Analysis and interpretation of Qantas Limited Annual Report 2013
Application of equity accounting for associates
Note: For the purpose of this assignment, you are asked to focus on how Qantas Limited applies equity accounting to its investments in associates, not jointly controlled entities.
1. Qantas Limited uses the equity accounting method to account for its investments in associates (and jointly controlled entities) in its Annual Report 2013. Explain the equity accounting method for associates with reference to Qantas Limited Annual Report 2013. Make sure you make explicit reference to the actual figures recorded by Qantas Limited to apply the equity accounting method for associates in Qantas Limited Annual Report 2013 (and in your answer state clearly where these figures appear in Qantas Ltd Annual Report 2013). Note that Qantas Ltd includes total equity accounted figures for its investments in associates and jointly controlled entities on the face of its Financial Statements. Refer the notes to Qantas Ltd financial statements for more detail. (Hint: make sure you scan the entire Annual Report for information that relates to equity accounted investments in associates). (12 marks)
2. What are the likely equity accounting journal entries processed by Qantas Limited in Qantas Limited Annual Report 2013? Make sure you refer to actual figures in Qantas Limited Annual Report 2013 (and in your answer state clearly where these figures appear in Qantas Ltd Annual Report 2013). Also, include a narration for each (likely) journal entry. Be specific. (Hint: once again, make sure you scan the entire Annual Report for information that relates to equity accounted investments in associates. Be sure to locate the Note to the Accounts that focuses on accounting for associates using the equity method). (12 marks)
3. What are Qantas Limited’s likely incentives to use equity accounting for its investments in associates for 2013? In your opinion, what accounting theories help to explain Qantas Limited’s behaviour with respect to the application of equity accounting for 2013. (4 marks)
4. In your opinion, do you think Qantas Limited would present a more favourable financial recording of its investments in associates if Qantas Limited had used fair value through the profit and loss for its investments in associates for 2013 (rather than equity accounting)? In your opinion, which accounting method would provide the most useful
information to users of Qantas Limited’s Annual report 2013? Give reasons. (For this question, assume that Qantas Ltd could choose to use either fair value through the profit and loss or equity accounting to account for its investments in associates).In this assignment you will analyse, interpret and explain the application of equity accounting for associates by Qantas Limited in its 2013 Annual Report. A copy of the 2013 Annual Report for Qantas Limited has been put on blackboard for you (in the Assessment folder). Qantas Limited annual reports are also available at: http://www.qantas.com.au/travel/airlines/investors-annual-reports/global/en
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