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. This means that machinery must be appraised at fair value upon acquisition and depreciated throughout its life. This amount would include direct expenses like the purchase price and any indirect costs, such as delivery or installation.
Kenya Ltd usually uses historical cost accounting when determining the asset’s original value. 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. Finally, when it comes down to presentation, it should occur on balance sheet in fixed assets section listing the name and corresponding amount 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.