2 question 1 40 marks africa ltd
In the consolidated annual financial statements of Africa Ltd for 2005, Kenya Ltd’s machinery should be appropriately recognized, measured and presented. Specifically, this requires that the machinery should be valued at its fair value when being acquired and then depreciated over its useful life. The amount allocated to the machinery would need to include both direct costs such as purchase price plus any associated indirect expenses such as installation or delivery.
When it comes down to measuring the assets owned by Kenya Ltd, historical cost accounting is usually used in order determine their original worth. However if there are significant changes in market conditions over time which result in a decrease/increase of asset’s value then fair value measurement can also be applied instead taking into account current economic circumstances. Lastly when it comes down presentation this should take place on balance sheet under fixed assets section detailing name of each item along with corresponding amounts purchased.
Overall, appropriate recognition, measurement and presentation of machinery owned by Kenya Ltd are essential components when preparing consolidated annual financial statements since they provide helpful insights into company’s performance thus allowing decision makers make more informed decisions overall.