Finance and Accounting Regulation and Compliance

Question: Discuss about the Finance and Accounting for Regulation and Compliance. Answer: 1. A1. Without compliance of regulation and compliance of corporate governance, a corporate company cannot run because it is the requirement of the stock exchange to comply with the listing agreement. But sometimes, there might be a situation where some of the conditions did not get fulfilled. So, in that case company has to report that it is complying with all the requirements because it is not intentionally that the company is not able to comply with some of the conditions, it is because of some unavoidable reasons which would get fine in a short span of time. Reporting of non-compliance in the annual report will give negative impact on the investors and the stock will crash and the company will be in tight situation. With this the faith of the investors will loose and they start selling off the shares because people invests in the business with a faith that proper corporate governance is being applied in the organization and all the activities are under the control of the top management. On whole companies might leave some of the regulations because of their business structure but it does not mean that there is no corporate governance being followed in the company. 2. Calculation of depreciation of aircraft Total Cost: 1200000 % of share Apportioned cost Airframe 55% 660000 Engines 40% 480000 Fittings 5% 60000 Formula of depreciation: (Cost- Residual value)/ useful life Airframe (660000-150000)/15 34000 Engines 480000/20 24000 Fittings 60000/5 12000 Total Depreciation Aircraft 34000 Engines 24000 Fittings 12000 70000 Journal entries For acquisition Aircraft A/c_____Dr. 1200000 To bank A/c 1200000 For depreciation Depreciation A/c 70000 To Acc. Dep. on aircraft 70000 3.(a) Receipts payments Net receipts/ payments Discount factor @ 10.97% Present Value 1294384 0 1294384 1 -350000 -350000 0.901 -315401 -350000 -350000 0.812 -284221 -350000 -350000 0.732 -256125 -350000 -350000 0.659 -230805 -350000 -350000 0.594 -207989 IRR 10.97% (1,294,541) b) Journal entries in the books of Burt Ltd Jun-16 Building A/c___Dr 1294384 To Lease payable 1294384 Lease payable 315401 To cash A/c 315401 Interest expense A/c 107394 To Lease payable 107394 (1294384-315401)*10.97% Depreciation expense A/c 180731 To acc. Dep A/c 180731 Jun-17 Lease payable 284221 To cash A/c 284221 Interest expense A/c 76215 To Lease payable 76215 (1294384-315401-284221)*10.97% Depreciation expense A/c 180731 To acc. Dep A/c 180731 c) Extract of financial statement Building 1294384 Lease payable 878371 Acc. Dep 361461 d) Journal entries considering as operating lease. Jun-16 Lease rent 315401 To cash 315401 Jul-17 Lease rent 284221 To cash 284221 4.A4. In active market securities are traded in a large volume. The securities which are traded in active market usually have lower bid-ask spread. This market is mainly common for tangible assets not for intangible assets. There are some intangible assets which are traded like of production quotas, fishing licenses, etc. There are 2 phases of active markets one of particular stock and other for US stock market. Thats why, this is very liquid market. It is the most liquid market and the market which is not liquid, suddenly selling assets can cause the market to fall, which may limit or even undo the benefits of selling at that particular moment. It should not be confused with active market management or investment. It is a strategy in which an investor or fund manager picks up those funds which will perform disproportionately well. References: Accounting Financial tax, Accounting for lease: Operating and capital lease, viewed on 4th oct, 2016,https://accounting-financial-tax.com/2008/09/accounting-for-lease-operating-and-capital-lease/.