i.e., 2020) are provided below:

Required:

For the year ending 30 June 2021 (NOTE: comparative financial statements are not required),

1. Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for NUSTAR Ltd; (5 Marks)

2. Prepare a statement of comprehensive income for NUSTAR Ltd in accordance with the requirements of AASB 101. NUSTAR Ltd uses the single statement format for the statement of profit or loss and other comprehensive income and classifies expenses by function within the statement; (6 marks)

3. Prepare a statement of changes in equity for NUSTAR Ltd in accordance with the requirements of AASB 101; (6 marks)

4. Prepare a statement of financial position for NUSTAR Ltd in accordance with AASB 101. Use the current/non-current presentation format; (6 marks)

5. Prepare appropriate notes to the accounts. (You are not required to prepare a note related to income taxes. Include the following note as note 1. You may optionally add accounting policies to this note) (12 marks)

“1. Summary of significant accounting policies

Basis of accounting

The financial report is a general purpose financial report which has been prepared on the historical cost basis, except where stated otherwise.

Statement of Compliance

The financial statements have been prepared in accordance with the requirements of the Corporations Act, Australian Accounting Standards which include Australian equivalents to International Financial Reporting Standards (AIFRSs) and AASB Interpretations. Compliance with AIFRSs ensures the financial statements and notes comply with International Financial Reporting Standards.”

APPENDIX A: PRESENTATION REQUIREMENTS (Departures may attract a penalty)

1. The assignment is required to be submitted through Turnitin by the due date;

2. It is worth 20% of the final grade but will be marked out of 40;

3. The assignment will be marked on the basis of arequirement of "suitable for publication", that is, the relevant statements/notes comprise an external report;

4. The assignment must be performed individually;

5. You are to employ an aggregated format whenever appropriate and consistent with provision of minimum line items prescribed in AASB101;

6. The financial statements and the notes are to be typed or word processed in 12 point font;

7. You are not to use specialised accounting software packages, such as are employed by professional accounting firms, to produce your financial reports;

8. You are to apply the ‘function of expense’ or ‘cost of sales’ method to the classification of expenses in the income statement (see AASB101 paras 97-105);

9. You are directed to use the current/non-current format for the statement of financial position (balance sheet) and supply a “net assets” line item;

10. The notes are to be simplified equivalences to published reports; that means a list of constituent components of a given line item with their respective dollar amounts, not footnotes; for Part B there is one set of notes to cover all statements, numbered sequentially from 1 (as supplied).

APPENDIX B

APPENDIX C: General Marking Criteria