AASB101 Presentation of Financial Statements - Implementation of AASB Conceptual Framework - Essay Assignment Help

Essay

Introduction

The company listed on the ASX chosen for this essay is Atomos Ltd. The company produces camera touch screens for Canon, Panasonic, Sony, etc. The focus of this essay is riveted at the measurement of inventory as per the accounting standards implemented by the company. The inventory system of the company has also been identified in the essay. The latter section of the essay discusses the costing method applied by the Atomos Ltd, alongside the impact of other costing methods on its financial statements. The discussion in the essay is facilitated through the use of the Annual Report of 2017.

Discussion

The amendments issued by the AASB are incorporated in their accounting standards, and are adopted by the Atomos Ltd. It must be noted that the accounting standards implemented by the company are in accordance with their operations. Following up on that, the company has stated its inventories as per the revised accounting standards. Atomos Ltd. Values its inventories at the lower of net realizable value and cost. Net realizable value alludes to the value of inventory that is an estimation of the deduction of all the costs associated with sale from the selling price of the inventory. It is particularly through the weighted average costing that the company states the costs of its inventories. The finished goods of the company consist of a combination of direct and indirect costs. These not only include the direct materials and labor, making up the prime cost, but also an amalgamation of fixed and variable overheads. 

The Annual Report’ 2017 of Atomos Ltd, however, also presents some of the primary sources of uncertainty in the estimation of the values stated in the financial statements. The sources of estimation uncertainty also include inventories. The net realizable values of the inventories are calculated using some of the most authentic and reliable information at the year-end. However, technical developments or the future dynamics of the market may cause a reduction in the selling prices. The Annual Report of Atomos Ltd indicates that the company maintains a periodic system of inventory. In the perspective of Liu and Esogbue (2012), a company maintaining the periodic system of inventory checks up on its inventories at fixed time intervals. While the inventory checks are performed at particular intervals, the company maintaining periodic inventory system still has the option to alter the quantity of the material in the purchase order, and modify the reorder level and the rate of demand. 

Cholodowicz and Orlowski (2015) define order quantity as the value of the deduction of the position of inventory on the date the inventory check is performed from the maximum level of inventory. The periodic system of inventory chosen by Atomos Ltd has provided the company with a lot of benefits. First and foremost, this particular inventory system is rather easy to implement. Since the company has a high demand for its products in the market, maintaining a perpetual inventory system will not be a pragmatic approach. Therefore, a periodic inventory system with checks at specified time intervals is quick and also efficient to some extent. In addition to that, Atomos Ltd also gets the option to define “periods” as per its convenience. The implementation of a periodic inventory system does not call for an investment of exorbitant sums. This is particularly because a periodic inventory system does not require a substantial investment in advanced software. However, those who are assigned the responsibility of counting the inventory at fixed intervals must devote a lot of time to this task. Costs are not that big of a problem; the time is.