Part A – Sustainability Reporting and Theories of Accounting
Background Information:
The Australasian Reporting Awards (ARA) have been championing excellence in annual
reporting since their inception in 1950. By promoting transparency, accountability, and effective
communication in corporate reporting, the ARA has contributed significantly to the
understanding and visibility of organizational accomplishments and intentions. In 2023, the ARA
recognized five organizations for their outstanding Sustainability Reporting with Gold Awards.
The distinguished recipients include:
• CLP Holdings Limited
• Fonterra Co-operative Group Limited
• Mineral Resources Limited
• Sanford Limited
• Sunway Berhad
Requirements:
(a) Sustainability Reporting Evaluation (600-800 words): Select ANY one of the above five
companies and critically evaluate its 2022 Sustainability/Integrated Report. These reports are
readily available in the assessment folder for your convenience, or you can access them directly
from the provided links above.
Note: Your evaluation should scrutinize the quality, depth, and transparency of the report, how
well the company commits to sustainable reporting practices, and identify any potential areas
for reporting/disclosure improvement. Your evaluation must be specific to the chosen company,
and any generic discussion will not secure a satisfactory mark.
(b) Management Remuneration and Sustainability Performance (400-500 words): In recent
years, more firms are tying senior management remuneration to ESG (Environmental, Social,
and Governance) performance. Exploring this trend and considering the positive accounting
theory, discuss the implications, effectiveness, potential challenges of this approach, and its role
in promoting better ESG performance.
(Your submission should be a comprehensive, well-structured essay in no more than 1,500
words. This should include an introduction and a conclusion. Ensure your arguments are
supported by relevant sources and these sources are appropriately cited. The reference list is
not included in the total word count.)
Part B Question 1. – Accounting for Leases
Richmond Ltd enters into a non-cancellable contract with Go-Get Ltd to use a truck for a period
of three years. The truck is explicitly specified in the contract, and Richmond Ltd decides where
the truck will be driven, what cargo will be transported and when the truck will be used. Go-Get
Ltd has the right to replace the truck with another truck, which is identical to the first truck,
when Go-Get Ltd performs maintenance on the original truck. In addition, Go-Get Ltd has some
restrictions in the contract, specifically, that Richmond Ltd cannot haul explosives in the truck.
Richmond Ltd pays $55,000 on signing the agreement on 1 July 2022. The truck is expected to
have an economic life of six years, after which time it will have an expected salvage value of
$50,000. There is a purchase option which Richmond Ltd will be able to exercise at the end of
the lease term for $73,000. If this purchase option is exercised the truck will be transferred to
Richmond Ltd.
There are six half-yearly payments of $120,000, the first being made on 31 December 2022.
Included within the $120,000 lease payments is an amount of $42,000 representing payment to
Go-Get Ltd for insurance and maintenance of the truck. The truck is to be depreciated on a
straight-line basis. The rate of interest implicit in the lease is 12% per annum.
Requirements (rounded to the nearest dollar):
a) In accordance with AASB16 ‘Leases’, identify whether the contract between Richmond Ltd
and Go-Get Ltd contains a lease. Provide necessary justifications to support your answer.
Assuming the above contract contains a lease in accordance with AASB16,
b) Calculate the lease liability and lease asset for Richmond Ltd (show workings);
c) Prepare a full lease schedule for Richmond Ltd, showing the division of the lease rental into
interest and principal components; and
d) Provide the journal entries for the lease transactions in the books of Richmond Ltd for the
financial year ending 30 June 2023 (from 1 July 2022 to 30 June 2023). Narrations are not
required.
Part B Question 2. – Accounting for Income Tax
This question relates to IAS12/ AASB112 Income Tax and requires the following to be submitted:
An excel workbook with the following four (4) sheets:
a. Sheet 1: Background Information
b. Sheet 2: Calculating Taxable Income
c. Sheet 3: Calculating DTA/DTL
d. Sheet 4: Change in tax rate
Requirements:
a) Calculate the taxable income / tax loss and the current tax liability (if any) for the financial
year ended 30th June 2023. Prepare a journal entry to recognise the current tax liability / tax
loss.
(In Sheet 2: Calculating Taxable Income)
b) Calculate deferred tax asset and deferred tax liability balances as at 30th June 2023. Prepare
the deferred tax journal entries for the year ended 30th June 2023.
Note that you are NOT required to prepare journals to offset the deferred tax asset and
deferred tax liability balances.
(In Sheet 3: Calculating DTA/DTL 2023)
c) Assume that by 1 December 2023 there was a change in tax rate. With reference to AASB112
Income Taxes, discuss the accounting treatment of the deferred tax asset and deferred tax
liability balances as of 1 December 2023 following a lower tax threshold for the 2023-2024
financial year. Prepare the journal entries to record the effect of change in tax rate.
(In Sheet 4: Change in Tax Rate)
• For Part A, write the answer in a new word document
• For Question 1 in Part B, write the answer in a new word document
• For Question 2 in Part B, you must use the excel spread sheet provided
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