Explain to management whether the items listed are material in accordance with the requirements of AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.

The following information has been extracted from the financial records of the Australian

 

furniture manufacturer Mel Ltd for the year ended 30 June 2018. Explain to management

whether the items listed are material in accordance with the requirements of AASB 108

‘Accounting Policies, Changes in Accounting Estimates and Errors’.

(a) During the year, the company expanded its operations into China, investing

$170 000 in assets to date. The total assets of Mel Ltd as at 30 June 2018 are equal

to $3 564 612.

(b) An acquisition of inventory was incorrectly recorded at $40 000 instead of $50 000.

Total current assets for the year are $240 000.

(c) A recently elected government in a neighbouring island nation is introducing new

legislation, the objective of which is to seize control of foreign-owned assets. Mel Ltd has

a five-year-old manufacturing plant (carrying amount $420 000) located in this country.

(d) A director of Mel Ltd has received subsidised air travel at a cost of $20 000 for the

year. The current operating profit is $1 890 000.

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