ATAR Notes: Forum

VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Accounting => Topic started by: asian_91 on April 09, 2011, 03:45:07 pm

Title: Help! Help!
Post by: asian_91 on April 09, 2011, 03:45:07 pm

Hey, just wondering how would you classify the items, 'Provision for dividend' and 'Land held for redevelopment' as Asset, liability, revenue or expense? Also what is 'provision for dividend'?

Thanks :)

Title: Re: Help! Help!
Post by: soopertaco on April 09, 2011, 10:47:13 pm

from last year, i think a dividend is the proceeds you receive from an investment. so provision of dividend would probably be revenue.

I'd assume land held for redevelopment is an asset, although if it isn't controlled as a result of past transactions, by the definition it might not be relevant to the business.

Title: Re: Help! Help!
Post by: asian_91 on April 10, 2011, 04:44:51 pm

Thanks

Title: Re: Help! Help!
Post by: Fyrefly on April 10, 2011, 08:50:14 pm

This isn't VCE stuff...

The short answer to your questions:
Provision for Dividend = Liability
Land Held for Redevelopment = Asset


Provision for Dividend:

AASB137 applies:

Quote from: AASB137

A provision is a liability of uncertain timing or amount.

Recognition of Provisions
14 A provision shall be recognised when:
(a) an entity has a present obligation (legal or constructive) as a result of a past event;
(b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
(c) a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, no provision shall be recognised.

So a Provision for Dividends is like saying, "Okay, we've promised to pay shareholders a dividend... but we either (a) don't know how much we'll pay them or (b) don't know when we'll pay them."


Land Held for Redevelopment:

If the owner intends to redevelop and sell the land, then AASB102 applies:

Land held for development and/or resale is valued at the lower of cost and net realisable value. Cost includes:

• the cost of acquisition, development and interest incurred on financing of that land during its development.
• interest and other holding charges incurred after development is complete are recognised immediately as expenses.
• land held for development as community facilities is valued at the lower of cost and net realisable value. Cost includes the cost of acquisition and development.

If the owner intends to redevelop the land for its own use, or has not yet decided what to do with the redeveloped land, then AASB140 applies:

Quote from: AASB140

16. Investment property shall be recognised as an asset when, and only when:
(a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and
(b) the cost of the investment property can be measured reliably.

20. An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement.

Title: Re: Help! Help!
Post by: soopertaco on April 12, 2011, 04:58:44 pm

well i had a shot haha :)