SOLUTIONS MANUAL
Contemporary Issues in Accounting
Michaela Rankin, Kimberly Ferlauto, Susan McGowan, and Patricia Stanton
? ?
S
3rd Edition
S E
C C
U S
_ ?
A I
V U
ST
, TABLE OF CONTENTS
Contemporary Issues in Accounting (3rd Edition)
Michaela Rankin, Kimberly Ferlauto, Susan McGowan, and Patricia Stanton
? ?
Chapter 1 Contemporary Issues in Accounting
S
Chapter 2 Standard Setting
S
Chapter 3 Measurement
Chapter 4
E
Theories in Accounting
Chapter 5 The Conceptual Framework for Financial Reporting
C
Chapter 6 Corporate Governance
C
Chapter 7 Technology in Accounting
Chapter 8
U
Capital Market Research and Accounting
S
Chapter 9 Earnings Management
Chapter 10 Sustainability and Corporate Social Responsibility
_
Chapter 11 International Accounting
?
Chapter 12 Fair Value Accounting
A
Chapter 13 Products of the Accounting System V I
TU
S
, Solutions manual
to accompany
? ?
Contemporary issues in
S S
accounting
C E
C
3rd edition
U S
by
_ ?
Rankin et al.
A I
V U
S T
Not for distribution in full. Instructors may post selected solutions for questions assigned as
homework to their LMS.
© John Wiley & Sons Australia, Ltd 2022
, Chapter 1: Contemporary issues in accounting
Chapter 1: Contemporary issues in accounting
Contemporary issue 1.1
Dick Smith hearings reveal questionable accounting of rebates
Questions
?
1. This article states ‘accounting standards are currently unclear’ with regard to how
to account for rebates. Given these rebates seem to be quite common, can you think
?
of any reasons the accounting for these could be unclear and why there may not be
S
an accounting standard that specifies exactly how to account for these particular
transactions?
S
2. This article claims that profits were overstated by Tesco ‘because it had booked
rebates from suppliers before receiving them’. Do accounting principles require
E
cash to be received before recognising items in the accounting? If not, why should
accounting be implicated in these profit overstatements?
C
3. A note prepared by PricewaterhouseCoopers claims that supplier rebates are
complex and as accounting requirements are unclear.
C
Ultimately, getting rebate accounting correct relies on a culture and leadership that
encourages accounting for the commercial substance of rebate arrangements and
U
discourages short‐term profit maximisation.
S
What do you think is meant by ‘getting the accounting correct’? Can you identify any
factors that would influence the exercise of professional judgement in this context?
_
1. The key reason would be that rebates vary significantly and are often complex. These can
?
involve for example:
Rebates related to inventory (e.g. retrospective volume rebates)
A
Other rebates (e.g. involving contributions to marketing and promotional costs or
activities).
I
These rebates will be tailored to the particular circumstances (as the PWC notes states these
V
vary widely “reflecting the different elements of the goods and services exchanged between
suppliers and retailers”.)
U
Given the complexities and variations in these rebates, it would not be feasible for the
accounting standards to specify exactly how to account for every possible rebate in every
T
particular context/circumstance. The principles in the standards should be applied to reflect
the substance of the particular rebate contract/arrangement. For example, if the rebate related
S
to volume rebates we would need to apply the principles relating to cost of inventory in IAS
2/AASB 102 Inventories.
Students should also consider if the accounting standards were to specify exactly how such
rebates were to be accounted for:
Is it likely such prescriptions would take a conservative approach (e.g. not allow
these rebates to be recognised/factored into costing of inventory until virtually
certain)? If this occurred would it necessarily result in faithful representation.
© John Wiley and Sons Australia, Ltd 2022 1.1
Contemporary Issues in Accounting
Michaela Rankin, Kimberly Ferlauto, Susan McGowan, and Patricia Stanton
? ?
S
3rd Edition
S E
C C
U S
_ ?
A I
V U
ST
, TABLE OF CONTENTS
Contemporary Issues in Accounting (3rd Edition)
Michaela Rankin, Kimberly Ferlauto, Susan McGowan, and Patricia Stanton
? ?
Chapter 1 Contemporary Issues in Accounting
S
Chapter 2 Standard Setting
S
Chapter 3 Measurement
Chapter 4
E
Theories in Accounting
Chapter 5 The Conceptual Framework for Financial Reporting
C
Chapter 6 Corporate Governance
C
Chapter 7 Technology in Accounting
Chapter 8
U
Capital Market Research and Accounting
S
Chapter 9 Earnings Management
Chapter 10 Sustainability and Corporate Social Responsibility
_
Chapter 11 International Accounting
?
Chapter 12 Fair Value Accounting
A
Chapter 13 Products of the Accounting System V I
TU
S
, Solutions manual
to accompany
? ?
Contemporary issues in
S S
accounting
C E
C
3rd edition
U S
by
_ ?
Rankin et al.
A I
V U
S T
Not for distribution in full. Instructors may post selected solutions for questions assigned as
homework to their LMS.
© John Wiley & Sons Australia, Ltd 2022
, Chapter 1: Contemporary issues in accounting
Chapter 1: Contemporary issues in accounting
Contemporary issue 1.1
Dick Smith hearings reveal questionable accounting of rebates
Questions
?
1. This article states ‘accounting standards are currently unclear’ with regard to how
to account for rebates. Given these rebates seem to be quite common, can you think
?
of any reasons the accounting for these could be unclear and why there may not be
S
an accounting standard that specifies exactly how to account for these particular
transactions?
S
2. This article claims that profits were overstated by Tesco ‘because it had booked
rebates from suppliers before receiving them’. Do accounting principles require
E
cash to be received before recognising items in the accounting? If not, why should
accounting be implicated in these profit overstatements?
C
3. A note prepared by PricewaterhouseCoopers claims that supplier rebates are
complex and as accounting requirements are unclear.
C
Ultimately, getting rebate accounting correct relies on a culture and leadership that
encourages accounting for the commercial substance of rebate arrangements and
U
discourages short‐term profit maximisation.
S
What do you think is meant by ‘getting the accounting correct’? Can you identify any
factors that would influence the exercise of professional judgement in this context?
_
1. The key reason would be that rebates vary significantly and are often complex. These can
?
involve for example:
Rebates related to inventory (e.g. retrospective volume rebates)
A
Other rebates (e.g. involving contributions to marketing and promotional costs or
activities).
I
These rebates will be tailored to the particular circumstances (as the PWC notes states these
V
vary widely “reflecting the different elements of the goods and services exchanged between
suppliers and retailers”.)
U
Given the complexities and variations in these rebates, it would not be feasible for the
accounting standards to specify exactly how to account for every possible rebate in every
T
particular context/circumstance. The principles in the standards should be applied to reflect
the substance of the particular rebate contract/arrangement. For example, if the rebate related
S
to volume rebates we would need to apply the principles relating to cost of inventory in IAS
2/AASB 102 Inventories.
Students should also consider if the accounting standards were to specify exactly how such
rebates were to be accounted for:
Is it likely such prescriptions would take a conservative approach (e.g. not allow
these rebates to be recognised/factored into costing of inventory until virtually
certain)? If this occurred would it necessarily result in faithful representation.
© John Wiley and Sons Australia, Ltd 2022 1.1
